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https://www.sec.gov/Archives/edgar/data/912766/000104746917000224/a2230660zs1a.htm
S1/A1a2230660zs1a.htmS1/A
Usetheselinkstorapidlyreviewthedocument
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IndextoConsolidatedFinancialStatements
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AsfiledwiththeSecuritiesandExchangeCommissiononJanuary18,2017
RegistrationNo.333207243
UNITEDSTATES
SECURITIESANDEXCHANGECOMMISSION
WASHINGTON,D.C.20549
AmendmentNo.6
to
FORMS1
REGISTRATIONSTATEMENT
UNDER
THESECURITIESACTOF1933
LaureateEducation,Inc.
(Exactnameofregistrantasspecifiedinitscharter)
Delaware
(StateorOtherJurisdictionof
Incorporationor
Organization)
8200
(PrimaryStandardIndustrial
ClassificationCodeNumber)
521492296
(I.R.S.Employer
IdentificationNo.)
650S.ExeterStreet
Baltimore,Maryland21202
(410)8436100
(Address,includingzipcode,andtelephonenumber,including
areacode,ofregistrant'sprincipalexecutiveoffices)
RobertW.Zentz,Esq.
SeniorVicePresident,SecretaryandGeneralCounsel
650S.ExeterStreet
(410)8436100
(Name,address,includingzipcode,andtelephonenumber,including
areacode,ofagentforservice)
Withcopiesto:
RobertW.Smith,Jr.,Esq.
MichaelJ.Stein,Esq.
DLAPiperLLP(US)
6225SmithAvenue
Baltimore,MD21209
(410)5803000
JosephH.Kaufman,Esq.
DavidW.Azarkh,Esq.
SimpsonThacher&BartlettLLP
425LexingtonAvenue
NewYork,NY10017
(212)4552000
Approximatedateofcommencementofproposedsaletothepublic:
AssoonaspracticableafterthisRegistrationStatementisdeclaredeffective.
IfanyofthesecuritiesbeingregisteredonthisFormaretobeofferedonadelayedorcontinuousbasispursuanttoRule415undertheSecuritiesActof1933checkthefollowing
box:
IfthisFormisfiledtoregisteradditionalsecuritiesforanofferingpursuanttoRule462(b)undertheSecuritiesAct,pleasecheckthefollowingboxandlisttheSecuritiesAct
registrationstatementnumberoftheearliereffectiveregistrationstatementforthesameoffering.
IfthisFormisaposteffectiveamendmentfiledpursuanttoRule462(c)undertheSecuritiesAct,checkthefollowingboxandlisttheSecuritiesActregistrationstatement
numberoftheearliereffectiveregistrationstatementforthesameoffering.
IfthisFormisaposteffectiveamendmentfiledpursuanttoRule462(d)undertheSecuritiesAct,checkthefollowingboxandlisttheSecuritiesActregistrationstatement
numberoftheearliereffectiveregistrationstatementforthesameoffering.
Indicatebycheckmarkwhethertheregistrantisalargeacceleratedfiler,anacceleratedfiler,anonacceleratedfiler,orasmallerreportingcompany.Seethedefinitionsof"large
acceleratedfiler,""acceleratedfiler"and"smallerreportingcompany"inRule12b2oftheExchangeAct.
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Largeacceleratedfiler
Acceleratedfiler
Nonacceleratedfiler
(Donotcheckifa
smallerreportingcompany)
Smallerreportingcompany
CALCULATIONOFREGISTRATIONFEE
TitleofEachClassofSecurities
tobeRegistered
ClassAcommonstock,parvalue$0.004per
share
Amounttobe
Registered(1)(2)
ProposedMaximum
AggregateOffering
PriceperShare(2)
ProposedMaximum
AggregateOffering
Price(2)
Amountof
RegistrationFee(3)
33,350,000
$20.00
$667,000,000
$75,786
(1)
IncludestheaggregateofferingpriceofsharesofClassAcommonstockthattheunderwritershavetheoptiontopurchase.See"Underwriting."
(2)
EstimatedsolelyforthepurposeofcalculatingtheregistrationfeeinaccordancewithRule457(a)undertheSecuritiesActof1933,asamended.
(3)
$10,070ofsuchfeewaspreviouslypaid.
TheRegistrantherebyamendsthisRegistrationStatementonsuchdateordatesasmaybenecessarytodelayitseffectivedateuntiltheRegistrantshallfileafurther
amendmentwhichspecificallystatesthatthisRegistrationStatementshallthereafterbecomeeffectiveinaccordancewithSection8(a)oftheSecuritiesActof1933,as
amended,oruntiltheRegistrationStatementshallbecomeeffectiveonsuchdateastheSecuritiesandExchangeCommission,actingpursuanttosaidSection8(a),may
determine.
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Theinformationinthispreliminaryprospectusisnotcompleteandmaybechanged.Wemaynotsellthesesecuritiesuntilthe
registrationstatementfiledwiththeSecuritiesandExchangeCommissioniseffective.Thispreliminaryprospectusisnotanofferto
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registrationstatementfiledwiththeSecuritiesandExchangeCommissioniseffective.Thispreliminaryprospectusisnotanofferto
sellthesesecuritiesandwearenotsolicitingofferstobuythesesecuritiesinanyjurisdictionwheretheofferorsaleisnotpermitted.
SubjecttoCompletion,datedJanuary18,2017
PROSPECTUS
29,000,000Shares
ClassACommonStock
LaureateEducation,Inc.isoffering29,000,000sharesofitsClassAcommonstock.Thisisourinitialpublicofferingandnopublic
marketcurrentlyexistsforoursharesofClassAcommonstock.Weanticipatethattheinitialpublicofferingpricewillbebetween$17.00
and$20.00pershare.
Followingthisoffering,wewillhavetwoclassesofoutstandingcommonstock,ClassAcommonstockandClassBcommonstock.
TherightsoftheholdersofClassAcommonstockandClassBcommonstockwillbeidentical,exceptwithrespecttovotingand
conversion.EachshareofClassAcommonstockwillbeentitledtoonevotepershare.EachshareofClassBcommonstockwillbe
entitledtotenvotespershareandwillbeconvertibleatanytimeintooneshareofClassAcommonstock.OutstandingsharesofClassB
commonstockwillrepresentapproximately97.9%(or97.6%iftheunderwritersexerciseinfulltheiroptiontopurchaseadditionalshares
ofClassAcommonstock)ofthevotingpowerofouroutstandingcapitalstockfollowingthisoffering.Aftercompletionofthisoffering,
WengenAlberta,LimitedPartnership,anAlbertalimitedpartnership("Wengen"),ourcontrollingstockholder,willcontinuetocontrola
majorityofthevotingpowerofouroutstandingcommonstock.Asaresult,wearea"controlledcompany"withinthemeaningofthe
NasdaqGlobalSelectMarket("Nasdaq")corporategovernancestandards.See"SecurityOwnershipofCertainBeneficialOwnersand
Management."InOctober2015,weredomiciledinDelawareasapublicbenefitcorporationasademonstrationofourlongterm
commitmenttoourmissiontobenefitourstudentsandsociety.
WehaveappliedforthelistingofourClassAcommonstockonNasdaqunderthesymbol"LAUR."
InvestinginourClassAcommonstockinvolvesrisks.See"RiskFactors"beginningonpage29.
Initialpublicofferingprice
Underwritingdiscountsandcommissions(1)
Proceeds,beforeexpenses,tous
(1)
Per
Share
$
$
$
Total
$
$
$
Wehaveagreedtoreimbursetheunderwritersforcertainexpensesinconnectionwiththisoffering.See"Underwriting."
Wehavegrantedtheunderwriterstherighttopurchaseuptoanadditional4,350,000sharesofClassAcommonstockfromus.
TheSecuritiesandExchangeCommissionandstatesecuritiesregulatorshavenotapprovedordisapprovedthesesecurities,or
determinedifthisprospectusistruthfulorcomplete.Anyrepresentationtothecontraryisacriminaloffense.
TheunderwritersexpecttodeliverthesharesofClassAcommonstocktopurchaserson,2017.
JointBookRunningManagers
CreditSuisse
MorganStanley
Barclays
MacquarieCapital J.P.Morgan
BMOCapitalMarkets
Citigroup
Goldman,Sachs&Co.
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CoManagers
Baird
BarringtonResearch
BradescoBBI
PiperJaffray
Stifel
WilliamBlair
BTGPactual
,2017
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TABLEOFCONTENTS
TrademarksandTradenames
IndustryandMarketData
PresentationofFinancialInformation
LetterfromDougBecker
ProspectusSummary
RiskFactors
SpecialNoteRegardingForwardLookingStatements
UseofProceeds
DividendPolicy
Capitalization
Dilution
SelectedHistoricalConsolidatedFinancialandOtherData
Management'sDiscussionandAnalysisofFinancialConditionandResultsofOperations
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ii
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1
29
93
95
96
97
99
101
107
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Management'sDiscussionandAnalysisofFinancialConditionandResultsofOperations
Business
IndustryRegulation
Management
ExecutiveCompensation
SecurityOwnershipofCertainBeneficialOwnersandManagement
CertainRelationshipsandRelatedPartyTransactions
DescriptionofCapitalStock
DescriptionofCertainIndebtedness
MaterialU.S.FederalTaxConsequencesforNonU.S.HoldersofClassACommonStock
SharesEligibleforFutureSale
Underwriting
LegalMatters
Experts
WhereYouCanFindMoreInformation
107
179
219
267
277
310
316
322
332
343
347
350
357
357
357
F1
Youshouldrelyonlyontheinformationcontainedinthisprospectusorcontainedinanyfreewritingprospectusfiledwiththe
SecuritiesandExchangeCommission(the"SEC").Neitherwenortheunderwritershaveauthorizedanyonetoprovideyouwithadditional
informationorinformationdifferentfromthatcontainedinthisprospectusorinanyfreewritingprospectusfiledwiththeSEC.Weare
offeringtosell,andseekingofferstobuy,ourClassAcommonstockonlyinjurisdictionswhereoffersandsalesarepermitted.The
informationcontainedinthisprospectusisaccurateonlyasofthedateofthisprospectus.
Throughandincluding,2017(the25thdayafterthedateofthisprospectus),alldealersthateffecttransactionsinthese
securities,whetherornotparticipatinginthisoffering,mayberequiredtodeliveraprospectus.Thisisinadditiontothedealers'
obligationtodeliveraprospectuswhenactingasunderwritersandwithrespecttotheirunsoldallotmentsorsubscriptions.
ForinvestorsoutsideoftheUnitedStates,neitherwenortheunderwritershavedoneanythingthatwouldpermitthisofferingor
possessionordistributionofthisprospectusoranyfreewritingprospectuswemayprovidetoyouinconnectionwiththisofferinginany
jurisdictionwhereactionforthatpurposeisrequired,otherthanintheUnitedStates.Youarerequiredtoinformyourselvesaboutandto
observeanyrestrictionsrelatingtothisofferingandthedistributionofthisprospectusandanysuchfreewritingprospectusoutsideofthe
UnitedStates.
Asusedinthisprospectus,unlessotherwisestatedorthecontextotherwiserequires,referencesto"we,""us,""our,"the"Company,"
"Laureate"andsimilarreferencesrefercollectivelytoLaureateEducation,Inc.anditssubsidiaries.Unlessotherwisestatedorthecontext
requires,referencestotheLaureateInternationalUniversitiesnetworkincludeSantaFeUniversityofArtandDesign("SFUAD"),whichis
ownedbyWengen.LaureateisaffiliatedwithSFUAD,butdoesnotownorcontrolitand,
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accordingly,SFUADisnotincludedinthefinancialresultsofLaureatepresentedthroughoutthisprospectus.
TRADEMARKSANDTRADENAMES
LAUREATE,LAUREATEINTERNATIONALUNIVERSITIESandtheleafsymbolaretrademarksofLaureateEducation,Inc.inthe
UnitedStatesandothercountries.ThisprospectusalsoincludesothertrademarksofLaureateandtrademarksofotherpersons,whichare
propertiesoftheirrespectiveowners.
INDUSTRYANDMARKETDATA
Weobtainedtheindustry,marketandcompetitivepositiondatausedthroughoutthisprospectusfromourowninternalestimatesand
researchaswellasfromindustrypublicationsandresearch,surveysandstudiesconductedbythirdparties.Thisprospectusalsocontains
theresultsfromstudiesbyMillwardBrownandGallup,Inc.("Gallup").WecommissionedtheMillwardBrownstudyaspartofour
periodicevaluationofemploymentratesandstartingsalaryinformationforourgraduates.Inaddition,wecommissionedtheGallupsurvey
toexploretherelationshipbetweentheexperiencesofstudentsatWaldenUniversity,ouronlineuniversitylocatedintheUnitedStates,
andlongtermoutcomesofthosestudentsbasedonthesurveyresponses.
Industrypublications,studiesandsurveysgenerallystatethattheyhavebeenobtainedfromsourcesbelievedtobereliable,although
theydonotguaranteetheaccuracyorcompletenessofsuchinformation.Whilewebelievethateachofthesepublications,surveysand
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theydonotguaranteetheaccuracyorcompletenessofsuchinformation.Whilewebelievethateachofthesepublications,surveysand
studiesisreliable,wehavenotindependentlyverifiedindustry,marketandcompetitivepositiondatafromthirdpartysources.Whilewe
believeourinternalbusinessresearchisreliableandthemarketdefinitionsareappropriate,neithersuchresearchnorthesedefinitionshave
beenverifiedbyanyindependentsource.
PRESENTATIONOFFINANCIALINFORMATION
Inthisprospectuswepresentcertaindataforthe12monthperiod("LTM")endedSeptember30,2016.Thisdatahasbeenderivedby
summingourhistoricalresultsfortheyearendedDecember31,2015andourhistoricalresultsfortheninemonthsendedSeptember30,
2016,thensubtractingourhistoricalresultsfortheninemonthsendedSeptember30,2015.Ourresultsofoperationsfortheninemonths
endedSeptember30,2016arenotnecessarilyindicativeoftheresultsthatmaybeexpectedforthefullyear.
OnMay2,2016,weannouncedachangetoouroperatingsegmentsinordertoalignourstructuremoregeographically.Our
institutioninItaly,NuovaAccademiadiBelleArtiMilano("NABA"),includingDomusAcademy,movedfromourGPSsegmentintoour
Europesegment.MediaDesignSchool("MDS"),locatedinNewZealand,movedfromourGPSsegmentintoourAMEAsegment.OurGPS
segmentnowfocusesonLaureate'sfullyonlineglobaloperationsandonitscampusbasedinstitutionsintheUnitedStates.Thischange
hasbeenreflectedinthefinancialstatementsforallperiodspresented.
OnJanuary10,2017,weannouncedthatweplantocombineourEuropeandAMEAoperations,effectiveMarch31,2017,inorderto
reflectourbeliefthatwewillbeabletooperatetheinstitutionsinthoseoperationsmoresuccessfullyandefficientlyundercommon
management.TheCompanyiscurrentlyevaluatingtheimpactofthiscombinationonitsoperatingsegments.Allinformationinthis
prospectusispresentedconsistentlywithouroperatingsegmentsasineffectonSeptember30,2016,andonthedateofthisprospectus,
anddoesnotreflectanypossiblesegmentrealignment.
OnJanuary1,2016,LaureateadoptedAccountingStandardsUpdate201503,whichsimplifiedthepresentationofdebtissuance
costsbyrequiringdebtissuancecoststobepresentedasadeductionfromdebt.Atadoption,thenewguidancewasappliedretrospectively
toallpriorperiodspresentedinthisprospectus.
OurconsolidatedfinancialstatementsincludedinthisprospectusarepresentedinU.S.dollars($)roundedtothenearestthousand,
withmanyamountsinthisprospectusroundedtothenearesttenthofamillion.Therefore,discrepanciesinthetablesbetweentotalsand
thesumsoftheamountslistedmayoccurduetosuchrounding.
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LETTERFROMDOUGBECKER
DearProspectiveInvestors,
AsthefounderofLaureate,itismyprivilegetoexplainthecompanyanditsbeliefs,asawayofeducatingpotentialnewinvestorsto
determineifweareacompatiblefit.Thiscompanywasfoundedover25yearsagoand,whiletheofferings,strategiesandeventhenameof
thecompanyhavechangedovertheyears,ourcorebeliefsremainthesame.Chiefamongthemisourbeliefinthepowerofeducationto
transformlives,andourviewthattheprivatesectorcanmakeapositiveimpactinafieldthattraditionallyhasbeentheprovinceofthe
publicsector.Ihavebeenaccompaniedonthisjourneybyremarkablepartners,friendsandcoworkers,andthesuccessandlongevityof
thiscompanyisacredittotheirpassion,commitmentandmanysacrifices.Manyofthesecontributorsarestillwithusandsomearegone,
butIwritethisletteronbehalfofthemall,inasharedbeliefthatLaureateisthatrarecompanythatwilloutliveitsmanyfoundersand
makelastingcontributionstotheworld.
Seventeenyearsago,weenteredthefieldofinternationalhighereducationwiththeacquisitionofUniversidadEuropeadeMadridin
Spain,andthisbecameourtestbedforinnovationaswedevelopedourideasfornewwaystomanageuniversitiesandtoimprove
outcomesforstudents.Thecompanywasbuiltupontheideathatourmainpurposewastoprepareourstudentsforsuccessintheircareers
andlives.Andwealsobelievedthatthiswasamuchmorevaluablecontributionifitcouldbedoneatscale.Therearemanybarriersthat
inhibitparticipationinhighereducationandwecommittedourselvestoovercomingthesebarriersinordertoexpandaccess.Thisrequires
ustoeducatestudentsatanaffordableprice,andinfactourtuitiontypicallyisfarbelowtheactualperstudentcosttosocietyofpublic
institutions,whichareheavilysubsidizedbygovernment.Expandingaccessalsorequiresustoacceptmorestudentscomparedtoelite
institutions,andtodemonstratethatmanyofourstudentsgraduateandsucceedincareerandlife.
Fromtheverybeginning,wewantedtocreateaninternationalnetworkofuniversitiesthatwouldgiveourstudentsaunique
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Fromtheverybeginning,wewantedtocreateaninternationalnetworkofuniversitiesthatwouldgiveourstudentsaunique
multiculturalexperienceandbetterpreparationforsuccessinanincreasinglyglobalizedworkforce.Sowesearchedforothercompatible
acquisitionsof,orpartnershipswith,universitiesinothercountries,initiallyinSpanishspeakingmarketsbuteventuallyacrossmany
languagesandcultures.Intheprocess,weforgedthelargestandmostpowerfulnetworkofuniversitiesofitskind,withover70institutions
thattodayservemorethanonemillionstudents.ManyoftheseuniversitiesareownedorcontrolledbyLaureate,butwealsomanage
institutionsthatwedonotown.Inaddition,weprovideservicesundercontracttogovernmentsandtoprestigiouspublicandnonprofit
universities,whichdemonstratesourqualityandvalue.Webelievethatprovidingthesetypesofserviceswillbecomeanincreasingly
importantpartofourbusinessmodel.
Accountabilityforresultshasbeenacriticalfactorinoursuccess,andtoaccomplishthiswehavebroughttogetherbestpracticesfrom
thefieldsofhighereducationandbusinessmanagement.Asacompany,weunderstandtheneedsoftheprivatesector,whichwill
ultimatelyemploymostofourgraduates.Sowebuilddeeplinkageswithemployerstoensurethatourcurriculumreflectsthelatest
requirementsandthatourstudentsgraduatewiththeskillstosucceed.Butwearenotjustacompany.Weareacompanyofeducators.Our
academicleadersensurethatwehavegreatteachersintheclassroom,teachingineffectivewaysandwiththerightcurriculum,andwitha
humanconnectiontoeachofourstudents.Theyensurethatweunderstandtheneedsandrequirementsofregulatorsinthemanycountries
thatweserve,helpingachievethegoalsofincreasingparticipationwhileassuringquality.Theireffortsallowustodelivergreat,
measurableoutcomesforourstudents,themajorityofwhomareoutsidetheUnitedStates.
Werecognizetheenormousimportancethatsocietyplacesoneducationasapublicgoodorevenacivilright,andwerespecttherole
thatgovernmentplaysinensuringqualityandaccesstoeducation.Asaleaderinthisfield,wearerequiredtooperatewiththehighest
integrityandthedeepestcommitmenttosocialresponsibility.Thishasalwayscausedustohaveaculturethatcombinesthe"head"ofa
businessenterprisescalable,efficientandaccountableformeasurableresultswiththe
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"heart"ofanonprofitorganizationdedicatedtoimprovinglivesandbenefittingsociety.Wereconcilethesetwoconceptsbydelivering
measurableresultsforourstudents,recognizingthatwhenourstudentssucceed,countriesprosperandsocietiesbenefit.Thismeansthat
wehavealwaysaskedourstockholdersandemployeestorecognizeourcommitmenttoputtheneedsofourstudentsfirst.
Ibelievethatbalancingtheneedsofourconstituentshasbeeninstrumentaltooursuccessandlongevity,allowingustogrowevenin
challengingeconomictimes.Foralongtime,wedidn'thaveaneasywaytoexplaintheideaofaforprofitcompanywithsuchadeep
commitmenttobenefittingsociety.Sowetooknoticewhenin2010thefirststateintheU.S.passedlegislationcreatingtheconceptofa
PublicBenefitCorporation,anewtypeofforprofitcorporationwithanexpressedcommitmenttocreatingamaterialpositiveimpacton
society.Wewatchedthisconceptcarefullyasitsweptthenation,with31statesandtheDistrictofColumbianowhavingpassed
legislationtoallowforthisnewclassofcorporation,whichcommitsitselftohighstandardsofcorporatepurpose,accountabilityand
transparency.ThisincludesDelaware,thestatethatwehaveselectedasournewdomicileandwhichhasthemostuptodatePublic
BenefitCorporationlaw.WebelievethatwearebyfarthelargestcompanytobecomeaPublicBenefitCorporationandthat,followingour
IPO,welikelywillbethefirstpubliclytradedPublicBenefitCorporation.Inaddition,whilenotrequiredbyDelawarelaw,wehave
chosentohaveoursocialandenvironmentalperformance,accountabilityandtransparencyassessedagainsttheproprietarycriteria
establishedbyanindependentnonprofitorganization.Basedonthisassessment,wehavebeendesignatedasa"CertifiedBCorporation."
Whichbringsmetothetopicofourinitialpublicoffering.ManyofyoumayknowthatLaureatewaspreviouslyapubliclytraded
company,from1993untilwewentprivatein2007.Soweunderstandtheadvantagesandchallengesassociatedwithbeingpublic.We
wentprivatewiththeintentionofaccomplishingsomeveryspecificobjectivesand,havingachievedthesegoals,webelieveitistimefor
ustoreestablishourselvesasapubliclytradedcompany.Beingpublicbringsthehighestleveloftransparency,andwillenableustomore
easilyraisecapitaltosupportourmissionwhich,atitscore,isaboutexpandingaccesstohighereducationthroughgreaterscale.Wewant
tobestensurethatwealwayshavecapitaltogrowandbringthebenefitsofoureducationprogramstomorestudents.Werecognizethat
someinvestorsinpubliccompaniesarehighlyfocusedonshorttermresults,andwehopethatitisverycleartothemthatthisisnotour
approach.Withthebenefitofalongtermview,wewillbalancetheneedsofstockholderswiththeneedsofstudents,employeesandthe
communitiesinwhichweoperate,andwebelievethatthisapproachwilldeliverthebestresultsforourinvestors.Weplantoseekoutand
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communitiesinwhichweoperate,andwebelievethatthisapproachwilldeliverthebestresultsforourinvestors.Weplantoseekoutand
engagewithinvestorswhoseethebenefitofthisapproach,andwhowanttobeapartofanenduring,missiondrivencompanythatwe
believehasstrongprospectsforlongtermgrowthandtheopportunitytohelpmillionsofpeoplechangetheirlivesthrougheducation.We
usetheexpressionHereForGoodtoexplainourcommitmenttothinkingandactingforthelongterm,andprovidingasignificantbenefit
tosociety.
Lookingahead,Ican'tthinkofamoreexcitingtimeforourcompany.Theworldembracesthepowerandimportanceofeducationand
isseekingnewideasandtechnologiestodeliverbettereducationtomorepeopleatanaffordablecost.Webelieveweareuniquely
positionedtomeetthisneedthroughourunparalleledscaleandresources,andourgrowingcapacitytoprovideourintellectualproperty
andservicestootheruniversitiesandgovernments.
Sincerelyyours,
DouglasL.Becker
Founder,Chairmanand
ChiefExecutiveOfficer
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PROSPECTUSSUMMARY
Thissummaryhighlightsinformationcontainedelsewhereinthisprospectusanddoesnotcontainalloftheinformationthatyou
shouldconsiderbeforemakingyourinvestmentdecision.BeforeinvestinginourClassAcommonstock,youshouldcarefullyreadthis
entireprospectus,includingtheinformationpresentedunderthesectionentitled"RiskFactors"andthefinancialstatementsandnotes
theretoincludedelsewhereinthisprospectus.
LAUREATEEDUCATION,INC.
OurMission
Laureateisaninternationalcommunityofuniversitiesthatencourageslearningwithoutboundaries.Ourpurposeistoofferhigher
educationwithauniquemulticulturalperspective,andprepareourstudentsforexcitingcareersandlifelongachievement.Webelievethat
whenourstudentssucceed,countriesprosperandsocietiesbenefit.
OurBeliefs
Weareamissiondrivencompanywithalongtermperspective,committedtoaddressingtheneedsofourstudentsandpreparingthem
fortheirfutureendeavors.Weareintenselyfocusedonprovidingourstudentswiththehighestqualityeducationresultinginstrong
employmentopportunities.Inadditiontodeliveringsuperioroutcomesforourstudents,weremainhighlyfocusedondeliveringsocial
returnstoallofourconstituents,especiallythelocalcommunitiesweserve.Keydecisionsaffectingeachinstitutionaremadebylocal
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returnstoallofourconstituents,especiallythelocalcommunitiesweserve.Keydecisionsaffectingeachinstitutionaremadebylocal
managementandfaculty,takingintoaccounttheneedsofthestudents,prospectiveemployers,surroundingcommunitiesandregulators.
Webelieveourdedicationtotheseconstituencieshasenabledourinstitutionstobecometrustedbrandsintheirlocalmarkets,andhas
enabledLaureatetobecomeatrustednameinglobalhighereducation.
OurBusiness
Wearethelargestglobalnetworkofdegreegrantinghighereducationinstitutions,withmorethanonemillionstudentsenrolledat
our71institutionsin25countriesonmorethan200campuses,whichwecollectivelyrefertoastheLaureateInternationalUniversities
network.Weparticipateintheglobalhighereducationmarket,whichwasestimatedtoaccountforrevenuesofapproximately$1.5trillion
in2015,accordingtoGSVAdvisors("GSV").Webelievetheglobalhighereducationmarketpresentsanattractivelongtermopportunity,
primarilybecauseofthelargeandgrowingimbalancebetweenthesupplyanddemandforqualityhighereducationaroundtheworld.
Advancededucationopportunitiesdrivehigherearningspotential,andwebelievetheprojectedgrowthinthemiddleclasspopulation
worldwideandlimitedgovernmentresourcesdedicatedtohighereducationcreatesubstantialopportunitiesforhighqualityprivate
institutionstomeetthisgrowingandunmetdemand.Ouroutcomesdrivenstrategyisfocusedonenablingmillionsofstudentsgloballyto
prosperandthriveinthedynamicandevolvingknowledgeeconomy.
In1999,wemadeourfirstinvestmentinhighereducationand,sincethattime,wehavedevelopedintothegloballeaderinhigher
education,basedonthenumberofstudents,institutionsandcountriesmakingupournetwork.Ourglobalnetworkof71institutions
comprises59institutionsweownorcontrol,andanadditional12institutionsthatwemanageorwithwhichwehaveotherrelationships.
Ourinstitutionsarerecognizedfortheirhighqualityacademics.Forexample,weownandoperateUniversidaddelValledeMxico
("UVMMexico"),thelargestprivateuniversityinMexico,whichin2016wasrankedseventhamongallpublicandprivatehigher
educationinstitutionsinthecountrybyGuaUniversitaria,anannualpublicationofReader'sDigest.Ourtrackrecordfordelivering
highqualityoutcomestoourstudents,whilestressingaffordabilityandaccessibility,hasbeenakeyreasonforourlongrecordofsuccess,
including16consecutiveyearsofenrollmentgrowth.Wehavegenerated
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compoundannualgrowthrates("CAGRs")intotalenrollmentandrevenuesof10.4%and9.0%,respectively,from2009through
September30,2016.FortheLTMendedSeptember30,2016,wegeneratedtotalrevenuesof$4,218.8million,operatingincomeof
$336.8million,netincomeof$311.6millionandAdjustedEBITDAof$708.3million.ForareconciliationofAdjustedEBITDAtonet
income(loss),see"ProspectusSummarySummaryHistoricalConsolidatedFinancialandOtherData."
SincebeingtakenprivateinAugust2007,wehaveundertakenseveralinitiativestocontinuallyimprovethequalityofourprograms
andoutcomesforourstudents,whileexpandingourscaleandgeographicpresence,andstrengtheningourorganizationandmanagement
team.From2007toSeptember30,2016,wehaveexpandedinto12newcountries,addedover100campusesworldwideandgrown
enrollmentfromapproximately300,000tomorethanonemillionstudentswithacombinationofstrongorganicrevenuegrowthof9.3%
(averageannualrevenuegrowthfrom2007to2015excludingacquisitions)andthesuccessfulintegrationof41strategicacquisitions.Key
tothisgrowthwereexpansionsintoBrazil,whereweowned13institutionswithacombinedenrollmentofapproximately260,000
students,andexpansionsintoAsia,theMiddleEastandAfrica,whereweownedorcontrolled21institutionswithacombinedenrollment
ofapproximately86,000students.Further,wehavemadesignificantcapitalinvestmentsandcontinuetomakeoperationalimprovements
intechnologyandhumanresources,includingkeymanagementhires,andaredevelopingscalablebackofficeoperationstosupportthe
LaureateInternationalUniversitiesnetwork,includingimplementingaverticallyintegratedinformationtechnology,finance,accounting
andhumanresourcesorganizationthat,amongotherthings,aredesignedtoenhanceouranalyticalcapabilities.Finally,overthepast
severalyears,wehaveinvestedheavilyintechnologyenabledsolutionstoenhancethestudentexperience,increasepenetrationofour
hybridofferingsandoptimizeefficiencythroughoutournetwork.Webelievetheseinvestmentshavecreatedanintellectualproperty
advantagethathasfurtherdifferentiatedourofferingsfromlocalmarketcompetitors.
TheLaureateInternationalUniversitiesnetworkenablesustoeducateourstudentslocally,whileconnectingthemtoaninternational
communitywithaglobalperspective.Ourstudentscantakeadvantageofsharedcurricula,optionalinternationalprogramsandservices,
includingEnglishlanguageinstruction,dualdegreeandstudyabroadprogramsandotherbenefitsofferedbyotherinstitutionsinour
network.Webelievethatthebenefitsofthenetworktranslateintobettercareeropportunitiesandhigherearningspotentialforour
graduates.
TheinstitutionsintheLaureateInternationalUniversitiesnetworkofferabroadrangeofundergraduateandgraduatedegreesthrough
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campusbased,onlineandhybridprograms.Approximately93%ofourstudentsattendtraditional,campusbasedinstitutionsoffering
multiyeardegrees,similartoleadingprivateandpublichighereducationinstitutionsintheUnitedStatesandEurope.Inaddition,
approximatelytwothirdsofourstudentsareenrolledinprogramsoffourormoreyearsinduration.Ourprogramsaredesignedwitha
distinctemphasisonapplied,professionalorientedcontentforgrowingcareerfieldsandarefocusedonspecificacademicdisciplines,or
verticals,thatwebelievedemonstratestrongemploymentopportunitiesandprovidehighearningspotentialforourstudents,including:
Acrosstheseacademicdisciplines,wecontinuallyandproactivelyadaptourcurriculumtotheneedsofthemarket,including
emphasizingthecoreSTEM(science,technology,engineeringand
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math)andbusinessdisciplines.WebelievetheSTEMandbusinessdisciplinespresentattractiveareasofstudytostudents,especiallyin
developingcountrieswherethereexistsastrongandongoingfocustodevelopandretainprofessionallytrainedindividuals.Since2009,
wehavemorethandoubledourenrollmentofstudentspursuingdegreesinBusiness&Management,Medicine&HealthSciencesand
Engineering&InformationTechnology,ourthreelargestdisciplines.Webelievetheworkofourgraduatesinthesedisciplinescreatesa
positiveimpactonthecommunitiesweserveandstrengthensourinstitutions'reputationswithintheirrespectivemarkets.
Acrosstheworld,weoperateinstitutionsthataddressregional,nationalandlocalsupplyanddemandimbalancesinhighereducation.
Asthegloballeaderinhighereducation,webelieveweareuniquelypositionedtoeffectivelydeliverhighqualityeducationacross
differentbrandsandtuitionlevelsinthemarketsinwhichweoperate.Inmanydevelopingmarkets,traditionalhighereducationstudents
(definedas1824yearolds)havehistoricallybeenservedbypublicuniversities,whichhavelimitedcapacityandareoftenunderfunded,
resultinginaninabilitytomeetgrowingstudentdemandsandemployerrequirements.Ourinstitutionsinthesemarketsoffertraditional
highereducationstudentsaprivateeducationalternative,oftenwithmultiplebrandsandpricepointsineachmarket,withinnovative
programsandstrongcareerdrivenoutcomes.Inmanyofthesesamemarkets,nontraditionalstudentssuchasworkingadultsanddistance
learnershavelimitedoptionsforpursuinghighereducation.Throughtargetedprogramsandmultipleteachingmodalities,weareableto
servethedifferentiatedneedsofthisuniquedemographic.OurflexibleapproachacrossgeographiesallowsLaureatetoaccessabroader
addressablemarketofstudentsbyefficientlytailoringinstitutionstomeettheneedsofaparticulargeographyandstudentpopulation.
Wehavefourreportingsegments,whicharesummarizedinthetablebelow.WegroupourinstitutionsbygeographyinLatinAmerica
("LatAm"),Europe("Europe")andAsia,MiddleEastandAfrica("AMEA")forreportingpurposes.OurGlobalProductsandServices
segment("GPS")includesourfullyonlineuniversitiesandourcampusbasedinstitutionsintheUnitedStates.
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ThefollowinginformationforouroperatingsegmentsispresentedasofSeptember30,2016,exceptwhereotherwiseindicated,and
reflectstheoperatingsegmentchangediscussedinthesectionentitled"PresentationofFinancialInformation":
Countries
Institutions
Enrollments(roundedtonearest
thousand)
LTMendedSeptember30,2016
Revenues($inmillions)
%ContributiontoLTMended
September30,2016Revenues
LatAm
Europe
8
29
7
14
AMEA
8
21
834,000 54,000 86,000

$ 2,378.7 $

GPS
2
7
Total
25
71
73,000 1,047,000
496.9 $
419.1 $
939.9 $
4,218.8
12%
10%
22%
100%
56%
TheeliminationofintersegmentrevenuesandamountsrelatedtoCorporate,whichtotal$15.7million,isnot
separatelypresented.
OurIndustry
Wearetheleaderintheglobalmarketforhighereducation,whichischaracterizedbyasignificantimbalancebetweensupplyand
demand,especiallyindevelopingeconomies.Inmanycountries,demandforhighereducationislargeandgrowing.GSVestimatesthat
highereducationinstitutionsaccountedfortotalrevenuesofapproximately$1.5trilliongloballyin2015,withthehighereducation
marketexpectedtogrowbyapproximately5%perannumthrough2020.Globalgrowthinhighereducationisbeingfueledbyseveral
demographicandeconomicfactors,includingagrowingmiddleclass,globalgrowthinservicesandtechnologyrelatedindustriesand
recognitionofthesignificantpersonalandeconomicbenefitsgainedbygraduatesofhighereducationinstitutions.Atthesametime,
manygovernmentshavelimitedresourcestodevotetohighereducation,resultinginadiminishedabilitybythepublicsectortomeet
growingdemand,andcreatingopportunitiesforprivateeducationproviderstoenterthesemarketsanddeliverhighqualityeducation.As
aresult,theprivatesectorplaysalargeandgrowingroleinhighereducationglobally.WhiletheLaureateInternationalUniversities
networkisthelargestglobalnetworkofdegreegrantinghighereducationinstitutionsintheworld,ourtotalenrollmentofmorethanone
millionstudentsrepresentsonly0.5%ofworldwidehighereducationstudents.
Large,GrowingandUnderpenetratedPopulationofQualifiedHigherEducationStudents.AccordingtotheUnitedNations
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Large,GrowingandUnderpenetratedPopulationofQualifiedHigherEducationStudents.AccordingtotheUnitedNations
Educational,ScientificandCulturalOrganization("UNESCO"),198.6millionstudentsworldwidewereenrolledinhighereducation
institutionsin2013,nearlydoublethe99.7millionstudentsenrolledin2000,andapproximately90%ofthosestudentswereenrolledat
institutionsoutsideoftheUnitedStatesasof2013.Inmanycountries,includingthroughoutLatinAmerica,Asiaandotherdeveloping
regions,thereisgrowingdemandforhighereducationbasedonfavorabledemographics,increasingsecondarycompletionratesand
increasinghighereducationparticipationrates,resultingincontinuedgrowthinhighereducationenrollments.Whileglobalparticipation
rateshaveincreasedfortraditionalhighereducationstudents(definedas1824yearolds),themarketforhighereducationisstill
significantlyunderpenetrated,particularlyindevelopingcountries.Giventhelowpenetrationrates,manygovernmentsindeveloping
countrieshaveastatedgoalofincreasingthenumberofstudentsparticipatinginhighereducation.Forexample,Mexico'sparticipation
rateincreasedfromapproximately16%toapproximately22%from2003to2013,andtheMexicangovernmenthassetagoalof
increasingthenumberofstudentsenrolledinhighereducationby17%overthenextthreeyears.Otherdevelopingcountrieswithlarge
addressablemarketsaresimilarlyunderpenetratedasevidencedbythefollowingparticipationratesfor2013:Brazil(32%),China(22%)
andIndia(19%),allofwhicharewellbelowratesofdevelopedcountriessuchasthe
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UnitedStatesandSpain,whichin2013hadparticipationratesofapproximately63%andapproximately60%,respectively.
StrongEconomicIncentivesforHigherEducation.AccordingtotheBrookingsInstitution,approximately1.8billionpeopleinthe
worldcomposedthemiddleclassin2009,anumberthatisexpectedtomorethandoubleby2030toalmostfivebillionpeople.We
believethatmembersofthislargeandgrowinggroupseekadvancededucationopportunitiesforthemselvesandtheirchildrenin
recognitionofthevastdifferentialinearningspotentialwithandwithouthighereducation.AccordingtodatafromtheOrganizationfor
EconomicCooperationandDevelopment("OECD"),incertainEuropeanmarketsinwhichweoperate,theearningsfromemploymentfor
anadultcompletinghighereducationwereapproximately60%higherthanthoseofanadultwithjustanuppersecondaryeducation,
whileintheUnitedStatesthedifferentialwasapproximately76%.Thisincomegapisevenmorepronouncedinmanydeveloping
countriesaroundtheworld,includingadifferentialofapproximately139%inChileandapproximately152%inBrazil.OECDstatistics
alsoshowthatoverallemploymentratesaregreaterforindividualscompletinghighereducationthanforthosewhohavenotcompleted
uppersecondaryeducation.Inaddition,webelieveaseconomiesaroundtheworldareincreasinglybasedontheservicessector,theywill
requiresignificantinvestmentinhumancapital,advancededucationandspecializedtrainingtoproduceknowledgeableprofessionals.We
believethecumulativeimpactoffavorabledemographicandsocioeconomictrends,coupledwiththesuperiorearningspotentialof
highereducationgraduates,willcontinuetoexpandthemarketforprivatehighereducation.
IncreasingRoleofthePrivateSectorinHigherEducation.Inmanyofourmarkets,theprivatesectorplaysameaningfulrolein
highereducation,bridgingsupplyanddemandimbalancescreatedbyalackofcapacityatpublicuniversities.Inadditiontocapacity
limitations,webelievethatlimitedpublicresources,andthecorrespondingpolicyreformstomakehighereducationsystemsless
dependentonthefinancialandoperationalsupportoflocalgovernments,haveresultedinincreasedenrollmentsinprivateinstitutions
relativetopublicinstitutions.
AccordingtotheOECD,from2003to2013,thenumberofstudentsenrolledinprivateinstitutionsgrewfromapproximately26%to
approximately31%oftotalenrollmentswithinOECDcountries.Forexample,BrazilandChilerelyheavilyuponprivateinstitutionsto
deliverqualityhighereducationtostudents,withapproximately71%(in2012)andapproximately84%(in2013),respectively,ofhigher
educationstudentsinthesecountriesenrolledinprivateinstitutions.
Thedecreaseingovernmentfundingtopublichighereducationinstitutionsinrecentyearshasservedtospurthegrowthofprivate
institutions,astuitionshavebeenincreasinglyfundedbyprivatesources.Onaverage,OECDcountriesexperiencedadecreaseinpublic
fundingfromapproximately69%oftotalfundingin2000toapproximately65%in2012.Forexample,Mexicoexperiencedadecreasein
publicfundingasapercentageoftotalfundingofapproximatelytenpercentagepointsduringthesameperiod.Webelievethesetrends
haveincreaseddemandforcompetitiveprivateinstitutionsaspublicinstitutionsareunabletomeetthedemandofstudentsandfamilies
aroundtheworld,especiallyindevelopingmarkets.
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GreaterAccessibilitytoHigherEducationthroughOnlineandHybridOfferings.ImprovingInternetbroadbandinfrastructureand
newinstructionmethodologiesdesignedfortheonlinemediumhavedrivenincreasedacceptanceoftheonlinemodalityglobally.
AccordingtoasurveyconductedbytheBabsonSurveyResearchGroup,approximately71%ofacademicleadersratedonlinelearning
outcomesasthesameorsuperiortoclassroomlearningin2014,upfromapproximately57%in2003.GSVestimatesthattheonlinehigher
educationmarketwillgrowbyaCAGRofapproximately25%,from$49billionin2012to$149billionin2017.Additionally,newonline
andhybrideducationofferingshaveenabledthecosteffectivedeliveryofhighereducation,whileimprovingoverallaffordabilityand
accessibilityforstudents.Webelievethatincreasingstudentdemand,coupledwith
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growingemployerandregulatoryacceptanceofdegreesobtainedthroughonlineandhybridmodalities,willcontinuetodrivesignificant
growthintheonlineandhybridhighereducationmarketglobally.
OurStrengthsandCompetitiveAdvantages
Webelieveourkeycompetitivestrengthsthatwillenableustoexecuteourgrowthstrategyincludethefollowing:
FirstMoverandLeaderinGlobalHigherEducation.In1999,wemadeourfirstinvestmentinglobalhighereducation.Sincethat
time,theLaureateInternationalUniversitiesnetworkhasgrowntoinclude71institutionsin25countriesthatenrollmorethanone
millionstudents,ofwhichapproximately95%areoutsideoftheUnitedStates.Ourgrowthhasbeentheresultofnumerousorganic
initiatives,supplementedbysuccessfullycompletingandintegrating41acquisitionssinceAugust2007,substantiallyallofwhichwere
completedthroughprivatenegotiationsandnotaspartofanauctionprocess.Givenoursizeandstatusasthefirstmoverinmanyofour
markets,wehavebeenabletoacquiremanymarqueeassets,whichwebelievewillhelpusmaintainourmarketleadingpositionduetothe
considerabletimeandexpenseitwouldtakeacompetitortoestablishanintegratednetworkofinternationaluniversitiesofsimilarscale
withthebrands,intellectualpropertyandaccreditationsthatwepossess.
LongStandingandReputableUniversityBrandsDeliveringHighQualityEducation.Webelievewehaveestablishedareputation
forprovidinghighqualityhighereducationaroundtheworld,andthatourschoolsareamongthemostrespectedhighereducationbrands
intheirlocalmarkets.Manyofourinstitutionshaveover40yearhistories,withsomeinstitutionsapproaching100years.Inadditionto
longstandingpresencesintheirlocalcommunities,manyofourinstitutionsarerankedamongthebestintheirrespectivecountries.For
example,theBarmetrodelaEducacinSuperiorhasrankedUniversidadAndrsBelloasthetopprivateuniversityinChile.Similarly,
inBrazil,UniversidadeAnhembiMorumbiisrankedbyGuiadoEstudanteasoneofSoPaulo'stopuniversities,andinEurope,
UniversidadEuropeadeMadridisthesecondlargestprivateuniversityinSpainandreceivedfourstarsintheprestigious2015QSStarsTM
internationaluniversityrating.
Ourstrongbrandsareperpetuatedbyourstudentcentricfocusandourmissiontoprovidegreateraccesstocosteffective,highquality
highereducation,whichallowsmorestudentstopursuetheiracademicandcareeraspirations.Wearecommittedtocontinuallyevaluating
ourinstitutionstoensureweareprovidingthehighestqualityeducationtoourstudents.Ourproprietarymanagementtool,theLaureate
EducationAssessmentFramework("LEAF"),isusedtoevaluateinstitutionalperformancebasedon44uniquecriteriaacrossfivedifferent
categories:Employability,LearningExperience,PersonalExperience,Access&OutreachandAcademicExcellence.LEAF,in
conjunctionwithadditionalexternalassessmentmethodologies,suchasQSStarsTM,allowsustoidentifykeyareasforimprovementin
ordertodriveacultureofqualityandcontinualinnovationatourinstitutions.Forexample,morethan86%ofstudentsattendingLaureate
institutionsinBrazilareenrolledinaninstitutionwithanIGCscore(anindicatorusedbytheBrazilianMinistryofEducationtoevaluate
thequalityofhighereducationinstitutions)thathasimprovedsince2010.Inaddition,ourBrazilianinstitutions'IGCscoreshave
increasedbyapproximately16%onaveragefrom2010to2014,placingthreeofourinstitutionsinthetopquintile,andnine
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(encompassingapproximately96%ofourstudentenrollmentinBrazil)inthetopthreequintilesofallprivatehighereducation
institutionsinthecountry.
Manyofourinstitutionsandprogramshaveearnedthehighestaccreditationavailable,whichprovidesuswithastrongcompetitive
advantageinlocalmarkets.Forexample,weservemorethan200,000studentsinthefieldsofmedicineandhealthsciencesonover100
campusesthroughouttheLaureateInternationalUniversitiesnetwork,including22medicalschoolsand19dentalschools.Medical
schoollicensesareoftenthemostdifficulttoobtainandareonlygrantedtoinstitutionsthatmeet
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rigorousstandards.Webelievetheexistenceofmedicalschoolsatmanyofourinstitutionsfurthervalidatesthequalityofourinstitutions
andprograms.Similarly,otherinstitutionshavereceivednumerousspecializedaccreditations,includingthoseforPh.D.programs.
SuperiorOutcomesforOurStudents.Weofferhighqualityundergraduate,graduateandspecializedprogramsinawiderangeof
disciplinesthatgeneratestronginterestfromstudentsandprovideattractiveemploymentprospects.Wedesignourprogramstoprepare
studentstocontributeproductivelyintheirchosenprofessionsuponemployment.Ourcurriculumdevelopmentprocessincludesemployer
surveysandongoingresearchintobusinesstrendstodeterminetheskillsandknowledgebasethatwillberequiredbythoseemployersin
thefuture.Thisinformationresultsintimelycurriculumupgrades,whichhelpsensurethatourgraduatesacquiretheskillsthatwillmake
themmarketabletoemployers.In2014,wecommissionedastudybyMillwardBrown,aleadingthirdpartymarketresearchorganization,
ofgraduatesatLaureateinstitutionsrepresentingover60%oftotalLaureateenrollments.Graduatesat12ofour13surveyedinternational
institutionsachieved,onaverage,equalorhigheremploymentrateswithin12monthsofgraduationascomparedtograduatesofother
institutionsinthesamemarkets,andinallofourpremiuminstitutionssurveyed,graduatesachievedhigherstartingsalariesascompared
tograduatesofotherinstitutionsinthosesamemarkets(salarypremiumtomarketbenchmarksrangedfromapproximately6%to
approximately118%).
RobustTechnologyandIntellectualPropertyPlatform.Byvirtueofour17yearsofexperienceoperatinginaglobalenvironment,
managingcampusbasedinstitutionsacrossmultipledisciplinesanddevelopingandadministeringonlineprogramsandcurricula,wehave
developedanextensivecollectionofintellectualproperty.Webelievethiscollectionofintellectualproperty,whichincludesonline
capabilities,campusdesignandmanagement,recruitmentoftransnationalstudents,facultytraining,curriculumdesignandquality
assurance,amongotherproprietarysolutions,providesourstudentsatrulydifferentiatedlearningexperienceandcreatesasignificant
competitiveadvantageforourinstitutionsovercompetitors.
Acriticalelementofourintellectualpropertyisasuiteofproprietarytechnologysolutions.SelectexamplesincludeOneCampus,
whichconnectsstudentsacrossournetworkwithsharedonlinecoursesanddigitalexperiences,andSlingshot,anonlinecareerorientation
toolthatenablesstudentstoexplorecareerpathsthroughstateoftheartinterestassessmentandrichcontentabouthundredsofcareers.
Ourcommitmenttoinvestingintechnologyinfrastructure,softwareandhumancapitalensuresahighqualityeducationalexperiencefor
ourstudentsandfaculty,whilealsoprovidinguswiththeinfrastructuretomanageandscaleourbusiness.
Ourintellectualpropertyhasbeenakeydriverindevelopingpartnershipswithprestigiousindependentinstitutionsandgovernments
globally.Forexample,wehavepartneredwithothertraditionalpublicandprivatehighereducationinstitutionsasaproviderofonline
services.WehaveoperatedthismodelformorethantenyearswiththeUniversityofLiverpoolintheUnitedKingdomand,morerecently,
wehaveaddednewpartnershipswiththeUniversityofRoehamptonintheUnitedKingdomandtheUniversityofMiamiintheUnited
States.Additionally,in2013,theKingdomofSaudiArabialaunchedtheCollegeofExcellenceprogramwithalongtermgoalofopening
100newtechnicalcolleges,andsoughtprivateoperatorstomanagetheinstitutionsonitsbehalfunderanoperatingmodelinwhichthe
KingdomofSaudiArabiafundsthecapitalrequirementstobuildtheinstitutions,andtheprivateoperatorrunstheacademicoperations
underacontractmodel.AsofSeptember30,2016,wehavebeenawardedcontractstooperateeightofthe33collegesforwhichcontracts
havebeenawardedtodate,morethananyotherproviderintheKingdomofSaudiArabia.
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ScaleandDiversificationofOurGlobalNetwork.TheLaureateInternationalUniversitiesnetworkisdiversifiedacross
25countries,71campusbasedandonlineinstitutionsandover2,500programs.Additionally,inmanymarkets,wehavemultiple
institutionsservingdifferentsegmentsofthepopulation,atdifferentpricepointsandwithdifferentacademicofferings.Althoughthe
majorityofour
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institutionsservethepremiumsegmentofthemarket,wealsohaveexpandedourportfolioofofferingsinmanymarketstoincludehigh
qualityvalueandtechnicalvocationalinstitutions.Byservingmultiplesegmentsofthemarket,allwithhighqualityofferings,weare
abletocontinuetoexpandourenrollmentsduringvaryingeconomiccycles.Webelievethereisnootherpublicorprivateorganization
thatcommandscomparableglobalreachorscale.
Ourglobalnetworkallowsourinstitutionstobringtheirdistinctiveidentitiestogetherwithourproprietaryinternationalcontent,
managerialbestpracticesandinternationalprograms.Throughcollaborationacrosstheglobalnetwork,wecanefficientlyshareacademic
curriculaandresources,createdualdegreeprogramsandstudentexchanges,developourfacultyandincorporatebestpracticesthroughout
theorganization.Inaddition,ourwiderangingnetworkallowsustocontinuetoscaleourbusinessbyfacilitatingtheexpansionof
existingprogramsandcampuses,thelaunchofnewprograms,theopeningofnewcampusesinareasofhighdemandandthestrategic
acquisitionandintegrationofnewinstitutionsintoournetwork.Forexample,theresourcesandsupportofourglobalnetworkhavehada
demonstratedimpactonourMedicine&HealthSciencesexpansioneffort,whichhasresultedinenrollmentgrowthfromapproximately
75,000studentsin2009tomorethan200,000studentsasofSeptember30,2016.Furthermore,theexistingbreadthofournetworkallows
ustoprovideahighqualityeducationalexperiencetoourstudents,whilesimultaneouslyaccessingthebroadestaddressablemarketfor
ourofferings.
Inrecognitionofthebenefitsofourinternationalscale,andinordertoformalizeourorganizationalfocusontheopportunities
presentedbyourestablishednetwork,wecreatedtheLaureateNetworkOffice("LNO")in2015.TheLNOisanimportantresourcethat
allowsus,amongotherthings,tobetterleverageourexpertiseintheonlinemodalitytoincreasethefrequencyandeffectivenessofonline
andhybridlearningopportunitiesacrossthenetwork.
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Tofurtherillustratethebreadthanddiversityofourglobalnetwork,thechartsbelowshowthemixofourgeographicrevenues,
programs,modalityandlevelsofstudy:
AttractiveFinancialModel.
StrongandConsistentGrowth.Wehaveaproventrackrecordofdeliveringstrongfinancialresultsthroughvarious
economiccycles.From2009to2015,ourrevenuesandAdjustedEBITDAgrewataCAGRof10.5%and11.3%,
respectively(13.5%and14.8%onaconstantcurrencybasis,respectively).From2009to2015,ournetlossincreasedata
CAGRof13.2%to$315.8millionfortheyearendedDecember31,2015.Duringthissameperiod,werealizedconstant
currencyrevenuegrowthofatleast10.3%everyyear.Adjustedforacquisitions,ouraverageannualorganicrevenuegrowth
overthesameperiodwas7.6%(10.4%onaconstantcurrencybasis).ForareconciliationofAdjustedEBITDAtonet
income(loss),see"SummaryHistoricalConsolidatedFinancialandOtherData."
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income(loss),see"SummaryHistoricalConsolidatedFinancialandOtherData."
PrivatePayModel.Over75%ofourrevenuesfortheyearendedDecember31,2015weregeneratedfromprivatepay
sources.Webelievestudents'andfamilies'willingnesstoallocatepersonalresourcestofundhighereducationatour
institutionsvalidatesourstrongvalueproposition.
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RevenueVisibilityEnhancedbyProgramLengthandStrongRetention.Themajorityoftheacademicprogramsofferedby
ourinstitutionslastbetweenthreeandfiveyears,andapproximatelytwothirdsofourstudentswereenrolledinprogramsof
atleastfouryearsormoreinduration,asofSeptember30,2016.Thelengthofourprogramsprovidesuswithahighdegree
ofrevenuevisibility,whichhistoricallyhasledtomorepredictablefinancialresults.Giventhatourfallstudentintakeis
substantiallycompletedbytheendofSeptember,wehavevisibilityintoapproximately70%ofthefollowingyear's
revenues,assumingaconstantforeignexchangeenvironmentandassumingretentionandgraduationratesinlinewith
historicalperformance.Weactivelymonitorandmanagestudentretentionbecauseoftheimpactithasonstudentoutcomes
andourfinancialresults.Thehistoricalannualstudentretentionrate,whichwedefineastheproportionofprioryear
studentsreturninginthecurrentyear(excludinggraduatingstudents),ofover80%hasnotvariedbymorethanthree
percentagepointsinanyoneyearoverthelastfiveyears.Givenourhighdegreeofrevenuevisibility,weareabletomake
attractivecapitalinvestmentsandexecuteotherstrategicinitiativestohelpdrivesustainablegrowthinourbusiness.
AttractiveReturnonIncrementalInvestedCapital("ROIIC").Ourcapitalinvestmentssinceinceptionhavecreated
significantscaleandhavealsolaidthefoundationforcontinuedstrongorganicgrowth.Giventhatwehavealreadymade
foundationalinfrastructureinvestmentsinmanyofourcoremarkets,weexpecttorecognizeattractivereturnson
incrementalinvestedcapitaldeployed.AsofDecember31,2015,ourfouryearROIICwas28.1%.Formoreinformationon
ROIIC,see"SelectedHistoricalConsolidatedFinancialandOtherData."
ProvenManagementTeam.Wehaveanexperiencedandtalentedseniormanagementteam,withstronginternationalexpertisefrom
awidevarietyofindustryleadingglobalcompanies.Ourexecutiveofficershavebeenwithusanaverageof13yearsandhaveledour
transformationintothelargestglobalnetworkofdegreegrantinghighereducationinstitutionsintheworld.DouglasL.Becker,our
Chairman,ChiefExecutiveOfficerandfounder,hasledourCompanysinceitsinceptionin1989andhascultivatedanentrepreneurialand
collaborativemanagementculture.Thisentrepreneurialleadershipstylehasbeencomplementedbyanexecutivemanagementteamwith
broadglobalexperience,enablingustoinstitutestronggovernancepracticesthroughoutournetwork.Thestrengthofthemanagement
teamhasenabledthesharingofbestpractices,allowingustocapitalizeonfavorablemarketdynamicsandleadingtothesuccessful
integrationofnumerousinstitutionsintotheLaureateInternationalUniversitiesnetwork.Inaddition,wehavestrongregionalandlocal
managementteamswithadeepunderstandingofthelocalmarkets,thatarefocusedonmeetingtheneedsofourstudentsandcommunities,
andmaintainingkeyrelationshipswithregulatorsandbusinessleaders.Ourmanagementteamhasaproventrackrecordofgainingthe
trustandrespectofthemanyregulatoryauthoritiesthatarecriticaltoourbusiness.
OurGrowthStrategy
WeintendtocontinuetofocusongrowingtheLaureateInternationalUniversitiesnetworkthroughthefollowingkeystrategies:
ExpandPrograms,DemographicsandCapacity.Wewillcontinuetofocusonopportunitiestoexpandourprogramsandthetypeof
studentsthatweserve,aswellasourcapacityinourmarketstomeetlocaldemand.Wealsointendtocontinuetoimprovetheperformance
ofeachofourinstitutionsbyadoptingbestpracticesthathavebeensuccessfulatotherinstitutionsintheLaureateInternational
Universitiesnetwork.Webelievetheseinitiativeswilldriveorganicgrowthandprovideanattractivereturnoncapital.Inparticular,we
intendto:
AddNewProgramsandCourseOfferings.Wewillcontinuetodevelopnewprogramsandcourseofferingstoaddressthe
changingneedsinthemarketsweservebyusingsharedcurricula
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changingneedsinthemarketsweservebyusingsharedcurricula
10
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availablethroughthenetwork,andinconsultationwithleadinglocalbusinesses.Newprogramsandcourseofferingsenable
ustoconsistentlyprovideahighqualityeducationthatisdesiredbystudentsandprospectiveemployers.Asweoptimize
ourofferingstodelivercoursesinhighdemanddisciplines,wealsobelievewewillbeabletoincreaseenrollmentand
improveutilizationatinstitutionsacrossournetwork.
ExpandTargetStudentDemographics.Inmanyofourmarkets,weusesophisticatedanalyticaltechniquestoidentify
opportunitiestoprovidequalityeducationtoneworunderservedstudentpopulationswheremarketdemandisnotbeing
met,suchasnontraditionalstudents(e.g.,workingadults)whomayvalueflexibleschedulingoptions,aswellastraditional
students.Ourabilitytoprovidequalityeducationtotheseunderservedmarketshasprovidedadditionalgrowthtothe
LaureateInternationalUniversitiesnetworkandweintendtoleverageourmanagementcapabilitiesandlocalknowledge
tofurthercapitalizeonthesehighereducationopportunitiesinnewandexistingmarkets.Asweexpandinaparticular
countryorregion,weoftendeveloptailoredprogramstoaddresstheunmetneedsofthesemarkets.
IncreaseCapacityatExistingandNewCampusLocations.Wewillcontinuetomakedemanddriveninvestmentsin
additionalcapacitythroughouttheLaureateInternationalUniversitiesnetworkbyexpandingexistingcampusesand
openingnewcampuses,includinginnewcities.Weemployahighlyanalyticalprocessbasedoneconomicand
demographictrends,anddemanddataforthelocalmarkettodeterminewhenandwheretoexpandcapacity.Whenopening
anewcampusorexpandingexistingfacilities,weusebestpracticesthatwehavedevelopedovermorethanthepastdecade
tocosteffectivelyexpeditetheopeninganddevelopmentofthatlocation.
Wehavesuccessfullyimplementedthesestrategiesatmanyofourinstitutions.Forexample,atUVMMexicowegrewtotalenrollments
fromapproximately37,000studentsin2002toapproximately128,000in2015.Thisgrowthwastheresultoftheintroductionofnew
programs,includinginthefieldsofhealthsciences,engineeringandhospitality,theadditionof23newcampuslocations(from13in
2002to36in2015),andtheabilitytoservenewmarketsegmentssuchasworkingadults.WhileUVMMexicohasgrownintothelargest
privateinstitutioninMexico,ourrelentlessfocusonacademicqualityremains.Infact,UVMMexicohasimprovedfromthe9 thranked
institutionin2004tothe7 thrankedinstitutionin2016accordingtoGuaUniversitaria.
ExpandPenetrationofOnlineandHybridOfferings.Weintendtoincreasethenumberofourstudentswhoreceivetheireducation
throughfullyonlineorhybridprogramstomeetthegrowingdemandofyoungergenerationsthatcontinuetoembracetechnology.Over
thepastdecade,theglobalpopulationwithInternetaccesshascontinuedtogrow,andForresterResearch,Inc.("Forrester")estimatesa
totalof3.5billionpeoplewillhaveInternetaccessby2017,representingnearlyhalfoftheworld'spopulation.Additionally,inmanyof
ourmarkets,onlineeducationisbecomingmoreacceptedbyregulatorsandeducationprofessionalsasaneffectivemeansofproviding
qualityhighereducation.Asthequalityandacceptanceofonlineeducationincreasesglobally,weplantocontinueinvestinginboth
expandingourstandaloneonlinecourseofferingsandenhancingourtraditionalcampusbasedcourseofferingsviacomplementaryonline
delivery,creatingahybriddeliverymodel.WebelieveourhistoryofsuccesswithWaldenUniversity,afullyonlineinstitutioninthe
UnitedStates,andourwelldevelopedonlineprogramofferingswillprovideaconsiderableadvantageoverlocalcompetitors,enablingus
tocombineourstronglocalbrandswithourexperienceindeliveringonlineeducation.Bytheendof2019,ourgoalistoincreasethe
numberofstudentcredithourstakenonline,whichwasapproximately11%asoftheendof2015,toapproximately25%.Someofour
networkinstitutionsarealreadyimplementingonlineprogramswithsignificantprogressbeingmade.Forexample,atUniversidadEuropea
deMadridinSpain,approximately20%ofourstudentstookatleastoneonlinecourseasofJune30,2016.Ouronlineinitiativeis
designedtonotonlyprovideourstudentswithaccesstothetechnologyplatformsandinnovativeprogramstheyexpect,butalsoto
increaseour
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enrollmentinamorecapitalefficientmanner,leveragingcurrentinfrastructureandimprovingclassroomutilization.
ExpandPresenceinAMEA.AMEArepresentsthelargesthighereducationmarketopportunityintheworldwithmorethan
120millionstudentsenrolledinhighereducationinstitutionsin2013,accordingtoUNESCO.Despitethelargenumberofstudents
enrolled,participationratesintheregionsuggestsignificantlyunderpenetratedenrollmentgiventhestrongimbalancebetweenthesupply
anddemandforhighereducation.
In2008,weenteredtheAMEAhighereducationmarketwithouracquisitionofaninterestinINTIEducationGroupinMalaysia.In
thelasteightyears,wehavegrownourAMEAfootprinttoinclude21institutionsineightcountries,servingapproximately86,000
students,representinganenrollmentCAGRofapproximately20%sinceenteringtheregionin2008.RecentexpansionintheAMEA
regionincludeseightCollegesofExcellenceintheKingdomofSaudiArabia,andourfirstinstitutioninSubSaharanAfricain2013,
MonashSouthAfrica.Inanticipationofcontinuedgrowth,wehavemadesignificantinvestmentsintheregion,includinghiringan
experiencedregionalmanagementteamandestablishingtheinfrastructuretohelpfacilitategrowthandfurtherexpandourfootprintinthe
region.WeplantocontinuetoexpandourpresenceinAMEAbyprioritizingmarketsbasedondemographic,marketandregulatory
factors,whileseekingattractivereturnsoncapital.
AcceleratePartnershipandServicesModelGlobally.Asthegloballeaderinhighereducation,webelievewearewellpositionedto
capitalizeonadditionalopportunitiesintheformofpartnershipandservicemodelsthataredesignedtoaddressthegrowingneedsof
traditionalinstitutionsandgovernmentsaroundtheworld.
Increasinglymorecomplexservicesandoperatingcapabilitiesarerequiredbyhighereducationinstitutionstoaddresstheneedsof
studentseffectively,andwebelieveourexpertiseandknowledgewillallowustoleverageourintellectualpropertyandtechnologyto
servethismarketneed.Wehavepartneredwithtraditionalpublicandprivateeducationinstitutionsasaproviderofonlineservicesandwe
believetherewillbeopportunitiestoexpandthatplatformundersimilarrelationshipswithotherprestigiousindependentinstitutionsin
thefuture.Additionally,wearecontinuallyaddingtooursuiteofsolutions,andwebelievemanyoftheseproductsandserviceswill
provideadditionalcontractualandlicensingopportunitiesforusinthefuture.Forexample,inrecentyearswehavesignificantly
advancedourdigitalteachingandlearningeffortsthroughproprietarytechnologyenabledsolutionssuchas:
OneFolio,anonlinetoolthatconnectsLaureatefacultymembers,instructionaldesigners,andlearningarchitectsto
valuabledigitalresourcestheycanusetoenhancethestudentlearningexperience.
LaureateLanguages,whichprovidesdigitallanguagelearningsolutionstoourstudentsandfacultyintheareasofGeneral
English,ProfessionalEnglishandEnglishforAcademicPurposes,aswellasteachertrainingandassessment.
Additionally,governmentsaroundtheworldareincreasinglyfocusedonincreasingparticipationratesandoftendonothavean
establishedorscalablepublicsectorplatformwiththenecessaryexpertisetoaccomplishthatobjective,andthereforearewillingtofund
privatesectorsolutions.WebelieveourcurrentpartnershipwiththeKingdomofSaudiArabia,wherewewereselectedastheirlargest
partnerfortheCollegesofExcellenceprogram,isademonstrationofhowourdistinctportfolioofsolutionsdifferentiatesusfromother
providerswhoparticipatedintheselectionprocess.Weareinactivediscussionwithothergovernmentsregardingsimilarpartnerships,as
wellasothersolutionsthatwecanprovidetoexistingandnewpartners,andweanticipatethiscouldbeasourceofadditionalrevenuefor
usinthefuture.
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IncreaseOperatingEfficienciesthroughCentralizationandStandardization.In2014,welaunchedExcellenceinProcess("EiP")
asanenterprisewideinitiativetooptimizeandstandardizeourprocessestoenablesustainedgrowthandmarginexpansion.Theprogram
aimstoenableverticalintegrationofprocurement,informationtechnology,finance,accountingandhumanresources,thusenablingusto
fullyleveragethegrowingsizeandscopeofourlocaloperations.Specifically,wehavedevelopedandbeguntodeployregionalshared
servicesorganizations("SSOs")aroundtheworld,whichwillprocessmostbackofficeandnonstudentfacingtransactionsforthe
institutionsintheLaureateInternationalUniversitiesnetwork,suchasaccounting,financeandprocurement.TheimplementationofEiP
andregionalSSOsareexpectedtogeneratesignificantcostsavingsthroughoutthenetworkasweeliminateredundantprocessesandbetter
leverageourglobalscale.Inaddition,centralizedinformationtechnology,productdevelopmentandcontentmanagementwillallowusto
propagatebestpracticesthroughouttheLaureateInternationalUniversitiesnetworkandcapitalizeonefficienciestohelpimprove
performance.WeanticipateEiPwillrequireaninvestmentofapproximately$180millionfrom2015to2017,withthefirstsignificant
investmentsalreadyhavingbeenmadein2015.Theseinvestmentshavealreadybeguntogeneratecostsavingsand,uponcompletionof
theproject,weexpecttheseefficienciestogenerateapproximately$100millioninannualcostsavingsin2019,whilealsoenhancingour
internalcontrolsandthespeedofintegrationofnewacquisitions.Wealsobelievetheseinitiativeswillenhancethestudentexperienceby
improvingthequalityofouroperationsandbyenablingadditionalreinvestmentinfacilities,facultyandcourseofferings.
TargetStrategicAcquisitions.SincebeingtakenprivateinAugust2007,wehavemade41acquisitionswithanaggregatepurchase
priceofapproximately$2.0billion,includingassumeddebt.Substantiallyalloftheseacquisitionswerecompletedthroughprivate
negotiationsandnotaspartofanauctionprocess,whichwebelievedemonstratesourstandingasapartnerofchoice.Weintendto
continuetoexpandthroughtheselectiveacquisitionofinstitutionsinnewandexistingmarkets.Weemployahighlydisciplined
approachtoacquisitionsbyfocusingonkeycharacteristicsthatmakecertainmarketsparticularlyattractiveforprivatehighereducation,
suchasdemographics,economicandsocialfactors,thepresenceofastablepoliticalenvironmentandaregulatoryclimatethatvalues
privatehighereducation.Whenweenteranewmarketorindustrysector,wetargetinstitutionswithwellregardedreputationsandwhich
arewellrespectedbyregulators.Wealsoinvesttimeandresourcestounderstandthemanagerial,financialandacademicresourcesofthe
prospectandtheresourceswecanbringtothatinstitution.Afteranacquisition,wefocusonorganicgrowthandfinancialreturnsby
applyingbestpracticesandintegrating,bothoperationallyandfinancially,theinstitutionintotheLaureateInternationalUniversities
network,andwehaveastrongtrackrecordofsuccess.Foralltheinstitutionsweacquiredbetween1999andDecember31,2010,we
achievedaverageenrollmentandrevenueCAGRsofapproximately15%andapproximately19%,respectively,inthefourfullyears
followingthefirstanniversaryoftheacquisition.Further,weachievedoperatingincomeCAGRs(adjustedforimpairmentcharges)of
approximately40%,translatingintoamarginexpansionofnearlysixpercentagepointsforthesameperiod.Additionally,webring
programsandexpertisetoincreasethequalityandreputationofinstitutionsafterweacquirethem,andassisttheminearningnewformsof
licensesandaccreditations.Webelieveourexperiencedmanagementteam,historyofstrongfinancialperformancerootedinthesuccessful
integrationofpreviousacquisitions,localcontactsandculturalunderstandingmakesustheleadingchoiceforhighereducation
institutionsseekingtojoinaninternationaleducationalnetwork.
OurHistory
Wewerefoundedin1989asSylvanLearningSystems,Inc.,aproviderofabroadarrayofsupplementalandremedialeducational
services.In1999,wemadeourfirstinvestmentinglobalhighereducationwithouracquisitionofUniversidadEuropeadeMadrid,andin
2001weenteredthemarketforonlinedeliveryofhighereducationservicesintheUnitedStateswithouracquisitionofWalden
University.In2003,wesoldtheprincipaloperationsthatmadeupourthenK12educationalservices
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businessandcertainventureinvestmentsdeemednotstrategictoourhighereducationbusiness,andin2004wechangedournameto
LaureateEducation,Inc.BetweenthetimewesoldtheK12educationalservicesbusinessin2003andAugust2007,weacquirednine
institutionsforanaggregatepurchasepriceofapproximately$160million,includingassumeddebt,andenteredsevennewcountries.
InAugust2007,wewereacquiredinaleveragedbuyoutbyaconsortiumofinvestmentfundsandotherinvestorsaffiliatedwithor
managedby,amongothers,DouglasL.Becker,ourChairmanandChiefExecutiveOfficerandfounder,StevenM.Taslitz,adirectorofthe
Company,KohlbergKravisRoberts&Co.L.P.(togetherwithitsaffiliates,"KKR"),Point72AssetManagement,L.P.(togetherwithits
affiliates,"Point72"),BregalInvestments,Inc.(togetherwithitsaffiliates,"Bregal"),StepStoneGroupLLC(togetherwithitsaffiliates,
"StepStone"),SterlingFundManagement,LLC(togetherwithitsaffiliatesandinvestmentfundsmanagedbyit,"SterlingPartners")and
SnowPhippsGroup,LLC(togetherwithitsaffiliates,"SnowPhipps"and,collectively,the"WengenInvestors"),foranaggregatetotal
purchasepriceof$3.8billion,including$1.7billionofdebt,allofwhichhasbeenrefinancedorreplaced.See"RiskFactorsRisks
RelatingtoOurIndebtednessThefactthatwehavesubstantialdebtcouldmateriallyadverselyaffectourabilitytoraiseadditional
capitaltofundouroperationsandlimitourabilitytopursueourgrowthstrategyortoreacttochangesintheeconomyorourindustry."We
believethattheseinvestorshaveembracedourmission,commitmenttoacademicqualityandongoingfocustoprovideasocialbenefitto
thecommunitiesweserve.
team.SinceAugust2007,wehavecompleted41acquisitionswithanaggregatepurchasepriceofapproximately$2billion,including
assumeddebt,andentered12newcountries,andwenowhaveatotalinstitutioncountof71.
Inearly2013,InternationalFinanceCorporation("IFC"),amemberoftheWorldBankGroup,theIFCAfrica,LatinAmericanand
CaribbeanFund,LPandtheKoreaInvestmentCorporation(togetherwiththeIFC,the"IFCInvestors")collectivelyinvested$200million
inourcommonstock.IFCisaglobaldevelopmentinstitutionthathelpsdevelopingcountriesachievesustainablegrowthbyfinancing
investmentintheprivatesectorandprovidingadvisoryservicestobusinessesandgovernments.
InDecember2013,theboardsofdirectorsofWengenandLaureateauthorizedthecombinationofLaureateandLaureateEducation
AsiaLimited("LaureateAsia").LaureateAsiawasasubsidiaryofWengenthatprovidedhighereducationprogramsandservicesto
studentsthroughanetworkoflicensedinstitutionslocatedinAustralia,China,India,MalaysiaandThailand.Wengentransferred100%of
theequityofLaureateAsiatoLaureate.Thetransactionisaccountedforasatransferbetweenentitiesundercommoncontroland,
accordingly,theaccountsofLaureateAsiaareretrospectivelyincludedinthefinancialstatementsandnotestheretoincludedelsewherein
thisprospectus.
PublicBenefitCorporationStatus
InOctober2015,weredomiciledinDelawareasapublicbenefitcorporationasademonstrationofourlongtermcommitmenttoour
missiontobenefitourstudentsandsociety.Publicbenefitcorporationsarearelativelynewclassofcorporationsthatareintendedto
produceapublicbenefitandtooperateinaresponsibleandsustainablemanner.UnderDelawarelaw,publicbenefitcorporationsare
requiredtoidentifyintheircertificateofincorporationthepublicbenefitorbenefitstheywillpromoteandtheirdirectorshaveadutyto
managetheaffairsofthecorporationinamannerthatbalancesthepecuniaryinterestsofthestockholders,thebestinterestsofthose
materiallyaffectedbythecorporation'sconduct,andthespecificpublicbenefitorpublicbenefitsidentifiedinthepublicbenefit
corporation'scertificateofincorporation.PublicbenefitcorporationsorganizedinDelawareare
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alsorequiredtoassesstheirbenefitperformanceinternallyandtodisclosepubliclyatleastbienniallyareportdetailingtheirsuccessin
meetingtheirbenefitobjectives.
Wedonotbelievethataninvestmentinthestockofapublicbenefitcorporationdiffersmateriallyfromaninvestmentina
corporationthatisnotdesignatedasapublicbenefitcorporation.Webelievethatourongoingeffortstoachieveourpublicbenefitgoals
willnotmateriallyaffectthefinancialinterestsofourstockholders.HoldersofourClassAcommonstockwillhavevoting,dividendand
othereconomicrightsthatarethesameastherightsofstockholdersofacorporationthatisnotdesignatedasapublicbenefitcorporation.
See"RiskFactorsRisksRelatingtoInvestinginOurClassACommonStockAsapublicbenefitcorporation,ourfocusonaspecific
publicbenefitpurposeandproducingapositiveeffectforsocietymaynegativelyinfluenceourfinancialperformance"and"Descriptionof
CapitalStockPublicBenefitCorporationStatus."
Ourpublicbenefit,asprovidedinourcertificateofincorporation,is:toproduceapositiveeffect(orareductionofnegativeeffects)
forsocietyandpersonsbyofferingdiverseeducationprogramsdeliveredonlineandonpremisesoperatedinthecommunitiesthatwe
serve.Bydoingso,webelievethatweprovidegreateraccesstocosteffective,highqualityhighereducationthatenablesmorestudentsto
achievetheiracademicandcareeraspirations.MostofouroperationsareoutsidetheUnitedStates,wherethereisalargeandgrowing
imbalancebetweenthesupplyanddemandforqualityhighereducation.Ourstatedpublicbenefitisfirmlyrootedinourcompanymission
andourbeliefthatwhenourstudentssucceed,countriesprosperandsocietiesbenefit.Becomingapublicbenefitcorporationunderscores
ourcommitmenttoourpurposeandourstakeholders,includingstudents,regulators,employers,localcommunitiesandstockholders.
CertifiedBCorporation
Inadditiontobecomingapublicbenefitcorporation,althoughnotrequiredbyDelawarelaw,wehaveelectedtohaveoursocialand
environmentalperformance,accountabilityandtransparencyassessedagainsttheproprietarycriteriaestablishedbyanindependentnon
profitorganization.Asaresultofthisassessment,wehavebeendesignatedasa"CertifiedBCorporation TM."See"BusinessCertifiedB
Corporation."
RecentDevelopments
SaleofGlionandLesRochesHospitalityManagementSchools
OnMarch15,2016,wesignedanagreementwithEurazeo,apubliclytradedFrenchinvestmentcompany,tosellGlionandLes
Rochesandassociatedinstitutions(the"SwissInstitutionSale")foratotaltransactionvalueofCHF380million(approximately
$385millionatthesigningdate),subjecttocertainadjustments.ThesaleincludedtheoperationsofGlioninSwitzerlandandtheUnited
Kingdom,withatotalofapproximately1,800students,andtheoperationsofLesRochesinSwitzerlandandtheUnitedStates,aswellas
LRGinSwitzerland,LesRochesJinJianginChina,RACAinJordanandLesRochesMarbellainSpain,withacombinedtotalof
approximately3,000students.ThetransactionclosedonJune14,2016andwereceivedtotalnetproceedsofapproximately$339million.
WearecontinuingtoprovidecertainbackofficeservicestoGlionandLesRoches,andprogramsofthoseinstitutionswillcontinueon
variouscampusesintheLaureateInternationalUniversitiesnetworkthroughouttheworld.
SaleofOperationsinFrance
OnApril19,2016,wesignedanagreementwithApaxPartners,aprivateequityfirm,underwhichApaxPartnersacquiredLIUFSAS
(the"FrenchInstitutionSale"),ourFrenchholdingcompany("LIUF"),foratotaltransactionvalueofEUR201million(approximately
$228millionatthesigningdate),subjecttocertainadjustments.LIUFcomprisedourfiveinstitutionslocatedinFrancewitha
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totalstudentpopulationofapproximately7,500:coleSupriureduCommerceExtrieur,InstitutFranaisdeGestion,EuropeanBusiness
School,coleCentraled'ElectroniqueandCentred'tudesPolitiquesetdelaCommunication.ThetransactionclosedonJuly20,2016
andwereceivedtotalnetproceedsofapproximately$207million.
2015and2016OperatingResultsofInstitutionsAssociatedwiththeSwissInstitutionSaleandtheFrenchInstitutionSale
FortheyearendedDecember31,2015,thecombinedcontributionstorevenues,operatingincome,anddepreciationandamortization
expensefromtheinstitutionsassociatedwiththeSwissInstitutionSaleandtheFrenchInstitutionSalewereapproximately$262.2million,
$15.3millionand$13.7million,respectively.FortheninemonthsendedSeptember30,2016(duringtheperiodthatthoseinstitutions
wereincludedinourconsolidatedresultspriortobeingsold),thecombinedcontributionstorevenues,operatingincome,anddepreciation
andamortizationexpensefromtheinstitutionsassociatedwiththeSwissInstitutionSaleandtheFrenchInstitutionSalewere
approximately$142.0million,$23.7millionand$3.0million,respectively.
SeniorNoteExchangeTransaction
OnApril15,2016,weenteredintoseparate,privatelynegotiatednoteexchangeagreements(the"NoteExchangeAgreements")with
certainexistingholders(the"ExistingHolders")ofouroutstanding9.250%SeniorNotesdue2019(the"SeniorNotes")pursuanttowhich
wewillexchange$250.0millioninaggregateprincipalamountofSeniorNotesforsharesofourClassAcommonstock.Weexpectthe
exchangetobecompletedwithinoneyearandonedayaftertheconsummationofthisoffering.ThenumberofsharesofClassAcommon
stockissuablewillequal104.625%oftheaggregateprincipalamountofSeniorNotestobeexchanged,or$261.6million,dividedby
$,theinitialpublicofferingpricepershareofClassAcommonstockinthisoffering.Followingthisoffering,butpriortothe
exchange,theSeniorNotessubjecttotheexchangewillcontinuetoreceiveinterestatthesamerateastheSeniorNotesthatarenot
subjecttotheexchange.
PursuanttotheNoteExchangeAgreements,onJune15,2016,wealsorepurchasedfromtheExistingHolders$62.5millionaggregate
principalamountofSeniorNotesatparvalue,plusaccruedandunpaidinterestandspecialinterest.Within60daysafterthe
consummationofthisoffering,attheoptionoftheExistingHoldersortheirtransferees,wewillrepurchaseuptoanadditional
$62.5millionaggregateprincipalamountofSeniorNotesattheredemptionpricesetforthintheindenturegoverningtheSeniorNotes
thatisapplicableasofthedateofpricingofthisoffering,plusaccruedandunpaidinterestandspecialinterest(the"Subsequent
Repurchase").
TheNoteExchangeAgreementswillterminateifthisofferingisnotconsummatedonorbeforeAugust15,2017,andtheexchangeof
$250.0millioninaggregateprincipalamountofSeniorNotesforsharesofClassAcommonstockandtheSubsequentRepurchasewillnot
occur.
Uponconsummationofallofthetransactionsdescribedabove,wewillhaveretiredupto$375.0millioninaggregateprincipal
amountofSeniorNotes.
Assuminganinitialpublicofferingpriceof$18.50pershare,whichisthemidpointoftherangesetforthonthecoverpageofthis
prospectus,andassumingthecompletionoftheexchangetransactiononeyearandonedayafterthedateofthisoffering,weexpectto
issueanaggregateof14,138,514sharesofClassAcommonstockinconnectionwiththeexchangetransaction.
TheexchangeofSeniorNotesforsharesofClassAcommonstockwillbeeffectedinrelianceontheexemptionfromregistration
providedbySection3(a)(9)oftheSecuritiesAct.Nothinghereinshallconstituteorbedeemedtoconstituteanoffertosellorthe
solicitationofanoffertobuytheSeniorNotes.
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SeriesAPreferredStockOffering
OnDecember4,2016,wesignedasubscriptionagreement(the"SubscriptionAgreement")withsixinvestors,includingKKRand
SnowPhipps,pursuanttowhichweagreedtoissueandselltothoseinvestorsanaggregateof400,000sharesofanewseriesofour
convertibleredeemablepreferredstock(the"SeriesAPreferredStock")inaprivateofferingfortotalgrossproceedsof$400millionandnet
proceedsofapproximately$383million.Closingofthefirsttrancheoffundingforthistransaction(the"Closing")occurredon
December20,2016andwereceivednetproceeds,afterissuancecosts,ofapproximately$328million.Oneinvestorwillfundaportionof
itspurchasepriceequalto$57million(approximately$55millionnetofissuancecosts)priortoJanuary23,2017.Theproceedsfromthe
SeriesAPreferredStockofferinghaveandwillbeusedprimarilyto,amongotherthings,repayaportionofouroutstandingdebt,
includingourrevolvingcreditfacility.
Dividendscompoundquarterlyand,ifnotpaidinsharesofSeriesAPreferredStockonaquarterlybasisorincash,accruewhen,as
andifdeclaredbytheboardofdirectorsoftheCompany,oneachshareofSeriesAPreferredStock.TheholdersofsharesofSeriesA
PreferredStockareentitledtothepaymentoftheirliquidationpreferenceincashincertaincircumstances,includinguponthesaleofthe
Companyorthesaleofallorsubstantiallyallofourassets,anduponachangeincontrolofWengen.TheholdersofSeriesAPreferred
Stockdonothaveanyvotingrightsexceptasrequiredbylawandwithrespecttocertainextraordinaryactions.
ThesharesofSeriesAPreferredStockareonlyconvertibleintosharesofourClassAcommonstockundercertaincircumstances,
includingupontheclosingofasaleoftheCompanyorWengen,intheeventWengennolongerexclusivelycontrolsusand,following
thisofferingandexceptincertaincircumstances,byusandtheholdersoftheSeriesAPreferredStockintosharesofourClassAcommon
stockcommencingontheearliertooccurofonedayfollowingthefirstanniversaryoftheclosingofthisofferingandthetime
immediatelypriortotheeffectivenessofaregistrationstatementfiledbyusinconnectionwithourfirstfollowonpublicoffering
followingthisofferinginwhichtheholdersofsharesofSeriesAPreferredStockreceivenetproceedsnotlessthanthePriorityAmount.
"PriorityAmount"means,generally,sharesofourClassAcommonstockinadollaramountequalto,asofanydateofdetermination,the
greaterof(a)25%oftheaggregateofferingpriceofallClassAcommonstockproposedtobeofferedandsoldinourfirstfollowonpublic
offeringfollowingthisofferingand(b)$275million.
ThesharesofSeriesAPreferredStockareredeemableatouroptionatanytimeuntiltheclosingofthisofferingand,thereafter,subject
tocertainconditions,andbytheholdersoftheSeriesAPreferredStockafterthefifthanniversaryoftheissuedate,ineachcase,ata
redemptionpricepershareequalto115%ofthesumoftheissueamountpershareplusanyaccruedandunpaiddividends.Ifwefailto
redeemthesharesofSeriesAPreferredStockwhenrequiredafterthefifthanniversaryoftheissuedate,theholdersoftheSeriesAPreferred
Stockareentitledtocertainremedies,includingtheabilitytotakecontrolofamajorityofourboardofdirectorsandcauseasaleofthe
Companyand/orcauseustoraisedebtorequitycapitalinanamountsufficienttoredeemtheremainingoutstandingsharesofSeriesA
PreferredStock.
FollowingClosing,andsolongasthesharesofSeriesAPreferredStockareoutstanding,wewillbesubjecttocertainfinancial
covenantsrelatingtototalnetleverageandtrailing12monthsrevenueandAdjustedEBITDA(asdefinedintheStockholdersAgreement
(asdefinedbelow)).FailurebytheCompanytosatisfythesecovenantswouldresultintheholdersoftheSeriesAPreferredStock
obtainingcertainremedies,including(i)theabilitytoappointanindividualtoadvisetheboardofdirectorsonimprovingourgrowthand
profitabilityand(ii)consentto(A)theincurrenceofadditionalindebtednessand(B)acquisitionsofassetsandtheestablishmentofnew
schoolsbytheCompany.Inaddition,wewouldberequiredtoimplementaonetimecostreductionprogram.
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FormoreinformationonourSeriesAPreferredStock,includingforadescriptionofcertainrightsthatterminateupontheeffective
timeofthisoffering,see"DescriptionofCapitalStockPreferredStockSeriesAPreferredStock."
EstimatedFiscal2016FinancialResults
Theunauditedestimatedfinancialresultssetforthbelowarepreliminaryandsubjecttorevisionbaseduponthecompletionofour
yearendfinancialclosingprocessaswellastherelatedexternalauditoftheresultsofoperationsforthefiscalyearendedDecember31,
2016.Oncetheyearendfinancialclosingprocessandexternalauditarecompleted,wemayreportfinancialresultsthatcoulddiffer,and
thedifferencescouldbematerial.
Thepreliminaryfinancialdatasetforthbelowhavebeenpreparedby,andaretheresponsibilityof,ourmanagement.
PricewaterhouseCoopersLLPhasnotaudited,reviewed,compiledorperformedanyprocedureswithrespecttothefollowingpreliminary
financialdata.Accordingly,PricewaterhouseCoopersLLPdoesnotexpressanopinionoranyotherformofassurancewithrespect
thereto.
Thefollowinginformationandestimatescontaincertainforwardlookingstatements.Whilewebelievethatsuchinformationand
estimatesarebasedonreasonableassumptions,ouractualresultsmayvary,andsuchvariationsmaybematerial.Factorsthatcould
causethepreliminaryfinancialdataandestimatestodifferinclude,butarenotlimitedto:(i)additionaladjustmentsinthecalculation
of,orapplicationofaccountingprinciplesfor,thefinancialresultsfortheyearendedDecember31,2016(ii)discoveryofnew
informationthataffectsaccountingestimates,managementjudgment,orimpactsvaluationmethodologiesunderlyingtheseestimated
resultsand(iii)thecompletionofourauditforthefiscalyearendedDecember31,2016.
ForthefiscalyearendedDecember31,2016,weexpecttogeneratetotalrevenuesofbetween$4,200.0millionand$4,240.0million,
operatingincomeofbetween$381.6millionand$396.1million,netincomeofbetween$355.0millionand$388.8millionandAdjusted
EBITDAofbetween$750.0millionand$760.0million.PleaseseebelowforareconciliationofAdjustedEBITDAtonetincome.In
addition,pleaseseefootnote3under"SummaryHistoricalConsolidatedFinancialandOtherData"foradefinitionofAdjustedEBITDA,
reasonswhyweincludeitandcertainlimitationstoitsuse.Weexpectnewenrollmentsatallofourinstitutionstobebetween505,500and
506,500studentsfortheyearendedDecember31,2016.Weexpecttotalenrollmentatallofourinstitutionsto
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bebetween1,035,000and1,041,000studentsasofDecember31,2016,comparedto1,009,000studentsatDecember31,2015,after
givingeffecttotheSwissInstitutionSaleandtheFrenchInstitutionSale.
(inmillions)
Netincome
Plus:
Incometaxexpense
Incomefromcontinuingoperationsbeforeincometaxesandequityinnetlossof
affiliates
Plus:
Gainonsaleofsubsidiaries,net(a)
Foreigncurrencyexchangeincome,net(b)
Otherexpense(income),net
Lossonderivatives
Lossondebtextinguishment
Interestincome
Interestexpense
Operatingincome
Plus:
Depreciationandamortizationexpense
Stockbasedcompensationexpense(c)
EiPexpenses(d)
AdjustedEBITDA
(a)
(b)
(c)
(d)
Fortheyearended
December31,2016
LowEnd HighEnd
355.0 $

55.6
388.8
61.6
410.6
450.4
(406.6) (406.6)
(54.6)
(75.2)
0.3
(0.8)
8.9
7.9
17.4
17.4
(18.2)
(19.2)
423.8
422.2
381.6
396.1
272.9
271.9
38.9
37.9
56.6
54.1
$ 750.0 $ 760.0
Primarilyrepresentsagainofapproximately$249.1million,subjecttocertainadjustments,resultingfromtheSwiss
InstitutionSalethatclosedonJune14,2016,andagainofapproximately$149.0million,subjecttocertain
adjustments,resultingfromtheFrenchInstitutionSalethatclosedonJuly20,2016.
Primarilyrelatestoforeignexchangegainsandlossesonintercompanytransactions,excludingpermanent
intercompanyloansnotplannedoranticipatedtobesettledintheforeseeablefuture.
Representsnoncash,stockbasedcompensationexpensepursuanttotheprovisionsofAccountingStandards
Codification("ASC")Topic718"CompensationStockCompensation"("ASCTopic718").
EiPimplementationexpensesarerelatedtoourenterprisewideinitiativetooptimizeandstandardizeourprocesses,
creatingverticalintegrationofprocurement,informationtechnology,finance,accountingandhumanresources,
whichbeganin2014andisexpectedtobesubstantiallycompletedbytheendof2017.EiPincludesthe
establishmentofregionalSSOsaroundtheworld,aswellasimprovementstooursystemofinternalcontrolsover
financialreporting.
RiskFactors
Wearesubjecttocertainrisksrelatedtoourindustryandourbusiness,andtherearerisksassociatedwithinvestinginourClassA
commonstock.Theriskssetforthunderthesectionentitled"RiskFactors"reflectrisksanduncertaintiesthatmaymateriallyadversely
affectourbusiness,
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prospects,financialcondition,operatingresultsandgrowthstrategy.Insummary,significantrisksrelatedtoourbusinessinclude:
weareaglobalbusinesswithoperationsin25countriesaroundtheworldandaresubjecttocomplexbusiness,economic,
legal,political,taxandforeigncurrencyrisks,whichrisksmaybedifficulttoadequatelyaddress
ifwedonoteffectivelymanageourgrowthandbusiness,ourresultsofoperationsmaybemateriallyadverselyaffected
ifwecannotmaintainstudentenrollmentsinourinstitutionsandmaintaintuitionlevels,ourresultsofoperationsmaybe
materiallyadverselyaffected
wehaveincurrednetlossesineachofthelastthreefiscalyears
ourinstitutionsaresubjecttouncertainandvaryinglawsandregulations,andanychangestotheselawsorregulationsor
theirapplicationtousmaymateriallyadverselyaffectourbusiness,financialconditionandresultsofoperations
ourrighttoreceiveeconomicbenefitsfromcertainoftheinstitutionsthatareorganizedasnotforprofitornonstock
entities,andthatweaccountforasvariableinterestentities,maybelimited
ourabilitytocontrolourinstitutionsmaybemateriallyadverselyaffectedbychangesinlawsaffectinghighereducationin
certaincountriesinwhichweoperate
thefactthatwehavesubstantialdebtcouldadverselyaffectourabilitytoraiseadditionalcapitaltofundouroperationsand
limitourabilitytopursueourgrowthstrategyortoreacttochangesintheeconomyorourindustry
thedualclassstructureofourcommonstockascontainedinourcertificateofincorporationhastheeffectofconcentrating
votingcontrolwiththosestockholderswhoheldourstockpriortothisoffering,includingWengenandourexecutive
officers,employeesanddirectorsandtheiraffiliates,andlimitingyourabilitytoinfluencecorporatematters
wecurrentlyhavefourmaterialweaknessesandifwefailtomaintainproperandeffectiveinternalcontrols,ourabilityto
produceaccuratefinancialstatementsonatimelybasiscouldbemateriallyadverselyaffectedand
asapublicbenefitcorporation,ourfocusonaspecificpublicbenefitpurposeandproducingapositiveeffectforsociety
maycauseourboardofdirectorstomakedecisionsthatmaynotbeinthebestinterestsofourstockholders.
Inconnectionwithyourinvestmentdecision,youshouldreviewthesectionofthisprospectusentitled"RiskFactors."
CorporateInformation
Ourprincipalexecutiveofficesarelocatedat650S.ExeterStreet,Baltimore,Maryland21202.Ourtelephonenumberis(410)843
6100.Ourwebsiteisaccessiblethroughwww.laureate.net.Informationon,oraccessiblethrough,ourwebsiteisnotpartof,andisnot
incorporatedinto,thisprospectus.
20
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THEOFFERING
ClassAcommonstockofferedby
us
ClassAcommonstocktobe
outstandingafterthisoffering
29,000,000shares
29,000,000shares,representinga2.1%votinginterest(or
33,350,000shares,representinga2.4%votinginterest,ifthe
underwritersexerciseinfulltheiroptiontopurchaseadditionalshares
ofClassAcommonstock).
ClassBcommonstocktobe
133,300,971shares,representinga97.9%votinginterest(ora97.6%
votinginterest,iftheunderwritersexerciseinfulltheiroptionto
purchaseadditionalsharesofClassAcommonstock).
Underwriters'optiontopurchase
additionalsharesofourClassA
commonstock
Wehavegrantedtheunderwritersanoptiontopurchaseupto
4,350,000additionalsharesofClassAcommonstockattheinitial
publicofferingpriceforaperiodof30daysfromthedateofthis
prospectus.
Useofproceeds
Weestimatethatournetproceedsfromthesaleof29,000,000sharesof
ourClassAcommonstockbeingofferedbyuspursuanttothis
prospectusatanassumedinitialpublicofferingpriceof$18.50per
share,themidpointoftherangesetforthonthecoverpageofthis
prospectus,afterdeductingestimatedunderwritingdiscountsand
commissionsandestimatedofferingexpensespayablebyus,willbe
approximately$496.7million.Weintendtousethenetproceedsfrom
thisofferingtorepay,redeemorrepurchaseouroutstandingSenior
Notes,ourtermloansunderourSeniorSecuredCreditFacilities(as
definedbelow)and/orthesellernotesusedtopartiallyfinancethe
acquisitionofFMUGroup.See"UseofProceeds."
Dividendpolicy
WedonotintendtopaydividendsonourClassAcommonstock
followingthisoffering.Anydeclarationandpaymentoffuture
dividendstoholdersofourClassAcommonstockmaybelimitedby
restrictivecovenantsinourdebtagreements,andwillbeatthesole
discretionofourboardofdirectorsandwilldependonmanyfactors,
includingourfinancialcondition,earnings,capitalrequirements,level
ofindebtedness,statutoryandcontractualrestrictionsapplicabletothe
paymentofdividendsandotherconsiderationsthatourboardof
directorsdeemsrelevant.See"DividendPolicy."
Riskfactors
Pleaseread"RiskFactors"andotherinformationincludedinthis
prospectusforadiscussionoffactorsyoushouldcarefullyconsider
beforedecidingtoinvestinourClassAcommonstock.
ProposedNasdaqsymbol
LAUR
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TableofContents
ThetotalnumberofsharesofourClassAandClassBcommonstockoutstandingafterthisofferingisbasedonnosharesofour
ClassAcommonstockand133,300,971sharesofourClassBcommonstockoutstanding,asofSeptember30,2016,andexcludesthe
followingshares:
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133,300,971sharesofClassAcommonstockissuableupontheconversionofourClassBcommonstockthatwillbe
10,860,526sharesofClassBcommonstockissuableupontheexerciseoftotalstockoptionsoutstandingasof
September30,2016ataweightedaverageexercisepriceof$21.80pershare
31,905sharesofClassBcommonstockthataresubjecttoforfeitureandsubstantialrestrictionsontransfer
2,773,098sharesofClassBcommonstockissuableuponexerciseofoptionstobegrantedtoMr.Beckeratthe
consummationofthisofferinginexchangefortheliquidationofcertainprofitsinterestsheholdsinWengen(the
"ExecutiveProfitsInterests"),assuminganinitialpublicofferingpriceof$18.50pershare,whichisthemidpointofthe
rangesetforthonthecoverpageofthisprospectus
1,296,621sharesofcommonstockavailableforadditionalgrantsundertheLaureateEducation,Inc.2013LongTerm
IncentivePlan,whichgrantswillbeforClassBcommonstockifgrantedpriortothecompletionofthisofferingandfor
ClassAcommonstockifgrantedafterthecompletionofthisoffering
7,431sharesofClassBcommonstockreservedforissuanceundertheLaureateEducation,Inc.DeferredCompensation
Plan,asamendedandrestatedeffectiveJanuary1,2009(the"Post2004DCP")
358,708sharesofClassBcommonstockissuableuponthevestingofrestrictedstockunitsoutstandingasofSeptember30,
2016
691,010sharesofClassBcommonstockissuableuponthevestingofperformanceshareunitsoutstandingasof
September30,2016
14,138,514sharesofClassAcommonstockissuableinconnectionwiththeNoteExchangeAgreements,assumingan
initialpublicofferingpriceof$18.50pershare,whichisthemidpointoftherangesetforthonthecoverpageofthis
prospectusand
allsharesofClassAcommonstockissuableuponconversionoftheSeriesAPreferredStock.
Unlessotherwisestated,informationinthisprospectus(exceptforthehistoricalfinancialstatements)assumes:
thereclassificationofourexistingcommonstockintoanequivalentnumberofsharesofourClassBcommonstockandthe
authorizationofourClassAcommonstock
thatouramendedandrestatedcertificateofincorporation,whichwewillfileinconnectionwiththecompletionofthis
offering,isineffect
thatouramendedandrestatedbylaws,whichwewilladoptinconnectionwiththecompletionofthisoffering,areineffect
and
noexercisebytheunderwritersoftheiroptiontopurchase4,350,000additionalsharesofClassAcommonstockfromusin
thisoffering.
Theinformationinthisprospectusreflectsa4to1reversestocksplitofourcommonstockthatweintendtoeffectpriortothe
effectivenessoftheregistrationstatementofwhichthisprospectusisapart.
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SUMMARYHISTORICALCONSOLIDATEDFINANCIALANDOTHERDATA
SetforthbelowaresummaryhistoricalconsolidatedfinancialdataofLaureateEducation,Inc.,atthedatesandfortheperiods
indicated.ThesummaryhistoricalstatementsofoperationsdataandstatementsofcashflowsdataforthefiscalyearsendedDecember31,
2015,2014and2013havebeenderivedfromourhistoricalauditedconsolidatedfinancialstatementsincludedelsewhereinthis
prospectus.Theunauditedhistoricalconsolidatedstatementsofoperationsdataandstatementsofcashflowsdatafortheninemonths 36/620
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prospectus.Theunauditedhistoricalconsolidatedstatementsofoperationsdataandstatementsofcashflowsdatafortheninemonths
endedSeptember30,2016and2015andtheunauditedconsolidatedbalancesheetdataasofSeptember30,2016havebeenderivedfrom
ourhistoricalunauditedconsolidatedfinancialstatementsincludedelsewhereinthisprospectus.Wehavepreparedtheunaudited
financialinformationonthesamebasisastheauditedconsolidatedfinancialstatementsandhaveincluded,inouropinion,alladjustments
thatweconsidernecessaryforafairpresentationofthefinancialinformationsetforthinthosestatements.Thesegmentdatareflectsthe
operatingsegmentchangediscussedinthesectionentitled"PresentationofFinancialInformation."Ourhistoricalresultsarenot
necessarilyindicativeofourfutureresults.Thedatashouldbereadinconjunctionwiththeconsolidatedfinancialstatementsandrelated
notesandotherfinancialinformationincludedtherein.SeeaccompanyinghistoricalfinancialstatementsofFMUGroupandSociedade
EducacionalSulRioGrandenseLtda.,whichareincludedbecausethesetwoacquisitionsmetthesignificancethresholdsofRule305of
RegulationSX.
Thesummaryhistoricalconsolidatedfinancialandotherdatashouldbereadinconjunctionwith"SelectedHistoricalConsolidated
FinancialandOtherData,""Management'sDiscussionandAnalysisofFinancialConditionandResultsofOperations"andour
consolidatedfinancialstatementsandrelatednotesincludedelsewhereinthisprospectus.
(Dollaramountsinthousands,exceptpershare
amounts)
ConsolidatedStatementsof
Operations:
Revenues
Costsandexpenses:
Directcosts
Generalandadministrativeexpenses
Lossonimpairmentofassets
Operatingincome
Interestincome
Interestexpense
(Loss)gainonderivatives
Other(expense)income,net
Foreigncurrencyexchangegain(loss),
net
Gainonsaleofsubisidaries,net(1)
Income(loss)fromcontinuing
operationsbeforeincometaxesand
equityinnetincome(loss)of
affiliates
Incometax(expense)benefit
NineMonthsEnded
September30,
2016
Netincome(loss)
Netloss(income)attributableto
noncontrollinginterests
Netincome(loss)attributableto
$3,141,156
2,795,027
134,103
212,026
9,924
(300,145)
(1,263)
(2,618)
1,268
2015
$4,291,659
3,760,016
194,686
336,957
13,328
(398,042)
(1,263)
(2,607)
195
2014
$4,414,682
3,838,179
151,215
125,788
299,500
21,822
(385,754)
(22,984)
(3,101)
(1,184)
362,948 (220,224) (200,610) (201,671)

(35,246) (81,587) (117,730)
39,060
20
2,106
2,495
158
327,722 (299,705) (315,845) (162,453)

(3,102)
1,929
(91,246)
(905 )
(90,222)

327,722 (299,705) (315,845) (162,453)
4,350
(85,076)
2,817
124
(403)
4,162
$ 330,539 $ (299,581) $ (316,248) $ (158,291) $
796
2013
$3,913,881
3,418,449
141,197
33,582
320,653
21,805
(350,196)
(1,361)
6,631
7,499
80,263 (139,416) (149,178) (109,970)

398,412

Equityinnetincome(loss)ofaffiliates,
netoftax

operations

Incomefromdiscontinuedoperations,
netoftaxof$0forallyears

Gainonsalesofdiscontinued
operations,netoftaxof$0,$0,$0,$0,
and$1,864,respectively
2015
(unaudited)
$3,068,299
2,697,820
158,566
211,913
13,305
(314,383)
(17,363)
(8,235)
(964)
FiscalYearEnded
December31,
15,398
(69,678)
23
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(Dollaramountsinthousands,exceptpershare
amounts)
Netincome(loss)pershareattributable
tocommonstockholders
Basic
Diluted
Weightedaveragecommonstockused
tocomputenetlosspershare
attributabletocommonstockholders
Basic
Diluted
NineMonthsEnded
September30,
2016

$
$
2015
(unaudited)

2.52 $
2.48 $

133,291
134,217
FiscalYearEnded
December31,

(2.28) $
(2.28) $

132,941
132,941
2015

(2.44) $
(2.44) $

132,950
132,950
2014

(1.24) $
(1.24) $

132,616
132,616
2013
(0.60)
(0.60)
131,983
131,983
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Diluted
ConsolidatedStatementsofCash
Flows:
Netcashprovidedbyoperating
activitiesofcontinuingoperations
Netcashprovidedby(usedin)investing
activitiesofcontinuingoperations
Netcash(usedin)providedby
financingactivitiesofcontinuing
operations
activitiesofdiscontinuedoperations
Netcashprovidedbydiscontinued
operations
Effectsofexchangeratechangeson
cash
Businessacquisitions,netofcash
acquired
Paymentsofcontingentconsideration
foracquisition
132,941
132,950
132,616
131,983
$ 195,970 $ 220,295 $ 170,486 $ 269,156 $ 277,202
392,330
(572,684)
(41,324) (173,642) (489,181) (889,083)
12,056
34,424
172,586
756,663
344
344
7,182
(34,221)
(34,179)
(50,877)
(12,531)
(6,705)
$1,738,315
331,754
309,874
697,872
(9,516)
$3,068,299
$ 329,440
25,735
36,346
189,496
(100,255)
$ 480,762
$1,775,287
321,081
312,928
737,914
(6,054)
$3,141,156
$ 323,143
23,630
37,823
175,150
(83,881)
$ 475,865
(1,275)
$2,415,641
486,235
422,134
979,920
(12,271)
$4,291,659
$ 463,691
78,439
49,869
226,804
(115,395)
$ 703,408
$2,532,451
533,862
405,555
954,494
(11,680)
$4,414,682
$ 541,975
72,777
30,130
222,998
(94,355)
$ 773,525
834,000
54,000
86,000
73,000
1,047,000
809,000
55,000
84,000
78,000
1,026,000
794,000
62,000
84,000
81,000
1,021,000
SegmentData:(2)
Revenues
LatAm
Europe
AMEA
GPS
Corporate
Totalrevenues
AdjustedEBITDA(3)
LatAm
Europe
AMEA
GPS
Corporate
TotalAdjustedEBITDA
OtherData:
Totalenrollments(roundedtothe
nearestthousand):
LatAm
Europe
AMEA
GPS
Total
Newenrollments(roundedtothenearest
hundred):
LatAm
Europe
AMEA
GPS
Total
134,217
389,400
8,900
38,300
33,200
469,800
384,600
9,600
39,300
33,800
467,300
(6,705) (287,945) (177,550)
393,200
25,400
42,800
43,200
504,600
752,000
53,000
77,000
77,000
959,000
344,700
21,400
42,500
41,000
449,600
(5,674)
$2,340,867
501,398
202,251
872,426
(3,061)
$3,913,881
$ 466,664
72,745
(4,843)
205,581
(93,675)
$ 646,472
617,000
49,000
61,000
76,000
803,000
315,400
19,600
21,000
39,000
395,000
24
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(Dollaramountsinthousands)
ConsolidatedBalanceSheets:
Cashandcashequivalents(includesVIEamountsof$164,922)
Restrictedcashandinvestments(6)
Networkingcapital(deficit)(includingcashandcash
equivalents)
Propertyandequipment,net
Goodwill
Tradenames
Otherintangibleassets,net
Totalassets(includesVIEamountsof$1,469,249)
Totaldebt,includingduetoshareholdersofacquired
companies(7)
Deferredcompensation
ConvertibleRedeemablePreferredStock
AsofSeptember30,2016
Actual
AsAdjusted(4)
(unaudited)

481,471 $
176,235
(422,130)
2,177,596
2,009,278
1,325,613
51,084
7,508,457
4,242,255
31,804
AsFurther
Adjusted(5)
704,471 $ 1,201,122
176,235 176,235
(182,130)
2,177,596
2,009,278
1,325,613
51,084
7,731,457
314,521
2,177,596
2,009,278
1,325,613
51,084
8,228,108
4,082,255 4,082,255
31,804
31,804
400,000 400,000
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ConvertibleRedeemablePreferredStock
Redeemablenoncontrollinginterestsandequity
TotalLaureateEducation,Inc.stockholders'equity
(1)
(2)
(3)

21,365
651,530
400,000 400,000
21,365
21,365
651,530 1,148,181
Representsagainofapproximately$249.1million,subjecttocertainadjustments,resultingfromtheSwiss
OnJanuary10,2017,weannouncedthatweplantocombineourEuropeandAMEAoperations,effectiveMarch31,
2017.TheCompanyiscurrentlyevaluatingtheimpactofthiscombinationonitsoperatingsegments.See
"PresentationofFinancialInformation."
WedefineAdjustedEBITDAasnetloss,beforegainonsalesofdiscontinuedoperations,netoftax,incomefrom
discontinuedoperations,netoftax,equityinnet(income)lossofaffiliates,netoftax,incometaxexpense(benefit),
gainonsaleofsubsidiaries,net,foreigncurrencyexchangeloss(income),net,other(income)expense,net,loss(gain)
onderivatives,lossondebtextinguishment,interestexpenseandinterestincome,plusdepreciationand
amortization,stockbasedcompensationexpense,lossonimpairmentofassetsandexpensesrelatedto
implementationofourEiPinitiative.WhenwereviewAdjustedEBITDAonasegmentbasis,weexcludeinter
segmentrevenuesandexpensesthateliminateinconsolidation.AdjustedEBITDAisusedinadditiontoandin
conjunctionwithresultspresentedinaccordancewithgenerallyacceptedaccountingprinciplesintheUnitedStates
("GAAP")andshouldnotbereliedupontotheexclusionofGAAPfinancialmeasures.
WehaveincludedAdjustedEBITDAinthisprospectusbecauseitisakeymeasureusedbyourmanagementand
boardofdirectorstounderstandandevaluateourcoreoperatingperformanceandtrends,toprepareandapproveour
annualbudgetandtodevelopshortandlongtermoperationalplans.Inparticular,theexclusionofcertainexpenses
incalculatingAdjustedEBITDAcanprovideausefulmeasureforperiodtoperiodcomparisonsofourcorebusiness.
Additionally,AdjustedEBITDAisakeyinputusedbythecompensationcommitteeofourboardofdirectorsandour
ChiefExecutiveOfficerinconnectionwiththepaymentofincentivecompensationtoourexecutiveofficersand
othermembersofourmanagementteam.Accordingly,webelievethatAdjustedEBITDAprovidesusefulinformation
toinvestorsandothersinunderstandingandevaluatingouroperatingresultsinthesamemannerasourmanagement
andboardofdirectors.
OuruseofAdjustedEBITDAhaslimitationsasananalyticaltool,andyoushouldnotconsideritinisolationorasa
substituteforanalysisofourresultsasreportedunderGAAP.Someoftheselimitationsare:
althoughdepreciationandamortizationarenoncashcharges,theassetsbeingdepreciatedandamortizedmay
havetobereplacedinthefuture,andAdjustedEBITDAdoesnotreflectcashcapitalexpenditure
requirementsforsuchreplacementsorfornewcapitalexpenditurerequirements
AdjustedEBITDAdoesnotincludeimpairmentchargesonlonglivedassets
AdjustedEBITDAdoesnotreflectchangesin,orcashrequirementsfor,ourworkingcapitalneeds
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AdjustedEBITDAdoesnotconsiderthepotentiallydilutiveimpactofequitybasedcompensation
AdjustedEBITDAdoesnotreflectexpensesrelatedtoimplementationofourEiPprogramtooptimizeand
standardizeourprocessesand
AdjustedEBITDAdoesnotreflecttaxpaymentsthatmayrepresentareductionincashavailabletous.
OthercompaniesmaycalculateAdjustedEBITDAdifferentlythanthewaywedo,limitingtheusefulnessof
theseitemsascomparativemeasures.WebelievethattheinclusionofAdjustedEBITDAinthisprospectusis
appropriatetoprovideadditionalinformationtoinvestorsaboutourbusiness.Whilemanagementbelieves
thatthesemeasuresprovideusefulinformationtoinvestors,theSECmayrequirethatAdjustedEBITDAbe
presenteddifferentlyornotatallinfilingsmadewiththeSEC.
Becauseoftheselimitations,youshouldconsiderAdjustedEBITDAalongsideotherfinancialperformance
measures,includingvariouscashflowmetrics,netlossandourotherGAAPresults.The
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followingunauditedtablesetsforthareconciliationofAdjustedEBITDAtonetlossfortheperiodsindicated:
Netincome(loss)
Plus:
Gainonsalesof
discontinuedoperations,
netoftax
Incomefromdiscontinued
operations,netoftax
Income(loss)from
continuingoperations
Plus:
Equityinnet(income)loss
ofaffiliates,netoftax
Incometaxexpense
(benefit)
Income(loss)from
continuingoperations
beforeincometaxesand
equityinnet(income)
NineMonthsEnded
September30,
2016
2015
(unaudited)
FiscalYearEnded
December31,
2014
2015
2013
$ 327,722 $ (299,705) $ (315,845) $ (162,453) $ (85,076)

(4,350)
(796)
327,722 (299,705) (315,845) (162,453) (90,222)

(20)
(2,106)
(2,495)
(158)
905
35,246
81,587
117,730
(39,060)
91,246
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lossofaffiliates
Plus:
Gainonsaleofsubsidiaries,
net(a)
Foreigncurrencyexchange
(income)loss,net
Loss(gain)onderivatives
Lossondebt
extinguishment
Interestexpense
Interestincome
Operatingincome
Plus:
Depreciationand
amortizationexpense
EBITDA
Plus:
Stockbasedcompensation
expense(b)
Lossonimpairmentof
assets(c)
EiPexpenses(d)
AdjustedEBITDA
(a)
(b)
(c)
362,948 (220,224) (200,610) (201,671)

(398,412)
1,929
(80,263) 139,416 149,178 109,970

964
(1,268)
(195)
1,184
8,235
2,618
2,607
3,101
3,102
(7,499)
(6,631)
17,363
1,263
1,263
22,984
1,361
314,383 300,145 398,042 385,754 350,196
(13,305)
(9,924) (13,328) (21,822) (21,805)
211,913 212,026 336,957 299,500 320,653
202,735 209,390 282,946 288,331 242,725

414,648 421,416 619,903 587,831 563,378
28,939
27,222
39,021
49,190
49,512

125,788 33,582
37,175
27,227
44,484
10,716
$ 480,762 $ 475,865 $ 703,408 $ 773,525 $ 646,472
Seefootnote(1)above.
Representsnoncash,stockbasedcompensationexpensepursuanttotheprovisionsofASCTopic718.
Representsnoncashchargesrelatedtoimpairmentsoflonglivedassets.Forfurtherdetailsoncertain
impairmentitems,see"Management'sDiscussionandAnalysisofFinancialConditionandResultsof
Operations."
(d)
EiPimplementationexpensesarerelatedtoourenterprisewideinitiativetooptimizeandstandardizeour
processes,creatingverticalintegrationofprocurement,informationtechnology,finance,accountingand
humanresources,whichbeganin2014andisexpectedtobesubstantiallycompletedbytheendof2017.EiP
includestheestablishmentofregionalSSOs
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aroundtheworld,aswellasimprovementstooursystemofinternalcontrolsoverfinancialreporting.
(4)
(5)
(6)
Reflectstheissuanceof343,000sharesofSeriesAPreferredStockandthereceiptofapproximately$328millionin
netproceedsthatoccuredonDecember20,2016andtheissuanceofanadditional57,000sharesofSeriesAPreferred
Stockandthereceiptofapproximately$55millionofnetproceedsnolaterthanJanuary23,2017.
ReflectsthesalebyusofsharesofourClassAcommonstockofferedbythisprospectusattheinitialpublicoffering
priceof$18.50pershare,themidpointoftherangesetforthonthecoverpageofthisprospectus,afterdeducting
underwritingdiscountsandcommissionsandestimatedofferingexpensespayablebyusandtheapplicationofthe
netproceedsfromthisofferingasdescribedunder"UseofProceeds."A$1.00increaseordecreaseintheassumed
initialpublicofferingpriceof$18.50persharewouldincreaseordecreasetheamountofasadjustedcashandcash
equivalents,networkingcapital(deficit),totalassetsandtotalLaureateEducation,Inc.stockholders'equityby
approximately$27.3million,assumingthenumberofsharesofferedbyus,assetforthonthecoverpageofthis
prospectus,remainsthesameandafterdeductingtheestimatedunderwritingdiscountsandcommissionsand
estimatedofferingexpensespayablebyus.Similarly,anincreaseordecreaseofonemillionsharesinthenumberof
sharesofClassAcommonstockofferedbyuswouldincreaseordecreasetheamountofasadjustedcashandcash
equivalents,networkingcapital(deficit),totalassetsandtotalLaureateEducation,Inc.stockholders'equityby
approximately$17.4million.Doesnotreflecttheanticipatedexchangeof$250.0millioninaggregateprincipal
amountofSeniorNotesforsharesofClassAcommonstockwithinoneyearandonedayfollowingcompletionof
thisofferingpursuanttotheNoteExchangeAgreements.See"RecentDevelopmentsSeniorNoteExchange
Transaction."
Restrictedcashandinvestmentsincludescashequivalentsheldtocollateralizestandbylettersofcreditinfavorof
theU.S.DepartmentofEducation(the"DOE")inordertoallowourinstitutionsintheUnitedStatestoparticipatein
theTitleIVprogram.Inaddition,wemayhaverestrictedcashinescrowpendingpotentialacquisitiontransactions,
orotherwisehavecashthatisnotimmediatelyavailableforuseincurrentoperations.
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(7)
Includescurrentportionoflongtermdebtandcurrentportionofduetoshareholdersofacquiredcompanies.In
addition,pursuanttotheNoteExchangeAgreements,within60daysaftertheconsummationofthisoffering,the
ExistingHoldersmayrequireustorepurchaseuptoanadditional$62.5millionaggregateprincipalamountof
SeniorNotesattheredemptionpricesetforthintheindenturegoverningtheSeniorNotesthatisapplicableasofthe
dateofpricingofthisoffering,plusaccruedandunpaidinterestandspecialinterest.
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RISKFACTORS
InvestinginourClassAcommonstockinvolvesrisk.BeforeinvestinginourClassAcommonstock,youshouldcarefullyconsiderthe
followingrisksaswellastheotherinformationincludedinthisprospectus,including"Management'sDiscussionandAnalysisof
FinancialConditionandResultsofOperations"andourfinancialstatementsandrelatednotes.Anyofthefollowingriskscould
materiallyadverselyaffectourbusiness,financialconditionandresultsofoperations.However,therisksdescribedbelowarenotthe
onlyrisksthatweface.Additionalrisksanduncertaintiesnotcurrentlyknowntousorthosewecurrentlyviewtobeimmaterialmayalso
materiallyadverselyaffectourbusiness,financialconditionandresultsofoperations.Insuchacase,thetradingpriceoftheClassA
commonstockcoulddeclineandyoumayloseallorpartofyourinvestment.
RisksRelatingtoOurBusiness
Weareaglobalbusinesswithoperationsin25countriesaroundtheworldandaresubjecttocomplexbusiness,economic,legal,
political,taxandforeigncurrencyrisks,whichrisksmaybedifficulttoadequatelyaddress.
Ineachof2015,2014and2013,over80%ofourrevenuesweregeneratedfromoperationsoutsideoftheUnitedStates.Weownor
control59institutionsandmanageorhaverelationshipswith12otherlicensedinstitutionsin25countries,eachofwhichissubjectto
complexbusiness,economic,legal,political,taxandforeigncurrencyrisks.Aswecontinuetoexpandourinternationaloperations,we
mayhavedifficultymanagingandadministeringagloballydispersedbusinessandwemayneedtoexpendadditionalfundsto,among
otherthings,staffkeymanagementpositions,obtainadditionalinformationtechnologyinfrastructureandsuccessfullyimplementrelevant
courseandprogramofferingsforasignificantnumberofinternationalmarkets,whichmaymateriallyadverselyaffectourbusiness,
financialconditionandresultsofoperations.
Additionalchallengesassociatedwiththeconductofourbusinessoverseasthatmaymateriallyadverselyaffectouroperatingresults
include:
thelargesizeofournetworkanddiverserangeofinstitutionspresentnumerouschallenges,includingdifficultyinstaffing
andmanagingforeignoperationsasaresultofdistance,language,legalandotherdifferences
eachofourinstitutionsissubjecttouniquebusinessrisksandchallengesincludingcompetitivepressuresanddiverse
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eachofourinstitutionsissubjecttouniquebusinessrisksandchallengesincludingcompetitivepressuresanddiverse
pricingenvironmentsatthelocallevel
difficultymaintainingqualitystandardsconsistentwithourbrandsandwithlocalaccreditationrequirements
potentialeconomicandpoliticalinstabilityinthecountriesinwhichweoperate,includingstudentunrest
fluctuationsinexchangerates,possiblecurrencydevaluations,inflationandhyperinflation
difficultyselecting,monitoringandcontrollingpartnersoutsideoftheUnitedStates
compliancewithawidevarietyofdomesticandforeignlawsandregulations
expropriationofassetsbygovernments
politicalelectionsandchangesingovernmentpolicies
difficultyprotectingourintellectualpropertyrightsoverseasdueto,amongotherreasons,theuncertaintyoflawsand
enforcementincertaincountriesrelatingtotheprotectionofintellectualpropertyrights
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lowerlevelsofavailabilityoruseoftheInternet,throughwhichouronlineprogramsaredelivered
limitationsontherepatriationandinvestmentoffunds,foreigncurrencyexchangerestrictionsandinabilitytotransfercash
backtotheUnitedStateswithouttaxation
limitationsonourabilitytorealizeeconomicbenefitsfromcertaininstitutionsthatareorganizedasnotforprofitornon
stockentitiesandthatweaccountforasvariableinterestentitiesand
actsofterrorism,publichealthrisks,crimeandnaturaldisasters,particularlyinareasinwhichwehavesignificant
operations.
Oursuccessingrowingourbusinesswilldepend,inpart,ontheabilitytoanticipateandeffectivelymanagetheseandotherrisks
relatedtooperatinginvariouscountries.Anyfailurebyustoeffectivelymanagethechallengesassociatedwiththeinternational
expansionofouroperationscouldmateriallyadverselyaffectourbusiness,financialconditionandresultsofoperations.
Ifwedonoteffectivelymanageourgrowthandbusiness,ourresultsofoperationsmaybemateriallyadverselyaffected.
Wehaveexpandedourbusinessoverthepasteightyearsthroughtheexpansionofexistinginstitutionsandtheacquisitionofhigher
educationinstitutions,andweintendtocontinuetodosointhefuture.Wealsohaveestablishedandintendtoestablishnewinstitutions
incertainmarkets.Plannedgrowthwillrequireustoaddmanagementpersonnelandupgradeourfinancialandmanagementsystemsand
controlsandinformationtechnologyinfrastructure.Thereisnoassurancethatwewillbeabletomaintainoracceleratethecurrentgrowth
rate,effectivelymanageexpandingoperations,buildexpansioncapacity,integratenewinstitutionsorachieveplannedgrowthonatimely
orprofitablebasis.Ifourrevenuegrowthislessthanprojected,thecostsincurredfortheseadditionsandupgradescouldhaveamaterial
adverseeffectonourbusiness,financialconditionandresultsofoperations.
Ifwecannotmaintainstudentenrollmentsinourinstitutionsandmaintaintuitionlevels,ourresultsofoperationsmaybematerially
adverselyaffected.
Ourstrategyforgrowthandprofitabilitydepends,inpart,uponmaintainingand,subsequently,increasingstudentenrollmentsinour
institutionsandmaintainingtuitionlevels.Attritionratesareoftenduetofactorsoutsideourcontrol.Studentssometimesfacefinancial,
personalorfamilyconstraintsthatrequirethemtodropoutofschool.Theyalsoareaffectedbyeconomicandsocialfactorsprevalentin
theircountries.Insomemarketsinwhichweoperate,transfersbetweenuniversitiesarenotcommonand,asaresult,wearelesslikelyto
fillspacesofstudentswhodropout.Inaddition,ourabilitytoattractandretainstudentsmayrequireustodiscounttuitionfrompublished
levels,andmaypreventusfromincreasingtuitionlevelsatarateconsistentwithinflationandincreasesinourcosts.Ifweareunableto
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levels,andmaypreventusfromincreasingtuitionlevelsatarateconsistentwithinflationandincreasesinourcosts.Ifweareunableto
controltherateofstudentattrition,ouroverallenrollmentlevelsarelikelytodeclineorifweareunabletochargetuitionratesthatare
bothcompetitiveandcoverourrisingexpenses,ourbusiness,financialcondition,cashflowsandresultsofoperationsmaybematerially
adverselyaffected.Inaddition,studentenrollmentmaybenegativelyaffectedbyourreputationandanynegativepublicityrelatedtous.
Wehaveincurrednetlossesineachofthelastthreefiscalyears.
Weincurrednetlossesof$315.8million,$162.5millionand$85.1millionin2015,2014and2013,respectively,andhadan
accumulateddeficitof$1,079.0millionasofSeptember30,2016.Ouroperatingexpensesmayincreaseintheforeseeablefutureaswe
continuetoexpandouroperationsandtheLaureateInternationalUniversitiesnetwork.Theseeffortsmayprovemoreexpensivethanwe
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currentlyanticipate,andwemaynotsucceedinincreasingourrevenuessufficientlytooffsetanyhigherexpenses.Anyfailuretoincrease
ourrevenuescouldpreventusfromattainingprofitability.Wecannotbecertainthatwewillbeabletoattainprofitabilityonaquarterlyor
annualbasis.Ifweareunabletomanagetheserisksanddifficultieseffectivelyasweencounterthem,ourbusiness,financialconditionand
resultsofoperationsmaybemateriallyadverselyaffected.
Wemaynotbeabletoidentify,acquireorestablishcontrolof,andintegrateadditionalhighereducationinstitutions,oreffectively
integratepreviouslyacquiredinstitutions,whichcouldmateriallyadverselyaffectourgrowth.
Wehavepreviouslyreliedon,andweexpecttocontinuetorelyon,acquisitionsasanelementofourgrowth.In2015,wemadetwo
acquisitionstotaling$11.6million,in2014,wemadethreeacquisitionstotaling$469.2million,in2013,wemadefouracquisitions
totaling$321.7million,in2012,wemadetwoacquisitionstotaling$8.6million,in2011,wemadesixacquisitionstotaling$58.9million
andin2010wemadefouracquisitionstotaling$153.0million,includingdebtassumed.However,thereisnoassurancethatwewillbe
abletocontinuetoidentifysuitableacquisitioncandidatesorthatwewillbeabletoacquireorestablishcontrolofanyacquisition
candidateonfavorableterms,oratall.Inaddition,inmanycountries,theapprovalofaregulatoryagencyisneededtoacquireoroperatea
highereducationinstitution,whichwemaynotbeabletoobtain.Furthermore,thereisnoassurancethatanyacquiredinstitutioncanbe
integratedintoouroperationssuccessfullyorbeoperatedprofitably.Acquisitionsinvolveanumberofrisks,including:
diversionofmanagement'stimeandresources
adverseshorttermeffectsonreportedoperatingresults
competitionfromotheracquirors,whichcouldleadtohigherpricesandlostopportunities
culturalissuesrelatedtoacquisitionofcloselyheldinstitutionsincountriesaroundtheworld
failuresofduediligenceduringtheacquisitionprocess
integrationofacquiredinstitutions'operations,includingreportingsystemsandinternalcontrolsand
lossofkeyemployeesoftheacquiredbusiness.
Ifwedonotmakeacquisitionsormakefeweracquisitionsthanwehavehistorically,orifouracquisitionsarenotmanaged
successfully,ourgrowthandresultsofoperationsmaybemateriallyadverselyaffected.
Wemaynotbeabletosuccessfullyestablishnewhighereducationinstitutions,whichcouldmateriallyadverselyaffectourgrowth.
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Wehaveenterednewmarketsprimarilythroughacquisitions.Aspartofourexpansionstrategy,wemayestablishnewhigher
educationinstitutionsinsomemarketswheretherearenosuitableacquisitiontargets.Wehaveonlylimitedexperienceinestablishing
newinstitutions,suchastheestablishmentofouruniversitiesinMoroccoandAustralia,andthereisnoassurancethatwewillbeableto
dothissuccessfullyorprofitably.Establishingnewinstitutionsposesuniquechallengesandwillrequireustomakeinvestmentsin
management,capitalexpenditures,marketingactivitiesandotherresourcesthataredifferent,andinsomecasesmaybegreater,thanthose
madetoacquireandthenoperateanexistinginstitution.Toopenanewinstitution,wewillalsoberequiredtoobtainappropriate
governmentalapprovals,includinganewlicense,whichmaytakeasubstantialperiodoftimetoobtain.Ifweareunabletoestablishnew
highereducationinstitutionssuccessfully,ourgrowthmaybemateriallyadverselyaffected.
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OursuccessdependssubstantiallyonthevalueofthelocalbrandsofeachofourinstitutionsaswellastheLaureateInternational
Universitiesnetworkbrand,whichmaybemateriallyadverselyaffectedbychangesincurrentandprospectivestudents'perceptionof
ourreputationandtheuseofsocialmedia.
Eachofourinstitutionshasworkedhardtoestablishthevalueofitsindividualbrand.Brandvaluemaybeseverelydamaged,evenby
isolatedincidents,particularlyiftheincidentsreceiveconsiderablenegativepublicity.Therehasbeenamarkedincreaseinuseofsocial
mediaplatforms,includingweblogs(blogs),socialmediawebsites,andotherformsofInternetbasedcommunicationsthatallow
individualsaccesstoabroadaudienceofinterestedpersons.Webelievestudentsandprospectiveemployersvaluereadilyavailable
informationaboutourinstitutionsandoftenactonsuchinformationwithoutfurtherinvestigationorauthentication,andwithoutregardto
itsaccuracy.Inaddition,manyofourinstitutionsusetheLaureatenameinpromotingtheirinstitutionsandoursuccessisdependentin
largepartuponourabilitytomaintainandenhancethevalueoftheLaureateandLaureateInternationalUniversitiesbrands.Socialmedia
platformsanddevicesimmediatelypublishthecontenttheirsubscribersandparticipantspost,oftenwithoutfiltersorchecksonthe
accuracyofthecontentposted.Informationconcerningourcompanyandourinstitutionsmaybepostedonsuchplatformsanddevicesat
anytime.Informationpostedmaybemateriallyadversetoourinterests,itmaybeinaccurate,anditmayharmourperformance,prospects
andbusiness.
Ourreputationmaybenegativelyinfluencedbytheactionsofotherforprofitandprivateinstitutions.
Inrecentyears,therehavebeenanumberofregulatoryinvestigationsandcivillitigationmatterstargetingpostsecondaryforprofit
educationinstitutionsintheUnitedStatesandprivatehighereducationinstitutionsinothercountries,suchasChile.Theseinvestigations
andlawsuitshavealleged,amongotherthings,deceptivetradepractices,falseclaimsagainsttheUnitedStatesandnoncompliancewith
stateandDOEregulations,andbreachoftherequirementthatuniversitiesinChilebeoperatedasnotforprofitinstitutions.These
allegationshaveattractedadversemediacoverageandhavebeenthesubjectoffederalandstatelegislativehearingsandinvestigationsin
theUnitedStatesandinothercountries.Allegationsagainstthepostsecondaryforprofitandprivateeducationsectorsmayaffectgeneral
publicperceptionsofforprofitandprivateeducationalinstitutions,includinginstitutionsintheLaureateInternationalUniversities
networkandus,inanegativemanner.Adversemediacoverageregardingotherforprofitorprivateeducationalinstitutionsorregardingus
directlyorindirectlycoulddamageourreputation,reducestudentdemandforourprograms,materiallyadverselyaffectourrevenuesand
operatingprofitorresultinincreasedregulatoryscrutiny.
Growingouronlineacademicprogramscouldbedifficultforus.
Weanticipatesignificantfuturegrowthfromonlinecoursesweoffertostudents,particularlyinemergingmarkets.Theexpansionof
ourexistingonlineprograms,thecreationofnewonlineprogramsandthedevelopmentofnewfullyonlineorhybridprogramsmaynotbe
acceptedbystudentsoremployers,orbygovernmentregulatorsoraccreditationagencies.Inaddition,oureffortsmaybematerially
adverselyaffectedbyincreasedcompetitionintheonlineeducationmarketorbecauseofproblemswiththeperformanceorreliabilityof
ouronlineprograminfrastructure.Thereisalsoincreasingdevelopmentofonlineprogramsbytraditionaluniversities,bothinthepublic
andprivatesectors,whichmayhavemoreconsumeracceptancethanprogramswedevelop,becauseoflowerpricingorgreaterperception
ofvalueoftheirdegreesinthemarketplace,whichmaymateriallyadverselyaffectourbusiness,financialconditionandresultsof
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ofvalueoftheirdegreesinthemarketplace,whichmaymateriallyadverselyaffectourbusiness,financialconditionandresultsof
operations.
Oursuccessdepends,inpart,ontheeffectivenessofourmarketingandadvertisingprogramsinrecruitingnewstudents.
Inordertomaintainandincreaseourrevenuesandmargins,wemustcontinuetodevelopouradmissionsprogramsandattractnew
studentsinacosteffectivemanner.Overthelastseveralyears,insupportofouradmissionseffortsinallthecountriesinwhichweoperate,
wehaveincreasedthe
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amountsspentgloballyonmarketingandadvertisingfrom$265.4millionin2013to$278.3millionin2015,andweanticipatethatthis
trendwillcontinue.Aspartofourmarketingandadvertising,wealsosubscribetoleadgeneratingdatabasesincertainmarkets,thecostof
whichisexpectedtoincrease.Thelevelofmarketingandadvertisingandtypesofstrategiesusedareaffectedbythespecificgeographic
markets,regulatorycompliancerequirementsandthespecificindividualnatureofeachinstitutionanditsstudents.Thecomplexityof
thesemarketingeffortscontributestotheircost.Ifweareunabletoadvertiseandmarketourinstitutionsandprogramssuccessfully,our
abilitytoattractandenrollnewstudentscouldbemateriallyadverselyaffectedand,consequently,ourfinancialperformancecouldsuffer.
WeusemarketingtoolssuchastheInternet,radio,televisionandprintmediaadvertisingtopromoteourinstitutionsandprograms.Our
representativesalsomakepresentationsatuppersecondaryschools.Additionally,werelyonthegeneralreputationofourinstitutionsand
referralsfromcurrentstudents,alumniandemployersasasourceofnewenrollment.Amongthefactorsthatcouldpreventusfrom
marketingandadvertisingourinstitutionsandprogramssuccessfullyarethefailureofourmarketingtoolsandstrategiestoappealto
prospectivestudents,regulatoryconstraintsonmarketing,currentstudentand/oremployerdissatisfactionwithourprogramofferingsor
resultsanddiminishedaccesstouppersecondarycampuses.Inaddition,incertaininstances,localregulatoryauthoritiessetquotaseach
yearforhowmanystudentswemayenroll,whichmayfurtherlimitourabilitytorecruitnewstudentsormaintainourpresentenrollment
level.Insomeofthecountriesinwhichweoperate,enrollmentgrowthindegreegranting,highereducationinstitutionsisslowingoris
expectedtoslow.Inordertomaintaincurrentgrowthrates,wewillneedtoattractalargerpercentageofstudentsinexistingmarketsand
increaseouraddressablemarketbyaddinglocationsinnewmarketsandrollingoutnewacademicprograms.Anyfailuretoaccomplish
thismayhaveamaterialadverseeffectonourfuturegrowth.
Ourinstitutionsaresubjecttouncertainandvaryinglawsandregulations,andanychangestotheselawsorregulationsortheir
applicationtousmaymateriallyadverselyaffectourbusiness,financialconditionandresultsofoperations.
Highereducationisregulatedtovaryingdegreesandindifferentwaysineachofthecountriesinwhichweoperateaninstitution.In
general,ourinstitutionsmusthavelicenses,approvals,authorizations,oraccreditationsfromvariousgovernmentalauthoritiesand
accreditingbodies.Theselicenses,approvals,authorizations,andaccreditationsmustberenewedperiodically,usuallyafteranevaluation
oftheinstitutionbytherelevantgovernmentalauthoritiesoraccreditingbodies.Theseperiodicevaluationscouldresultinlimitations,
restrictions,conditions,orwithdrawalofsuchlicenses,approvals,authorizationsoraccreditations,whichcouldhaveamaterialadverse
effectonourbusiness,financialconditionandresultsofoperations.Insomecountriesinwhichweoperate,thereisatrendtowardmaking
continuedlicensureoraccreditationbasedonsuccessfulstudentoutcomes,suchasemployment,whichmaybeaffectedbymanyfactors
outsideofourcontrol.Oncelicensed,approved,authorizedoraccredited,someofourinstitutionsmayneedapprovalsfornewcampuses
ortoaddnewdegreeprograms.
Alloftheseregulationsandtheirapplicableinterpretationsaresubjecttochange.Moreover,regulatoryagenciesmayscrutinizeour
institutionsbecausetheyareownedorcontrolledbyaU.S.basedforprofitcorporation.OutsidetheUnitedStates,wemaybeparticularly
susceptibletosuchtreatmentbecause,inseveralofthecountriesinwhichweoperate,ourinstitutionsareamongthelargestprivate
institutionsandhaveasubstantialshareofthehighereducationmarket.Changesinapplicableregulationsmaycauseamaterialadverse
effectonourbusiness,financialconditionandresultsofoperations.
Changesinlawsgoverningstudentfinancingcouldaffecttheavailabilityofgovernmentsponsoredfinancingprogramsforournon
U.S.students,suchastheCrditoconAvaldelEstado(the"CAEProgram"),agovernmentsponsoredstudentloanprograminChile,the
FundodeFinanciamentoEstudantil("FIES"),agovernmentsponsoredloanprograminBrazil,andthePrograma
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UniversidadeParaTodos("PROUNI")inBrazil,allofwhichareofferedbygovernmentsasameansofincreasingstudentaccesstopost
secondaryeducationprograms.Ifthoseprogramsarechanged,orifourinstitutionsorourstudentsarenolongerpermittedtoparticipatein
thoseprograms,itcouldcauseamaterialadverseeffectonourbusiness,financialconditionandresultsofoperations.Forexample,in
December2014,theBraziliangovernmentannouncedanumberofchangestoFIESbeginningin2015.Thesechangeslimitthenumberof
newparticipantsandtheamountspentontheprogram,anddelaypaymentstothepostsecondaryinstitutionsthatwouldotherwisehave
beenduein2015.FormoreinformationontheCAEProgram,FIESandPROUNI,see"Ifstudentswhoavailthemselvesofgovernment
sponsoredstudentfinancingprogramsincertaincountriesdonotgraduateandsubsequentlydefaultontheirloans,wemayberesponsible
forrepayingasignificantportionoftheirloans"and"BusinessOurOperatingSegmentsLatAmGovernmentSponsoredStudent
FinancingPrograms."Asanotherexample,inOctober2013,oneofourinstitutionsinChile,UniversidaddeLasAmricas("UDLAChile"),
wasnotifiedbytheNationalAccreditationCommissionthatitsinstitutionalaccreditationwouldnotberenewed.UDLAChileappealed
thisdecisionbutreceivedafinaldeterminationthattheappealwasdeniedonJanuary22,2014.UDLAChilefiledanewapplicationfor
accreditationinOctober2015andwasnotifiedinMarch2016thatithadbeenaccreditedforthreeyearsuntilMarch2019.Institutional
accreditationisrequiredfornewstudentstobeeligibletoparticipateintheCAEProgramandnewstudentsatUDLAChilewerenot
eligibletoparticipateintheCAEProgramduringtheperiodthatUDLAChilewasnotaccredited.Formoreinformationaboutpossible
changesingovernmentregulationofhighereducationinChile,includingpossiblechangestostudentfinancingprograms,see"
PoliticalandregulatorydevelopmentsinChilemaymateriallyadverselyaffectouroperations"and"IndustryRegulationChilean
RegulationRecentDevelopments."InDecember2015,theAustralianparliamentadoptedlegislationthatimposedlimitsongovernment
financingofvocationaleducationbeginninginJanuary2016,andtheAustraliangovernmentannouncedthatitplanstofundamentally
redesignthevocationaleducationfeehelpschemeinthenearfuture.Whileweareunabletopredictwhatchangesmaybeadopted,any
suchredesigncouldmateriallyaffectourbusiness,financialconditionandresultsofoperations.See"BusinessOurOperatingSegments
AMEAGovernmentSponsoredStudentFinancingPrograms."
Thelawsofthecountrieswhereweownorcontrolinstitutionsandexpecttoacquireownershiporcontrolofinstitutionsinthefuture
mustpermitbothprivatehighereducationinstitutionsandforeignownershiporcontrolofthem.Forpolitical,economicorotherreasons,a
countrycoulddecidetochangeitslawsorregulationstoprohibitorlimitprivatehighereducationinstitutionsorforeignownershipor
controlorprohibitorlimitourabilitytoenterintocontractsoragreementswiththeseinstitutions.Ifthischangeoccurred,itcouldhavea
materialadverseeffectonourbusiness,financialconditionandresultsofoperationsandwecouldbeforcedtosellaninstitutionataprice
thatcouldbelowerthanitsfairmarketvalueorrelinquishcontrolofaninstitution.Aforcedsaleorrelinquishmentofcontrolcould
materiallyadverselyaffectourbusiness,financialconditionandresultsofoperations.
IstanbulBilgiUniversity,amemberoftheLaureateInternationalUniversitiesnetworklocatedinTurkey,isestablishedasa
"FoundationHighEducationInstitution"(a"FoundationUniversity")undertheTurkishhighereducationlaw,sponsoredbyan
educationalfoundation(the"BilgiFoundation").Assuch,itissubjecttoregulation,supervisionandinspectionbytheTurkishHigher
EducationCouncil(the"YK").In2014,theTurkishparliamentamendedthehighereducationlawtoprovideexpandedauthoritytothe
YKwithrespecttoFoundationUniversities,includingauthorizingadditionalremediesforviolationsofthehighereducationlawandof
regulationsadoptedbytheYK.OnNovember19,2015,theYKpromulgatedan"OrdinanceConcernedwithAmendmentto
FoundationHighEducationInstitutions"(the"Ordinance")theprincipaleffectsofwhichrelatetothesupervisionandinspectionof
FoundationUniversitiesbytheYK.UndertheOrdinance,theYKhasexpandedauthoritytoinspectaccounts,transactions,activities
andassetsofFoundationUniversities,aswellastheiracademicunits,programs,projectsandsubjects.TheOrdinanceestablishesa
progressiveseriesoffiveremediesthattheYKcantakeintheeventitfindsaviolationoftheOrdinance,rangingfrom
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(1)awarningandrequestforcorrectionto(2)thesuspensionoftheFoundationUniversity'sabilitytoestablishnewacademicunitsor
programsto(3)limitingthenumberofstudentstheFoundationUniversitycanadmit,includingceasingnewadmissions,to(4)provisional
suspensionoftheFoundationUniversity'slicenseto(5)cancellationoftheFoundationUniversity'slicense.Sincethepromulgationofthe
Ordinance,theYKhascancelledthelicensesof15FoundationUniversities.
TheOrdinancespecifiesthatFoundationUniversitiescannotbeestablishedbyfoundationsinordertogainprofitforthemselves,and
prohibitsspecifiedtypesoffundtransfersfromFoundationUniversitiestotheirsponsoringfoundation,withcertainexceptionsfor
paymentsmadeundercontractualarrangementsforvariousgoodsandservicesthatareprovidedatorbelowcurrentmarketrates.Istanbul
BilgiUniversityhasenteredintocontractualarrangementswithasubsidiaryofLaureatethatisamemberoftheboardoftrusteesofthe
BilgiFoundation,andhasaffiliatesthatarealsomembersofthatboard,toprovideIstanbulBilgiUniversitywithmanagement,operational
andstudentservicesandcertainintellectualpropertyatfairmarketrates.TheYKconductsannualauditsoftheoperationsofIstanbul
BilgiUniversityandcurrentlyisintheprocessofcompletingitsmostrecentaudit.IftheYKweretodeterminethatanyofthese
contractsorthepaymentsmadebyIstanbulBilgiUniversitytothisLaureatesubsidiary,oranyotheractivitiesofIstanbulBilgiUniversity,
includingthedonationof40.0millionTurkishLirasmadebytheuniversitytoacharitablefoundationthatwassubsequentlyreimbursed
totheuniversitybycertainLaureateownedentities,violatetheOrdinanceorotherapplicablelaw,theYKcouldtakeactionsagainst
IstanbulBilgiUniversityuptoandincludingcancellationofitslicense.See"Weareconductinganinternalinvestigationofoneofour
networkinstitutionsforviolationsoftheCompany'spolicies,andpossibleviolationsoftheU.S.ForeignCorruptPracticesActandother
applicablelaws.Aviolationoftheselawsandregulationscouldsubjectustopenalties,harmourreputationandmateriallyadversely
affectourbusiness,financialconditionandresultsofoperations."Further,iftheYKweretodeterminethatanyadministratorsofIstanbul
BilgiUniversityhavedirectlytakenanyactionsorsupportedanyactivitiesthatareintendedtoharmtheintegrityofthestate,thelicense
oftheuniversitycouldbecancelled.InJuly2016,acoupattemptincreasedpoliticalinstabilityinTurkey,andtheuncertaintiesarising
fromthefailedcoupinTurkeycouldleadtochangesinlawsaffectingIstanbulBilgiUniversityorresultinmodificationstothecurrent
interpretationsandenforcementoftheOrdinanceorotherlawsandregulationsbytheYK.AnysuchactionsbytheYK,including
actionsinrelationtotheconductoftheannualaudit,couldhaveamaterialadverseimpactonIstanbulBilgiUniversity'sfuturegrowthor
itsabilitytoremaininoperation,andcouldhaveamaterialadverseeffectonourbusiness,financialconditionandresultsofoperations.
ForafulldescriptionofthelawsandregulationsaffectingourhighereducationinstitutionsintheUnitedStates("U.S.Institutions"),
andtheimpactofthoselawsandregulationsontheoperationsofourU.S.Institutions,includingtheabilityofourU.S.Institutionsto
continuetoaccessU.S.federalstudentaidfundingsources,see"RisksRelatingtoOurHighlyRegulatedIndustryintheUnitedStates"
and"IndustryRegulationU.S.Regulation."OurinstitutionslocatedoutsidetheUnitedStatesalsoparticipateinvariousstudent
financialaidprogramsofferedbythecountriesinwhichtheyoperate.
PoliticalandregulatorydevelopmentsinChilemaymateriallyadverselyaffectouroperations.
Asaconsequenceofstudentprotestsandpoliticaldisturbances,during2011and2012,theformerChileangovernmentannounced
severalproposedreformstothehighereducationsystem.Thereforms,iftheyhadbeenadopted,couldhaveincludedchangingthecurrent
accreditationsystemtomakeitmoredemanding,revisingthestudentfinancingsystemtoprovideasinglefinancingsystemforstudentsin
allhighereducationinstitutions(replacingtheCAEProgram),establishingasystemofinformationtransparencyforhighereducation,
creatinganagencytopromoteaccountabilitybyhighereducationinstitutions,changingcertaincorporategovernancerulesfor
universities(suchastheneedforaminimumnumberofindependentdirectors),andestablishingproceduresfortheapprovalof,or
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otherwiselimiting,transactionsbetweenhighereducationinstitutionsandrelatedparties.Otherlegislativereformswerepromotedby
membersoftheChileanCongressbutwerenotsupportedbythepreviousChileangovernment,includingproposalstorestrictrelatedparty
transactionsbetweenhighereducationinstitutionsandentitiesthatcontrolthem.InNovemberandDecember2013,Chileheldnational
elections.ThepresidentialelectionwaswonbyformerpresidentMichelleBachelet,whoassumedofficeonMarch11,2014,anda
politicalcoalitionledbyMs.BacheletwontheelectionsforbothhousesoftheChileanCongress,ineachcaseforfouryearsbeginningon
March11,2014.Althoughtheelectionplatformofthenewgovernmentmentionedthatstrongerregulationofhighereducationwas
required,itdidnotcontainspecificcommitmentswithrespecttotheabovementionedreforms,otherthanthecreationofaspecialagency
tooverseehighereducationinstitutions'compliancewithlawandregulations.Inthesecondquarterof2014,thenewgovernment
announcedthewithdrawalofalloftheprioradministration'shighereducationproposalsanditsintenttosubmitnewbillstotheChilean
Congress.
InApril2016,theChileanCongressmadereformstospecificcareerdisciplines,includingpedagogy.Law20,903createdtheteaching
professionaldevelopmentsystem(SistemadeDesarrolloProfesionalDocente),whichaimstoimprovethequalityoftrainingforthose
whochoosetostudypedagogybysettingnewprogramadmissionrequirementsandmandatoryinstitutionalaccreditationstandardsfor
pedagogycareerprograms.Asthesechangeshaveonlytakeneffectin2017,theirimpactcannotyetbedeterminedhowever,theChilean
universitiesintheLaureateInternationalUniversitiesnetworkarepreparingtoadjusttothenewregimeandwillbemonitoringtheeffects
ontheirpedagogyprograms.
OnJuly4,2016,theChileanPresidentsubmittedtotheChileanCongressabill(the"HigherEducationBill")that,ifapproved,would
changetheentireregulatorylandscapeofhighereducationinChile,asitwouldamendand/orreplacemostofthecurrentlyapplicable
legislation,includingrepealingthecurrentlawsgoverninguniversities,professionalinstitutesandtechnicaltrainingcenters.Amongother
things,theHigherEducationBillwouldcreatetheUndersecretaryofHigherEducation,whichwouldproposepoliciesonhighereducation
totheMinistryofEducation,includingpoliciesonaccess,inclusion,retentionandgraduationofhighereducationstudents.The
UndersecretaryofHigherEducationwouldalsodeveloppoliciesrelatingtothepromotiondevelopment,supportandcontinuous
improvementofthequalityofhighereducationinstitutionsandtheirrelationshipwiththeneedsofthecountry.TheUndersecretaryof
HigherEducationwouldalsomanagethenewCommonAccessSystemforHigherEducationInstitutions,whichwouldestablishthe
processandmechanismsfortheapplication,admissionandselectionofundergraduatestudents,andwhichwouldbemandatoryatall
highereducationinstitutionsthatreceivepublicfundingthroughtheMinistryofEducation.
TheHigherEducationBillalsoincludesnewregulationsapplicabletonotforprofiteducationalinstitutionsthatwould:(i)provide
thattheircontrollersandmemberscanonlybeindividuals,othernotforprofitsorstateownedentities(ii)createtheobligationtouse
theirresourcesandreinvesttheirsurplusorprofitsinthepursuitoftheirobjectivesandinenhancingthequalityoftheeducationthey
provide(iii)createtheobligationtohaveaboardofdirectors,whichcannotdelegateitsfunctions,andwhosememberscannotbe
removedunlessapprovedbythemajorityoftheboardandforseriousreasonsand(iv)prohibitrelatedpartytransactionswiththeir
founders,controllers,membersoftheboard,rectorandtheirrelativesorrelatedentities,unlessthecounterpartytothetransactionis
anothernotforprofitentity,andestablishregulationsforotherrelatedpartytransactionswhichincludetheneedforthemtobeunder
marketconditionsandapprovedbytheboard.Formoreinformationaboutpossiblechangesingovernmentregulationofhighereducation
inChileasaresultoftheHigherEducationBill,see"IndustryRegulationChileanRegulationRecentDevelopments."Seealso,"
Studentprotestsmaydisruptourabilitytoholdclassesaswellasourabilitytoattractandretainstudents,whichcouldmaterially
adverselyaffectouroperations."
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WearecurrentlyevaluatingtheeffecttheproposedHigherEducationBillwouldhaveontheChileaninstitutionsintheLaureate
InternationalUniversitiesnetworkifitisadoptedintheformintroducedintheChileanCongress.Wecannotpredictwhetherornotthe
proposedHigherEducationBillwillbeadoptedinthisform,orifanyhighereducationlegislationwillbeadoptedthatwouldaffectthe
institutionsintheLaureateInternationalUniversitiesnetwork.However,ifanysuchlegislationisadopted,itcouldhaveamaterial
adverseeffectonourresultsofoperationsandfinancialcondition.
WhilewebelievethatallofourinstitutionsinChileareoperatinginfullcompliancewithChileanlaw,wecannotpredicttheextentor
outcomeofanyeducationalreformsthatmaybeimplementedinChile.Dependinguponhowthesereformsaredefinedandimplemented,
therecouldbeamaterialadverseeffectonourfinancialconditionandresultsofoperations.AnydisruptiontoouroperationsinChile
wouldhaveamaterialadverseeffectonourfinancialconditionandresultsofoperations.Similarreformsinothercountriesinwhichwe
operatecouldalsohaveamaterialadverseeffectonourfinancialconditionandresultsofoperations.
RegulatorychangesinChilemayreduceaccesstostudentfinancingforsomeofourstudentsinChile,whichcouldreduceenrollments
atourChileaninstitutions.
OnNovember27,2015,theChileanCongresspassedthe2016budgetlaw(the"2016BudgetLaw").Bymeansofthe2016Budget
Law,theadministrationsoughttoimplementapolicytograntfreeaccesstohighereducationtostudentsfromthefirstfiveincomedeciles
whoattendcertainuniversitiesortechnicalvocational("tech/voc")institutions.Foruniversitystudents,the2016BudgetLawwouldhave
requiredthemtobeenrolledinuniversitiesthateitheraremembersoftheConsejodeRectoresdelasUniversidadesChilenas(the
"CRUCh")orareprivateuniversitiesthatarenotmembersoftheCRUChthat,onSeptember30,2015,metthefollowingrequirements:
(a)beingaccreditedforfouryearsormore(b)notbeingrelatedtoforprofitlegalentitiesand(c)havingarepresentativeofthestudents
ornonacademicpersonnelasamemberoftheirgoverningbody.Fortech/vocstudents,theBudgetLawwouldhaverequiredthemtobe
enrolledininstitutionsorganizedasnotforprofitlegalentitiesthatwereaccreditedforfourormoreyears.
OnDecember21,2015,theConstitutionalTribunal("CT")declaredportionsofthe2016BudgetLawdealingwithhighereducation
institutionstobeunconstitutional,inparticularthoseportionsthatwouldrequirestudentstoattendinstitutionswithspecific
characteristicsinordertoobtainfreetuitionas,undertheChileanConstitution,thatwouldconstitutearbitrarydiscriminationaffecting
studentswhoareinthesameeconomiccondition.
BeforetheCTpublishedthetextofitsdecision,theadministrationsubmittedtotheChileanCongressabillmodifyingthe2016
BudgetLawthatestablishesdifferentconditionstoaccessfreehighereducation(theleycortaor"ShortLaw").TheShortLawwas
approvedbyCongresstwodaysafteritssubmission,onDecember23,2015,andpublishedonDecember26,2015.TheShortLawis
effectiveonlyduring2016andwasnotsubjecttoaconstitutionalchallenge.
UndertheShortLaw,foruniversitystudentstobeeligibleforfreetuition,theyhadtocomefromthefirstfiveincomedecilesand
enrolleitherinaStateowneduniversityorinaprivateuniversitythatonDecember27,2015wasaccreditedforatleastfouryearsand
controlledbyindividualsornotforprofitlegalentities.TheShortLawexcludedtech/vocstudentsfromeligibilityforfreetuitionin
2016.However,theShortLawprovidedthatfreetuitionfortech/vocstudentswouldbeimplementedwithinthreeyearsprovidedthatthey
attendtech/vocinstitutionsthatareaccreditedforatleastfouryearsandareorganizedasnotforprofitlegalentities.TheShortLaw
providedthattech/vocinstitutionsthatwereorganizedasforprofitentitiesshould,notlaterthanDecember27,2015,statetheirintention
toreorganizeasnotforprofitentitiesinordertobeeligibletoparticipateincertainstudentfinancingprograms.
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FortheperiodbetweentheeffectivedateoftheShortLawandsuchtimeasstudentsattech/vocinstitutionsbecomeeligibleto
participateinthefreetuitionprogram,theShortLawmodifiedtheallocationsoftheNuevoMilenioScholarship("NMS").TheShortLaw
dividedthisscholarshipprogramintothreeparts:(i)NMSI,whichgrantsstudentswhomeetcertainpersonalconditionsscholarshipsofup
toCLP600,000peryear(ii)NMSII,whichgrantsstudentsscholarshipsofuptoCLP850,000peryear,providedthestudentscomefrom
thefirstfiveincomedecilesandthetech/vocinstitutioninwhichtheyareenrolledisorganizedasanotforprofitlegalentityor,ifthe
tech/vocinstitutionisnotsoorganized,theinstitutionhasstatedinwritingitsintentiontobecomeanotforprofitentityandtobe
accreditedand(iii)NMSIII,whichgrantsstudentsscholarshipsofuptoCLP900,000peryear,providedthatsuchstudentsandthe
institutioninwhichtheyenrollmeettherequirementsforNMSIIandthetech/vocinstitutionwas,onDecember31,2015,accreditedfor
fouryearsormore.
TheChileanuniversitiesandtech/vocinstitutionsintheLaureateInternationalUniversitiesnetworkdidnotmeeteachofthesetests,
sostudentsattheseinstitutionswerenoteligibleforfreetuitionorNMSIIorNMSIIIscholarshipsundertheShortLaw.Itispossiblethat
theprovisionsoftheShortLawcouldhaveamaterialadverseeffectonourresultsofoperationsandfinancialcondition.
OnNovember11,2016,theChileanCongresspassedthe2017budgetlaw(the"2017BudgetLaw").The2017BudgetLawincluded
changestothepoliciesforgrantingfreeaccesstohighereducationandscholarshipstostudentsfromthefirstfiveandsevenincome
decileswhoattendcertainuniversitiesortech/vocinstitutions.
Foruniversitystudents,the2017BudgetLawprovidesforfreeaccesstohighereducationwiththesamerequirementsaswereinthe
2016BudgetLawbutaddstherequirementthateligibleuniversitieshaveaminimumof80%oftheirnewlyenrolledstudentswithan
averageresultfromthenationaluniversityadmissionsexamination,highschoolgradesandhighschoolrankingsaboveaspecifiedlevel,
andhaveatransparentadmissionsystemthatmusthavebeenpublishedontheinstitution'swebsitebyDecember1,2016.Fortech/voc
institutions,the2017BudgetLawprovidesforeligibilityforfreeaccessforstudentsiftheyareenrolledininstitutions(i)organizedas
notforprofitlegalentitiesorasforprofitlegalentitiesthathavefiledfortransformationtonotforprofitlegalentitiesunderthe
"TransformationLaw"passedbytheChileanCongressonNovember16,2016,beforeDecember15,2016,(ii)accreditedforfouryearsor
moreasofDecember23,2016,(iii)havingascontrollersnotforprofitlegalentitiesornaturalpersons,(iv)havingstatedtheirintentionto
participateinthefreeaccesssystembeforeDecember15,2016,and(v)havingatransparentadmissionsystemthatmusthavebeen
publishedontheinstitution'swebsitebyDecember1,2016.
The2017BudgetLawalsomodifiedtheallocationsoftheBicentenarioScholarship("theBSProgram").TheBSProgramsupports
accesstohighereducationforuniversitystudentscomingfromoneofthefirstsevenincomedecilesandcoversthefullamountoftuition
uptoanamountauthorizedbythegovernment.Historically,theBSProgramsolelybenefitedstudentsofCRUChuniversities.The2017
BudgetLawterminatedthedifferentiationbetweenCRUChandnonCRUChuniversitiesforeligibilityfortheBSProgram.Thus,for
2017,3,500BSProgramscholarshipswillbegrantedtostudentsatnonCRUChuniversitiesand3,500additionalBSProgram
scholarshipswillbegrantedtostudentsatnonCRUChuniversitiesin2018.By2019,thegovernmentpromisestohaveanequalBS
Programscholarshippolicyforalluniversities,whetherCRUChornonCRUCh.StudentsmayapplyforaBSProgramscholarshipiftheir
universityisaccreditedforatleastfouryearsandif80%oftheuniversity'snewlyenrolledstudentshaveanaverageresultfromthe
nationaluniversityadmissionsexamination,highschoolgradesandhighschoolrankingsaboveaspecifiedlevel.
Underthe2017BudgetLaw,theNMSIIandNMSIIIareavailabletoallstudentsenrolledinatech/vocinstitution,whetherforprofit
ornotforprofit:(i)NMSIIinanamountofCLP860,000peryear,oruptotheeffectivegovernmentapprovedtuitionfeeifitislessthan
thatamount,forstudentswhocomefromthefirstfiveincomedecileswithanaveragehighschoolgradeof5.0andthetech/voc
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institutioninwhichtheyareenrolledbeingaccreditedforatleastthreeyearsand(ii)NMSIII,inanamountuptoCLP900,000peryear,
oruptotheeffectivegovernmentapprovedtuitionfeeifitislessthanthatamount,providedthatsuchstudentsandtheinstitutionin
whichtheyenrollmeettherequirementsforNMSIIandthetech/vocinstitutionwas,onDecember31,2016,accreditedforfouryearsor
more.TheNMSIIIscholarshipwilllastuntilthetaxbenefitestablishedintheTransformationLawfortech/vocinstitutionsends.
Finally,underthe2017BudgetLaw,theComptrollerGeneralwillbeinchargeofoverseeingtheuseofthepublicresourcesinhigher
education.
WecannotpredicttheeffectthatthestudentfinancingreformsmayhaveonouroperationsinChile.Anymateriallimitationsonthe
accessofourstudentsinChiletogovernmentsponsoredfinancingmayhaveamaterialadverseeffectonourfinancialconditionand
resultsofoperations.Similarlimitationsongovernmentsponsoredstudentfinancinginothercountriesinwhichweoperatecouldalso
haveamaterialadverseeffectonourfinancialconditionandresultsofoperations.
WearesubjecttoinvestigationsbyChileanregulators,whichcouldindividuallyorintheaggregate,materiallyadverselyaffectour
business,financialconditionandresultsofoperations.
InDecember2014,theChileanCongressapprovedlegislationthatprovidesfortheappointmentofaprovisionaladministratoror
closingadministratortohandletheaffairsoffailinguniversitiesoruniversitiesfoundtohavebreachedtheirbylaws(the"Provisional
AdministratorLaw").IftheMinistryofEducationweretodeterminethatoneoftheuniversitiesinChilethatispartoftheLaureate
InternationalUniversitiesnetworkhadviolateditsbylaws,itcouldappointaprovisionaladministratorforthatuniversitycausingusto
loseourrightstocontrolthatinstitution,whichcouldhaveamaterialadverseeffectonourresultsofoperationsandfinancialcondition.
InJune2012,aninvestigativecommitteeoftheChileanChamberofDeputiesissuedapreliminaryreportontheChileanhigher
educationsystemallegingthatcertainuniversities,includingthethreeuniversitiesthatLaureatecontrolsinChile,havenotcompliedwith
therequirementsofChileanlawthatuniversitiesbenotforprofit.Amongtheirregularitiescitedinthereportarehighsalariestoboard
membersortopexecutives,outsourcingofservicestorelatedparties,andthatuniversitiesarebeingboughtandsoldbyforeignand
economicgroups.TheinvestigativecommitteereferreditsreporttotheMinistryofEducationandtothePublicProsecutorofChileto
determinewhethertherehasbeenanyviolationofthelaw.ThePublicProsecutorhasappointedaregionalprosecutortoinvestigate
whetheranycriminalchargesshouldbebroughtforallegedviolationsofthelawsonhighereducation.OnJuly19,2012,theChilean
ChamberofDeputiesrejectedthereportoftheinvestigativecommittee.InDecember2012,inlightofthecriminalprosecutionofthe
formerpresidentoftheNationalAccreditationCommissionforallegedbribery,theChileanChamberofDeputiesmandateditsEducation
CommissiontobeaninvestigativecommitteeregardingthefunctioningoftheNationalAccreditationCommission,especiallywith
respecttocompliancewiththeNationalAccreditationCommission'sdutytooverseehighereducationentities.TheEducation
Commissiondeliveredareport,whichwasapprovedbytheChamberofDeputiesonOctober1,2013,containingseveralrecommendations
toimproveregulationofthehighereducationaccreditationsystem.Additionally,theChileanChamberofDeputiesapprovedthecreation
ofaspecialinvestigativecommitteetoresumetheinvestigationofhighereducationperformedbytheinvestigativecommitteethatissued
theJune2012reportthatwaspreviouslyrejectedbytheChamberofDeputies.OnJanuary15,2014,thatinvestigativecommittee
approvedanewreportrecommending,amongotherthings,improvementstotheChileanhighereducationsystemregulations,
amendmentstothehighereducationfinancingsystem,particularlytheCAEProgram,impositionofcriminalpenaltiesforviolationofthe
requirementthatuniversitiesbenotforprofit,andsupportoflegislationthatwouldprohibitrelatedpartytransactions,prohibitthe
transferofcontrolofuniversities,andrequireuniversitiestohaveindependentboardmembers.Thereportwasapprovedbythefull
ChamberofDeputiesonApril1,2014.IftheChileanCongresswere
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toapprovelegislationimplementingtherecommendationsinthisreport,itcouldhaveamaterialadverseeffectonourresultsofoperations
andfinancialcondition.
OnFebruary18,2014,theMinistryofEducationdisclosedthatonNovember15,2013andFebruary11,2014,ithadinitiatedinternal
investigationsintoUDLAChileandUniversidadAndrsBello("UNAB"),respectively.Theinvestigationswereinitiateduponreferrals
fromtheNationalEducationCouncilandtheNationalAccreditationCommission,whichhadconveyedtotheMinistryofEducationtheir
concernsregardingcertainagreementsenteredintobyUDLAChileandUNABwiththeircontrollingentities,includingconcernsabout
theamountandrealusemadebytheuniversitiesoftheservicesprovidedunderthoseagreements.Theinvestigationsareaninitialstepby
theMinistryofEducationtodeterminewhethertheMinistryshouldbeginformalsanctionproceedingsagainsttheuniversities.The
MinistryofEducationalsodisclosedthatithaddeliveredrelevantdocumentationonthemattertothePublicProsecutor.InJanuary2016,
theMinistryofEducationannouncedthatithadclosedtheinvestigationintoUNAB.
InMay2014,ServiciodeImpuestosInternosChile("SII"),theChileantaxauthority,institutedanauditofUniversidadViadelMar,
UNABandUDLAChilequestioningwhethertheyhadregularlypaidtheirtaxesasnonprofitentitiesfortheperiodfrom2011to2014,
specificallyinrelationtotheirfinancialdealingswithLaureateforprofitentities.Anynoncompliancewiththenonprofitlawswould
subjectthemtothepaymentofadditionaltaxesandpenalties.AsofAugust2015,SIIhadnotifiedallthreeinstitutionsthatitsaudit
detected"nodifferences"inthetaxespaidandthetaxesowed,andprovidedawrittenclosurelettertoeachoftheinstitutions.InDecember
2016,SIInotifiedseparatelyUDLAChileandUNABthataspartofthegeneralauditprogramcalled"AuditoriaIntegralaUniversidades,"
itwasrequestingsupportingdocumentationfromthemforthetaxperiodsbetweenNovember2013andOctober2016.Eachinstitution
willsubmitresponsivedocumentsthatsupporttaxespaidrelatedtoitsrevenuesandexpenses,includingtotheextentsuchrevenuesand
expensesinvolvefinancialdealingswithLaureateforprofitentities.
InJune2016,theMinistryofEducationnotifiedUNABthatitwasopeninganinvestigationintopossibleviolationsofthenotfor
profitnatureofUNAB.InSeptember2016,theMinistryofEducationnotifiedUVMChilethatitwasopeningasimilarinvestigationof
UVMChile.EachoftheinstitutionscontinuestoberesponsivetotheMinistryofEducation'srequestsaspartoftheseinvestigations.Each
investigationwillbeconductedbyaninvestigatorappointedbytheMinistryofEducationundertheProvisionalAdministratorLaw,and
bothUNABandUVMChilehavebeenadvisedthattheinvestigationwilllastatleastsixmonths.UndertheProvisionalAdministrator
Law,attheendoftheinvestigationtheMinistryofEducationcaneitherclosetheinvestigationorissueareportimposingoneofthe
followingmeasures:(i)orderingarecoveryplanfortheinvestigatedinstitution,shouldtheMinistryverifyseverebreachesofthe
institution'sfinancial,administrative,labororacademiccommitments(ii)withthepriorconsentoftheNationalEducationCouncil,
namingaprovisionaladministratorfortheinstitutioniftheMinistrydeterminesthat(a)thereareseriousriskstotheadministrativeor
financialviabilityoftheinstitutionthatmayaffectthecontinuityofitseducationalprograms,(b)thereareseriousandrecurringbreaches
oftheacademiccommitmentsoftheinstitutiontoitsstudentsduetoalackofeducationalorteachingresourcesavailabletogrant
professionalortechnicaldegrees,(c)itisimpossiblefortheinstitutiontomaintainitsacademicfunctionsduetosanctions,injunctionsor
foreclosuresaffectingtheinstitution,itscampusesoritsassets,(d)theinstitutionisdeclaredbankruptor(e)arecoveryplanpursuantto
(i)abovehasnotbeenpresented,hasbeenrejectedorhasbeenbreachedbytheinstitutionor(iii)initiatingaprocesstorevokethe
institution'slicense,inwhichcaseitwouldnameaclosingadministrator.
WhilewebelievethatallofourinstitutionsinChileareoperatinginfullcompliancewithChileanlaw,wecannotpredictwhetherthe
MinistryofEducationorthePublicProsecutorwilltakeanyactioninresponsetothereportsoftheChamberofDeputiesinvestigative
committees,orwhatoutcomemayresultfromanyinvestigationsundertakenbytheMinistryofEducation,thePublicProsecutororthe
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SIIinresponsetothereferralsfromtheNationalEducationCouncilandNationalAccreditationCommission,orbytheMinistryof
EducationasaresultofitsinvestigationundertheProvisionalAdministratorLaw.Dependingupontheoutcomeofanyinvestigationby
theChileanauthorities,therecouldbeamaterialadverseeffectonourbusiness.AnydisruptiontoouroperationsinChilewouldhavea
materialadverseeffectonourfinancialconditionandresultsofoperations.
Ourrighttoreceiveeconomicbenefitsfromcertainoftheinstitutionsthatareorganizedasnotforprofitornonstockentities,andthat
weaccountforasvariableinterestentities,maybelimited.
WehaveobtainedboardandoperatingcontrolandcontrollingfinancialinterestsinentitiesoutsidetheUnitedStatesthatare
educationalinstitutionssimilartoU.S.notforprofit,nonstockuniversities.Underapplicablelaw,theseinstitutionsdonothave
recognized"owners"orshareholders,andgenerallycannotdeclaredividendsordistributetheirnetassetstous.Foraccountingpurposes,
wehavedeterminedthattheseinstitutionsareVariableInterestEntities("VIEs")underGAAPandthatwearetheprimarybeneficiaryof
theseVIEs.MaintenanceofourinterestintheVIEinstitutions,andourabilitytoreceiveeconomicbenefitsfromtheseentities,isbasedon
acombinationof(1)serviceagreementsthatotherLaureateentitieshavewiththeVIEinstitutions,allowingtheinstitutionstoaccessthe
benefitsoftheLaureateInternationalUniversitiesnetworkandallowingustorecognizeeconomiesofscalethroughoutthenetwork,
(2)ourabilitytoprovidetheseentitieswithopportunitiestoinvestformarketreturnsineducationrelatedrealestateentitiesgloballyand
(3)ourabilitytotransferourrightstogoverntheVIEinstitutions,ortheentitiesthatpossessthoserights,tootherparties,whichwould
yieldareturnifandwhentheserightsaretransferred.Inlimitedcircumstances,wemayhaverightstotheresidualassetsinliquidation.
Underthemutuallyagreedserviceagreements,wearepaidatmarketratesforprovidingservicestoinstitutionssuchasaccesstocontent,
supportwithcurriculumdesign,professionaldevelopment,studentexchange,accesstodualdegreeprograms,affiliationandaccesstothe
LaureateInternationalUniversitiesnetwork,andmanagement,legal,tax,finance,accounting,treasury,useofrealestateandother
services.Whilewebelievethesearrangementsconformtoapplicablelaw,theVIEinstitutionsaresubjecttoregulationbyvariousagencies
basedontherequirementsoflocaljurisdictions.Theseagencies,aswellaslocallegislativebodies,reviewandupdatelawsandregulations
astheydeemnecessaryorappropriate.Wecannotpredicttheformofanylawsthatmaybeenacted,orregulationsthatultimatelymaybe
adoptedinthefuture,orwhateffectstheymighthaveonourresultsofoperations,financialconditionandcashflows.Iflocallawsor
regulationsweretochange,theVIEinstitutionswerefoundtobeinviolationofexistinglocallawsorregulations,orregulatorswereto
questionthefinancialsustainabilityoftheVIEinstitutionsand/orwhetherthecontractualarrangementswereatfairvalue,local
governmentagenciescould,amongotheractions:
revokethebusinesslicensesand/oraccreditationsoftheVIEinstitutions
voidorrestrictrelatedpartytransactions,suchasthecontractualarrangementsbetweenusandtheVIEinstitutions
imposefinesthatsignificantlyimpactbusinessperformanceorotherrequirementswithwhichtheVIEinstitutionsmaynot
beabletocomply
requireustochangethegovernancestructuresoftheVIEinstitutions,suchthatwewouldnolongermaintaincontrolofthe
VIEinstitutionsor
disallowatransferofourrightstogoverntheVIEinstitutions,ortheentitiesthatpossessthoserights,toathirdpartyfor
consideration.
Ifweareunabletoreceiveeconomicbenefitsfromtheseinstitutions,itwouldhaveamaterialadverseeffectonourresultsof
operationsandfinancialcondition.Inaddition,ifweareunableorlimitedinourabilitytoreceiveeconomicbenefitsfromthese
institutions,wemaybeunabletoconsolidatetheVIEinstitutionsintoourconsolidatedfinancialstatementsorwemaybelimitedinour
abilitytorecognizealloftheinstitutions'earningsinourconsolidatedstatementsofoperations.
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Ourabilitytocontrolourinstitutionsmaybemateriallyadverselyaffectedbychangesinlawsaffectinghighereducationincertain
countriesinwhichweoperate.
Ourinstitutionsaregovernedbythehighereducationlawsofthevariouscountriesinwhichweoperate,whichmaybeamendedor
interpretedinwaysthataffectourabilitytomaintaincontrolovertheinstitutionsthroughourabilitytoappointthemembersofthe
institutions'governingbodies.Ifweareunabletomaintainourrightsofcontrolofappointmentstothosegoverningbodies,ourabilityto
realizeeconomicbenefitsfromtheseinstitutionsmaybeseverelylimited,includingnotbeingabletotransfercontroloftheinstitutionsin
awaythatwouldyieldusareturnonourinvestmentornotbeingabletoimplementormaintainserviceagreementswiththose
institutions.
Itispossiblethatthegovernanceandcontrolstructuresthatweimplementataspecificinstitutiontocomplywithlocallawsand
regulationswouldnotallowustomeetthestandardsforconsolidationofthatinstitution'sfinancialstatementsintoourownconsolidated
financialstatements.Ifwedeterminethatwedonotcontrolaninstitutionorotherwisemeetthestandardsforconsolidation,
deconsolidationofthatinstitutionwouldberequired.Inthatevent,orifourcontrollingfinancialinterestinthatinstitutionisimpaired,it
couldhaveamaterialadverseeffectonourbusiness,financialconditionandresultsofoperations.
Forexample,inthesecondhalfof2010,Ecuadoradoptedanewhighereducationlawthat,uponitsimplementation,requiredusto
modifythegovernancestructureofourinstitutioninthatcountry.Whiletheconstitutionalityofcertainprovisionsofthehighereducation
lawiscurrentlybeingchallengedinEcuador'scourtsystem,thelawhasbeenimplemented.Inthefourthquarterof2012,theConsejode
EducacinSuperior(the"CES"),therelevantregulatorybody,commencedreviewingandissuingcommentsonbylawssubmittedbyother
Ecuadorianhighereducationinstitutions,implementingandenforcingthecogovernanceprovisionsofthenewlaw.Inaccordancewith
ASC810101510,webelievedthatcontrolnolongerresidedwithLaureategiventhegovernmentallyimposeduncertainties.Asaresult,
UniversidaddeLasAmricasEcuador("UDLAEcuador")wasdeconsolidatedinthefourthquarterof2012andalossof$43.7millionwas
recordedinlossfromregulatorychangesintheconsolidatedstatementofoperations.Thislossrepresentedourinitialinvestmentonthe
leveragedbuyoutdateintheEcuadorianinstitutionof$17.9million,aswellas$25.8millionofaccumulatedearningsfromtheleveraged
buyoutdatetothedateofdeconsolidation.TheCESapprovedUDLAEcuador'snewbylawscomplyingwiththe2010lawinSeptember
2014andwenolongercontrolUDLAEcuador,althoughwemaintaincontractualarrangementswiththeinstitution.Seealso"Industry
RegulationChileanRegulationRecentDevelopments."
Ourbusinessmaybemateriallyadverselyaffectedbyageneraleconomicslowdownorrecession.
Manycountriesaroundtheworldhaverecentlyexperiencedreducedeconomicactivity,increasedunemployment,substantial
uncertaintyabouttheirfinancialservicesmarketsand,insomecases,economicrecession.Theseeventsmayreducethedemandforour
programsamongstudents,whichcouldmateriallyadverselyaffectourbusiness,financialcondition,resultsofoperationsandcashflows.
Theseadverseeconomicdevelopmentsalsomayresultinareductioninthenumberofjobsavailabletoourgraduatesandlowersalaries
beingofferedinconnectionwithavailableemploymentwhich,inturn,mayresultindeclinesinourplacementandretentionrates.For
example,intheUnitedStates,ourprofessionalorientedgraduateprograms,suchasmaster'sdegreesinteaching,aredirectlyaffectedby
theemploymentandpromotionprospectsforpersonswithadvanceddegrees.Effortsbystatesinrecentyearstoreduceeducationfunding
bylayingoffyoungerteachersandcurtailingpayincreasesforremainingteachersmayhaveamaterialadverseeffectonourabilityto
attractandretainstudentsinourgraduateeducationprograms.Inaddition,in2015wegeneratedapproximately83%ofourrevenues
outsidetheUnitedStates,includingapproximately56%ofourrevenuesfromourLatAmsegment.Asaresult,anygeneraleconomic
slowdownorrecessionthatdisproportionatelyimpactsthe
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countriesinwhichourinstitutionsoperatecouldhaveamaterialadverseeffectonourbusiness,financialcondition,resultsofoperations
andcashflows.
Thehighereducationmarketisverycompetitive,andwemaynotbeabletocompeteeffectively.
Highereducationmarketsaroundtheworldarehighlyfragmentedandareverycompetitiveanddynamic.Ourinstitutionscompete
withtraditionalpublicandprivatecollegesanduniversitiesandotherproprietaryinstitutions,includingthosethatofferonline
professionalorientedprograms.Ineachofthecountrieswhereweoperateaprivateinstitution,ourprimarycompetitorsarepublicand
otherprivateuniversities,someofwhicharelarger,morewidelyknownandhavemoreestablishedreputationsthanourinstitutions.Some
ofourcompetitorsinboththepublicandprivatesectorsmayhavegreaterfinancialandotherresourcesthanwehaveandhaveoperatedin
theirmarketsformanyyears.Wealsofacepotentialcompetitionfromalternativeeducationprovidersthatprioritizeopenaccesseducation
tostudents.Anumberoftheseprovidershavebeenformedrecentlytoprovideonlinecurriculumfromleadingacademicsatlittleorno
costtothestudent.Ifthisnewmodalityissuccessful,itcoulddisrupttheeconomicsofthecurrenteducationmodel(bothforprofitand
notforprofitinstitutions).Othercompetitorsmayincludelarge,wellcapitalizedcompaniesthatmaypursueastrategysimilartooursof
acquiringorestablishingforprofitinstitutions.Publicinstitutionsreceivesubstantialgovernmentsubsidies,andpublicandprivatenot
forprofitinstitutionshaveaccesstogovernmentandfoundationgrants,taxdeductiblecontributionsandotherfinancialresources
generallynotavailabletoforprofitinstitutions.Accordingly,publicandprivatenotforprofitinstitutionsmayhaveinstructionaland
supportresourcessuperiortothoseintheforprofitsector,andpublicinstitutionscanoffersubstantiallylowertuitionpricesorother
advantagesthatwecannotmatch.
Anyoftheselarge,wellcapitalizedcompetitorsmaymakeitmoredifficultforustoacquireinstitutionsaspartofourgrowthstrategy.
Theymayalsobeabletochargelowertuitionsorattractmorestudents,whichwouldadverselyaffectourgrowthandtheprofitabilityof
ourcompetinginstitutions.Thereisalsoanincreasedabilityoftraditionaluniversitiestoofferonlineprogramsandweexpectcompetition
toincreaseastheonlinemarketmatures.Thismaycreategreaterpricingoroperatingpressureonus,whichcouldhaveamaterialadverse
effectonourinstitutions'enrollments,revenuesandprofitmargins.Wemaynotbeabletocompetesuccessfullyagainstcurrentorfuture
competitorsandmayfacecompetitivepressuresthatcouldhaveamaterialadverseeffectonourbusiness,financialconditionandresults
ofoperations.
Ifourgraduatesareunabletoobtainprofessionallicensesorcertificationsrequiredforemploymentintheirchosenfieldsofstudy,our
reputationmaysufferandwemayfacedecliningenrollmentsandrevenuesorbesubjecttostudentlitigation.
Certainofourstudentsrequireordesireprofessionallicensesorcertificationsaftergraduationtoobtainemploymentintheirchosen
fields.Theirsuccessinobtainingsuchlicensuredependsonseveralfactors,includingtheindividualmeritsofthestudent,whetherthe
institutionandtheprogramwereapprovedbytherelevantgovernmentorbyaprofessionalassociation,whethertheprogramfromwhich
thestudentgraduatedmeetsallgovernmentalrequirementsandwhethertheinstitutionisaccredited.Ifoneormoregovernmental
authoritiesrefusestorecognizeourgraduatesforprofessionallicensureinthefuturebasedonfactorsrelatingtousorourprograms,the
potentialgrowthofourprogramswouldbenegativelyaffected,whichcouldhaveamaterialadverseeffectonourbusiness,financial
conditionandresultsofoperations.Inaddition,wecouldbeexposedtolitigationthatwouldforceustoincurlegalandotherexpenses
thatcouldhaveamaterialadverseeffectonourbusiness,financialconditionandresultsofoperations.Forexample,in2013,2015and
2016,severalgroupsofcurrentandformerstudentsfiledfiveseparatelawsuitsagainstUniversityofSt.AugustineforHealthSciences
("St.Augustine")relatingtomattersarisingbeforeweacquiredthatinstitutioninNovember2013.Theallegationsrelatetoaprogramthat
waslaunchedinMay2011and,atthetime,offereda"Masterof
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OrthopaedicPhysician'sAssistantProgram"degree.Theplaintiffsinthesemattersallegethattheuniversitymisrepresentedtheirabilityto
practiceaslicensedPhysicianAssistantswithaheightenedspecialtyinorthopaedics.OneofthelawsuitswasresolvedinOctober2015,
anotherwasresolvedinMarch2016,andanotherwasresolvedinJune2016andallhavebeendismissed.See"BusinessLegal
Proceedings"formoreinformation.Seealso"RisksRelatingtoOurHighlyRegulatedIndustryintheUnitedStatesTheinabilityof
ourgraduatestoobtainlicensureorotherspecializedoutcomesintheirchosenprofessionalfieldsofstudycouldreduceourenrollments
andrevenues,andpotentiallyleadtolitigationthatcouldbecostlytous."
Ourbusinessmaybemateriallyadverselyaffectedifwearenotabletomaintainorimprovethecontentofourexistingacademic
programsortodevelopnewprogramsonatimelybasisandinacosteffectivemanner.
Wecontinuallyseektomaintainandimprovethecontentofourexistingacademicprogramsanddevelopnewprogramsinorderto
meetchangingmarketneeds.Revisionstoourexistingacademicprogramsandthedevelopmentofnewprogramsmaynotbeacceptedby
existingorprospectivestudentsoremployersinallinstances.Ifwecannotrespondeffectivelytomarketchanges,ourbusinessmaybe
materiallyadverselyaffected.Evenifweareabletodevelopacceptablenewprograms,wemaynotbeabletointroducethesenew
programsasquicklyasstudentsoremployersrequireorasquicklyasourcompetitorsareabletointroducecompetingprograms.Our
effortstointroduceanewacademicprogrammaybeconditionedordelayedbyrequirementstoobtainforeign,federal,stateand
accreditingagencyapprovals.Thedevelopmentofnewprogramsandcourses,bothconventionalandonline,issubjecttorequirements
andlimitationsimposedbythegovernmentalregulatorybodiesofthevariouscountriesinwhichourinstitutionsarelocated,including
theDOE,statelicensingagenciesandtherelevantaccreditingbodies.Theimpositionofrestrictionsontheinitiationofneweducational
programsbyregulatoryagenciesmaydelaysuchexpansionplans.Ifwedonotrespondadequatelytochangesinmarketrequirements,our
abilitytoattractandretainstudentscouldbeimpairedandourfinancialresultscouldsuffer.
Establishingnewacademicprogramsormodifyingexistingacademicprogramsalsomayrequireustomakeinvestmentsin
specializedpersonnelandcapitalexpenditures,increasemarketingeffortsandreallocateresourcesawayfromotheruses.Wemayhave
limitedexperiencewiththesubjectmatterofnewprogramsandmayneedtomodifyoursystemsandstrategy.Ifweareunabletoincrease
thenumberofstudents,offernewprogramsinacosteffectivemannerorotherwisemanageeffectivelytheoperationsofnewlyestablished
academicprograms,ourbusiness,financialconditionandresultsofoperationscouldbemateriallyadverselyaffected.
Failuretokeeppacewithchangingmarketneedsandtechnologycouldharmourabilitytoattractstudents.
Thesuccessofourinstitutionsdependstoasignificantextentonthewillingnessofprospectiveemployerstohireourstudentsupon
graduation.Increasingly,employersdemandthattheiremployeespossessappropriatetechnologicalskillsandalsoappropriate"soft"
skills,suchascommunication,criticalthinkingandteamworkskills.Theseskillscanevolverapidlyinachangingeconomicand
technologicalenvironment.Accordingly,itisimportantthatoureducationalprogramsevolveinresponsetothoseeconomicand
technologicalchanges.Theexpansionofexistingacademicprogramsandthedevelopmentofnewprogramsmaynotbeacceptedby
currentorprospectivestudentsorbytheemployersofourgraduates.Studentsandfacultyincreasinglyrelyonpersonalcommunication
devicesandexpectthatwewillbeabletoadaptourinformationtechnologyplatformsandoureducationaldeliverymethodstosupport
thesedevicesandanynewtechnologiesthatmaydevelop.Evenifourinstitutionsareabletodevelopacceptablenewprogramsandadapt
tonewtechnologies,ourinstitutionsmaynotbeabletobeginofferingthosenewprogramsandtechnologiesasquicklyasrequiredby
prospectivestudentsandemployersorasquicklyasourcompetitorsbeginofferingsimilarprograms.Ifweareunabletoadequately
respondtochangesinmarketrequirementsduetoregulatory
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orfinancialconstraints,unusuallyrapidtechnologicalchangesorotherfactors,ourabilitytoattractandretainstudentscouldbeimpaired,
theratesatwhichourgraduatesobtainjobsinvolvingtheirfieldsofstudycouldsufferandourresultsofoperationsandcashflowscould
bemateriallyadverselyaffected.
Ifstudentswhoavailthemselvesofgovernmentsponsoredstudentfinancingprogramsincertaincountriesdonotgraduateand
subsequentlydefaultontheirloans,wemayberesponsibleforrepayingasignificantportionoftheirloans.
OuraccreditedChileaninstitutionsparticipateinaChileangovernmentsponsoredstudentfinancingprogramknownastheCAE
Program.TheprogramwasimplementedbytheChileangovernmentin2006topromotehighereducationinChileforlowersocio
economiclevelstudentswithgoodacademicstanding.TheCAEPrograminvolvestuitionfinancingandguaranteesthataresharedbyour
institutionsandthegovernment.Aspartoftheprogram,ourinstitutionsprovideguaranteesresultingincontingentliabilitiestothird
partyfinancinginstitutions,beginningat90%ofthetuitionloansmadedirectlytoqualifiedstudentsenrolledthroughtheCAEProgram
anddecliningto60%.Theguaranteesbyourinstitutionsarefortheperiodinwhichthestudentisenrolled,andtheguaranteesare
assumedentirelybythegovernmentuponthestudent'sgraduation.Additionally,whenastudentleavesoneofourinstitutionsandenrolls
inanotherCAEqualifiedinstitution,ourinstitutionwillremaintheguarantorofthetuitionloansthathavebeengrantedtothestudentup
tosuchdate,anduntilthestudent'sgraduationfromthenewCAEqualifiedinstitution.Assumingthatallstudentsatourinstitutionswho
areintheCAEProgram,andallstudentswholeftourinstitutionsandwerepartoftheCAEProgram,donotgraduate,andthatallofthose
studentsdefaultonthefullamountoftheCAEqualifiedloanbalances,themaximumpotentialamountofpaymentsourinstitutionscould
berequiredtomakeundertheCAEProgramwasapproximately$484millionatSeptember30,2016.AsofSeptember30,2016,wehad
recorded$23.7millionasestimatedguaranteeliabilitiesfortheseobligations.Ifasignificantportionofourstudentswhoparticipateinthe
CAEProgramweretodefault,thefinancialconditionandresultsofoperationsofeachparticipatinginstitutionwouldbematerially
adverselyaffected.
Similarly,studentsatsubstantiallyallofourBrazilianinstitutionsareparticipatinginaBraziliangovernmentprogramknownas
FIES.FIESisafederalprogramestablishedtoprovidefinancingtostudentsenrolledinprivateinstitutionsofhighereducationthatmeet
certainacademicstandardsandwhosehouseholdincomespercapitarelativetothecostoftuitionarebelowacertainlevel.UnderFIES,
thegovernmentloansaportionofthetuitiontoeligiblestudents,someofwhomarerequiredtonameaguarantortounderwritetheirloan.
Thegovernmentthenpaysthecorrespondingloanamounttothehighereducationinstitutioninspecialbondsthattheinstitutionmayuse
topayitsnationalsocialsecuritytaxandcertainotherfederaltaxesor,iftheinstitutionhasataxclearancecertificate,thattheinstitution
cansellforcashinapublicauctionconductedbyagovernmentsponsoredbank.UnderFIES,ifastudentdefaultsonhisorherrepayment
ofaFIESloan,andtheguarantordoesnotfulfillitsguarantee,thehighereducationinstitutionisresponsibleforrepayingupto15%ofthe
relateddelinquency(30%ifaninstitutionhasoneormoreopentaxdisputesthatarenotbeingdefendedincompliancewiththe
applicablesecurity/bondrequirements).However,sinceFebruary2014,allnewstudentswhoparticipateinFIESmustalsoenrollinthe
FundodeGarantiadeOperaesdeCrditoEducativo("FGEDUC"),whichisagovernmentmandated,privateguaranteefundthatallows
participatingeducationalinstitutionstoinsurethemselvesfor90%(or13.5%of15%)oftheirlossesrelatedtostudentdefaultsunderthe
FIESprogram.See"BusinessOurOperatingSegmentsLatAmGovernmentSponsoredFinancingPrograms."Ifparticipationbyour
BrazilianstudentsinFIESincreases,andasignificantportionofourparticipatingstudentsintheprogramweretodefaultandtheir
respectiveguarantorsweretofailtofulfillthetermsoftheirguarantee,orifthedefaultingstudentwasnotrequiredtoprovideaguarantor,
ourfinancialconditionandresultsofoperationscouldbemateriallyadverselyaffected.Inaddition,ifanyinstitutionwereinvolvedina
taxdisputewiththeBraziliangovernment,andsuchinstitutionwerenotdefendingthesuitincompliancewiththe
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applicablesecurity/bondrequirements,theamountoftheguaranteewouldincreaseto30%,whichcouldmateriallyadverselyaffectour
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Regulatorychangesthataffectthetimingofgovernmentsponsoredstudentaidpaymentsorreceiptofgovernmentsponsoredfinancial
aidcouldmateriallyadverselyaffectourliquidity.
Newregulationsmaychangethetimingforthecollectionofgovernmentsponsoredstudentaidpaymentsfromourstudents.For
example,inDecember2014,regulatorsinBrazilannouncedseveralsignificantrulechangestoFIESbeginningin2015additional
regulationswereissuedinDecember2015.Thesechangesraisetheeligibilityrequirements,reducetheannualbudgetfortheprogramand
delaypaymentstothepostsecondaryinstitutionsthatwouldotherwisehavebeenduein2015and2016.Suchadelayintuitionpayments
fromgovernmentsponsoredprogramsmaynegativelyaffectourliquidityandwemayrequireadditionalworkingcapitalorthirdparty
fundingtofinanceouroperations.See"Management'sDiscussionandAnalysisofFinancialConditionandResultsofOperations
LiquidityandCapitalResourcesFIESPaymentPlan,""BusinessOurOperatingSegmentsLatAmGovernmentSponsoredStudent
FinancingPrograms"and"IndustryRegulationBrazilRegulationStudentFinancingProgram."Seealso"RisksRelatingtoour
HighlyRegulatedIndustryintheUnitedStatesTheDOEmaychangeourU.S.Institutions'methodofreceivingTitleIVprogramfunds,
whichcouldmateriallyaffectourliquidity."
Wemayhaveexposuretogreaterthananticipatedtaxliabilities.
Asamultinationalcorporation,wearesubjecttoincometaxesaswellasnonincomebasedtaxesintheUnitedStatesandvarious
foreignjurisdictions.
Ourfutureincometaxescouldbemateriallyadverselyaffectedbyearningsbeinglowerthananticipatedinjurisdictionswherewe
havelowerstatutorytaxratesandhigherthananticipatedinjurisdictionswherewehavehigherstatutorytaxrates.Inaddition,changesin
thevaluationofourdeferredtaxassetsandliabilities,orchangesintaxlaws,regulationsandaccountingprinciples,couldhaveamaterial
adverseeffectonourfutureincometaxes.Thedeterminationofourworldwideprovisionforincometaxesandothertaxliabilitiesrequires
significantjudgment,andtherearemanytransactionsandcalculationswheretheultimatetaxdeterminationisuncertain.Wehavenot
recordedanydeferredtaxliabilitiesforundistributedforeignearningseitherbecauseoflegalrestrictionsondistributionsorbecauseour
historicalstrategywastoreinvesttheseearningsoutsidetheUnitedStates.Ascircumstanceschangeandifsomeorallofthese
undistributedforeignearningsareremittedtotheUnitedStates,wemayberequiredtorecognizedeferredtaxliabilitiesonthoseamounts.
WeearnasignificantamountofourincomefromsubsidiarieslocatedincountriesoutsidetheUnitedStates,andanyrepatriationof
fundscurrentlyheldinforeignjurisdictionsmayresultinhighereffectivetaxratesforourcompany.Inaddition,therehavebeenproposals
tochangeU.S.taxlawsthatwouldsignificantlyimpacthowU.S.multinationalcorporationsaretaxedonforeignearnings.Althoughwe
cannotpredictwhetherorinwhatformthisproposedlegislationmaypass,ifenacteditcouldhaveamaterialadverseeffectonourtax
expenseandcashflows.
Additionally,incertaincountriesinwhichweoperate,highereducationinstitutionsareeitherexemptfrompayingcertaintaxes,
includingincometaxes,orpaytaxesatsignificantlyreducedrates.Thisincludescertainofourhighereducationinstitutionsthatare
organizedasVIEs,similartonotforprofitinstitutionsintheUnitedStates.Ifweweretolosethisfavorabletaxtreatment,eitherbecausea
VIEinstitutionisconvertedintoaforprofitshareholderownedentity,orbecauseofachangeinlocaltaxlaws,ourtaxliabilitiescould
increasematerially.
Wearesubjecttoregularreviewandauditbybothdomesticandforeigntaxauthorities.Anyadverseoutcomeofsuchareviewor
auditcouldhaveanegativeeffectonouroperatingresultsandfinancialcondition.Wearealsosubjecttononincomebasedtaxes,suchas
payroll,sales,use,value
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added,networth,propertyandgoodsandservicestaxes,inboththeUnitedStatesandvariousforeignjurisdictions.Weareunderregular
auditbytaxauthoritieswithrespecttothesenonincomebasedtaxesandmayhaveexposuretoadditionalnonincomebasedtax
liabilities.Ouracquisitionactivitieshaveincreasedthevolumeandcomplexityoflawsandregulationsthatwearesubjecttoandwith
whichwemustcomply.
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During2010,wewerenotifiedbytheSpanishTaxingAuthorities("STA")(inthiscase,bytheRegionalInspectionOfficeofthe
SpecialMadridTaxUnit)thatanauditofsomeofourSpanishsubsidiarieswasbeinginitiatedfor2006and2007.OnJune29,2012,the
STAissuedafinalassessmenttoIniciativasCulturalesdeEspaa,S.L.("ICE"),ourSpanishholdingcompany,forapproximatelyEUR
11.1million($12.4millionatSeptember30,2016),includinginterest,forthosetwoyearsbasedonitsrejectionofthetaxdeductibilityof
financialexpensesrelatedtocertainintercompanyacquisitionsandtheapplicationoftheSpanishETVEregime.OnJuly25,2012,we
filedaclaimwiththeRegionalEconomicAdministrativeCourtchallengingthisassessmentand,inthesamemonth,weissuedacash
collateralizedletterofcreditfortheassessmentamount,inordertosuspendthepaymentofthetaxdue.Further,inJuly2013,wewere
notifiedbytheSTA(inthiscase,bytheCentralInspectionOfficeforLargeTaxpayers)thatanauditofICEwasalsobeinginitiatedfor
2008through2010.OnOctober19,2015,theSTAissuedafinalassessmenttoICEforapproximatelyEUR17.2million($19.3millionat
September30,2016),includinginterest,forthosethreeyears.Wehaveappealedthisassessmentand,inordertosuspendthepaymentof
thetaxassessmentuntilthecourtdecision,weissuedacashcollateralizedletterofcreditfortheassessmentamountplusinterestand
surcharges.Webelievetheassessmentsinthiscasearewithoutmeritandintendtodefendvigorouslyagainstthem.Duringthesecond
quarterof2016,wewerenotifiedbytheSTAthattaxauditsoftheSpanishsubsidiarieswerealsobeinginitiatedfor2011and2012no
assessmentshaveyetbeenissuedfortheseyears.
DuringthequarterendedJune30,2015,wereassessedourpositionregardingtheICEtaxauditmattersasaresultofrecentadverse
decisionsfromtheSpanishSupremeCourtandSpanishNationalCourtoncasesfortaxpayerswithsimilarfacts,anddeterminedthatwe
couldnolongersupportamorelikelythannotposition.Asaresult,duringthesecondquarterof2015,werecordedaprovisiontotaling
EUR37.6million($42.1million)fortheperiodfromJanuary1,2006throughSeptember30,2016.Weplantocontinuetheappeals
processfortheperiodsalreadyauditedandassessed.
Althoughwebelieveourestimatesarereasonable,theultimatetaxoutcomemaydifferfromtheamountsrecordedinourfinancial
statementsandmaymateriallyadverselyaffectourfinancialresultsintheperiodorperiodsforwhichsuchdeterminationismade.
Marketperceptionsconcerningtheinstabilityoftheeuro,thepotentialreintroductionofindividualcurrencieswithintheEurozone,or
thepotentialdissolutionoftheeuroentirely,couldadverselyaffectourbusinessandfinancialposition.
AsaresultofthecreditcrisisinEurope,inparticularinCyprus,Greece,Italy,Ireland,PortugalandSpain,theEuropeanCommission
createdtheEuropeanFinancialStabilityFacility(the"EFSF")andtheEuropeanFinancialStabilityMechanism(the"EFSM")toprovide
fundingtoEurozonecountriesinfinancialdifficultiesthatseeksuchsupport.Throughout2011,theEFSFandEFSMundertookaseriesof
interventionstoprovidedirectfinancingorothercreditsupporttoEuropeangovernments.In2012,certainEurozonestatesannounced
austerityprogramsandothercostcuttinginitiatives,andtheEFSFwaspermittedtofurtherexpanditspowerstoprovidedirectloansto
certainEurozonefinancialinstitutions.Despitethesemeasures,therecanbenoassurancethattherecentmarketdisruptionsinEurope
relatedtosovereigndebt,includingtheincreasedcostoffundingforcertaingovernmentsandfinancialinstitutions,willnotcontinue,nor
cantherebeanyassurancethatfutureassistancepackageswillbeavailableor,evenifprovided,willbesufficienttostabilizetheaffected
countriesandmarketsinEuropeorelsewhere.
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UncertaintypersistsregardingthedebtburdenofcertainEurozonecountries,includingthoseinwhichwehavehighereducation
institutions,andthesolvencyofcertainEuropeanfinancialinstitutionsandtheirrespectiveabilitytomeetfuturefinancialobligations.In
2015,Greeceenteredintoextendednegotiationswithitsinternationalcreditorinstitutionsastoitsrequestforadditionalassistanceor
reliefinmeetingitsfinancialobligations.UncertaintyregardingthisfinancialassistanceandGreece'sabilitytomeetitsfinancial
obligationsledtotheimpositionofcapitalcontrolswithinGreeceandtheclosingofthecountry'sbanksandstockexchangesforan
extendedperiodoftime,allofwhichhascausedasignificantnegativeimpactontheGreekeconomy.Whilewedonothaveany
institutionsinGreece,ourinstitutioninCyprus(EuropeanUniversityCyprus)drawsasignificantproportionofitsstudentsfromGreece,
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institutionsinGreece,ourinstitutioninCyprus(EuropeanUniversityCyprus)drawsasignificantproportionofitsstudentsfromGreece,
andmaybeadverselyaffectedbythecurrentandanyfutureeconomicturmoilinGreece.
Ingeneral,theprotractedadversemarketconditionsinEuropehavecreateddoubtsastotheoverallstabilityoftheeuroandthe
suitabilityoftheeuroasasinglecurrencygiventhediverseeconomicandpoliticalcircumstancesinindividualmemberstates.Theseand
otherconcernscouldleadtothereintroductionofindividualcurrenciesinoneormorememberstatesor,inmoreextremecircumstances,
thepossibledissolutionoftheeuroentirely.Shouldtheeurodissolveentirely,thelegalandcontractualconsequencesforholdersofeuro
denominatedobligationswouldbedeterminedbylawsineffectatsuchtime.Thesepotentialdevelopments,ormarketperceptions
concerningtheseandrelatedissues,couldmateriallyadverselyaffectourbusiness,financialconditionandresultsofoperations.
OurreportedrevenuesandearningsmaybenegativelyaffectedbythestrengtheningoftheU.S.dollarandcurrencyexchangerates.
Wereportrevenues,costsandearningsinU.S.dollars,whileourinstitutionsgenerallycollecttuitioninthelocalcurrency.Exchange
ratesbetweentheU.S.dollarandthelocalcurrencyinthecountrieswhereweoperateinstitutionsarelikelytofluctuatefromperiodto
period.In2015,approximately83%ofourrevenuesoriginatedoutsidetheUnitedStates.Wetranslaterevenuesandotherresults
denominatedinforeigncurrenciesintoU.S.dollarsforourconsolidatedfinancialstatements.Thistranslationisbasedonaverage
exchangeratesduringareportingperiod.TheU.S.dollarhasbeenstrengtheningagainstmanyinternationalcurrencies,includingthe
Brazilianreal,euroandMexicanpeso.Forexample,theBraziliandollartorealspotexchangerateincreasedfrom1:2.3621on
December31,2013to1:2.6576onDecember31,2014,1:3.9180onDecember31,2015and1:3.2352onSeptember30,2016.Asthe
exchangerateoftheU.S.dollarstrengthens,ourreportedinternationalrevenuesandearningsarereducedbecauseforeigncurrencies
translateintofewerU.S.dollars.FortheyearendedDecember31,2015,ahypothetical10%adversechangeinaverageannualforeign
currencyexchangerates,excludingtheimpactsofourderivatives,wouldhavedecreasedouroperatingincomeandourAdjustedEBITDA
by$21.9millionand$71.1million,respectively.Formoreinformation,see"Management'sDiscussionandAnalysisofFinancial
ConditionandResultsofOperationsOverviewFactorsAffectingComparabilityForeignExchange."
Totheextentthatforeignrevenuesandexpensetransactionsarenotdenominatedinthelocalcurrencyand/ortotheextentforeign
earningsarereinvestedinacurrencyotherthantheirfunctionalcurrency,wearealsosubjecttotheriskoftransactionlosses.We
occasionallyenterintoforeignexchangeforwardcontractsorotherhedgingarrangementstoreducetheearningsimpactofnonfunctional
currencydenominatednontradereceivablesanddebtandtoprotecttheU.S.dollarvalueofourassetsandfuturecashflowswithrespectto
exchangeratefluctuations.Giventhevolatilityofexchangerates,thereisnoassurancethatwewillbeabletoeffectivelymanagecurrency
transactionand/ortranslationrisks.Therefore,volatilityincurrencyexchangeratesmayhaveamaterialadverseeffectonourbusiness,
financialcondition,resultsofoperationsandcashflows.
Currencyexchangeratesandourreportedrevenuesandearningsmayalsobenegativelyaffectedbyinflationorhyperinflation.Ifa
countryinwhichweoperateisdesignatedasahighlyinflationary
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economyinthefutureunderGAAP,theU.S.dollarwouldbecomethefunctionalcurrencyforouroperationsinthatcountry.Asaresult,all
gainsandlossesresultingfromtheremeasurementofthefinancialresultsofoperationsinsuchcountryandothertransactionalforeign
exchangegainsandlosseswouldbereflectedinourearnings,whichcouldresultinvolatilitywithinourearnings,ratherthanasa
componentofourcomprehensiveincomewithinstockholders'equity.Hyperinflationinanyofthecountriesinwhichweoperatemay
haveamaterialadverseeffectonourbusiness,financialcondition,resultsofoperationsandcashflows.
Weexperienceseasonalfluctuationsinourresultsofoperations.
Mostoftheinstitutionsinournetworkhaveasummerbreak,duringwhichclassesaregenerallynotinsessionandminimalrevenues
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Mostoftheinstitutionsinournetworkhaveasummerbreak,duringwhichclassesaregenerallynotinsessionandminimalrevenues
arerecognized.Inadditiontothetimingofsummerbreaks,holidayssuchasEasteralsohaveanimpactonouracademiccalendar.
Operatingexpenses,however,donotfullycorrelatetotheenrollmentandrevenuecycles,astheinstitutionscontinuetoincurexpenses
duringsummerbreaks.Giventhegeographicdiversityofourinstitutionsanddifferencesintimingofsummerbreaks,oursecondand
fourthquartersarestrongerrevenuequartersasthemajorityofourinstitutionsareinsessionformostoftheserespectivequarters.Ourfirst
andthirdfiscalquartersareweakerrevenuequartersbecausethemajorityofourinstitutionshavesummerbreaksforsomeportionofoneof
thesetwoquarters.Becauseasignificantportionofourexpensesdonotvaryproportionatelywiththefluctuationsinourrevenues,our
resultsinaparticularfiscalquartermaynotindicateaccuratelytheresultswewillachieveinasubsequentquarterorforthefullfiscalyear.
Connectivityconstraintsorsystemdisruptionstoourcomputernetworkscouldhaveamaterialadverseeffectonourabilitytoattract
andretainstudents.
Weruntheonlineoperationsofourinstitutionsondifferentplatforms,whichareinvariousstagesofdevelopment.Theperformance
andreliabilityoftheseonlineoperationsarecriticaltothereputationofourinstitutionsandourabilitytoattractandretainstudents.Any
computersystemerrororfailure,orasuddenandsignificantincreaseintrafficonourinstitutions'computernetworksmayresultinthe
unavailabilityofthesecomputernetworks.Inaddition,anysignificantfailureofourcomputernetworkscoulddisruptouroncampus
operations.Individual,sustainedorrepeatedoccurrencescouldsignificantlydamagethereputationofourinstitutions'operationsand
resultinalossofpotentialorexistingstudents.Additionally,thecomputersystemsandoperationsofourinstitutionsarevulnerableto
interruptionormalfunctionduetoeventsbeyondourcontrol,includingnaturaldisastersandothercatastrophiceventsandnetworkand
telecommunicationsfailures.Thedisasterrecoveryplansandbackupsystemsthatwehaveinplacemaynotbeeffectiveinaddressinga
naturaldisasterorcatastrophiceventthatresultsinthedestructionordisruptionofanyofourcriticalbusinessorinformationtechnology
andinfrastructuresystems.Asaresultofanyoftheseevents,wemaynotbeabletoconductnormalbusinessoperationsandmaybe
requiredtoincursignificantexpensesinordertoresumenormalbusinessoperations.Asaresult,ourrevenuesandresultsofoperations
maybemateriallyadverselyaffected.
Werelyoncomputersystemsforfinancialreportingandotheroperationsandanydisruptionsinoursystemswouldmateriallyadversely
affectus.
Werelyoncomputersystemstosupportourfinancialreportingcapabilities,includingourSSOs,andotheroperations.Aswithany
computersystems,unforeseenissuesmayarisethatcouldaffectourabilitytoreceiveadequate,accurateandtimelyfinancialinformation,
whichinturncouldinhibiteffectiveandtimelydecisions.Furthermore,itispossiblethatourinformationsystemscouldexperiencea
completeorpartialshutdown.Ifsuchashutdownoccurred,itcouldmateriallyadverselyaffectourabilitytoreportourfinancialresultsin
atimelymannerortootherwiseoperateourbusiness.
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Thepersonalinformationthatwecollectmaybevulnerabletobreach,theftorlossthatcouldmateriallyadverselyaffectourreputation
andoperations.
Possessionanduseofpersonalinformationinouroperationssubjectsustorisksandcoststhatcouldharmourbusiness.Our
institutionscollect,useandretainlargeamountsofpersonalinformationregardingourstudentsandtheirfamilies,includingsocial
securitynumbers,taxreturninformation,personalandfamilyfinancialdataandcreditcardnumbers.Wealsocollectandmaintain
personalinformationofouremployeesintheordinarycourseofourbusiness.Ourcomputernetworksandthenetworksofcertainofour
vendorsthatholdandmanageconfidentialinformationonourbehalfmaybevulnerabletounauthorizedaccess,computerhackers,
computerviruses,cyberattacksandothersecuritythreats.Confidentialinformationalsomaybecomeavailabletothirdparties
inadvertentlywhenweintegrateorconvertcomputernetworksintoournetworkfollowinganacquisitionofaninstitutionorinconnection
withupgradesfromtimetotime.
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withupgradesfromtimetotime.
Duetothesensitivenatureoftheinformationcontainedonournetworks,suchasstudents'grades,ournetworksmaybetargetedby
hackers.Auserwhocircumventssecuritymeasurescouldmisappropriateproprietaryinformationorcauseinterruptionsormalfunctionsin
ouroperations.Althoughweusesecurityandbusinesscontrolstolimitaccessanduseofpersonalinformation,athirdpartymaybeableto
circumventthosesecurityandbusinesscontrols,whichcouldresultinabreachofstudentoremployeeprivacy.Inaddition,errorsinthe
storage,useortransmissionofpersonalinformationcouldresultinabreachofstudentoremployeeprivacy.Possessionanduseofpersonal
informationinouroperationsalsosubjectsustolegislativeandregulatoryburdensthatcouldrequirenotificationofdatabreachesand
restrictouruseofpersonalinformation.Asaresult,wemayberequiredtoexpendsignificantresourcestoprotectagainstthethreatofthese
securitybreachesortoalleviateproblemscausedbythesebreaches.Amajorbreach,theftorlossofpersonalinformationregardingour
studentsandtheirfamiliesorouremployeesthatisheldbyusorourvendorscouldhaveamaterialadverseeffectonourreputationand
resultsofoperationsandcouldresultinfurtherregulationandoversightbygovernmentalauthoritiesandcouldviolatethelawsofoneor
morecountriesinwhichweoperate,whichcouldsubjectustocivilorcriminalpenaltiesandincreasedcostsofcompliance.
Studentprotestsandstrikesmaydisruptourabilitytoholdclassesaswellasourabilitytoattractandretainstudents,whichcould
materiallyadverselyaffectouroperations.
Political,socialandeconomicdevelopmentsinthecountriesinwhichweoperatemaycauseprotestsanddisturbancesagainst
conditionsinthosecountries,includingpoliciesrelatingtotheoperationandfundingofhighereducationinstitutions.Thesedisturbances
mayinvolveprotestsonuniversitycampuses,includingtheoccupationofuniversitybuildingsandthedisruptionofclasses.Forexample,
duringthesecondquarterof2016,studentsinChileengagedinamobilizationthatincludedtheoccupationofbuildingsanddisruption
ofclassesontheirrespectivecampusestoprotest,amongotherthings,thefailureoftheChileangovernmenttoenactproposedreformsof
thehighereducationsystemthathadbeenpromisedbyPresidentBacheletinher2013presidentialcampaign,aswellastocallattention
totheirbeliefthatthereshouldnotbeanyroleorinvolvementofforprofitcompaniesintheoperationofprivateuniversitiesinChile,
includingtheuniversitiesthatarepartoftheLaureateInternationalUniversitiesnetwork.DuringMayandJune2016,approximately30
universitiesaswellasover100highschoolshadtheirbuildingsoccupiedorclassesdisruptedduetothestudentmobilizations.Students
occupiedbuildingsonfiveofUNAB'scampusesandonecampusatUniversidadViadelMarandover70%ofstudentsenrolledatthose
universities,representingapproximately22%ofthetotalnumberofstudentsenrolledinLaureateInternationalUniversitiesinstitutions
inChile,werenotabletoattendclassesduringthattimeasaresultofsuchprotests,althoughclassesreturnedtonormalinJuly2016.We
areunabletopredictwhetherstudentsatinstitutionsintheLaureateInternationalUniversitiesnetworkinChileorothercountrieswill
engagein
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variousformsofprotestinthefuture.Shouldwesustainstudentstrikes,protestsoroccupationsinChileorothercountriesinthefuture,it
couldhaveamaterialadverseeffectonourresultsofoperationsandonouroverallfinancialcondition.Further,wemayneedtomake
additionalinvestmentsinsecurityinfrastructureandpersonnelonourcampusesinordertopreventfuturestudentprotestsfromdisrupting
theabilityofourinstitutionstoholdclasses.Ifwearerequiredtomakesubstantialadditionalinvestmentsinsecurity,orifweareunable
toidentifysecurityenhancementsthatwouldpreventfuturedisruptionsofclasses,thatcouldcauseanadverseeffectonourresultsof
operationsandfinancialcondition.Inaddition,wemayneedtopayovertimecompensationtocertainofourfacultyandstaff,whichmay
increaseouroverallcosts.
Wemaybeunabletooperateoneormoreofourinstitutionsorsufferliabilityorlossduetoanaturalorotherdisaster.
Ourinstitutionsarevulnerabletonaturalorotherdisasters,includingfires,earthquakes,hurricanesandothereventsbeyondour
control.AnumberofourinstitutionsarelocatedinareassuchasMexicoandCentralAmericathatarepronetohurricanedamage,which
maybesubstantial.Anumberofourinstitutionsarealsolocatedinareas,suchasChile,Mexico,PeruandTurkey,thatareproneto
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maybesubstantial.Anumberofourinstitutionsarealsolocatedinareas,suchasChile,Mexico,PeruandTurkey,thatareproneto
earthquakedamage.Forexample,in2010,amagnitude8.8earthquakestruckChileandamagnitude7.2earthquakestruckMexico.Many
ofourlocationsinChileandseverallocationsinMexicosustaineddamageintheseearthquakes.Alsoin2010,weexperiencedafireina
dormitoryatoneofourinstitutionsinSwitzerland.Itispossiblethatoneormoreofourinstitutionswouldbeunabletooperateforan
extendedperiodoftimeintheeventofahurricane,earthquakeorotherdisasterwhichdoessubstantialdamagetotheareainwhichan
institutionislocated.Thefailureofoneormoreofourinstitutionstooperateforasubstantialperiodoftimecouldhaveamaterialadverse
effectonourresultsofoperations.Intheeventofamajornaturalorotherdisaster,wecouldalsoexperiencelossoflifeofstudents,faculty
membersandadministrativestaff,orliabilityfordamagesorinjuries.
Ifthereisanoutbreakofdiseaseinoneormoreofourlocations,ourabilitytorecruitnewstudentsorholdclassesmaybeinterrupted.
Inrecentyears,therehavebeennumerousoutbreaksofinfectiousdiseases,suchasZika,SARSandtheH1N1virus,thathavespread
quicklythroughpopulationsincountriesinwhichweoperate,andhavehadseriousimpactonbusinessesthatoperateinthosecountries.
Concentratedpopulations,suchasstudentsinuppersecondaryschoolsanduniversities,maybeparticularlysusceptibletothesediseases,
requiringlocalgovernmentstotakevariousmeasures,includingsuspensionofbusinessandquarantines,tocontroltheirspread.Ifthereis
anoutbreakofdiseaseinacountryinwhichweoperate,ourrecruitersmaybepreventedfromvisitinglocaluppersecondaryschools
duringthestudentrecruitmentseason,whichcouldhaveamaterialadverseeffectonournewstudentenrollmentsduringthefollowing
academicterm.Inaddition,anoutbreakduringtheacademicyearcouldresultinashutdownofoneormorecampuses,oraquarantinethat
couldpreventstudentsandfacultyfromenteringacampusor,inthecaseofaresidentialcampus,aquarantineofstudentsoncampus
withoutfacultyaccess,resultinginamaterialadverseeffectonourresultsofoperations.
Weintendtoincreasethenumberofinternationalstudentsatmanyofourinstitutions,whichpresentsmultiplerisks.
Asignificantportionofstudentsatseveralofourinstitutionscomefromothercountries.Weintendtoincreaseinternationalstudent
representationatourinstitutions,includingincreaseddualdegreeprogramsbetweenuniversitiesandincreasedstudyabroadprograms.
Theabilityofforeignstudentstoregisteratourinstitutionsissubjecttovariousobstaclesoverwhichwehavenocontrol,includingtheir
abilitytoobtainstudentvisas,thefinancialstabilityofthecountriesfromwhichthey
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come,theirfamilies'abilitytoaffordourprograms,andquarantinesandothertravelrestrictionsintheeventoftheoutbreakofepidemics.
Forexample,duringtheSARSepidemicinAsiain2003,SwitzerlandeffectivelypreventedstudentsfromAsia,whomadeupalarge
proportionofthestudentsatthehospitalityinstitutionsthatwethenownedinSwitzerland,fromtravelingtoSwitzerland.Anyrestrictions
ontheabilityofinternationalstudentstoobtainvisastostudyatourinstitutions,oranyrestrictionsontheirabilitytotravel,couldhavea
materialadverseeffectonourresultsofoperations.
Wemaybeunabletorecruit,trainandretainqualifiedandexperiencedfacultyandadministrativestaffatourinstitutions.
Oursuccessandabilitytogrowdependontheabilitytohireandretainlargenumbersoftalentedpeople.Theprocessofhiring
employeeswiththecombinationofskillsandattributesrequiredtoimplementourbusinessstrategycanbedifficultandtimeconsuming.
Ourfacultymembersinparticulararekeytothesuccessofourinstitutions.Ourrapidglobalexpansionhaspresentedchallengesfor
recruitingtalentedpeoplewiththerightexperienceandskillsforourneeds.Wefacecompetitioninattractingandretainingfaculty
memberswhopossessthenecessaryexperienceandaccreditationtoteachatourinstitutions.Asweexpandandaddpersonnel,itmaybe
difficulttomaintainconsistencyinthequalityofourfacultyandadministrativestaff.Ifweareunableto,orareperceivedtobeunableto,
attractandretainexperiencedandqualifiedfaculty,ourbusiness,financialconditionandresultsofoperationsmaybemateriallyadversely
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attractandretainexperiencedandqualifiedfaculty,ourbusiness,financialconditionandresultsofoperationsmaybemateriallyadversely
affected.
Highcrimelevelsincertaincountriesandregionsinwhichweoperateinstitutionsmayhaveanimpactonourabilitytoattractand
retainstudentsandmayincreaseouroperatingexpenses.
Manyofourinstitutionsarelocatedincountriesandregionsthathavehighratesofviolentcrime,drugtraffickingandvandalism.If
weareunabletomaintainadequatesecuritylevelsonourcampuses,andtoworkwithlocalauthoritiestomaintainadequatesecurityin
theareasadjacenttoourcampuses,wemaynotbeabletocontinuetoattractandretainstudents,orwemayhavetocloseacampuseither
temporarilyorpermanently.Forexample,in2014weclosedasmallcampusofoneofouruniversitiesinMexicobecauseofthreatsfroma
localdrugcartel.Inaddition,highcrimeratesmayrequireustomakeadditionalinvestmentsinsecurityinfrastructureandpersonnel,
whichmaycauseustoincreaseourtuitionratesinordertomaintainoperatingmargins.Certainsecuritymeasuresmaymaterially
adverselyaffectthecampusexperiencebymakingaccessbystudentsmorecumbersome,whichmaybeviewednegativelybysomeofour
existingorprospectivestudents.Ifwearenotabletoattractandretainstudentsbecauseofourinabilitytoprovidethemwithasafe
environment,orifwearerequiredtomakesubstantialadditionalinvestmentsinsecurity,thatcouldcauseamaterialadverseeffectonour
Ifweareunabletoupgradeourcampuses,theymaybecomelessattractivetoparentsandstudentsandwemayfailtogrowourbusiness.
Allofourinstitutionsrequireperiodicupgradestoremainattractivetoparentsandstudents.Upgradingthefacilitiesatour
institutionscouldbedifficultforanumberofreasons,includingthefollowing:
ourpropertiesmaynothavethecapacityorconfigurationtoaccommodateproposedrenovations
constructionandothercostsmaybeprohibitive
wemayfailtoobtainregulatoryapprovals
itmaybedifficultandexpensivetocomplywithlocalbuildingandfirecodes,especiallyastopropertiesthatweacquired
aspartofpastacquisitions
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wemaybeunabletofinanceconstructionandothercostsand
wemaynotbeabletonegotiatereasonabletermswithourlandlordsordevelopersorcompletetheworkwithinacceptable
timeframes.
Ourfailuretoupgradethefacilitiesofourinstitutionscouldleadtolowerenrollmentandcouldcauseamaterialadverseeffectonour
Ourplannedgrowthwillrequireoccupyingincreasingamountsofrealestatethatcanbedifficulttoobtainandaresubjecttolocal
regulationandcontrolbylandlords.
Inordertocontinuetoexpand,wemustcontinuetobuyorleaseadditionalrealestateandconstructnewcampusbuildings.
Constructionofnewcampusbuildingsrequiresustoobtainpermitsfromlocalauthoritiesandtomanagecomplexconstructionprojects,
whichmayresultinunanticipateddelaysorexpenditures.In2013,theopeningofanewcampusbuildingatUNABwasdelayed,resulting
intheneedtorelocatestudentstotemporaryfacilitieswhilethebuildingwascompleted.UNABincurredexpensestorenttemporary
facilitiesandprovidedtuitiondiscountstothosestudentsaffectedbythedelay.TherealestatethatinstitutionsintheLaureate
InternationalUniversitiesnetworkoccupyissubjecttolocalregulations,someofwhichmayaffecttheirabilitytoexpandtheir
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InternationalUniversitiesnetworkoccupyissubjecttolocalregulations,someofwhichmayaffecttheirabilitytoexpandtheir
operations.Forexample,insomelocations,institutionsarerequiredbylocalregulationstoprovideaspecificnumberofparkingspaces
perstudentenrolledorperareaconstructed.Eveniftherewereadequatespaceintheacademicfacilitiestoexpandthenumberofprograms
offeredorstudentsenrolled,wemaynotbeabletoexpandifwearenotabletoprovideadequateparkingatareasonablecost.The
majorityoftherealestatethatinstitutionsintheLaureateInternationalUniversitiesnetworkoccupyisleasedandmaybesubjecttolease
provisionsthatgivethelandlordtheabilitytoaffecttheoperationoftheacademicprograms.Forexample,incertainjurisdictions,the
landlordmayberesponsibleforobtainingandmaintainingoccupancypermitsorlicenses,withoutwhichwecannotoperate.Ifthe
landlorddoesnotmaintaintherequiredpermitsorlicenses,theinstitutionmayberequiredtosuspendoperations,whichcouldhavea
materialadverseeffectonourresultsofoperations.InBrazil,realestatelawsprovidethatrenttermsundercertaintypesofleasesare
subjecttoperiodicadjustmentstoreflectlocaleconomicconditions.Theserentincreasescanbesubstantial,whichcouldhaveamaterial
adverseeffectonourresultsofoperations.Wecurrentlyhaveleaseswithvariousexpirationdates,someofwhichhaverenewaloptions.
Ourabilitytorenegotiatefavorabletermsonanexpiringleaseortonegotiatefavorabletermsforasuitablealternatelocation,andour
abilitytonegotiatefavorableleasetermsforadditionallocations,willdependonconditionsintherealestatemarket,competitionfor
desirablepropertiesandourrelationshipswithcurrentandprospectivelandlordsormaydependonotherfactorsthatarenotwithinour
control.Anyorallofthesefactorsandconditionscouldnegativelyaffectourgrowth.
Oursuccessdependsontheskillsofourexecutiveofficers,particularlyourChairmanandChiefExecutiveOfficer.Ifwelosekey
personnelorareunabletohireadditionalqualifiedpersonnel,ourbusinessmaybeharmed.
Ourfuturesuccessdependstoasignificantdegreeontheskills,experienceandeffortsofDouglasL.Becker,ourChairman,Chief
ExecutiveOfficerandfounder,whohasalwaysplayedandcontinuestoplayanintegralroleindevelopingandexecutingourgrowth
strategy.WecannotassureyouthatwewillhaveaninternalcandidatetotakeontheroleofChairmanandChiefExecutiveOfficershould
Mr.Beckerbecomeunableorunwillingtoserve.Wealsohaveotherveryexperiencedandvaluableexecutivesinseniormanagementroles
whowouldbeextremelydifficulttoreplace,thelossofwhoseservicescouldaffectthegrowthorresultsofourcompany.Asour
competitorsexpandtheiroperations,theymayhavetheresourcestohireawaymembersofourmanagementteam.Thereisnoassurance
thatwewillbeabletoretainourexistingkeypersonnel,particularlyinlightofincreasedcompetitioninthehighereducationindustry,or
thatwewillbeabletoattract,assimilateorretainthe
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additionalpersonnelneededtosupportourbusiness.Ifwecannot,wemaynotbeabletogrowourbusinessasplanned,andwemaynotbe
abletooperateourexistingbusinesseffectively.Inaddition,wemaynothaveidentifiedclearsuccessorstoourmanagementteamand
otherkeyemployees,whichcouldresultinlostopportunitiesanddisruptionstoouroperationsintheeventofanunexpecteddeparture.
Thiscouldhaveamaterialadverseeffectonourbusiness,financialconditionandresultsofoperations.
OurstatusasaCertifiedBCorporationmaynotresultinthebenefitsthatweanticipate.
WhilenotrequiredbyDelawarelaworthetermsofourcertificateofincorporation,wehaveelectedtohaveoursocialand
profitorganization.Asaresultofthisassessment,wehavebeendesignatedasa"CertifiedBCorporation TM,"whichreferstocompanies
thatarecertifiedasmeetingcertainlevelsofsocialandenvironmentalperformance,accountabilityandtransparency.Thestandardsfor
CertifiedBCorporationcertificationaresetbyanindependentorganizationandmaychangeovertime.See"BusinessCertifiedB
Corporation."OurreputationcouldbeharmedifweloseourstatusasaCertifiedBCorporation,whetherbyourchoiceorbyourfailureto
continuetomeetthecertificationrequirements,ifthatfailureorchangeweretocreateaperceptionthatwearemorefocusedonfinancial
performanceandarenolongerascommittedtothevaluessharedbyCertifiedBCorporations.Likewise,ourreputationcouldbeharmedif
ourpubliclyreportedCertifiedBCorporationscoredeclines.
Theminorityownersofourinstitutionsmaydisagreewiththewayweoperatetheinstitutionsorplantoexpandtheinstitutions,which
couldmateriallyadverselyaffectourbusinessandresultsofoperations.
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Althoughwecontrolallofourinstitutions,weshareownershiporcontrolofseveralofourinstitutionswithminoritystockholders.We
currentlydonothavetherighttobuyoutalloftheseminorityinterests.Theminorityownerscouldassertthatourbusinessdecisionsat
theinstitutionadverselyaffectedthevalueoftheirinvestment.Incertainofourinstitutions,minorityownerscontinuetooccupykey
managementpositionsandmayhavetheabilitytoenterintoagreementswiththirdpartiesortakeotheractionsthatareinconsistentwith
ourcorporatepolicies,whichcouldcreatelegalburdensandadditionalexpenseforus.Inaddition,disagreementswiththeminority
ownersmaydistractmanagementandmaymateriallyadverselyaffectourbusiness,financialconditionandresultsofoperations.
Litigationmaymateriallyadverselyaffectourbusiness,financialconditionandresultsofoperations.
Ourbusinessissubjecttotheriskoflitigationbyemployees,students,suppliers,competitors,minoritypartners,stockholders,
governmentagenciesorothersthroughprivateactions,classactions,administrativeproceedings,regulatoryactionsorotherlitigation.
Theoutcomeoflitigation,particularlyclassactionlawsuits,regulatoryactionsandintellectualpropertyclaims,isdifficulttoassessor
quantify.Plaintiffsinthesetypesoflawsuitsmayseekrecoveryofverylargeorindeterminateamounts,andthemagnitudeofthepotential
lossrelatingtotheselawsuitsmayremainunknownforsubstantialperiodsoftime.Inaddition,certainoftheselawsuits,ifdecided
adverselytousorsettledbyus,mayresultinliabilitymaterialtoourfinancialstatementsasawholeormaynegativelyaffectour
operatingresultsifchangestoourbusinessoperationarerequired.Thecosttodefendfuturelitigationmaybesignificant.Therealsomay
beadversepublicityassociatedwithlitigationthatcouldnegativelyaffectcustomerperceptionofourbusiness,regardlessofwhetherthe
allegationsarevalidorwhetherweareultimatelyfoundliable.Asaresult,litigationmaymateriallyadverselyaffectourbusiness,
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Wearesubjecttoanticorruptionlawsinthejurisdictionsinwhichweoperate,includingtheU.S.ForeignCorruptPracticesAct(the
"FCPA"),aswellastradecomplianceandeconomicsanctionslawsandregulations.Ourfailuretocomplywiththeselawsand
regulationscouldsubjectustocivilandcriminalpenalties,harmourreputationandmateriallyadverselyaffectourbusiness,financial
conditionandresultsofoperations.
Doingbusinessonaworldwidebasisrequiresustocomplywiththelawsandregulationsofnumerousjurisdictions.Theselawsand
regulationsplacerestrictionsonouroperationsandbusinesspractices.Inparticular,wearesubjecttotheFCPA,whichgenerallyprohibits
companiesandtheirintermediariesfromprovidinganythingofvaluetoforeignofficialsforthepurposeofobtainingorretainingbusiness
orsecuringanyimproperbusinessadvantage,alongwithvariousotheranticorruptionlaws.Asaresultofdoingbusinessinforeign
countriesandwithforeignpartners,weareexposedtoaheightenedriskofviolatinganticorruptionlaws.Althoughwehaveimplemented
policiesandproceduresdesignedtoensurethatwe,ouremployeesandotherintermediariescomplywiththeFCPAandotheranti
corruptionlawstowhichwearesubject,thereisnoassurancethatsuchpoliciesorprocedureswillworkeffectivelyallofthetimeor
protectusagainstliabilityundertheFCPAorotherlawsforactionstakenbyouremployeesandotherintermediarieswithrespecttoour
businessoranybusinessesthatwemayacquire.Wecannotassureyouthatallofourlocalpartnerswillcomplywiththeselaws,inwhich
casewecouldbeheldliableforactionstakeninsideoroutsideoftheUnitedStates,eventhoughourpartnersmaynotbesubjecttothese
laws.Ourcontinuedinternationalexpansion,andanydevelopmentofnewpartnershipsandjointventurerelationshipsworldwide,
increasetheriskofFCPAviolationsinthefuture.
Violationsofanticorruptionlaws,exportcontrollawsandregulations,andeconomicsanctionslawsandregulationsarepunishable
bycivilpenalties,includingfines,aswellascriminalfinesandimprisonment.IfwefailtocomplywiththeFCPAorotherlawsgoverning
theconductofinternationaloperations,wemaybesubjecttocriminalandcivilpenaltiesandotherremedialmeasures,whichcould
materiallyadverselyaffectourbusiness,financialcondition,resultsofoperationsandliquidity.Anyinvestigationofanypotential
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materiallyadverselyaffectourbusiness,financialcondition,resultsofoperationsandliquidity.Anyinvestigationofanypotential
violationsoftheFCPAorotheranticorruptionlaws,exportcontrollawsandregulations,andeconomicsanctionslawsandregulationsby
theUnitedStatesorforeignauthoritiescouldalsomateriallyadverselyaffectourbusiness,financialcondition,resultsofoperationsand
liquidity,regardlessoftheoutcomeoftheinvestigation.
WemaynotgenerateanticipatedsavingsfromourEiPprogramorourSSOs.
Weanticipatemakinganinvestmentofapproximately$180millioninourEiPprogramfrom2015to2017tooptimizeand
standardizeourprocesseswithagoalofenablingsustainedgrowthandmarginexpansion,andwehavedevelopedandbeguntodeploy
SSOsaroundtheworldwiththegoalofprocessingmostbackofficeandnonstudentfacingtransactionsfortheinstitutionsinthe
LaureateInternationalUniversitiesnetwork,suchasaccounting,financeandprocurement.Whileweexpecttheseprogramstogenerate
approximately$100millioninannualcostsavingswhenfullyrealizedin2019,therecanbenoassurancethatwewillachievethese
savingsgoalsorthatwewillnothavetomakeadditionalinvestmentsintheseprogramstodoso.Inaddition,ourabilitytoimplement
theseprogramssuccessfullyandtimelycouldbeadverselyaffectedbymanyfactorsincluding,amongothers,lackofacceptancebylocal
regulatorsandinstitutions,inabilitytoidentifyandhirequalifiedpersonneltostaffSSOsandunanticipatedtechnicaldifficulties.Ifweare
notabletoimplementtheEiPprogramandtheSSOssuccessfullyandtimely,atthecoststhatwecurrentlyanticipate,theseinitiativesmay
notgeneratetheirintendedoperatingefficiencieswhichcouldhamperourabilitytogrowinascalablemanner,andthiscouldhavea
materialadverseeffectonourbusiness,financialconditionandresultsofoperations.
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WeareconductinganinternalinvestigationofoneofournetworkinstitutionsforviolationsoftheCompany'spolicies,andpossible
violationsoftheU.S.ForeignCorruptPracticesActandotherapplicablelaws.Aviolationoftheselawsandregulationscouldsubject
ustopenalties,harmourreputationandmateriallyadverselyaffectourbusiness,financialconditionandresultsofoperations.
Aspreviouslydisclosed,duringthefourthquarterof2014,werecordedanoperatingexpenseof$18.0million(thevalueof
40.0millionTurkishLirasatthedateofdonation)foradonationbyournetworkinstitutioninTurkeytoacharitablefoundation.We
believedthedonationwasencouragedbytheTurkishgovernmenttofurtherapublicprojectsupportedbythegovernmentandexpected
thatitwouldenhancethepositionandongoingoperationsofourinstitutioninTurkey.TheCompanyhaslearnedthatthecharitable
foundationwhichreceivedthedonationdisbursedthefundsatthedirectionofaformerseniorexecutiveatournetworkinstitutionin
Turkeyandotherexternalindividualstoathirdpartywithoutourknowledgeorapproval.
InJune2016,theAuditCommitteeoftheBoardofDirectorsinitiatedaninternalinvestigationintothismatterwiththeassistanceof
externalcounsel.Theinvestigationconcernsthefactssurroundingthedonation,violationsoftheCompany'spolicies,andpossible
violationsoftheFCPAandotherapplicablelawsinwhatappearstobeafraudperpetratedbytheformerseniorexecutiveatournetwork
institutioninTurkeyandotherexternalindividuals.Thisincludesaninvestigationtodetermineifthediversionwaspartofaschemeto
misappropriatethefundsandwhetheranyportionofthefundswaspaidtogovernmentofficials.Asofthedateofthisprospectus,wehave
notidentifiedthatanyotherofficersoremployeesoutsideofTurkeywereinvolvedinthediversionoftheintendeddonation.Although
wearepursuingeffortstorecoverthedivertedfunds,thereisnoassurancethatwewillbesuccessful.
WehavebeenadvisedbyTurkishcounselthat,underTurkishlaw,aFoundationUniversitymaynotmakepaymentsthatcausea
decreaseintheuniversity'swealthordonototherwisebenefittheuniversity.Giventheuncertaintyofrecoveryofthediverteddonation
andtomitigateanypotentialregulatoryissuesinTurkeyrelatingtothedonation,certainLaureateownedentitiesthataremembersofthe
foundationthatcontrolsournetworkinstitutioninTurkeyhavecontributedanamountofapproximately$13.0million(thevalueof
40.0millionTurkishLirasonNovember4,2016,thedateofcontribution)toournetworkinstitutioninTurkeytoreimburseitforthe
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donation.
Asaresultoftheinvestigation,whichisongoing,wetookstepstoremovetheformerseniorexecutiveatournetworkinstitutionin
Turkey.BecauseofthecomplexorganizationalstructureinTurkey,thistookapproximatelyonemonthandduringthatperiodouraccess
tocertainaspectsofthebusinessincludingthefinancialandotherrecordsoftheuniversitywasinterrupted.Theformerseniorexecutiveis
nownolongeraffiliatedwithournetworkinstitutionandweagainhaveaccesstothefinancialandotherrecordsoftheuniversity.
InSeptember2016,wevoluntarilydisclosedtheinvestigationtotheU.S.DepartmentofJustice(the"DOJ")andtheSEC.The
Companyintendstofullycooperatewiththeseagenciesandanyotherapplicableauthoritiesinanyinvestigationthatmaybeconducted
inthismatterbythem.TheCompanyhasinternalcontrolsandcompliancepoliciesandproceduresthataredesignedtoprevent
misconductofthisnatureandsupportcompliancewithlawsandbestpracticesthroughoutitsglobaloperations.TheCompanyistaking
stepstoenhancetheseinternalcontrolsandcompliancepoliciesandprocedures.Theinvestigationisongoing,andwecannotpredictthe
outcomeatthistime,ortheimpact,ifany,totheCompany'sconsolidatedfinancialstatementsorpredicthowtheresultingconsequences,
ifany,mayimpactourinternalcontrolsandcompliancepoliciesandprocedures,business,abilityorrighttooperateinTurkey,resultsof
operationsorfinancialposition.IfwearefoundtohaveviolatedtheFCPAorotherlawsgoverningtheconductofouroperations,wemay
besubjecttocriminalandcivilpenaltiesandotherremedialmeasures,whichcouldmateriallyadverselyaffectourbusiness,financial
condition,resultsofoperationsandliquidity.
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See"Wecurrentlyhavefourmaterialweaknessesinourinternalcontroloverfinancialreportingthat,ifnotcorrected,couldresultin
materialmisstatementsofourfinancialstatements"and"Ourinstitutionsaresubjecttouncertainandvaryinglawsandregulations,and
anychangestotheselawsorregulationsortheirapplicationtousmaymateriallyadverselyaffectourbusiness,financialconditionand
resultofoperations."
Wecurrentlyhavefourmaterialweaknessesinourinternalcontroloverfinancialreportingthat,ifnotcorrected,couldresultin
materialmisstatementsofourfinancialstatements.
InthecourseofpreparingourconsolidatedfinancialstatementsasofandfortheyearendedDecember31,2013,weidentifiedcertain
materialweaknessesinourinternalcontroloverfinancialreporting.Amaterialweaknessisadeficiency,oracombinationofdeficiencies,
ininternalcontroloverfinancialreporting,suchthatthereisareasonablepossibilitythatamaterialmisstatementofourannualorinterim
consolidatedfinancialstatementswillnotbepreventedordetectedonatimelybasis.Thematerialweaknessesrelatedto(1)aninadequate
contractmanagementprocess,(2)inadequateaccountingfortaxmatters,(3)inadequateknowledgeofGAAPinthenonU.S.finance
organization,(4)inadequatejournalentryreviewprocessesand(5)inadequatecontrolsoverkeyreportsandspreadsheets.Wehave
remediatedfourofthefivematerialweaknesseshowever,materialweaknessesrelatedtoinadequatecontrolsoverkeyreportsand
spreadsheetsremainedatDecember31,2015andSeptember30,2016.
AsofDecember31,2015,weidentifiedamaterialweaknessinourinternalcontroloverfinancialreportingrelatedtoinadequate
controlsoverkeyreportsandspreadsheets,asdiscussedabove.Specifically,wedidnotdesignadequatecontrolstoaddressthe
completenessandaccuracyofkeyreportsandkeyspreadsheets.Thismaterialweakness,incombinationwithotherpriormaterial
weaknesses,contributedtoarevisiontoourauditedfinancialstatementsfortheyearendedDecember31,2013.Thismaterialweakness
couldresultinadditionalmisstatementstotheaccountsanddisclosuresthatwouldresultinamaterialmisstatementofourconsolidated
financialstatementsthatwouldnotbepreventedordetected.
AsofSeptember30,2016,weidentifiedthreeadditionalmaterialweaknesses,asfollows:
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Weidentifiedamaterialweaknessinourriskassessmentprocess,whichwedeterminedwasnotoperatingadequatelyto
identifyandaddresstheriskstoourbusinessandtoestablishappropriatecontrolobjectivesgiventheenvironmentin
whichweoperateandthedecentralizedstructureusedtomanageouroperatingactivities.Thismaterialweaknessinourrisk
assessmentprocesswasafactorcontributingtotwoadditionalmaterialweaknesseswhichwehavefurtherdescribedbelow:
Weidentifiedamaterialweaknessinthatwedidnotappropriatelyassesstherisksrelatingtoourcontracting
processesanddidnothavecontrolsthatwereproperlydesignedoroperatingeffectivelytodetectandpreventfraud.
Specifically,ourcontrolsovercontractingprocesseswerenotdesignedoroperatingeffectivelytoincorporate
appropriatelevelsofduediligence,requisitemanagementapprovals,segregationofdutiesorongoingmonitoring.
ThismaterialweaknessallowedfortheoccurrenceoftheincidentinournetworkinstitutioninTurkeyasdiscussed
in"IndustryRegulationTurkishRegulationandInternalInvestigation,"aswellascertainothercontracting
irregularitiesatothernetworkinstitutionsthatalsonecessitatedaninternalinvestigation.Thiscontroldeficiency
couldresultinmaterialmisstatementsoftheaccountsanddisclosuresthatwouldresultinamaterialmisstatementof
ourconsolidatedfinancialstatementsthatwouldnotbepreventedordetected.
Weidentifiedamaterialweaknessinthatwedidnotmaintaineffectivecontrolsovertheoperatingeffectivenessof
informationtechnology("IT")generalcontrolsforinformation
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systemsthatarerelevanttothepreparationofourfinancialstatements.Specificallywedidnot:
(i)
maintainprogramchangemanagementcontrolstoensurethatITprogramanddatachangesaffectingfinancialIT
applicationsandunderlyingaccountingrecordsareidentified,tested,authorizedandimplementedappropriately
(ii)
maintainuseraccesscontrolstoensureappropriatesegregationofdutiesandthataccesstofinancialapplications
anddataisadequatelyrestrictedtoappropriatepersonneland
(iii)
maintaincomputeroperationscontrolstoensurethatprivilegesareappropriatelygranted,anddatabackupsare
authorizedandmonitored.
TheseITdeficienciesdidnotresultinamaterialmisstatementtothefinancialstatements,however,thedeficiencies,whenaggregated,
couldimpacttheeffectivenessofITdependentcontrols(suchasautomatedcontrolsthataddresstheriskofmaterialmisstatementtooneor
moreassertions,alongwiththeITcontrolsandunderlyingdatathatsupporttheeffectivenessofsystemgenerateddataandreports)that
couldresultinmisstatementspotentiallyaffectingallfinancialstatementaccountsanddisclosuresthatwouldnotbepreventedordetected
inatimelymanner.
Wehavecommencedtheremediationofthesematerialweaknesses.Oureffortstoremediatethesematerialweaknessesmaynotbe
effective.Ifoureffortstoremediatethesematerialweaknessesarenotsuccessful,theremediatedmaterialweaknessesmayreoccur,the
currentmaterialweaknessesmaynotberemediatedinatimelymanner,orothermaterialweaknessescouldoccurinthefuture.
Asaresultofthesematerialweaknesses,wemaybeunabletoreportourfinancialresultsaccuratelyonatimelybasis,whichcould
causeourreportedfinancialresultstobemateriallymisstatedandresultinthelossofinvestorconfidenceordelistingofourClassA
commonstockandcouldcausethemarketpriceofourClassAcommonstocktodecline.Asaresultofsuchfailures,wecouldalsobecome
subjecttoinvestigationsbythestockexchangeonwhichourClassAcommonstockislisted,theSECorotherregulatoryauthorities,and
becomesubjecttolitigationfrominvestors,whichcouldharmourreputation,business,financialconditionandresultsofoperations,and
divertfinancialandmanagementresourcesfromourcorebusiness.
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Further,ifasaresultofthesematerialweaknessesweareunabletoprovidetheDOEwithrequiredfinancialstatementsbyspecified
deadlines,theDOEcouldtakeactiontomateriallylimitorterminateourU.S.Institutions'participationintheTitleIVfederalstudentaid
programs,whichcouldresultinamaterialoradversedeclineinrevenues,financialconditionorresultsofoperations.Furthermore,theU.S.
Institutionswouldthenbeunabletocontinuetheirbusinessascurrentlyconducted,whichcouldbeexpectedtohaveamaterialadverse
effectonourU.S.Institutions'abilitytocontinueasgoingconcerns.
See"WeareconductinganinternalinvestigationofoneofournetworkinstitutionsforviolationsoftheCompany'spolicies,and
possibleviolationsoftheU.S.ForeignCorruptPracticesActandotherapplicablelaws.Aviolationoftheselawsandregulationscould
subjectustopenalties,harmourreputationandmateriallyadverselyaffectourbusiness,financialconditionandresultsofoperations."
Ifwefailtomaintainproperandeffectiveinternalcontrols,ourabilitytoproduceaccuratefinancialstatementsonatimelybasiscould
bemateriallyadverselyaffected.
CommencingwithourfiscalyearendingDecember31,2017,wemustperformsystemandprocessevaluationandtestingofour
internalcontrolsoverfinancialreportingtoallowmanagementandourindependentregisteredpublicaccountingfirmtoreportonthe
effectivenessofourinternalcontrolsoverfinancialreportinginourForm10Kfilingforthatyear,asrequiredbySection404ofthe
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SarbanesOxleyActof2002(the"SarbanesOxleyAct").Thiswillrequirethatweincursubstantialadditionalprofessionalfeesand
internalcoststoexpandouraccountingandfinancefunctionsandthatweexpendsignificantmanagementeffortsandwemayneedto
makefurtherinvestmentsinordertobecomecompliant.Priortothisoffering,wehavenotbeenrequiredtotestourinternalcontrolswithin
aspecifiedperiodand,asaresult,wemayexperiencedifficultyinmeetingthesereportingrequirementsinatimelymanner.
Wemayinthefuturediscoverareasofourinternalfinancialandaccountingcontrolsandproceduresthatneedimprovement.Our
internalcontroloverfinancialreportingwillnotpreventordetectallerrorsandallfraud.Acontrolsystem,regardlessofhowwell
designedandoperated,canprovideonlyreasonable,notabsolute,assurancethatthecontrolsystem'sobjectiveswillbemet.Becauseof
theinherentlimitationsinallcontrolsystems,noevaluationofcontrolscanprovideabsoluteassurancethatmisstatementsduetoerroror
fraudwillnotoccurorthatallcontrolissuesandinstancesoffraudwillbedetected.
IfwearenotabletocomplywiththerequirementsofSection404oftheSarbanesOxleyActinatimelymanner,orifweareunableto
maintainproperandeffectiveinternalcontrols,wemaynotbeabletoproducetimelyandaccuratefinancialstatements,andweorour
independentregisteredpublicaccountingfirmmayconcludethatourinternalcontrolsoverfinancialreportingarenoteffectiveorour
independentregisteredpublicaccountingfirmmaynotbeabletoprovideuswithanunqualifiedopinionasrequiredbySection404of
theSarbanesOxleyAct.Ifthatweretohappen,investorscouldloseconfidenceinourreportedfinancialinformation,whichcouldleadto
adeclineinthemarketpriceofourClassAcommonstockandwecouldbesubjecttosanctionsorinvestigationsbythestockexchange
onwhichourClassAcommonstockislisted,theSECorotherregulatoryauthorities.
Additionally,theexistenceofanymaterialweaknesscouldrequiremanagementtodevotesignificanttimeandincursignificant
expensetoremediateanysuchmaterialweaknessandmanagementmaynotbeabletoremediateanysuchmaterialweaknessinatimely
manner.Theexistenceofanymaterialweaknessinourinternalcontroloverfinancialreportingcouldalsoresultinerrorsinourfinancial
statementsthatcouldrequireustorestateourfinancialstatements,causeustofailtomeetourreportingobligationsandcausetheholders
ofourClassAcommonstocktoloseconfidenceinourreportedfinancialinformation,allofwhichcouldmateriallyadverselyaffectour
businessandshareprice.
See"WeareconductinganinternalinvestigationofoneofournetworkinstitutionsforviolationsoftheCompany'spolicies,and
possibleviolationsoftheU.S.ForeignCorruptPracticesActandotherapplicablelaws.Aviolationoftheselawsandregulationscould
subjectustopenalties,harmourreputationandmateriallyadverselyaffectourbusiness,financialconditionandresultsofoperations."
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RisksRelatingtoOurHighlyRegulatedIndustryintheUnitedStates
FailureofanyofourU.S.Institutionstocomplywithextensiveregulatoryrequirementscouldresultinsignificantmonetaryliabilities,
finesandpenalties,restrictionsonouroperations,limitationsonourgrowth,orlossofaccesstofederalstudentloansandgrantsforour
students,onwhichwearesubstantiallydependent.
OurU.S.Institutionsaresubjecttoextensiveregulatoryrequirements,includingatthefederal,state,andaccreditingagencylevels.
ManystudentsatourU.S.Institutionsrelyontheavailabilityoffederalstudentfinancialaidprograms,knownasTitleIVprograms,which
areadministeredbytheDOE,tofinancetheircostofattendingourinstitutions.ForthefiscalyearendedDecember31,2015,Kendall
College,NewSchoolofArchitectureandDesign,St.AugustineandWaldenUniversityderivedapproximately36%,43%,49%and73%,
respectively,oftheirrevenues(calculatedonacashbasis)fromTitleIVprogramfunds.Intheaggregate,ourU.S.Institutionsderived
approximately$480millionofrevenues(calculatedonacashbasis)fromTitleIVprogramsduringtheyearendedDecember31,2015.
ToparticipateinTitleIVprograms,ourU.S.Institutionsmustbeauthorizedbytheappropriatestateeducationagencyoragencies,be
accreditedbyanaccreditingagencyrecognizedbytheDOE,andbecertifiedasaneligibleinstitutionbytheDOE.Asaresult,ourU.S.
InstitutionsaresubjecttoextensiveregulationandreviewbytheseagenciesandcommissionswhichcoverthevastmajorityofourU.S.
operations,includingoureducationalprograms,instructionalandadministrativestaff,administrativeprocedures,marketing,student
recruitingandadmissions,andfinancialoperations.Theseregulationsalsoaffectourabilitytoacquireoropenadditionalinstitutions,add
neweducationalprograms,substantiallychangeexistingprogramsorchangeourcorporateorownershipstructure.Theagenciesand
commissionsthatregulateouroperationsperiodicallyrevisetheirrequirementsandmodifytheirinterpretationsofexistingrequirements.
Regulatoryrequirementsarenotalwayspreciseandclear,andregulatoryagenciesmaysometimesdisagreewiththewayweinterpretor
applytheserequirements.Ifwemisinterpretorarefoundtohavenotcompliedwithanyoftheseregulatoryrequirements,ourU.S.
Institutionscouldsufferfinancialpenalties,limitationsontheiroperations,lossofaccreditation,terminationoforlimitationsontheir
abilitytograntdegreesandcertificates,orlimitationsonorterminationoftheireligibilitytoparticipateinTitleIVprograms,eachof
whichcouldmateriallyadverselyaffectourbusiness,financialconditionandresultsofoperations.Inaddition,ifwearechargedwith
regulatoryviolations,ourreputationcouldbedamaged,whichcouldhaveanegativeimpactonourenrollmentsandmateriallyadversely
affectourbusiness,financialconditionandresultsofoperations.Wecannotpredictwithcertaintyhowalloftheseregulatoryrequirements
willbeapplied,orwhetherwewillbeabletocomplywithalloftheapplicablerequirementsinthefuture.
IfanyofourU.S.InstitutionsweretoloseitseligibilitytoparticipateinTitleIVprograms,wewouldexperienceamaterialand
adversedeclineinrevenues,financialcondition,resultsofoperations,andfuturegrowthprospects.Furthermore,theaffectedU.S.
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adversedeclineinrevenues,financialcondition,resultsofoperations,andfuturegrowthprospects.Furthermore,theaffectedU.S.
Institutionwouldbeunabletocontinueitsbusinessasitiscurrentlyconducted,whichcouldhaveamaterialadverseeffectonthe
institution'sabilitytocontinueasagoingconcern.
IfanyoftheU.S.educationregulatoryagenciesorcommissionsthatregulateusdonotapproveordelayanyrequiredapprovalsof
transactionsinvolvingachangeofcontrol,includingourrecentconversiontoaDelawarepublicbenefitcorporationandthisoffering,
ourabilitytooperateorparticipateinTitleIVprogramsmaybeimpaired.
IfweoroneofourU.S.InstitutionsexperiencesachangeofownershiporcontrolunderthestandardsoftheDOE,anyapplicable
accreditingagency,anyapplicablestateeducationallicensingagency,oranyspecializedaccreditingagency,wemustnotifyorseek
approvalofeachsuchagencyorcommission.Theseagenciesdonothaveuniformcriteriaforwhatconstitutesachangeofownershipor
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control.Transactionsoreventsthattypicallyconstituteachangeofownershiporcontrolincludesignificantacquisitionsordispositions
ofsharesofthevotingstockofaninstitutionoritsparentcompany,andsignificantchangesinthecompositionoftheboardofdirectorsof
aninstitutionoritsparentcompany.Theoccurrenceofsomeofthesetransactionsoreventsmaybebeyondourcontrol.Ourfailureto
obtain,oradelayinreceiving,approvalofanychangeofcontrolfromtheDOEoranyapplicableaccreditingagencyorstateeducational
licensingagency,couldimpairourU.S.Institutions'abilitytooperateorparticipateinTitleIVprograms,whichcouldhaveamaterial
adverseeffectonourbusiness,financialconditionandresultsofoperations.Failuretoobtain,oradelayinreceiving,approvalofany
changeofcontrolfromanystateinwhichourU.S.Institutionsarecurrentlylicensedorauthorized,orfromanyapplicableaccrediting
agency,couldrequireustosuspendouractivitiesinthatstateorsuspendofferingapplicableprogramsuntilwereceivetherequired
approval,orcouldotherwiseimpairouroperations.
TheDOEpreviouslynotifiedusthatitconsidersthisofferingandourrecentconversiontoaDelawarepublicbenefitcorporationtobe
twoseparatechangesofownershipresultinginchangesincontrolundertheDOE'sregulations.UndertheDOE'sregulations,aninstitution
thatundergoesachangeincontrollosesitseligibilitytoparticipateinTitleIVprogramsandmustapplytotheDOEtoreestablishsuch
eligibility.Ifaninstitutionfilestherequiredapplicationandfollowscertainotherprocedures,theDOEmaytemporarilycertifythe
institutiononaprovisionalbasisfollowingthechangeincontrol,suchthattheinstitution'sstudentsretainaccesstoTitleIVprogram
fundsuntiltheDOEcompletesitsfullreviewofthechangeincontrol.Inaddition,theDOEwillextendsuchtemporaryprovisional
certificationiftheinstitutiontimelyfilesotherrequiredmaterials,includinganyrequiredapprovalsofthechangeincontrolbyitsstate
authorizingagencyandaccreditingcommission,andcertainfinancialinformation.Ifaninstitutionfailstomeetanyofthesedeadlines,its
certificationwillexpire,anditsstudentswillnotbeeligibletoreceiveTitleIVprogramfundsuntiltheDOEcompletesitsfullreview,
whichcommonlytakesseveralmonthsorlonger.WeappliedtotheDOEonbehalfofKendallCollege,NewSchoolofArchitectureand
Design,St.AugustineandWaldenUniversityforapprovaloftheseinstitutions'continuedparticipationinTitleIVprogramsinconnection
withboththisofferingandtherecentconversiontoaDelawarepublicbenefitcorporation.TheDOEcompleteditsreviewofthe
conversionandissuedprovisionalprogramparticipationagreementstotheinstitutionswithrespecttotheconversion.Wehavealsofiled
preacquisitionreviewapplicationstotheDOEonbehalfofKendallCollege,NewSchoolofArchitectureandDesign,St.Augustineand
WaldenUniversityinconnectionwiththisoffering.Afterthisofferingiscompleted,iftheapplicationsaredeemedmateriallycomplete,
theDOEwillissuetemporaryprogramparticipationagreementstotheinstitutions,whichwillexpireonthelastdayofthemonth
followingthemonthinwhichtheofferingoccurred.IfcertaindocumentsaresubmittedtoDOEbeforetheexpirationofthetemporary
programparticipationagreements,theeligibilityoftheinstitutionstoparticipateintheTitleIVprogramswillbecontinued.However,the
DOEwillonlyformallyreviewandapprovethisofferingafterithasoccurred.Asaresult,therecanbenoassurancethattheDOEwill
approvethisofferingandrecertifyourU.S.InstitutionsforcontinuedTitleIVprogrameligibilityfollowingthisoffering.IftheDOE
approvesanapplicationafterachangeincontrol,itwilltypicallycertifyaninstitutiononaprovisionalbasisforaperiodofupto
approximatelythreeyears.IftheDOEfailstorecertifyourU.S.Institutionsfollowingthisoffering,studentsattheaffectedinstitutions
wouldnolongerbeabletoreceiveTitleIVprogramfunds.TheDOEcouldalsorecertifyourU.S.Institutionsfollowingthisoffering,but
restrictordelaystudents'receiptofTitleIVprogramfunds,limitthenumberofstudentstowhomaninstitutioncoulddisbursesuchfunds,
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requirelettersofcredit,orimposeotherrestrictionsthatcouldmateriallyadverselyaffectourU.S.business.
WearealsoseekingconfirmationfromtheinstitutionalandprogrammaticaccreditingagenciesforKendallCollege,NewSchoolof
ArchitectureandDesign,St.AugustineandWaldenUniversity,aswellasfromtheU.S.institutionalaccreditingagencyforUniversidad
AndrsBello,whetherthisofferingwillconstituteachangeofcontrolundertheirrespectivestandards.Withrespecttotheinstitutional
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accreditingagencies,theHigherLearningCommission,theMiddleStatesCommissiononHigherEducationandtheCommissionon
SeniorCollegesoftheWesternAssociationofSchoolsandCollegeshaveinformedusthattheydonotconsiderthisofferingtoconstitute
achangeofcontrol,buthaverequiredcertainfollowupinformationregardingtheoffering.WithrespecttotheconversiontoaDelaware
publicbenefitcorporation,amongourinstitutionalaccreditors,theMiddleStatesCommissiononHigherEducationhasstatedthatit
considerstheconversiontoaDelawarepublicbenefitcorporationtoconstituteasubstantivechangeunderitsstandards,andhasapproved
theconversion.TheCommissiononSeniorCollegesoftheWesternAssociationofSchoolsandCollegesrequiredtheNewSchoolof
ArchitectureandDesignandSt.Augustinetosubmit"SubstantiveChange:ChangeinMission,Ownership,orFormofControl"proposals
totheStructuralChangecommittee.Thiscommitteereviewedtheseproposalsanddeterminedthatneitherthisofferingnortheconversion
toaDelawarepublicbenefitcorporationconstitutedstructuralchangesrequiringapproval.Followingtheconversion,theFlorida
CommissionforIndependentEducationissuedprovisionallicensestoWaldenUniversityandSt.Augustineandrequiredadditional
ongoingfinancialreporting.InSeptember2016itissuedafull,nonprovisionallicensetoSt.Augustinebutcontinuedtheschoolon
financialreporting.
Manystatesandprogrammaticaccreditorshaveinformedusthatthisofferingwillnotconstituteachangeofcontrol,butsome
agencieshavedeterminedthatthisofferingwillneedtobereviewedundertheirrespectivechangeofownershipstandards.Wehave
notifiedeachagencyregardingthisofferingandsomehaverequestedadditionalinformationinconnectionwiththisoffering.Tothe
extentanyagencyrequiresapprovalofthisofferingtheinstitutionalaccreditingagenciesandsomestateeducationalagenciesthat
authorizeourU.S.Institutionsalsomaynotacttorevieworapprovethisofferingonanadvancebasis.Ourfailuretoobtainanyrequired
approvalofthisofferingfromtheDOE,theinstitutionalaccreditingagencies,orthepertinentstateeducationalagenciescouldresultin
oneormoreofourU.S.InstitutionslosingcontinuedeligibilitytoparticipateintheTitleIVprograms,accreditationorstatelicensure,
whichcouldhaveamaterialadverseeffectonourU.S.business,financialconditionandresultsofoperations.
Inaddition,weincreasedourownershipofSt.Augustinefrom80%to100%onJune7,2016.The20%noncontrollinginterestwas
previouslyheldbyPatrisofSt.Augustine,Inc.andsubjecttoaputright,whichPatrisofSt.Augustine,Inc.electedtoexercise.Wehave
notifiedSt.Augustine'sapplicableregulatorsregardingtheincreaseinthepercentageofourownershipinSt.Augustine.
CongressmayrevisethelawsgoverningTitleIVprogramsorreducefundingforthoseandotherstudentfinancialassistanceprograms,
andtheDOEmayreviseitsregulationsadministeringTitleIVprograms,anyofwhichcouldreduceourenrollmentandrevenuesand
increasecostsofoperations.
TheHEAisafederallawthatgovernsTitleIVprograms.TheU.S.CongressmustauthorizeandappropriatefundingforTitleIV
programsundertheHEAandcanchangethelawsgoverningTitleIVprogramsatanytime.TheHEAwasmostrecentlyreauthorizedin
August2008throughfederalfiscalyear2014,althoughtheU.S.CongresshastakenactionsrequiredtoextendTitleIVprogramswhilean
HEAreauthorizationremainspendingandtheTitleIVprogramsremainauthorizedandfunctioning.CongresscontinuestoengageinHEA
reauthorizationhearings,withsuchhearingsexaminingvarioussubjectstobepotentiallyaddressedthroughreauthorization,including,
butnotlimitedto,collegeaffordability,theroleofconsumerinformationincollegechoicesbystudentsandfamilies,whetherTitleIV
programsshouldincludeinstitutionalrisksharing,andtheroleofaccreditingagenciesinensuringinstitutionalquality,amongother
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programsshouldincludeinstitutionalrisksharing,andtheroleofaccreditingagenciesinensuringinstitutionalquality,amongother
items.WecannotpredictthetimingandtermsofanyeventualHEAreauthorization,includinganypotentialchangestoinstitutional
participationorstudenteligibilityrequirementsorfundinglevelsforparticularTitleIVprograms,whichtermsmaymateriallyadversely
affectourbusiness,financialconditionandresultsofoperations.
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ApartfromTitleIVprograms,eligibleveteransandmilitarypersonnelmayreceiveeducationalbenefitsforthepursuitofhigher
education.AreductioninfederalfundinglevelsforTitleIVprograms,orforprogramsprovidingeducationalbenefitstoveteransand
militarypersonnel,couldreducetheabilityofsomestudentstofinancetheireducation.Wecannotpredictwithcertaintythefuture
fundinglevelsforTitleIVprograms,orforprogramsprovidingeducationalbenefitstoveteransandmilitarypersonnel,orthenatureof
anyfuturerevisionstothelaworregulationsrelatedtotheseprograms.BecauseasignificantpercentageoftherevenuesofourU.S.
InstitutionsisandisexpectedtobederivedfromTitleIVprograms,anyactionbytheU.S.CongressthatsignificantlyreducesTitleIV
programfundingortheabilityofourU.S.studentstoparticipateinTitleIVprogramscouldhaveamaterialadverseeffectonourU.S.
Institutions'enrollments,business,financialconditionandresultsofoperations.CongressionalactionalsomayrequireourU.S.
Institutionstomodifytheirpracticesinwaysthatcouldincreaseadministrativecostsandreduceprofitmargins,whichcouldhavea
materialadverseeffectonourbusiness,financialconditionandresultsofoperations.
Inrecentyears,theDOEhaspromulgatedasubstantialnumberofnewregulationsthatimpactourU.S.Institutions,including,butnot
limitedto,stateauthorization,standardsregardingthepaymentofincentivecompensation,thedefinitionofacredithourforthepurpose
ofdeterminingprogrameligibilityforTitleIVstudentfinancialaid,andthescopeoftheprohibitionandpotentialsanctionsfor
substantialmisrepresentations.TheseregulationsconcerningTitleIVprogramintegritygenerallybecameeffectiveonJuly1,2011.On
October30,2014,theDOEpublishedfinalregulationstodefine"gainfulemployment"forthepurposesoftheTitleIVprogram
requirementthateducationalprogramsofferedbyproprietaryinstitutionspreparestudentsforgainfulemploymentinrecognized
occupations,whichbecameeffectiveonJuly1,2015.InNovember2014,twoorganizationsrepresentingforprofitinstitutionsfiled
separatelawsuitsinfederaldistrictcourtsagainsttheDOEseekingtohavethefinalgainfulemploymentregulationsinvalidated.Inboth
cases,thecourtsupheldtheregulationsanddismissedthelawsuits.Inaddition,severaloftheprogramintegrityregulationsremainsubject
tofurtherinterpretationandspecificapplicationbytheDOE.
InOctober2014,theDOEpublishedfinalregulationsupdatingthestandardfordeterminingadversecredithistoryforthepurposesof
eligibilityforaDirectPLUSloan.OnDecember3,2014,theDOEpublishedproposedregulationsontheteacherpreparationprogram
accountabilitysystemundertheHEA,andadditionallyproposedamendmentsonteacherpreparationprogrameligibilityforTEACHGrant
participation.InOctober2016,theDOEpublisheditsfinalregulationsregardingteacherpreparationprogramsandTEACHGrant
eligibility.WearecurrentlyassessingtheeligibilityofWaldenUniversitytocontinuetoaccessTEACHGrantfundsunderthenew
regulations.
OnOctober30,2015,theDOEpublishedfinalregulationstoestablishaPayasYouEarnRepaymentPlanandimplementchanges
regardingcohortdefaultrateappealsandtheFederalFamilyEducationLoanandDirectLoanPrograms.ThePayasYouEarnRepayment
PlanprovisionstookeffectinDecember2015andamajorityoftheremainingprovisionsregulationstookeffectonJuly1,2016.Also,as
describedinmoredetailbelow,onOctober30,2015,theDOEpublishedfinalregulationsregardingcashmanagementanddebitcard
practices,retakingcourseworkandclocktocredithourconversion.AmajorityoftheprovisionsoftheregulationstookeffectonJuly1,
2016,andotherstookeffectonlaterdatesin2016.Thefinalregulationsconcerningcashmanagementrequire,amongotherthings,that
institutionssubjecttoheightenedcashmonitoringproceduresfordisbursementsofTitleIVfundsmust,effectiveJuly1,2016,payto
studentsanyapplicableTitleIVcreditbalancesbeforerequestingsuchfundsfromtheDOE.St.Augustine,WaldenUniversity,NewSchool
ofArchitectureandDesignandKendallCollegearecurrentlysubjecttoheightenedcashmonitoringprocedures.Wehavereviewedthe
regulationsandmadeappropriateadjustmentsinourbusinessoperationstomeetthoserequirementseffectiveJuly1,2016.
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regulationsandmadeappropriateadjustmentsinourbusinessoperationstomeetthoserequirementseffectiveJuly1,2016.
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OnDecember19,2016,theDOEpublishedfinalregulationsregardingstateauthorizationforprogramsofferedthroughdistance
educationandstateauthorizationforforeignlocationsofinstitutions.Amongotherprovisions,thesefinalregulationsrequirethatan
institutionparticipatingintheTitleIVfederalstudentaidprogramsandofferingpostsecondaryeducationthroughdistanceeducationbe
authorizedbyeachstateinwhichtheinstitutionenrollsstudents,ifsuchauthorizationisrequiredbythestate.TheDOEwouldrecognize
authorizationthroughparticipationinastateauthorizationreciprocityagreement,iftheagreementdoesnotpreventastatefromenforcing
itsownlaws.Thefinalregulationsalsorequirethatforeignadditionallocationsandbranchcampusesbeauthorizedbytheappropriate
foreigngovernmentagencyand,ifatleast50%ofaprogramcanbecompletedatthelocation/branch,beapprovedbytheinstitution's
accreditingagencyandbereportedtothestatewherethemaincampusislocated.Thefinalregulationswouldalsorequireinstitutionsto:
documentthestateprocessforresolvingcomplaintsfromstudentsenrolledinprogramsofferedthroughdistanceeducationor
correspondencecoursesandmakecertainpublicandindividualizeddisclosurestoenrolledandprospectivestudentsabouttheirdistance
educationprograms.ThesefinalregulationsareeffectiveJuly1,2018.
Also,onNovember1,2016,theDOEpublishedafinalruletoclarifyhowDirectLoanProgramborrowerswhobelievetheywere
defraudedbytheirinstitutionscanseekrelief,tostrengthenprovisionstoholdinstitutionsaccountablefortheirwrongdoingthatresultsin
loandischargesandtoexpandcircumstancesunderwhichtheDOEmayrequestlettersofcredit.Foradditionalinformationregardingthis
finalrule,see"TheDOEmayadoptregulationsgoverningfederalstudentloandebtforgivenessthatcouldresultinliabilityforamounts
basedonborrowerdefensesoraffecttheDOE'sassessmentofourinstitutionalcapability."Wecannotpredicttheoutcomeorrelatedimpact
ofanyoftheseitems.Asdescribedinmoredetailunder"IndustryRegulationU.S.Regulation,"ourU.S.Institutionsorcertainoftheir
educationalprogramsmayloseeligibilitytoparticipateinTitleIVprogramsiftheyorcertainoftheireducationalprogramscannot
maintaincompliancewithapplicableregulationsoftheDOE.
TheDOEmayadoptregulationsgoverningfederalstudentloandebtforgivenessthatcouldresultinliabilityforamountsbasedon
borrowerdefensesoraffecttheDOE'sassessmentofourinstitutionalcapability.
OnNovember1,2016,theDOEpublishedafinalrulethat,amongotherprovisions,establishesnewstandardsandprocessesfor
determiningwhetheraDirectLoanProgramborrowerhasadefensetorepayment("DTR")onaloanduetoactsoromissionsbythe
institutionatwhichtheloanwasusedbytheborrowerforeducationalexpenses.ThefinalregulationswilltakeeffectonJuly1,2017.
Amongothertopics,thisfinalruleestablishespermissibleborrowerdefenseclaimsfordischarge,proceduralrulesunderwhichclaimswill
beadjudicated,timelimitsforborrowers'claims,andguidelinesforrecoupmentbytheDOEofdischargedloanamountsfrominstitutions
ofhighereducation.Italsoprohibitsschoolsfromusinganypredisputearbitrationagreements,prohibitsschoolsfromprohibitingrelief
intheformofclassactionsbystudentborrowers,andinvalidatesclausesimposingrequirementsthatstudentspursueaninternaldispute
resolutionprocessbeforecontactingauthoritiesregardingconcernsaboutaninstitution.Forproprietaryinstitutions,thefinalrule
describesthethresholdforloanrepaymentratesthatwillrequirespecificdisclosurestocurrentandprospectivestudentsandtheapplicable
loanrepaymentratemethodology.Thefinalrulealsoestablishesimportantnewfinancialresponsibilityandadministrativecapacity
requirementsforbothnotforprofitandforprofitinstitutionsparticipatingintheTitleIVprograms.Forexample,certaineventswould
automaticallytriggertheneedforaschooltoobtainaletterofcredit,includingforpubliclytradedinstitutions,iftheSECwarnsthe
schoolthatitmaysuspendtradingontheschool'sstock,theschoolfailedtotimelyfilearequiredannualorquarterlyreportwiththeSEC,
ortheexchangeonwhichthestockistradednotifiestheschoolthatitisnotincompliancewithexchangerequirementsorthestockis
delisted.Othereventswouldwillrequirearecalculationofaschool'scompositescoreoffinancialresponsibility,including,for
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aproprietaryinstitutionwhosescoreislessthan1.5,anywithdrawalofanowner'sequitybyanymeans,includingbydeclaringa
dividend,unlesstheequityistransferredwithintheaffiliatedentitygrouponwhosebasisthecompositescorewascalculated.Thefinal
rulealsosetsfortheventsthatarediscretionarytriggersforlettersofcredit,meaningthatifanyofthemoccur,theDOEmaychooseto
requirealetterofcredit,increaseanexistingletterofcreditrequirementordemandsomeotherformofsuretyfromtheinstitution.Thefinal
ruleprovidesthatifaninstitutionfailstomeetthecompositescorerequirementforlongerthanthreeyearsunderprovisionalcertification,
theDOEmaymandateadditionalfinancialprotectionfromtheinstitutionoranypartywith"substantialcontrol"overtheinstitution.Such
partieswith"substantialcontrol"mustagreetojointlyandseverallyguaranteetheTitleIVliabilitiesoftheinstitutionattheendofthe
threeyearprovisionalcertificationperiod.Undercurrentregulations,apartymaybedeemedtohave"substantialcontrol"overan
institutionif,amongotherfactors,thepartydirectlyorindirectlyholdsanownershipinterestof25%ormoreofaninstitution,orisa
memberoftheboardofdirectors,ageneralpartner,thechiefexecutiveofficerorotherexecutiveofficeroftheinstitution.Ifwearerequired
torepaytheDOEforanysuccessfulDTRclaimsbystudentswhoattendedourU.S.Institutions,orwearerequiredtoobtainadditional
lettersofcreditorincreaseourcurrentletterofcredit,itcouldmateriallyaffectourbusiness,financialconditionsandresultsofoperations.
WearecurrentlyassessingtheimpactofthesefinalregulationsonourU.S.Institutions.
Hearingsandexaminationsoftheforprofiteducationalindustrycouldresultinnegativepublicity,additionallegislation,rulemaking
bytheDOEandotherfederalregulatoryagencies,andotherrestrictionsonourbusiness.
Inrecentyears,theU.S.HouseofRepresentativesEducationandWorkforceCommittee(the"HouseEducationandWorkforce
Committee")andtheU.S.SenateHealth,Education,LaborandPensionsCommittee(the"SenateHELPCommittee")haveincreasedthe
focusontheroleoftheforprofitpostsecondaryeducationindustry.Inthepast,hearingsbythesecommitteeshavefocused,amongother
things,onthemannerinwhichaccreditingagenciesreviewhighereducationinstitutions,studentrecruitingandadmissionsandoutcomes
ofstudents.InJuly2012,theDemocraticstaffoftheSenateHELPCommitteereleasedareportbasedoninformationrequestedfrom30
companiesoperatingproprietaryinstitutions,includingWaldenUniversity.Whilestatingthatproprietaryeducationalinstitutionssuchas
WaldenUniversityplayanimportantroleinhighereducationandshouldbewellequippedtomeettheneedsofnontraditionalstudents
whonowconstitutethemajorityofthepostsecondaryeducationpopulation,thereportwascriticaloftheproprietaryschoolsector.The
reportcouldbeusedforfuturelegislativeproposalsbymembersofCongressinconnectionwithareauthorizationoftheHEAorother
proposedlegislation.Thereportcouldalsoleadtofurtherinvestigationsofproprietaryschoolsbyvariousfederalandstategovernmental
agencies,andtoadditionalregulationspromulgatedbytheDOE.Also,asubcommitteeoftheU.S.SenateHomelandSecurityand
GovernmentAffairsCommitteehasconductedhearingscoveringthequalityofeducationprovidedbyproprietaryinstitutionsand
treatmentofeducationalbenefitsformilitarypersonnelforpurposesofthe90/10RuleoninstitutionaleligibilityforTitleIVprograms.In
April2012,PresidentObamasignedanexecutiveorderaimedatprovidingmilitarypersonnel,veteransandtheirfamilymemberswiththe
resourcestheyneedtomakeaninformeddecisionabouttheireducationalprospectsandotherprotections(the"ExecutiveOrder").
TheU.S.CongressandDepartmentofDefense(the"DoD")haveincreasedtheirfocusonDoDtuitionassistancethatisusedfor
distanceeducationandprogramsatproprietaryinstitutions.InAugust2013,theDoDbeganincorporatingtheprinciplesofexcellence
outlinedinthe2012ExecutiveOrderintotheircurrentMemorandumofUnderstanding(the"MOU"),whichincreasesoversightof
educationalprogramsofferedtoactivedutyservicemembersandconveysthecommitmentsandagreementsbetweeneducational
institutionsandtheDoDpriortoacceptingfundsunderthetuition
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assistanceprogram.InstitutionswererequiredtosigntheMOUbyMarch30,2012.AfterMarch1,2013,institutionswithoutasignedDoD
MOUcannotenrollservicemembersunderthetuitionassistanceprogram.InMay2014,theDoDreleasedafinalversionofitsrevised
MOU,whichincludednewprovisionsapplicabletoallhighereducationalinstitutionsprovidingeducationalprogramsthroughtheDoD
tuitionassistanceprogram.Amongotherthings,theMOUrequestedthatparticipatinginstitutionsprovidemeaningfulinformationto
studentsaboutthefinancialcostandattendanceataninstitutionsomilitarystudentscanmakeinformeddecisionsonwheretoattend
school,willnotuseunfair,deceptive,andabusiverecruitingpracticesandwillprovideacademicandstudentsupportservicestoservice
membersandtheirfamilies.TherevisedMOUalsoimplementedrulestostrengthenexistingproceduresforaccesstoDoDinstallationsby
educationalinstitutions,aDoDPostsecondaryEducationComplaintSystemforservicemembers,spouses,andadultfamilymembersto
registerstudentcomplaintsandestablishedauthorizationforthemilitarydepartmentstoestablishservicespecifictuitionassistance
eligibilitycriteriaandmanagementcontrols.OurU.S.InstitutionsutilizingtuitionassistancehavesignedDoD'sstandardMOU.TheDoD
hasbeguntoincreaseitsenforcementactivityinconnectionwiththe2012ExecutiveOrder.
Wecannotpredictwhether,ortheextenttowhich,thisscrutinywillresultinlegislationorfurtherrulemakingaffectingour
participationinTitleIVprograms,orinprogramsprovidingeducationalbenefitstoveteransandmilitarypersonnel.Totheextentthatany
lawsorregulationsareadoptedthatlimitourparticipationinTitleIVprograms,programsprovidingeducationalbenefitstoveteransand
militarypersonnel,ortheamountofstudentfinancialaidforwhichthestudentsatourU.S.Institutionsareeligible,thoseinstitutions'
enrollments,revenuesandresultsofoperationscouldbemateriallyadverselyaffected.
InSeptember2015,PresidentObamaannouncedtheDOE'slaunchofarevised"CollegeScorecard"websitethatprovidesaccessto
nationaldataoncollegecosts,graduationrates,debtandpostcollegeearnings,includingdataregardingourU.S.Institutions.Thisdata
wasupdatedinSeptember2016.Inaddition,inNovember2015,theDOEissuedcomparativedataregardingDOErecognized
accreditationagenciesandtheinstitutionstheyaccredit,whichincludemediandebt,repaymentrates,completionratesandmedian
earnings.TotheextentsuchdatagivesrisetonegativeperceptionsofourU.S.Institutionsorofproprietaryeducationalinstitutions
generally,ourreputationandbusinesscouldbemateriallyadverselyaffected.
OurU.S.InstitutionsmustperiodicallyseekrecertificationtoparticipateinTitleIVprogramsand,iftheDOEdoesnotrecertifythe
institutionstocontinueparticipatinginTitleIVprograms,ourstudentswouldlosetheiraccesstoTitleIVprogramfunds,orthe
institutionscouldberecertifiedbutrequiredtoacceptsignificantlimitationsasaconditionofcontinuedparticipationinTitleIV
programs.
DOEcertificationtoparticipateinTitleIVprogramslastsamaximumofsixyears,andinstitutionsarerequiredtoseekrecertification
fromtheDOEonaregularbasistocontinuetheirparticipationinTitleIVprograms.Aninstitutionmustalsoapplyforrecertificationby
theDOEifitundergoesachangeincontrol,asdefinedbyDOEregulations,andmaybesubjecttosimilarreviewifitexpandsits
operationsoreducationalprogramsincertainways.Generally,therecertificationprocessincludesareviewbytheDOEoftheinstitution's
educationalprogramsandlocations,administrativecapability,financialresponsibilityandotheroversightcategories.TheDOEcould
limit,suspendorterminateaninstitution'sparticipationinTitleIVprogramsforviolationsoftheHEAorTitleIVregulations.Asdiscussed
inmoredetailunder"IndustryRegulationU.S.Regulation,"eachofourU.S.InstitutionscurrentlyparticipatesintheTitleIVprograms
pursuanttotheDOE'sprovisionalformofcertification.
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TherecanbenoassurancethattheDOEwillrecertifyourU.S.InstitutionsafteritsreviewoftheU.S.Institutions'applicationsfor
continuedcertification,whichwerefiledinconnectionwiththisoffering.IftheDOEdoesnotreneworwithdrawsanyofourU.S.
Institutions'certificationstoparticipateinTitleIVprogramsatanytime,studentsintheaffectedinstitution(s)wouldnolongerbeableto
receiveTitleIVprogramfunds.Similarly,theDOEcouldrenewourU.S.Institutions'certifications,butrestrictordelayTitleIVfunding,
limitthenumberofstudentstowhomitcoulddisbursesuchfundsorimposeotherrestrictions.Inaddition,theDOEmaytakeemergency
actiontosuspendanyofourU.S.Institutions'certificationswithoutadvancenoticeifitreceivesreliableinformationthataninstitutionis
violatingTitleIVrequirementsanditdeterminesthatimmediateactionisnecessarytopreventmisuseofTitleIVfunds.Anyofthese
outcomescouldhaveamaterialadverseeffectonourU.S.Institutions'enrollmentsandourbusiness,financialconditionandresultsof
operations.
OurU.S.InstitutionswouldlosetheirabilitytoparticipateinTitleIVprogramsiftheyfailtomaintaintheirinstitutionalaccreditation,
andourstudentenrollmentscoulddeclineifwefailtomaintainanyofouraccreditationsorapprovals.
AninstitutionmustbeaccreditedbyanaccreditingagencyrecognizedbytheDOEtoparticipateinTitleIVprograms.Eachofour
U.S.Institutionsissoaccredited,andsuchaccreditationissubjecttorenewalorreviewperiodicallyorwhennecessary.IfanyofourU.S.
Institutionsfailstosatisfyanyofitsrespectiveaccreditingcommissions'standards,thatinstitutioncouldloseitsaccreditationbyits
respectiveaccreditingcommission,whichwouldcausetheinstitutiontoloseeligibilitytoparticipateinTitleIVprogramsandexperience
asignificantdeclineintotalstudentenrollments.Inaddition,manyofourU.S.Institutions'individualeducationalprogramsareaccredited
byspecializedaccreditingcommissionsorapprovedbyspecializedstateagencies.IfanyofourU.S.Institutionsfailstosatisfythe
standardsofanyofthosespecializedaccreditingcommissionsorstateagencies,thatinstitutioncouldlosethespecializedaccreditationor
approvalfortheaffectedprograms,whichcouldresultinmateriallyreducedstudentenrollmentsinthoseprogramsandhaveamaterial
adverseeffectonourbusiness,financialconditionandresultsofoperations.Inaddition,ifanaccreditingbodyofoneofourU.S.
InstitutionslosesrecognitionbytheDOE,thatinstitutioncouldloseitsabilitytoparticipateinTitleIVprograms.
IfanyofourU.S.Institutionsfailtoobtainormaintainanyofitsstateauthorizationsinstateswheresuchauthorizationisrequired,that
institutionmaynotbeabletooperateorenrollstudentsinthatstate,andmaynotbeabletoawardTitleIVprogramfundstostudents.
TheDOErequiresthataneducationalinstitutionbeauthorizedineachstatewhereitphysicallyoperatesinordertoparticipatein
TitleIVprograms.Thelevelofregulatoryoversightvariessubstantiallyfromstatetostate.OurcampusbasedU.S.Institutionsare
authorizedbyapplicablestateeducationallicensingagenciestooperateandtograntdegreesordiplomas,whichauthorizationsare
requiredforstudentsattheseinstitutionstobeeligibletoreceivefundingunderTitleIVprograms.IfanyofourU.S.Institutionsfailto
continuouslysatisfyapplicablestandardsformaintainingitsstateauthorizationinastateinwhichthatinstitutionisphysicallylocated,
thatinstitutioncouldloseitsauthorizationfromtheapplicablestateeducationalagencytooffereducationalprogramsandcouldbeforced
toceaseoperationsinthatstate.Suchalossofauthorizationwouldalsocausethatinstitution'slocationinthestatetoloseeligibilityto
participateinTitleIVprograms,whichcouldhaveamaterialadverseeffectonourbusiness,financialconditionandresultsofoperations.
DOEregulationseffectiveonJuly1,2011imposednewrequirementsregardingwhetherastate'sauthorizationofaneducational
institutionissufficientforpurposesofparticipationintheTitleIVprograms.Ifanyoftheauthorizationsprovidedtooneormoreofour
U.S.Institutionsaredeterminednottocomplywiththeseregulations,oroneormoreofourU.S.Institutionsisunabletoobtainor
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maintainanauthorizationthatsatisfiestheDOErequirements,studentsatthepertinentinstitutionmaybeunabletoaccessTitleIVfunds,
whichcouldhaveamaterialadverseeffectonourbusiness,financialconditionandresultsofoperationsintheUnitedStates.
Manystatesalsohavesoughttoassertjurisdiction,whetherthroughadoptionofnewlawsandregulationsornewinterpretationsof
existinglawsandregulations,overoutofstateeducationalinstitutionsofferingonlinedegreeprogramsthathavenophysicallocationor
otherpresenceinthestatebutthathavesomeactivityinthestate,suchasenrollingorofferingeducationalservicestostudentswhoreside
inthestate,employingfacultywhoresideinthestateoradvertisingtoorrecruitingprospectivestudentsinthestate.Stateregulatory
requirementsforonlineeducationareinconsistentbetweenstatesandnotwelldevelopedinmanyjurisdictions.Assuch,these
requirementschangefrequentlyand,insomeinstances,arenotclearorarelefttothediscretionofstateemployeesoragents.State
regulatoryagenciesmaysometimesdisagreewiththewaywehaveinterpretedorappliedtheserequirements.Anymisinterpretationbyus
oftheseregulatoryrequirementsoradversechangesinregulationsorinterpretationsoftheseregulationsbystatelicensingagenciescould
haveamaterialadverseeffectonourbusiness,financialconditionandresultsofoperations.
OuronlineeducationalprogramsofferedbyourU.S.Institutionsandtheconstantlychangingregulatoryenvironmentrequireusto
continuallyevaluateourstateregulatorycomplianceactivities.Wereviewthelicensurerequirementsofotherstateswhenappropriateto
determinewhetherouractivitiesinthosestatesconstituteapresenceorotherwiserequirelicensureorauthorizationbytherespectivestate
educationagencies.Therefore,inadditiontothestateswherewemaintainphysicalfacilities,wehaveobtained,orareintheprocessof
obtaining,approvalsorexemptionsthatwebelievearenecessaryinconnectionwithouractivitiesthatmayconstituteapresenceinsuch
otherstatesrequiringlicensureorauthorizationbythestateeducationalagencybasedonthelaws,rulesorregulationsofthatstate.Some
ofourapprovalsarependingorareintherenewalprocess.St.Augustinedoesnothavecurrentapprovalsorexemptionsfromthestate
educationalagenciesof12statesinwhichSt.Augustinedoesnotmaintainphysicallocationsbuthasenrolledasmallnumberofstudents.
Foreachsuchstate,St.Augustineiseitherintheprocessofapplyingforsuchapproval/exemptionorhasplanstosubmitsuchapplications
in2017.Inrecentyears,severalstateshavevoluntarilyenteredintoStateAuthorizationReciprocityAgreements("SARA")thatestablish
standardsforinterstateofferingofpostsecondarydistanceeducationcoursesandprograms.Ifaninstitution'shomestateparticipatesin
SARAandauthorizestheinstitutiontoprovidedistanceeducationinaccordancewithSARAstandards,thentheinstitutionneednot
obtainadditionalauthorizationsfordistanceeducationfromanyotherSARAmemberstate.TheSARAparticipationrequirementsand
processareadministeredbythefourregionalhighereducationcompactsintheUnitedStates(theMidwesternHigherEducationCompact
(the"MHEC"),theNewEnglandBoardofHigherEducation,theSouthernRegionalEducationBoardandtheWesternInterstate
CommissionforHigherEducation)andisoverseenbytheNationalCouncilforStateAuthorizationReciprocityAgreements.Ifanyofour
U.S.Institutionsfailtocomplywithstatelicensureorauthorizationrequirements,wecouldbesubjecttovarioussanctions,including
restrictionsonrecruitingstudents,providingeducationalprogramsandotheractivitiesinthatstate,andfinesandpenalties.Additionally,
newlaws,regulationsorinterpretationsrelatedtoprovidingonlineeducationalprogramsandservicescouldincreaseourcostofdoing
businessandaffectourabilitytorecruitstudentsinparticularstates,whichcould,inturn,negativelyaffectenrollmentsandrevenuesand
otherwisehaveamaterialadverseeffectonourbusiness,financialconditionandresultsofoperations.
WaldenUniversitywasapprovedtoparticipateinSARA,effectivethroughJune2,2016.OnApril8,2016,theMinnesotaOfficeof
HigherEducation("MOHE")notifiedWaldenUniversitythatitsrenewalapplicationtoparticipateinSARAhasbeendeniedbecause
WaldenUniversitydoesnothaveaninstitutionalfederalfinancialcompositescorecomputedbytheDOEinconnectionwithWalden
University'sparticipationinfederalTitleIVfinancingprogramsof1.5orhigher,althoughtheinstitutionalfinancialcompositescore
calculationmadebyWaldenUniversityinaccordancewiththe
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DOE'spublishedformulaandbasedonWaldenUniversity's2014auditedfinancialstatementsis3.0.Intheabsenceofaninstitutionlevel
financialcompositescorecalculatedbyDOE,MOHEviewedLaureate'sfinancialcompositescorecalculatedbasedonitsglobal
operations,whichdidnotexceed1.5for2014,asattributabletoWaldenUniversity.
OnMay6,2016,WaldenUniversityappealedtheMOHEdecisiontoMHEC.WaldenUniversityandMOHEparticipatedinanappeal
hearingbeforeMHEConJune3,2016.OnJune14,2016,MHECinformedWaldenUniversitythatitaffirmedMOHE'sdecision.Walden
UniversityhaduntilSeptember30,2016toregainitsstateauthorization,exemptionorotherrequiredstatusintheSARAstatesinwhichit
participatesinordertoseektoenrollnewstudentswhoresideinthosestates.Asofthedateofthisprospectus,WaldenUniversityhas
regainedauthorization,exemptionorotherrequiredstatusinallofthe31SARAstatesinwhichithasbeenaSARAparticipant.
ThefailuretomaintainanyrequiredstatelicensureorauthorizationforourdistanceeducationprogramsintheUnitedStatescould
prohibitusfromrecruitingprospectivestudentsorofferingeducationalservicestocurrentstudentsinoneormorestates,whichcould
significantlyreduceenrollmentsandrevenuesandhaveamaterialadverseeffectonourbusiness,financialconditionandresultsof
operationsintheUnitedStates.Additionally,aDOEregulationthatwastobecomeeffectiveonJuly1,2011requiredinstitutionstomeet
stateauthorizationrequirementsinstatesinwhichtheyenrolldistanceeducationstudents,butinwhichtheyarenotphysicallylocatedor
otherwisesubjecttostatejurisdiction,asaconditionofawardingTitleIVfundstostudentsinthatstate.InJuly2011,aFederalDistrict
Courtissuedanordervacatingtheregulation,whichwassustainedinJune2012bytheUnitedStatesCourtofAppealsfortheDistrictof
ColumbiaCircuit.OnDecember19,2016,theDOEpublishedfinalregulationsregardingstateauthorizationforprogramsofferedthrough
distanceeducationandstateauthorizationforforeignlocationsofinstitutions.Foradditionalinformationregardingthisproposedrule,see
"CongressmayrevisethelawsgoverningTitleIVprogramsorreducefundingforthoseandotherstudentfinancialassistanceprograms,
andtheDOEmayreviseitsregulationsadministeringTitleIVprograms,anyofwhichcouldreduceourenrollmentandrevenuesand
increasecostsofoperations."Anyfailuretocomplywithstaterequirements,oranynewormodifiedregulationsatthefederalorstatelevel,
couldresultinourinabilitytoenrollstudentsorreceiveTitleIVfundsforstudentsinthosestatesandcouldresultinrestrictionsonour
growthandenrollments.
Increasedregulatoryandenforcementeffortaimedatproprietaryeducationinstitutionscouldbeacatalystforlegislativeorregulatory
restrictions,investigations,enforcementactionsandclaimsthatcould,individuallyorintheaggregate,materiallyadverselyaffectour
business,financialcondition,resultsofoperationsandcashflows.
Theproprietaryeducationindustryisexperiencingbroadbased,intensifyingscrutinyintheformofincreasedinvestigationsand
enforcementactions.InOctober2014,theDOEannouncedaninteragencytaskforcecomposedoftheDOE,theU.S.FederalTrade
Commission(the"FTC"),theU.S.DepartmentsofJustice,TreasuryandVeteransAffairs,theConsumerFinancialProtectionBureau
("CFPB"),theSEC,andnumerousstateattorneysgeneral.TheFTChasalsorecentlyissuedcivilinvestigativedemandstoseveralother
U.S.proprietaryeducationalinstitutions,whichrequiretheinstitutionstoprovidedocumentsandinformationrelatedtotheadvertising,
marketing,orsaleofsecondaryorpostsecondaryeducationalproductsorservices,oreducationalaccreditationproductsorservices.The
CFPBhasalsoinitiatedaseriesofinvestigationsagainstotherU.S.proprietaryeducationalinstitutionsallegingthatcertaininstitutions'
lendingpracticesviolatevariousconsumerfinancelaws.Inaddition,attorneysgeneralinseveralstateshavebecomemoreactivein
enforcingconsumerprotectionlaws,especiallyrelatedtorecruitingpracticesandthefinancingofeducationatproprietaryeducational
institutions.Inaddition,severalstateattorneysgeneralhaverecentlypartneredwiththeCFPBtoreviewindustrypractices.
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Intheeventthatanyofourpastorcurrentbusinesspracticesarefoundtoviolateapplicableconsumerprotectionlaws,orifweare
foundtohavemademisrepresentationstoourcurrentorprospectivestudentsaboutoureducationalprograms,wecouldbesubjectto
monetaryfinesorpenaltiesandpossiblelimitationsonthemannerinwhichweconductourbusiness,whichcouldmateriallyadversely
affectourbusiness,financialcondition,resultsofoperationsandcashflows.Totheextentthatmorestatesorgovernmentagencies
commenceinvestigations,actinconcert,ordirecttheirfocusonourU.S.Institutions,thecostofrespondingtotheseinquiriesand
investigationscouldincreasesignificantly,andthepotentialimpactonourbusinesswouldbesubstantiallygreater.
Ourfailuretocomplywiththelawsandregulationsofvariousstatescouldresultinactionsthatwouldhaveamaterialadverseeffecton
ourenrollments,revenuesandresultsofoperations.
Wearesubjecttoextensivelawsandregulationsbythestatesinwhichweareauthorizedorlicensedtooperate.Statelawstypically
establishstandardsforinstruction,qualificationsoffaculty,administrativeprocedures,marketing,recruiting,financialoperationsand
otheroperationalmatters.Statelawsandregulationsmaylimitourabilitytooffereducationalprogramsandtoawarddegreesandmay
limittheabilityofourstudentstositforcertificationexamsintheirchosenfieldsofstudy.Inaddition,asmentionedabove,attorneys
generalinseveralstateshavebecomemoreactiveinenforcingconsumerprotectionlaws,andinsomeinstanceshavepartneredwiththe
CFPB.Inaddition,wemaybesubjecttolitigationbyprivatepartiesallegingthatweviolatedstatelawsregardingtheeducational
programsprovidedbyourU.S.Institutionsandtheiroperations.
InJanuary2015,twostudentsfiledsuitagainstusandWaldenUniversity,seekingclassactionstatusandallegingclaimsforbreachof
contractandunjustenrichmentandviolationsoftheMarylandandIllinoisconsumerprotectionlawsandCaliforniaunfaircompetition
lawrelatedtothestudents'doctoraldissertationandmaster'sthesisprocesses.Athirdstudentjoinedasaplaintiffwhenthecomplaintwas
subsequentlyamended.TheclaimsfromallthreestudentswereresolvedinDecember2015anddismissedwithprejudiceasofJanuary5,
2016.ThethreeplaintiffshavereenrolledatWaldenUniversitytocompletetheirPh.D.programs.Inaddition,severalgroupsofcurrent
andformerstudentsfiledfiveseparatelawsuitsagainstSt.Augustinerelatingtomattersarisingbeforeweacquiredtheschoolin
November2013.TheallegationspertaintoaprogramthatwaslaunchedinMay2011and,atthetime,offereda"MasterofOrthopaedic
Physician'sAssistantProgram"degree.Theplaintiffsinthesemattersallegethattheuniversitymisrepresentedtheirabilitytopracticeas
licensedPhysicianAssistantswithaheightenedspecialtyinorthopaedics.OneofthelawsuitswasresolvedinOctober2015,anotherwas
resolvedinMarch2016,andanotherwasresolvedinJune2016andallthreehavebeendismissed.Formoreinformationontheselawsuits,
see"BusinessLegalProceedings."Webelievetheclaimsintheremainingtwocasesarewithoutmeritandintendtodefendvigorously
againsttheallegations.Anyadverseoutcomeinsuchlitigationcouldresultinmonetaryorinjunctiverelief,whichcouldmaterially
adverselyaffectourU.S.Institutionsandtheiroperations.
OnSeptember8,2016,aspartofaprogramreviewthatMOHEisconductingofWaldenUniversity'sdoctoralprograms,MOHEsentto
WaldenUniversityaninformationrequestregardingitsdoctoralprogramsandcomplaintsfiledbydoctoralstudents.Wehavebeen
informedbyMOHEthatinanefforttobetterunderstandthecontext,backgroundandissuesrelatedtodoctoralstudentcomplaintsin
Minnesota,MOHEisinitiatingafullreviewofdoctoralprogramsforinstitutionsregisteredinMinnesota.Wecannotpredicttheoutcome
ofthismatter.However,ifMOHEmakesanadversedetermination,itcouldhaveamaterialadverseeffectonourbusiness,financial
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Theinabilityofourgraduatestoobtainlicensureorotherspecializedoutcomesintheirchosenprofessionalfieldsofstudycouldreduce
ourenrollmentsandrevenues,andpotentiallyleadtolitigationthatcouldbecostlytous.
Certainofourgraduatesseekprofessionallicensureorotherspecializedoutcomesintheirchosenfieldsfollowinggraduation.Their
successinobtainingtheseoutcomesdependsonseveralfactors,includingtheindividualmeritsofthelearner,butalsomaydependon
whethertheinstitutionandtheprogramwereapprovedbythestateorbyaprofessionalassociation,whethertheprogramfromwhichthe
learnergraduatedmeetsallstaterequirementsandwhethertheinstitutionisaccredited.Inaddition,professionalassociationsmayrefuseto
certifyspecializedoutcomesforourlearnersforsimilarreasons.Thestaterequirementsforlicensurearesubjecttochange,asarethe
professionalcertificationstandards,andwemaynotimmediatelybecomeawareofchangesthatmayimpactourlearnersincertain
instances.Also,asdescribedbelow,thefinalgainfulemploymentregulationsrequireaninstitutiontocertifytotheDOEthatits
educationalprogramssubjecttothegainfulemploymentrequirements,whichincludeallprogramsofferedbyourU.S.Institutions,meet
theapplicablerequirementsforgraduatestobeprofessionallyoroccupationallycertifiedinthestateinwhichtheinstitutionislocated.In
theeventthatoneormorestatesrefusestorecognizeourlearnersforprofessionallicensure,and/orprofessionalassociationsrefuseto
certifyspecializedoutcomesforourlearners,basedonfactorsrelatingtoourinstitutionorprograms,thepotentialgrowthofourprograms
wouldbenegativelyimpacted,whichcouldhaveamaterialadverseeffectonourbusiness,financialcondition,resultsofoperationsand
cashflows.Inaddition,wecouldbeexposedtolitigationthatwouldforceustoincurlegalandotherexpensesthatcouldhaveamaterial
adverseeffectonourbusiness,financialcondition,resultsofoperationsandcashflows.
IfanyofourU.S.InstitutionsdonotcomplywiththeDOE's"administrativecapability"standards,wecouldsufferfinancialpenalties,
berequiredtoacceptotherlimitationstocontinueparticipatinginTitleIVprogramsorloseoureligibilitytoparticipateinTitleIV
programs.
DOEregulationsspecifyextensivecriteriaaninstitutionmustsatisfytoestablishthatithastherequisite"administrativecapability"to
participateinTitleIVprograms.Thesecriteriarequire,amongotherthings,thatwecomplywithallapplicableTitleIVprogram
regulationshavecapableandsufficientpersonneltoadministerthefederalstudentfinancialaidprogramsnothavestudentloancohort
defaultratesinexcessofspecifiedlevelshaveacceptablemethodsofdefiningandmeasuringthesatisfactoryacademicprogressofour
studentshavevariousproceduresinplaceforsafeguardingfederalfundsnotbe,andnothaveanyprincipaloraffiliatewhois,debarredor
suspendedfromfederalcontractingorengaginginactivitythatiscausefordebarmentorsuspensionprovidefinancialaidcounselingto
ourstudentsrefertotheDOE'sOfficeofInspectorGeneralanycredibleinformationindicatingthatanyapplicant,student,employeeor
agentoftheinstitutionhasbeenengagedinanyfraudorotherillegalconductinvolvingTitleIVprogramssubmitinatimelymannerall
reportsandfinancialstatementsrequiredbyTitleIVregulationsandnototherwiseappeartolackadministrativecapability.Ifan
institutionfailstosatisfyanyofthesecriteriaorcomplywithanyotherDOEregulations,theDOEmaychangetheinstitution'smethodof
receivingTitleIVprogramfunds,whichinsomecasesmayresultinasignificantdelayintheinstitution'sreceiptofthosefundsplacethe
institutiononprovisionalcertificationstatusorcommenceaproceedingtoimposeafineortolimit,suspendorterminatethe
participationoftheinstitutioninTitleIVprograms.Thus,ifanyofourU.S.InstitutionswerefoundnottohavesatisfiedtheDOE's
"administrativecapability"requirements,wecouldbelimitedinouraccessto,orlose,TitleIVprogramfunding,whichcouldsignificantly
reduceourenrollmentsandhaveamaterialadverseeffectonourbusiness,financialconditionandresultsofoperations.
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IfanyofourU.S.InstitutionsdonotmeetspecificfinancialresponsibilitystandardsestablishedbytheDOE,thatinstitutionmaybe
requiredtopostaletterofcreditoracceptotherlimitationstocontinueparticipatinginTitleIVprograms,orthatinstitutioncouldlose
itseligibilitytoparticipateinTitleIVprograms.
ToparticipateinTitleIVprograms,ourU.S.Institutionsmustsatisfyspecificmeasuresoffinancialresponsibilityprescribedbythe
DOE,orpostaletterofcreditinfavoroftheDOEandpossiblyacceptotherconditionsonitsparticipationinTitleIVprograms.These
financialresponsibilitytestsareappliedonanannualbasisbasedonaninstitution'sauditedfinancialstatements,andmaybeappliedat
othertimes,suchasifaninstitutionundergoesachangeincontrol.TheDOEmayalsoapplysuchmeasuresoffinancialresponsibilityto
aneligibleinstitution'soperatingcompanyandownershipentitiesand,ifsuchmeasuresarenotsatisfiedbytheoperatingcompanyor
ownershipentities,requiretheinstitutiontopostaletterofcreditinfavoroftheDOEandpossiblyacceptotherconditionsonits
participationinTitleIVprograms.Theoperatingrestrictionsthatmaybeplacedonaninstitutionthatdoesnotmeetthequantitative
standardsoffinancialresponsibilityincludechangestothemethodofreceivingTitleIVprogramfunds,whichinsomecasesmayresultin
asignificantdelayintheinstitution'sreceiptofthosefunds.Limitationson,orterminationof,ourparticipationinTitleIVprogramsasa
resultofourfailuretodemonstratefinancialresponsibilitywouldlimitourstudents'accesstoTitleIVprogramfunds,whichcould
significantlyreduceenrollmentsandhaveamaterialadverseeffectonourbusiness,financialconditionandresultsofoperations.
Asdescribedinmoredetailunder"IndustryRegulationU.S.Regulation,"theDOEannuallyassessesourU.S.Institutions'financial
responsibilitythroughacompositescoredeterminationbasedonourconsolidatedauditedfinancialstatements.TheDOEhasdecidedto
assesscertainofourinstitutions'financialresponsibilityonaconsolidatedlevelattheLaureateEducation,Inc.level.InOctober2014,the
DOEdetermined,basedonLaureate'scompositescoreforitsfiscalyearendedDecember31,2013,thatLaureateand,consequently,
WaldenUniversity,NewSchoolofArchitectureandDesignandKendallCollegefailedtomeetthestandardsoffinancialresponsibility.As
aresult,theDOErequiredustoincreaseourrequiredletterofcreditamounttoapproximately$85.6millionforWaldenUniversity,
NewSchoolofArchitectureandDesignandKendallCollege,whichisequaltoapproximately10%ofTitleIVprogramfundsthatthese
institutionsreceivedduringthefiscalyearendedDecember31,2013.InSeptember2015,theDOErequiredustoincreaseourrequired
letterofcreditamountto$85.8millionforWaldenUniversity,NewSchoolofArchitectureandDesignandKendallCollege,whichis
approximately10%ofTitleIVprogramfundsthattheseinstitutionsreceivedduringthefiscalyearendedDecember31,2014.Werenewed
ourlettersofcreditforthisrequiredamount.InMarch2016,inconnectionwithitsreviewofourfinancialstatementsfollowingour
conversiontoaDelawarepublicbenefitcorporation,theDOEsentusaletterrequiringustoincreaseourexistingletterofcreditby
$4,682,990totheamountof$90,508,766forKendallCollege,St.Augustine,WaldenUniversityandNewSchoolofArchitectureand
Design,whichisequaltoapproximately10%oftheTitleIVprogramfundsthattheseschoolsreceivedduringthemostrecentlycompleted
fiscalyear.Intheletter,DOEalsohasrequiredustocontinuetocomplywithadditionalnotificationandreportingrequirements.Wehave
providedtheincreasedletterofcreditandarecomplyingwiththeadditionalnotificationandreportingrequirements.
WereceivedaletterdatedOctober4,2016fromtheDOE(subsequentlyrevisedonNovember4,2016)statingthat,basedon
Laureate'sfailuretomeetstandardsoffinancialresponsibilityforthefiscalyearendedDecember31,2015,wearerequiredtoeither:
(1)increaseourletterofcredittoanamountequalto50%(calculatedbytheDOEtobe$351,995,250)oftheTitleIV,HEAfundsreceived
byLaureateinthefiscalyearendedDecember31,2015)andqualifyasafinancialresponsibleinstitutionor(2)increaseourletterof
credittoanamountequalto15%(calculatedbytheDOEtobe$105,598,575)oftheTitleIV,HEAfundsreceivedbyLaureateinthefiscal
yearendedDecember31,2015andremainprovisionallycertifiedforaperiodofuptothreecompleteawardyears.Intheletter,theDOE
alsohasrequiredustocontinuetocomplywithadditionalnotificationand
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reportingrequirements.Wechosetoincreaseourletterofcreditto$105,598,575andtoremainprovisionallycertifiedforaperiodofupto
threecompleteawardyearsandhaveobtainedareplacementletterofcredit.St.Augustine,WaldenUniversity,NewSchoolofArchitecture
andDesignandKendallCollegealsocurrentlyreceiveTitleIVprogramfundsundertheleastrestrictiveformofheightenedcash
monitoringandaresubjecttocertainadditionalreportinganddisclosurerequirements.Theincreasedletterofcredithasbeenprovidedto
theDOE.
Further,theDOE,asaconditiontotheprovisionalprogramparticipationagreementoftheNationalHispanicUniversity,requested
thatwepostanadditionalletterofcreditinanamountequalto$1.5millionrepresentingapproximately25%oftheTitleIVprogram
fundsreceivedbytheNationalHispanicUniversityduringthefiscalyearendedDecember31,2013.InOctober2015,theDOEsentusa
letterrequiringustorenewourletterofcreditintheamountof$772,931fortheNationalHispanicUniversity(25%ofthetotalTitleIV
programfundstheinstitutionreceivedduringthefiscalyearendedDecember31,2014).Werenewedourlettersofcreditforthisrequired
amount.Thisrequirementwasinitiallyduetothefactthatthesubsidiarycorporationusedtoacquiretheinstitution'sassetsdidnotpossess
twoyearsofauditedfinancialstatementsatthetimeoftheacquisitioninApril2010,andtherequirementhasbeencontinuedbasedonthe
DOE'sreviewoftheinstitution'sauditedfinancialstatements.WereceivedaletterdatedSeptember21,2016fromtheDOEconfirmingthat
thisletterofcreditforNationalHispanicUniversitywasnolongerrequiredandmaybecancelledbyourbank.Wehavecancelledthis
letterofcreditandthefundshavebeenreleasedbacktous.
InDecember2015,theDOEsentusaletterrequiringustopostaletterofcreditintheamountof$14,967forSt.Augustine(25%of
thetotalTitleIVprogramrefundstheinstitutionmadeorshouldhavemadeduringthefiscalyearendedDecember31,2014).This
requirementwasduetothefactthatSt.Augustinewasfoundtohaveissuedlaterefundstomorethan5%ofthestudentsinitsauditor's
sampleforthe2014fiscalyear.Wehaveobtainedthisletterofcredit.Anyobligationtopost,maintainorincreasealetterofcreditcould
materiallyadverselyaffectourliquidityorincreaseourcostsofregulatorycompliance.TheDOEhasthediscretiontoincreaseourletterof
creditrequirementsatanytime.Ifweareunabletosecureanyrequiredletterofcredit,ourU.S.Institutionswouldlosetheireligibilityto
participateinTitleIVprograms,whichcouldhaveamaterialadverseeffectonourbusiness,financialconditionandresultsofoperations.
OnNovember1,2016,theDOEissuedafinalruletoreviseitsgeneralstandardsoffinancialresponsibilitytoincludevariousactions
andeventsthatwouldrequireinstitutionstoprovidetheDOEwithirrevocablelettersofcredit.Foradditionalinformationregardingthis
finalrule,see"TheDOEmayadoptregulationsgoverningfederalstudentloandebtforgivenessthatcouldresultinliabilityforamounts
basedonborrowerdefensesoraffecttheDOE'sassessmentofourinstitutionalcapability."IfwearerequiredtorepaytheDOEforany
successfulDTRclaimsbystudentswhoattendedourU.S.Institutions,orwearerequiredtoobtainadditionallettersofcreditorincrease
ourcurrentletterofcredit,itcouldmateriallyaffectourbusiness,financialconditionsandresultsofoperations.Wearecurrentlyassessing
theimpactofthesefinalregulationsonourU.S.Institutions.
TheDOEmaychangeourU.S.Institutions'methodofreceivingTitleIVprogramfunds,whichcouldmateriallyadverselyaffectour
liquidity.
TheDOEcanimposesanctionsforviolatingthestatutoryandregulatoryrequirementsofTitleIVprograms,includingtransferringone
ormoreofourU.S.InstitutionsfromtheadvancemethodortheheightenedcashmonitoringlevelonemethodofTitleIVpayment,eachof
whichpermitsaninstitutiontoreceiveTitleIVfundsbeforeorconcurrentlywithdisbursingthemtostudents,totheheightenedcash
monitoringleveltwomethodofpaymentortothereimbursementmethodofpayment,eachofwhichmaysignificantlydelayan
institution'sreceiptofTitleIVfundsuntilstudenteligibilityhasbeenverifiedbytheDOE.AnysuchdelayinourU.S.Institutions'receipt
ofTitleIVprogramfundsmay
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materiallyadverselyaffectourcashflowsandwemayrequireadditionalworkingcapitalorthirdpartyfundingtofinanceouroperations.
OurU.S.InstitutionsmayloseeligibilitytoparticipateinTitleIVprogramsifthepercentageofourU.S.Institutionsrevenuesderived
fromTitleIVprogramsistoohigh.
AprovisionoftheHEAcommonlyreferredtoasthe"90/10Rule"providesthataforprofiteducationalinstitutionlosesitseligibility
toparticipateinTitleIVprogramsif,underacomplexregulatoryformulathatrequirescashbasisaccountingandotheradjustmentstothe
calculationofrevenues,theinstitutionderivesmorethan90%ofitsrevenuesfromTitleIVprogramfundsforanytwoconsecutivefiscal
years.IfanyofourU.S.Institutionsweretoviolatethe90/10Rule,thatinstitutionwouldbecomeineligibletoparticipateinTitleIV
programsasofthefirstdayofthefiscalyearfollowingthesecondconsecutivefiscalyearinwhichtheinstitutionexceededthe90%
thresholdandwouldbeunabletoregaineligibilityfortwofiscalyearsthereafter.Inaddition,aninstitutionthatderivesmorethan90%of
itsrevenue(onacashbasis)fromTitleIVprogramsforanysinglefiscalyearwillbeplacedonprovisionalcertificationforatleasttwo
fiscalyearsandmaybesubjecttoadditionalconditionsorsanctionsimposedbytheDOE.UsingtheDOE'sformulaunderthe
"90/10Rule,"KendallCollege,NewSchoolofArchitectureandDesign,St.AugustineandWaldenUniversityderivedapproximately36%,
43%,49%and73%oftheirrevenues(calculatedonacashbasis),respectively,fromTitleIVprogramfundsforthefiscalyearended
December31,2015.
OurU.S.Institutions'ratioscouldincreaseinthefuture.Congressionalincreasesinstudents'TitleIVgrantandloanlimitsmayresult
inanincreaseintherevenueswereceivefromTitleIVprograms.Inrecentyears,legislationhasbeenintroducedinCongressthatwould
revisethe90/10RuletoconsidereducationalbenefitsforveteransandmilitarypersonnelfromtheDepartmentofVeteranAffairsand
DepartmentofDefense,respectively,inthesamemannerasTitleIVfundsforpurposesoftherule,toprohibitinstitutionsfrom
participatinginTitleIVprogramsforoneyeariftheyderivemorethan90%oftheirtotalrevenues(calculatedonacashbasis)fromthe
TitleIVprogramsandtheseotherfederalprogramsinasinglefiscalyearratherthanthecurrentruleoftwoconsecutivefiscalyears,andto
revisethe90/10Ruletoan85/15rule.Wecannotpredictwhether,ortheextenttowhich,anyoftheseproposedrevisionscouldbe
enactedintolaworresultinfurtherrulemaking.Inaddition,reductionsinstateappropriationsinanumberofareas,includingwithrespect
totheamountoffinancialassistanceprovidedtopostsecondarystudents,couldfurtherincreaseourU.S.Institutions'percentagesof
revenuesderivedfromTitleIVprogramfunds.Theemploymentcircumstancesofourstudentsortheirparentscouldalsoincreasereliance
onTitleIVprogramfunds.IfanyofourU.S.InstitutionsbecomeineligibletoparticipateinTitleIVprogramsasaresultofnoncompliance
withthe90/10Rule,itcouldhaveamaterialadverseeffectonourbusiness,financialconditionandresultsofoperations.
AnyofourU.S.InstitutionsmayloseeligibilitytoparticipateinTitleIVprogramsiftheirrespectivestudentloandefaultratesaretoo
high.
AneducationalinstitutionmayloseeligibilitytoparticipateinTitleIVprogramsif,forthreeconsecutiveyears,30%ormoreofits
studentswhowererequiredtobeginrepaymentontheirfederalstudentloansintherelevantfiscalyeardefaultontheirpaymentbythe
endofthenextfederalfiscalyear.Inaddition,aninstitutionmayloseitseligibilitytoparticipateinTitleIVprogramsifthedefaultrateas
determinedbytheDOEofitsstudentsexceeds40%foranysingleyear.
KendallCollege'sofficialthreeyearcohortdefaultratesforthe2013,2012and2011federalfiscalyearswere10.0%,7.9%and11.3%,
respectively.NewSchoolofArchitectureandDesign'sofficialthreeyearcohortdefaultratesforthe2013,2012and2011federalfiscal
yearswere5.1%,10.2%and11.2%,respectively.St.Augustine'sofficialthreeyearcohortdefaultratesforthe2013,2012and2011federal
fiscalyearswere0.2%,0.5%,and0.0%,respectively.WaldenUniversity'sofficialthreeyear
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cohortdefaultratesforthe2013,2012and2011federalfiscalyearswere6.7%,6.8%and7.8%,respectively.Theaveragenationalstudent
loandefaultratespublishedbytheDOEforallinstitutionsthatparticipatedinthefederalstudentaidprogramsfor2013,2012and2011
were11.3%,11.8%and13.7%,respectively,andforallproprietaryinstitutionsthatparticipatedinthefederalstudentaidprogramsfor
2013,2012and2011were15.0%,15.8%and19.1%,respectively.
WhilewebelieveourU.S.InstitutionsarenotindangerofexceedingtheregulatorydefaultratethresholdsforotherTitleIVprograms,
wecannotprovideanyassurancethatthiswillcontinuetobethecase.Anyincreaseininterestratesorrelianceon"selfpay"students,as
wellasdeclinesinincomeorjoblossesforourstudents,couldcontributetohigherdefaultratesonstudentloans.Exceedingthestudent
loandefaultratethresholdsandlosingeligibilitytoparticipateinTitleIVprogramswouldhaveamaterialadverseeffectonourbusiness,
financialconditionandresultsofoperations.Anyfuturechangesintheformulaforcalculatingstudentloandefaultrates,economic
conditionsorotherfactorsthatcauseourdefaultratestoincrease,couldplaceourU.S.Institutionsindangeroflosingtheireligibilityto
participateinTitleIVprograms,whichwouldhaveamaterialadverseeffectonourbusiness,financialconditionandresultsofoperations.
WecouldbesubjecttosanctionsorotheradverselegalactionsifanyofourU.S.Institutionsweretopayimpermissiblecommissions,
bonusesorotherincentivepaymentstoindividualsinvolvedinorwithresponsibilityforcertainrecruiting,admissionorfinancialaid
activities.
UndertheHEA,aneducationalinstitutionthatparticipatesinTitleIVprogramsmaynotmakeanycommission,bonusorother
incentivepaymentstoanypersonsorentitiesinvolvedinrecruitmentoradmissionsactivitiesorintheawardingoffinancialaid.The
requirementonlypertainstotherecruitmentofstudentswhoareU.S.citizens,permanentresidentsandotherstemporarilyresidinginthe
UnitedStateswiththeintentionofbecomingacitizenorpermanentresident.UnderregulationsthattookeffectonJuly1,2011,theDOE
effectivelyhastakenthepositionthatanycommission,bonusorotherincentivecompensationpaymentbasedinanypart,directlyor
indirectly,orsecuringenrollmentorawardingfinancialaidisinconsistentwiththestatutoryprohibitionagainstincentivecompensation.
TheDOEhasmaintainedthatinstitutionsmaymakemeritbasedadjustmentstoemployeecompensation,providedthatthoseadjustments
arenotbased,inanypart,directlyorindirectly,uponsecuringenrollmentsorawardingfinancialaid.Insubregulatorycorrespondenceto
institutions,theDOEprovidedadditionalguidanceregardingthescopeoftheprohibitiononincentivecompensationandtowhat
employeesandtypesofactivitiestheprohibitionapplies.Basedontheseregulatorychanges,wemodifiedsomeofourcompensation
practices,whichcouldmakeitmoredifficulttoattractandretainkeyemployeesandexecutives,andaffectourabilitytogrowand
maintainourbusinessandenrollments.
Inaddition,inrecentyears,severalforprofiteducationcompanieshavebeenfacedwithwhistleblowerlawsuitsundertheFederal
FalseClaimsAct,knownas"quitam"cases,bycurrentorformeremployeesallegingviolationsoftheprohibitionagainstincentive
compensation.Insuchcases,thewhistleblower'sclaimsarereviewedundersealbytheDepartmentofJusticeforpotentialintervention.If
theDepartmentofJusticeelectstointervene,itassumesprimarycontroloverthelitigation.IftheDOEweretodeterminethatweoranyof
ourU.S.InstitutionsviolatedthisrequirementofTitleIVprograms,orifweweretobefoundliableinaFalseClaimsactionalleginga
violationofthislaw,orifanythirdpartieswehaveengagedweretoviolatethislaw,wecouldbefinedorsanctionedbytheDOE,or
subjectedtoothermonetaryliabilityorpenaltiesthatcouldbesubstantial,includingthepossibilityoftrebledamagesunderaFalse
Claimsaction,anyofwhichcouldharmourreputation,imposesignificantcostsandhaveamaterialadverseeffectonourbusiness,
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WecouldbesubjecttosanctionsifanyofourU.S.InstitutionsfailstocorrectlycalculateandtimelyreturnTitleIVprogramfundsfor
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WecouldbesubjecttosanctionsifanyofourU.S.InstitutionsfailstocorrectlycalculateandtimelyreturnTitleIVprogramfundsfor
studentswhowithdrawbeforecompletingtheireducationalprogram.
AninstitutionparticipatinginTitleIVprogramsmustcalculatetheamountofunearnedTitleIVprogramfundsthatithasdisbursedto
studentswhowithdrawfromtheireducationalprogramsbeforecompletingsuchprogramsandmustreturnthoseunearnedfundstothe
appropriatelenderortheDOEinatimelymanner,generallywithin45daysofthedatetheinstitutiondeterminesthatthestudenthas
withdrawn.IfanyofourU.S.Institutionsdoesnotproperlycalculateandtimelyreturntheunearnedfundsforasufficientpercentageof
students,thatinstitutionmayhavetopostaletterofcreditinfavoroftheDOEequalto25%ofTitleIVprogramfundsthatshouldhave
beenreturnedforsuchstudentsinthepriorfiscalyear.Additionally,ifanyofourU.S.Institutionsdoesnotcorrectlycalculateandtimely
returnunearnedTitleIVprogramfunds,thatinstitutionmaybeliableforrepaymentofTitleIVfundsandrelatedinterestandmaybefined,
sanctioned,orotherwisesubjecttoadverseactionsbytheDOE,includingterminationofthatinstitution'sparticipationinTitleIV
programs.Anyoftheseadverseactionscouldincreaseourcostofregulatorycomplianceandhaveamaterialadverseeffectonour
OnMarch3,2015,theDOEissuedafinalprogramreviewdeterminationlettertoWaldenUniversityforaSeptember2012reviewof
the20112012and20122013TitleIVawardyears.TheletterrequiredWaldenUniversitytoreturn$34,281inTitleIVfunds,andalso
foundthatWaldenUniversityfailedtotimelyreturnTitleIVprogramfundsformorethan5%ofthewithdrawnstudentsduringitsfiscal
yearendedDecember31,2012.TheDOEnotedthatsuchafindingwouldusuallyrequireWaldentopostaletterofcredittotheDOE
equalto25%oftheTitleIVfundsthattheinstitutionshouldhavereturnedforwithdrawnstudentsinitsmostrecentlycompletedfiscal
yearhowever,suchanadditionalletterofcreditwasnotrequiredinthisinstancebecauseoftheletterofcreditthatwaspreviouslyposted
totheDOEbasedonourconsolidatedauditedfinancialstatementsfailingtomeettheDOE'sstandardsoffinancialresponsibility.
Wecouldalsobesubjecttofinesorpenaltiesrelatedtofindingscitedinourregulatorycompliancereviews.Formoreinformation,see
"Government,regulatoryagencies,accreditingbodiesandthirdpartiesmayconductcompliancereviews,bringclaimsorinitiate
litigationagainstus."
WeorcertainofoureducationalprogramsatourU.S.InstitutionsmayloseeligibilitytoparticipateinTitleIVprogramsifanyofour
U.S.InstitutionsorcertainoftheireducationalprogramscannotsatisfytheDOE's"gainfulemployment"requirements.
UndertheHEA,proprietaryschoolsgenerallyareeligibletoparticipateinTitleIVprogramsinrespectofeducationalprogramsthat
leadto"gainfulemploymentinarecognizedoccupation."Historically,theconceptof"gainfulemployment"hasnotbeendefinedin
detail.OnOctober30,2014,theDOEpublishedfinalregulationstodefine"gainfulemployment,"whichbecameeffectiveonJuly1,2015.
Thefinalregulationsdefinethisconceptusingtworatios,onebasedonannualdebttoannualearnings("DTE")andanotherbasedon
annualdebttodiscretionaryincome("DTI")ratio.Underthefinalregulations,aneducationalprogramwithaDTEratioatorbelow8%or
aDTIratioatorbelow20%isconsidered"passing."AneducationalprogramwithaDTEratiogreaterthan8%butlessthanorequalto
12%oraDTIratiogreaterthan20%butlessthanorequalto30%isconsideredtobe"inthezone."AneducationalprogramwithaDTE
ratiogreaterthan12%andaDTIratiogreaterthan30%isconsidered"failing."Aneducationalprogramwillceasetobeeligiblefor
studentstoreceiveTitleIVprogramfundsifitsDTEandDTIratiosarefailingintwooutofanythreeconsecutiveawardyearsorifbothof
thoseratesarefailingorinthezoneforfourconsecutiveawardyears.InJanuary2017,theDOEissuedtoinstitutionsfinalDTErates.
AmongtheClassificationofInstructionalProgramsreportedwithinNewSchoolofArchitectureandDesign,KendallCollegeandWalden
University,theDOEhasindicatedthatwehadonethatfailedandfiveinthezone.Thisrepresentsatotalofoneeducationalprogramthat
failedandteninthezone.St.Augustinehadnoprogramsthat
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failedorwereinthezone.Thepercentageofstudentsenrolledintheeducationalprogramthatfailedrepresentsapproximately1%ofthe
studentscurrentlyenrolledinourU.S.Institutions.Thepercentageofstudentsenrolledintheeducationalprogramsthatwereinthezone
representsapproximately5.3%.Wearecurrentlyexaminingandimplementingoptionsforeachoftheseprogramsandtheirstudents.
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representsapproximately5.3%.Wearecurrentlyexaminingandimplementingoptionsforeachoftheseprogramsandtheirstudents.
Additionally,thefinalregulationsrequireaninstitutiontocertifytotheDOEthatitseducationalprogramssubjecttothegainful
employmentrequirements,whichincludeallprogramsofferedbyourU.S.Institutions,meettheapplicablerequirementsforgraduatesto
beprofessionallyoroccupationallylicensedorcertifiedinthestateinwhichtheinstitutionislocated.Ifweareunabletocertifythatour
programsmeettheapplicablestaterequirementsforgraduatestobeprofessionallyoroccupationallycertifiedinthatstate,thenwemay
needtoceaseofferingcertainprogramsincertainstatesortostudentswhoareresidentsincertainstates.Thefinalregulationsfurther
includerequirementsforthereportingofstudentandprogramdatabyinstitutionstotheDOEandexpandthedisclosurerequirementsthat
havebeenineffectsinceJuly1,2011.InNovember2014,twoorganizationsrepresentingforprofitinstitutionsfiledseparatelawsuitsin
federaldistrictcourtsagainsttheDOEseekingtohavethefinalregulationsinvalidated.BothlawsuitsallegedthattheDOEexceededits
statutoryauthorityinpromulgatingtheregulation,thattheregulationviolatesaninstitution'sconstitutionalrightsandthattheregulation
isarbitraryandcapricious.Inbothcases,thecourtsupheldtheregulationsanddismissedthelawsuits.
ThefailureofanyprogramorprogramsofferedbyanyofourU.S.Institutionstosatisfyanygainfulemploymentregulationscould
renderthatprogramorprogramsineligibleforTitleIVprogramfunds.Additionally,anygainfulemploymentdatareleasedbytheDOE
aboutourU.S.Institutionsorwarningsprovidedunderthefinalregulationscouldinfluencecurrentstudentsnottocontinuetheirstudies,
discourageprospectivestudentsfromenrollinginourprogramsornegativelyimpactourreputation.Ifaparticulareducationalprogram
ceasedtobecomeeligibleforTitleIVprogramfunds,eitherbecauseitfailstopreparestudentsforgainfulemploymentinarecognized
occupationorduetootherfactors,wemaychoosetoceaseofferingtheprogram.Itispossiblethatseveralprogramsofferedbyourschools
maybeadverselyimpactedbytheregulationsduetolackofspecializedprogramaccreditationorcertificationorinthestatesinwhich
suchinstitutionsarebased.Wealsocouldberequiredtomakechangestocertainprogramsinthefutureinordertocomplywiththeruleor
toavoidtheuncertaintyassociatedwithsuchcompliance.Anyofthesefactorscouldreduceenrollments,impacttuitionprices,andhavea
materialadverseeffectonourU.S.Institutions'business,financialconditionandresultsofoperations.
Ifwefailtomaintainadequatesystemsandprocessestodetectandpreventfraudulentactivityinstudentenrollmentandfinancialaid,
ourbusinesscouldbemateriallyadverselyimpacted.
Highereducationalinstitutionsaresusceptibletoanincreasedriskoffraudulentactivitybyoutsidepartieswithrespecttostudent
enrollmentandstudentfinancialaidprograms.TheDOE'sregulationsrequireinstitutionsthatparticipateinTitleIVprogramstoreferto
theOfficeofInspectorGeneralcredibleinformationindicatingthatanyapplicant,employee,thirdpartyserviceroragentoftheinstitution
thatactsinacapacitythatinvolvesadministrationoftheTitleIVprogramshasbeenengagedinanyfraudorotherillegalconduct
involvingTitleIVprograms.Wecannotbecertainthatoursystemsandprocesseswillalwaysbeadequateinthefaceofincreasingly
sophisticatedandeverchangingfraudschemes.Thepotentialforoutsidepartiestoperpetratefraudinconnectionwiththeawardand
disbursementofTitleIVprogramfunds,includingasaresultofidentitytheft,maybeheightenedduetoourU.S.Institutionsoffering
variouseducationalprogramsviadistanceeducation.AnysignificantfailurebyoneormoreofourU.S.Institutionstoadequatelydetect
fraudulentactivityrelatedtostudentenrollmentandfinancialaidcouldresultinlossofaccreditationatthediscretionoftheinstitutions'
accreditingagency,whichwouldresultintheinstitutionlosingeligibilityforTitleIVprograms,orindirectactionbytheDOEtolimitor
terminatetheinstitution'sTitleIVprogram
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participation.Anyoftheseoutcomescouldhaveamaterialadverseeffectonourbusiness,financialconditionandresultsofoperations.
AnysubstantialmisrepresentationregardingourU.S.Institutionscouldhaveamaterialadverseeffectonourbusiness,financial
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TheDOE'sregulationregardingsubstantialmisrepresentationsincludesstatementsaboutthenatureofitseducationalprograms,its
financialchargesortheemployabilityofitsgraduates.UndertheregulationaspromulgatedbytheDOE,anyfalse,erroneous,or
misleadingstatement,orstatementthathasthelikelihoodortendencytodeceive,thataninstitution,oneofitsrepresentatives,orperson
orentitywithwhomtheinstitutionhasanagreementtoprovideeducationalprograms,marketing,advertising,recruitingoradmissions
services,makesdirectlyorindirectlytoastudent,prospectivestudent,anymemberofthepublic,anaccreditingagency,astatelicensing
agencyortheDOEcouldbedeemedamisrepresentationbytheinstitution.IntheeventthattheDOEdeterminesthataninstitution
engagedinasubstantialmisrepresentation,itcanrevoketheinstitution'sprogramparticipationagreement,imposelimitationsonthe
institution'sparticipationinTitleIVprograms,denyparticipationapplicationsonbehalfoftheinstitution,orseektofine,suspendor
terminatetheinstitution'sparticipationinTitleIVprograms.TheseregulationscreatebroadgroundsfortheDOEtomonitorandenforce
violationsoftheregulationsonsubstantialmisrepresentation,andtheDOEhasrecentlytakenactionstoterminatetheTitleIVProgram
participationof,andimposesignificantfinancialpenaltiesonotherinstitutionsbasedonitsdeterminationofsuchviolations.These
regulationsalsoprovidegroundsforprivatelitigantstoseektoenforcetheexpandedregulationsthroughFalseClaimsActlitigation,
whichcouldhaveamaterialadverseeffectonourbusiness,financialconditionandresultsofoperations.
TherequirementtonotifytheDOEinadvanceofintroducingnewprograms,andtoobtainapprovalsfornewprograms,coulddelaythe
introductionofsuchprogramsandnegativelyimpactgrowth.
AllofourU.S.InstitutionsarecurrentlyprovisionallycertifiedbytheDOEandremainsubjecttocertainprogramapproval
requirementsotherwiseapplicabletoprovisionallycertifiedinstitutions.AnydelayinobtainingarequiredDOEapprovalcoulddelaythe
introductionoftheprogram,whichcouldnegativelyimpactourenrollmentgrowth.
Abankruptcyfilingbyus,orbyanyofoursubsidiariesthatoperateourU.S.InstitutionsoraclosureofoneofourU.S.Institutionsor
theiraffiliates,wouldleadtoanimmediatelossoftheinstitution'seligibilitytoparticipateinTitleIVprograms.
Intheeventofabankruptcyfilingbyus,orbyanyofoursubsidiariesthatoperateourU.S.Institutions,theU.S.Institutionsownedby
usorthebankruptsubsidiarywouldloseitseligibilitytoparticipateinTitleIVprograms,pursuanttostatutoryprovisionsoftheHEAand
notwithstandingtheautomaticstayprovisionsoffederalbankruptcylaw,whichwouldmakeanyreorganizationdifficulttoimplement.
Additionally,intheeventofanybankruptcyaffectingoneormoreofourU.S.Institutions,theDOEcouldholdourotherU.S.Institutions
jointlyliableforanyTitleIVprogramliabilities,whetherassertedorunassertedatthetimeofsuchbankruptcy,ofourU.S.Institutions
whoseTitleIVprogrameligibilitywasterminated.
Further,intheeventthataninstitutionclosesandfailstopayliabilitiesorotheramountsowedtotheDOE,theDOEcanattributethe
liabilitiesofthatinstitutiontootherinstitutionsundercommonownership.IfanyoneofourU.S.Institutionsoraffiliatesweretocloseor
haveunpaidDOEliabilities,theDOEcouldseektohavethoseliabilitiesrepaidbyoneofourotherU.S.Institutions.Inaddition,the
ultimatecontrollingownerofSFUADisWengen,whichisalsotheultimatecontrollingownerofLaureate.Asaresult,itispossiblethat
theDOEcouldattempttoattributeanyunpaidTitleIVrelatedliabilitiesofSFUADtoourotherU.S.Institutionsduetotheircommon
ownership.
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Government,regulatoryagencies,accreditingbodiesandthirdpartiesmayconductcompliancereviews,bringclaimsorinitiate
litigationagainstus.
Becauseweoperateinahighlyregulatedindustry,wemaybesubjecttocompliancereviewsandclaimsofnoncomplianceand
lawsuitsbygovernmentagencies,regulatoryagenciesandthirdparties,includingclaimsbroughtbythirdpartiesonbehalfofthefederal
government.OnFebruary3,2015,theDOEissuedafinalprogramreviewdeterminationlettertoNationalHispanicUniversityregardinga
December2013reviewcoveringthe20122013and20132014TitleIVawardyears.TheletterdeterminedthatNationalHispanic
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December2013reviewcoveringthe20122013and20132014TitleIVawardyears.TheletterdeterminedthatNationalHispanic
Universityhastakencorrectiveactionsnecessarytoresolveallfindingsnotedinthepreliminaryreport,exceptforcertainfindingsrelated
todrugandalcoholabusepreventionprogramrequirements.Withrespecttothosefindings,theDOEdidnotrequireanyfurtheractiondue
tothefactthattheNationalHispanicUniversityclosedonAugust23,2015.OnSeptember11,2015,theDOEissuedanexpeditedfinal
programreviewdeterminationlettertoKendallCollegeregardingaMarchApril2015programreview.TheletterdeterminedthatKendall
Collegehastakencorrectiveactionsnecessarytoresolveallfindingsnotedinthepreliminaryreport.Inaddition,onSeptember21,2015,
theHigherLearningCommissionnotifiedKendallCollegethattheHigherLearningCommissionplacedtheschoolonongoingfinancial
monitoringoverthenext24months.Suchactionwasprimarilyduetoconcernsovertheschool'scontinuedrelianceuponLaureateto
providefinancialsupporttosustainitsoperations.Seealso"WecouldbesubjecttosanctionsifanyofourU.S.Institutionsfailsto
correctlycalculateandtimelyreturnTitleIVprogramfundsforstudentswhowithdrawbeforecompletingtheireducationalprogram."
Minnesota,MOHEisinitiatingafullreviewofdoctoralprogramsforinstitutionsregisteredinMinnesota.
InMay2017,KendallCollegeandWaldenUniversityarescheduledtohostinterimsitevisitsfromtheirinstitutionalaccreditor,
HigherLearningCommission,asaconditionoftheirongoingaccreditation.
Iftheresultsoftheseorotherreviewsorproceedingsareunfavorabletous,orifweareunabletodefendsuccessfullyagainstlawsuits
orclaims,wemayberequiredtopaymoneydamagesorbesubjecttofines,limitations,lossofeligibilityforTitleIVprogramfundingat
ourU.S.Institutions,injunctionsorotherpenalties.Wemayalsoloseorhavelimitationsimposedonouraccreditations,licensingorTitle
IVprogramparticipation,berequiredtopaymonetarydamagesorbelimitedinourabilitytoopennewinstitutionsoraddnewprogram
offerings.Evenifweadequatelyaddressissuesraisedbyanagencyrevieworsuccessfullydefendalawsuitorclaim,wemayhavetodivert
significantfinancialandmanagementresourcesfromourongoingbusinessoperationstoaddressissuesraisedbythosereviewsorto
defendagainstthoselawsuitsorclaims.Additionally,wemayexperienceadversecollateralconsequences,includingdeclinesinthe
numberofstudentsenrollingatourinstitutionsandthewillingnessofthirdpartiestodealwithusorourinstitutions,asaresultofany
negativepublicityassociatedwithsuchreviews,claimsorlitigation.Claimsandlawsuitsbroughtagainstusmaydamageourreputationor
causeustoincurexpenses,evenifsuchclaimsandlawsuitsarewithoutmerit,whichcouldhaveamaterialadverseeffectonourbusiness,
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RisksRelatingtoOurIndebtedness
Thefactthatwehavesubstantialdebtcouldmateriallyadverselyaffectourabilitytoraiseadditionalcapitaltofundouroperationsand
limitourabilitytopursueourgrowthstrategyortoreacttochangesintheeconomyorourindustry.
Wehave,andwillcontinuetohave,substantialdebtfollowingtheconsummationofthisoffering.AsofSeptember30,2016wehad
(a)a$1.66billionseniorsecuredcreditfacility(the"SeniorSecuredCreditFacilities")ofwhich(1)$325.0millionisamulticurrency
revolvingcreditfacilityscheduledtomatureinJune2019,ofwhich$160.0millionwasoutstandingatSeptember30,2016,
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(2)$282.6millionisaseniorsecuredtermloanfacilityscheduledtomatureinJune2018and(3)$1.22billionisaseniorsecuredterm
loanfacilityscheduledtomatureinMarch2021,(b)$1.38billionaggregateprincipalamountofseniornotesand(c)$1.25billionofother
longtermindebtedness,consistingofcapitalleaseobligations,notespayable,sellernotesandborrowingsagainstcertainlinesofcredit.
During2015,ourtotalcashinterestpaymentsonourdebtwereapproximately67%ofournetcashprovidedbyoperatingactivitiesof
continuingoperations(excludingsuchcashinterestexpense).Ourdebtcouldhaveimportantnegativeconsequencestoourbusiness,
including:
increasingthedifficultyofourabilitytomakepaymentsonouroutstandingdebt
increasingourvulnerabilitytogeneraleconomicandindustryconditionsbecauseourdebtpaymentobligationsmaylimit
ourabilitytouseourcashtorespondtoordefendagainstchangesintheindustryortheeconomy
requiringasubstantialportionofourcashflowfromoperationstobededicatedtothepaymentofprincipalandintereston
ourindebtedness,thereforereducingourabilitytouseourcashflowtofundouroperations,capitalexpendituresandfuture
businessopportunitiesortopaydividends
limitingourabilitytoobtainadditionalfinancingforworkingcapital,capitalexpenditures,debtservicerequirements,
acquisitionsandgeneralcorporateorotherpurposes
limitingourabilitytopursueourgrowthstrategy
limitingourabilitytoadjusttochangingmarketconditionsand
placingusatacompetitivedisadvantagecomparedtoourcompetitorswhoarelesshighlyleveraged.
Weandoursubsidiariesmaybeabletoincursubstantialadditionalindebtednessinthefuture,subjecttotherestrictionscontainedin
theseniorsecuredcreditagreementgoverningourSeniorSecuredCreditFacilitiesandtheindenturegoverningouroutstandingnotes.If
newindebtednessisaddedtoourcurrentdebtlevels,therelatedrisksthatwenowfacecouldintensify.
Wemaynotbeabletogeneratesufficientcashtoserviceallofourindebtednessandmaybeforcedtotakeotheractionstosatisfyour
obligationsunderourindebtedness,whichmaynotbesuccessful.
Ourabilitytomakescheduledpaymentsonortorefinanceourdebtobligationsdependsonourfinancialconditionandoperating
performance,whichissubjecttoprevailingeconomicandcompetitiveconditionsandtocertainfinancial,businessandotherfactors
beyondourcontrol.Wemaybeunabletomaintainalevelofcashflowsfromoperatingactivitiessufficienttopermitustopaythe
principal,premium,ifany,andinterestonourindebtedness.
Ifourcashflowsandcapitalresourcesareinsufficienttofundourdebtserviceobligations,wemaybeforcedtoreduceordelay
investmentsandcapitalexpenditures,ortosellassets,seekadditionalcapitalorrestructureorrefinanceourindebtedness.These
alternativemeasuresmaynotbesuccessfulandmaynotpermitustomeetourscheduleddebtserviceobligations.Intheabsenceofsuch
operating
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resultsandresources,wecouldfacesubstantialliquidityproblemsandmightberequiredtodisposeofmaterialassetsoroperationstomeet
ourdebtserviceandotherobligations.OurseniorsecuredcreditagreementgoverningourSeniorSecuredCreditFacilitiesandthe
indenturegoverningouroutstandingSeniorNotesrestrictourabilitytodisposeofassetsandusetheproceedsfromthedisposition.We
maynotbeabletoconsummatethosedispositionsortoobtaintheproceedsthatwecouldrealizefromthemandtheseproceedsmaynot
beadequatetomeetanydebtserviceobligationsthendue.
Repaymentofourdebtisdependentoncashflowgeneratedbyoursubsidiariesandtheirabilitytomakedistributionstousorreturn
cashviaotherrepatriationstrategies.
Oursubsidiariesownasignificantportionofourassetsandconductasignificantportionofouroperations.Accordingly,repaymentof
ourindebtednessisdependent,toasignificantextent,onthegenerationofcashflowbyoursubsidiariesandtheirabilitytomakesuch
cashavailabletous,bydividend,debtrepaymentorotherwise.BecausethemajorityofourindebtednessisdenominatedinU.S.dollars,
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cashavailabletous,bydividend,debtrepaymentorotherwise.BecausethemajorityofourindebtednessisdenominatedinU.S.dollars,
thestrengtheningoftheU.S.dollaragainstthelocalcurrenciesincountrieswherewehavesignificantoperationshasanadverseimpacton
ourcashflowswhentranslatedintoU.S.dollarsand,accordingly,couldhaveamaterialadverseimpactonourabilitytorepaythe
obligationsunderouroutstandingindebtedness.UnlesstheyareguarantorsofourSeniorSecuredCreditFacilitiesorouroutstanding
notes,oursubsidiariesdonothaveanyobligationtopayamountsdueonourindebtednessortomakefundsavailableforthatpurpose.
Oursubsidiariesmaynotbeableto,ormaynotbepermittedto,makedistributionstoenableustomakepaymentsinrespectofour
indebtedness.Eachsubsidiaryisadistinctlegalentityand,undercertaincircumstances,legalandcontractualrestrictionsmaylimitour
abilitytoobtaincashfromoursubsidiaries.Ournonguarantorsubsidiariesincludeforeignsubsidiariesandtheymaybeprohibitedbylaw
orotherregulationsfromdistributingfundstousand/orwemaybesubjecttopaymentofrepatriationtaxesandwithholdings.Ournon
guarantorsubsidiariesaccountforsubstantiallyallofourtotalrevenue,ourtotalAdjustedEBITDA,andourtotalassetsandourtotal
liabilities(otherthanourSeniorSecuredCreditFacilitiesandouroutstandingnotes).Whiletheseniorsecuredcreditagreementgoverning
ourSeniorSecuredCreditFacilitiesandtheindenturegoverningouroutstandingSeniorNoteslimittheabilityofoursubsidiariestoincur
consensualrestrictionsontheirabilitytopaydividendsormakeotherintercompanypaymentstous,theselimitationsaresubjectto
certainqualificationsandexceptions.Intheeventthatwedonotreceivedistributionsfromoursubsidiariesorreceivecashviaothercash
repatriationstrategiesforservicesrenderedandintellectualproperty,orifthestrengtheningoftheU.S.dollaragainstlocalcurrencies
significantlyreducestheamountofsuchdistributionswhentranslatedintoU.S.dollars,wemaybeunabletomakerequiredprincipaland
interestpaymentsonourindebtedness.
Ourdebtagreementscontain,andfuturedebtagreementsmaycontain,restrictionsthatmaylimitourflexibilityinoperatingour
business.
TheseniorsecuredcreditagreementgoverningourSeniorSecuredCreditFacilitiesandtheindenturegoverningouroutstanding
SeniorNotescontainvariouscovenantsthatmaylimitourabilitytoengageinspecifiedtypesoftransactions.Thesecovenantslimitour
andourrestrictedsubsidiaries'abilityto,amongotherthings:
paydividendsandmakecertaindistributions,investmentsandotherrestrictedpayments
incuradditionalindebtedness,issuedisqualifiedstockorissuecertainpreferredshares
sellassets
enterintotransactionswithaffiliates
createcertainliensorencumbrances
preserveourcorporateexistence
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merge,consolidate,sellorotherwisedisposeofallorsubstantiallyallofourassetsand
designateoursubsidiariesasunrestrictedsubsidiaries.
Inaddition,theseniorsecuredcreditagreementgoverningourSeniorSecuredCreditFacilitiesprovidesforcompliancewiththe
ConsolidatedSeniorSecuredDebttoConsolidatedEBITDARatio,asdefinedintheseniorsecuredcreditagreement,solelywithrespectto
therevolvinglineofcreditfacility,whichistestedquarterly.Themaximumratio,asdefined,is5.3x,4.5xand3.5xatDecember31,2015,
2016and2017,respectively.TheratioasofSeptember30,2016was3.44x.
TheseniorsecuredcreditagreementgoverningourSeniorSecuredCreditFacilitiesandtheindenturegoverningouroutstanding
SeniorNotesalsoincludecrossdefaultprovisionsapplicabletootheragreements.Abreachofanyofthesecovenantscouldresultina
defaultundertheagreementgoverningsuchindebtedness,includingasaresultofcrossdefaultprovisions.Inaddition,failuretomake
paymentsorobservecertaincovenantsontheindebtednessofoursubsidiariesmaycauseacrossdefaultonourSeniorSecuredCredit
FacilitiesandouroutstandingSeniorNotes.Uponourfailuretomaintaincompliancewiththesecovenants,thelenderscouldelectto
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FacilitiesandouroutstandingSeniorNotes.Uponourfailuretomaintaincompliancewiththesecovenants,thelenderscouldelectto
declareallamountsoutstandingtobeimmediatelydueandpayableandterminateallcommitmentstoextendfurthercredit.Ifthelenders
undersuchindebtednessacceleratetherepaymentofborrowings,wecannotassureyouthatwewillhavesufficientassetstorepaythose
borrowings,aswellasourotherindebtedness.WehavepledgedasignificantportionofourassetsascollateralunderourSeniorSecured
CreditFacilities.Ifwewereunabletorepaythoseamounts,thelendersunderourSeniorSecuredCreditFacilitiescouldproceedagainst
thecollateralgrantedtothemtosecurethatindebtedness.
Werelyoncontractualarrangementsandotherpayments,advancesandtransfersoffundsfromouroperatingsubsidiariestomeetour
debtserviceandotherobligations.
Weconductallofouroperationsthroughcertainofoursubsidiaries,andwehavenosignificantassetsotherthancashof$42.8million
asofSeptember30,2016helddomesticallyatcorporateentitiesandthecapitalstockorothercontrolrightsofoursubsidiaries.Asaresult,
werelyonpaymentsfromcontractualarrangements,suchasintellectualpropertyroyalty,networkfeeandmanagementservices
agreements.Inaddition,wealsorelyuponintercompanyloanrepaymentsandotherpaymentsfromouroperatingsubsidiariestomeetany
existingorfuturedebtserviceandotherobligations,asubstantialportionofwhicharedenominatedinU.S.dollars.Theabilityofour
operatingsubsidiariestopaydividendsortomakedistributionsorotherpaymentstotheirparentcompaniesordirectlytouswilldepend
ontheirrespectiveoperatingresultsandmayberestrictedby,amongotherthings,thelawsoftheirrespectivejurisdictionsoforganization,
regulatoryrequirements,agreementsenteredintobythoseoperatingsubsidiariesandthecovenantsofanyexistingorfutureoutstanding
indebtednessthatweoroursubsidiariesmayincur.Forexample,ourVIEinstitutionsgenerallyarenotpermittedtopaydividends.Further,
becausemostofourincomeisgeneratedbyouroperatingsubsidiariesinnonU.S.dollardenominatedcurrencies,ourabilitytoserviceour
U.S.dollardenominateddebtobligationsmaybeimpactedbyanystrengtheningoftheU.S.dollarcomparedtothefunctionalcurrencies
ofouroperatingsubsidiaries.
Disruptionsofthecreditandequitymarketsworldwidemayimpedeorpreventouraccesstothecapitalmarketsforadditionalfunding
toexpandourbusinessandmayaffecttheavailabilityorcostofborrowingunderourexistingseniorsecuredcreditfacilities.
Thecreditandequitymarketsofbothmatureanddevelopingeconomieshavehistoricallyexperiencedextraordinaryvolatility,asset
erosionanduncertainty,leadingtogovernmentalinterventioninthebankingsectorintheUnitedStatesandabroad.Ifthesemarket
disruptionsoccurinthefuture,wemaynotbeabletoaccessthecapitalmarketstoobtainfundingneededtorefinanceourexisting
indebtednessorexpandourbusiness.Inaddition,changesinthecapitalorotherlegalrequirements
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applicabletocommerciallendersmayaffecttheavailabilityorincreasethecostofborrowingunderourSeniorSecuredCreditFacilities.If
weareunabletoobtainneededcapitalontermsacceptabletous,wemayneedtolimitourgrowthinitiativesortakeotheractionsthat
materiallyadverselyaffectourbusiness,financialcondition,resultsofoperationsandcashflows.
Failuretoobtainadditionalcapitalinthefuturecouldmateriallyadverselyaffectourabilitytogrow.
Webelievethatourcashflowsfromoperations,cash,investmentsandborrowingsunderourmulticurrencyrevolvingcreditfacility
willbeadequatetofundourcurrentoperatingplansfortheforeseeablefuture.However,wemayneedadditionaldebtorequityfinancing
inordertofinanceourcontinuedgrowthandtofundtheput/callarrangementswithcertainminoritystockholders.Inaddition,wemaybe
requiredtobuyadditionalinterestsincertainhighereducationinstitutionsandredeemthesharesofourSeriesAPreferredStockat
specifiedtimesinthefuture.Theamountandtimingofsuchadditionalfinancingwillvaryprincipallydependingonthetimingandsize
ofacquisitionsandnewinstitutionopenings,thewillingnessofsellerstoprovidefinancingforfutureacquisitionsandthecashflowsfrom
ouroperations.Givencurrentglobalmacroconditions,companieswithemergingmarketexposurehavebeenmoreaffectedbyrecent
marketvolatility,andduringthepastyearthishasbeenreflectedinthetradinglevelofourSeniorNotes,whichhaveatvarioustimes
tradedatasignificantdiscounttopar.Duringthesecondquarterof2015,oneoftheleadingU.S.creditratingagenciesdowngradedour
creditratingonenotchandduringthesecondquarterof2016,anotheroftheleadingU.S.creditratingagenciesdowngradedourcredit
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creditratingonenotchandduringthesecondquarterof2016,anotheroftheleadingU.S.creditratingagenciesdowngradedourcredit
ratingonenotch.Asignificantlydiscountedtradingpriceforournotes,aswellasthereducedcreditrating,couldmateriallyandadversely
affectourabilitytoobtainadditionaldebtfinancinginthefuture.Totheextentthatwerequireadditionalfinancinginthefutureandare
unabletoobtainsuchadditionalfinancing,wemaynotbeabletofullyimplementourgrowthstrategy.
Ourvariableratedebtexposesustointerestrateriskwhichcouldmateriallyadverselyaffectourcashflow.
BorrowingsunderourSeniorSecuredCreditFacilitiesandcertainlocalcreditfacilitiesbearinterestatvariableratesandotherdebtwe
incuralsocouldbevariableratedebt.Ifmarketinterestratesincrease,variableratedebtwillcreatehigherdebtservicerequirements,
whichcouldmateriallyadverselyaffectourcashflow.Iftheseratesweretoincreasesignificantly,therisksrelatedtooursubstantialdebt
wouldintensify.Whilewehaveandmayinthefutureenterintoagreementslimitingourexposuretohigherinterestrates,anysuch
agreementsmaynotoffercompleteprotectionfromthisrisk.BasedonouroutstandingvariableratedebtasofSeptember30,2016,after
factoringintheinterestratefloorinourSeniorSecuredCreditFacilities,anincreaseof1%ininterestrateswouldresultinanincreasein
interestexpenseofapproximately$21.9milliononanannualbasis.
RisksRelatingtoInvestinginOurClassACommonStock
Ourstatusasapublicbenefitcorporationmaynotresultinthebenefitsthatweanticipate.
WeareapublicbenefitcorporationunderDelawarelaw.Asapublicbenefitcorporationwearerequiredtobalancethefinancial
interestsofourstockholderswiththebestinterestsofthosestakeholdersmateriallyaffectedbyourconduct,includingparticularlythose
impactedbythespecificbenefitpurposerelatingtoeducationsetforthinourcertificateofincorporation.Inaddition,thereisnoassurance
thattheexpectedpositiveimpactfrombeingapublicbenefitcorporationwillberealized.Accordingly,beingapublicbenefitcorporation
andcomplyingwithourrelatedobligationscouldnegativelyimpactourabilitytoprovidethehighestpossiblereturntoourstockholders.
Asapublicbenefitcorporation,wearerequiredtopubliclydiscloseareportatleastbienniallyonouroverallpublicbenefit
performanceandonourassessmentofoursuccessinachievingourspecificpublicbenefitpurpose.Ifwearenottimelyorareunableto
providethisreport,orifthereportisnot
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viewedfavorablybypartiesdoingbusinesswithusorregulatorsorothersreviewingourcredentials,ourreputationandstatusasapublic
benefitcorporationmaybeharmed.
Asapublicbenefitcorporation,ourfocusonaspecificpublicbenefitpurposeandproducingapositiveeffectforsocietymaynegatively
influenceourfinancialperformance.
Asapublicbenefitcorporation,sincewedonothaveafiduciarydutysolelytoourstockholders,wemaytakeactionsthatwebelieve
willbenefitourstudentsandthesurroundingcommunities,evenifthoseactionsdonotmaximizeourshortormediumtermfinancial
results.WhilewebelievethatthisdesignationandobligationwillbenefittheCompanygiventheimportancetoourlongtermsuccessof
ourcommitmenttoeducation,itcouldcauseourboardofdirectorstomakedecisionsandtakeactionsnotinkeepingwiththeshortterm
ormorenarrowinterestsofourstockholders.Anylongertermbenefitsmaynotmaterializewithinthetimeframeweexpectoratalland
mayhaveanimmediatenegativeeffect.Forexample:
wemaychoosetoreviseourpoliciesinwaysthatwebelievewillbebeneficialtoourstudentsandtheircommunitiesinthe
longterm,eventhoughthechangesmaybecostlyintheshortormediumterm
wemaytakeactions,suchasmodernizingcampusestoprovidestudentswiththelatesttechnology,eventhoughthese
actionsmaybemorecostlythanotheralternatives
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actionsmaybemorecostlythanotheralternatives
wemaybeinfluencedtopursueprogramsandservicestodemonstrateourcommitmenttoourstudentsandcommunities
eventhoughthereisnoimmediatereturntoourstockholdersor
inrespondingtoapossibleproposaltoacquiretheCompany,ourboardofdirectorsmaybeinfluencedbytheinterestsof
ouremployees,students,teachersandotherswhoseinterestsmaybedifferentfromtheinterestsofourstockholders.
Wemaybeunableorslowtorealizethelongtermbenefitsweexpectfromactionstakentobenefitourstudentsandcommunitiesin
whichweoperate,whichcouldmateriallyadverselyaffectourbusiness,financialconditionandresultsofoperations,whichinturncould
causeourstockpricetodecline.
Anactive,liquidtradingmarketforourClassAcommonstockmaynotdeveloporbesustained.
NopublictradingmarketcurrentlyexistsforourClassAcommonstock.Wecannotpredicttheextenttowhichinvestorinterestinour
companywillleadtothedevelopmentofatradingmarketonNasdaqorelsewhere,orhowactiveandliquidthatmarketmaybecome.Ifan
activeandliquidtradingmarketdoesnotdeveloporisnotmaintained,youmayhavedifficultysellinganyofourClassAcommonstock
thatyoupurchase.Theinitialpublicofferingpricefortheshareswillbedeterminedbynegotiationsbetweenusandtheunderwritersand
maynotbeindicativeofpricesthatwillprevailintheopenmarketfollowingthisoffering.ThemarketpriceofourClassAcommonstock
maydeclinebelowtheinitialofferingprice,andyoumaybeunabletosellyoursharesofourClassAcommonstockatorabovetheprice
youpaidinthisoffering,oratall.
YouwillsufferimmediateandsubstantialdilutioninthenettangiblebookvalueofthesharesofClassAcommonstockyoupurchasein
thisoffering.
TheinitialpublicofferingpriceofourClassAcommonstockissubstantiallyhigherthanthenettangiblebookvaluepershareof
outstandingcommonstockpriortothecompletionofthisoffering.BasedonournettangiblebookvalueasofSeptember30,2016and
upontheissuanceandsaleof29,000,000sharesofClassAcommonstockbyusataninitialpublicofferingpriceof$18.50pershare,the
midpointoftherangesetforthonthecoverpageofthisprospectus,afterdeductingestimatedunderwritingdiscountsandcommissions
andestimatedofferingexpensespayablebyus,ifyoupurchase
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ourClassAcommonstockinthisoffering,youwillpaymoreforyoursharesthantheamountspaidbyourexistingstockholdersfortheir
sharesandyouwillsufferimmediatedilutionofapproximately$(31.98)pershareinnettangiblebookvalueaftergivingeffecttothesale
of29,000,000sharesofourClassAcommonstockinthisofferingataninitialpublicofferingpriceof$18.50pershare,themidpointof
therangesetforthonthecoverpageofthisprospectus,afterdeductingestimatedunderwritingdiscountsandcommissionsandestimated
offeringexpensespayablebyus.WealsohavealargenumberofoutstandingoptionstopurchaseClassBcommonstockwithexercise
pricesthatarebelowtheestimatedinitialpublicofferingpriceofourClassAcommonstock.Inaddition,sharesofourSeriesAPreferred
Stockareconvertible,incertaincircumstances,intosharesofourClassAcommonstock.Totheextentthattheseoptionsareexercisedor
thesharesofSeriesAPreferredStockareconverted,youwillexperiencefurtherdilution.See"Dilution."
ThepriceofourClassAcommonstockmaybevolatile,andyoucouldloseallorpartofyourinvestment.
ThetradingpriceofourClassAcommonstockfollowingthisofferingmayfluctuatesubstantiallyandmaybehigherorlowerthanthe
initialpublicofferingprice.ThetradingpriceofourClassAcommonstockfollowingthisofferingwilldependonanumberoffactors,
includingthosedescribedinthis"RiskFactors"section,manyofwhicharebeyondourcontrolandmaynotberelatedtoouroperating
performance.ThesefluctuationscouldcauseyoutoloseallorpartofyourinvestmentinourClassAcommonstockasyoumaybeunable
tosellyoursharesatorabovethepriceyoupaidinthisoffering,oratall.Factorsthatcouldcausefluctuationsinthetradingpriceofour
ClassAcommonstockincludethefollowing:
quarterlyvariationsinourresultsofoperations
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resultsofoperationsthatvaryfromtheexpectationsofsecuritiesanalystsandinvestors
resultsofoperationsthatvaryfromthoseofourcompetitors
changesinexpectationsastoourfuturefinancialperformance,includingfinancialestimatesbysecuritiesanalystsand
investors
ourorourcompetitors'introductionofnewinstitutions,newprograms,conceptsorpricingpolicies
announcementsbyus,ourcompetitorsorourvendorsofsignificantacquisitions,jointmarketingrelationships,joint
venturesorcapitalcommitments
changesinconditionsintheeducationindustry,thefinancialmarketsortheeconomyasawhole
failureofanyofourinstitutionstosecureormaintainaccreditationorlicensure
announcementsofregulatoryorotherinvestigations,adverseregulatoryactionbyanyregulatorybodyincludingthose
overseasortheDOE,stateagenciesoraccreditingagencies,regulatoryscrutinyofouroperationsoroperationsofour
competitorsorlawsuitsfiledagainstusorourcompetitors
announcementsbythirdpartiesofsignificantclaimsorproceedingsagainstus
thesizeofourpublicfloat
changesinseniormanagementorkeypersonnel
changesinourdividendpolicy
adverseresolutionofneworpendinglitigationagainstus
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issuances,exchangesorsales,orexpectedissuances,exchangesorsalesofourcapitalstockand
generaldomesticandinternationaleconomicconditions.
Inthepast,followingperiodsofmarketvolatility,stockholdershaveinstitutedsecuritiesclassactionlitigation.Wemaybethetarget
ofthistypeoflitigationinthefuture.Ifweweretobecomeinvolvedinsecuritieslitigation,itcouldhaveasubstantialcostanddivert
resourcesandtheattentionofourmanagementteamfromourbusinessregardlessoftheoutcomeofsuchlitigation.
Inaddition,pricevolatilitymaybegreaterifthepublicfloatandtradingvolumeofourClassAcommonstockislow.Asaresult,you
maysufferalossonyourinvestment.
IfweorourexistinginvestorsselladditionalsharesofourClassAcommonstockorsharesofourSeriesAPreferredStockare
convertedintosharesofourClassAcommonstockafterthisoffering,themarketpriceofourClassAcommonstockcoulddecline.
ThemarketpriceofourClassAcommonstockcoulddeclineasaresultofsalesofalargenumberofsharesofClassAcommonstock
inthemarketafterthisoffering,ortheperceptionthatsuchsalescouldoccur.Thesesales,orthepossibilitythatthesesalesmayoccur,also
mightmakeitmoredifficultforustoraisecapitalthroughfuturesalesofequitysecuritiesatatimeandatapricethatwedeemappropriate,
oratall.Afterthecompletionofthisoffering,wewillhave29,000,000sharesofClassAcommonstockoutstanding.
We,ourdirectorsandexecutiveofficersandholdersofsubstantiallyallofouroutstandingcommonstock(includingWengenandthe
IFCInvestors(otherthantheKoreanInvestmentCorporation,whichholds1,390,902sharesofourcommonstock))haveagreednotto
(i)offer,pledge,sell,contracttosell,sellanyoptionorcontracttopurchase,purchaseanyoptionorcontracttosell,grantanyoption,right
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(i)offer,pledge,sell,contracttosell,sellanyoptionorcontracttopurchase,purchaseanyoptionorcontracttosell,grantanyoption,right
orwarranttopurchase,lendorotherwisetransferordisposeof,directlyorindirectly,anysharesofClassAcommonstockoranysecurities
convertibleintoorexercisableorexchangeableforsharesofClassAcommonstock(ii)fileanyregistrationstatementwiththeSEC
relatingtotheofferingofanysharesofClassAcommonstockoranysecuritiesconvertibleintoorexercisableorexchangeableforClassA
commonstockor(iii)enterintoanyswaporotherarrangementthattransferstoanother,inwholeorinpart,anyoftheeconomic
consequencesofownershipofClassAcommonstock,withouttheconsentoftherepresentativesoftheunderwritersforaperiodof180
daysfromthedateofthisprospectus,subjecttocertainexceptions.Onanasconvertedbasis,theseshareswillrepresentapproximately
81.1%ofouroutstandingClassAcommonstockafterthisoffering.OurClassAcommonstockthatisissueduponconversionofour
ClassBcommonstockalsomaybesoldpursuanttoRule144undertheSecuritiesAct,dependingontheirholdingperiodandsubjectto
restrictionsinthecaseofsharesheldbypersonsdeemedtobeouraffiliates.Asrestrictionsonresaleendorifthesestockholdersexercise
theirregistrationrights,themarketpriceofourstockcoulddeclineiftheholdersofrestrictedsharessellthemorareperceivedbythe
marketasintendingtosellthem.See"CertainRelationshipsandRelatedPartyTransactionsRegistrationRightsAgreement"and"Shares
EligibleforFutureSale."
Inaddition,pursuanttotheNoteExchangeAgreements,wewillexchange$250.0millioninaggregateprincipalamountofSenior
NotesforsharesofourClassAcommonstock.Weexpecttheexchangetobecompletedwithinoneyearandonedayafterthe
consummationofthisoffering,subjecttocertainexceptionsthatcouldresultintheexchangebeingcompletedpriortothattime.The
numberofsharesofClassAcommonstockissuablewillequal104.625%oftheaggregateprincipalamountofSeniorNotestobe
exchanged,or$261.6million,dividedby$,theinitialpublicofferingpricepershareofClassAcommonstockinthisoffering.
Assuminganinitialpublicofferingpriceof$18.50pershare,whichisthemidpointoftherangesetforthonthecoverpageofthis
prospectus,andassumingthecompletionoftheexchangetransactionontheoneyearanniversaryofthisoffering,weexpecttoissuean
aggregateof14,138,514sharesofClassAcommonstock.ThesharesofClassAcommonstock
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issueduponcompletionoftheexchangewillnotbesubjecttoanylockupagreementsandmaybesoldpursuanttoRule144underthe
SecuritiesAct,dependingontheirholdingperiodandsubjecttorestrictionsinthecaseofsharesheldbypersonsdeemedtobeour
affiliates.Asrestrictionsonresaleend,themarketpriceofourClassAcommonstockcoulddeclineiftheholdersofrestrictedsharessell
themorareperceivedbythemarketasintendingtosellthem.
Inaddition,theholdersofthesharesofSeriesAPreferredStockmayconverttheirsharesofSeriesAPreferredStockintosharesofour
ClassAcommonstockwithinoneyearandonedayaftertheconsummationofthisoffering,subjecttocertainexceptionsthatcouldresult
intheholdersbeingabletoconverttheirsharesofSeriesAPreferredStockpriortothattime.ThenumberofsharesofClassAcommon
stockissuableuponconversionwilldependupon,amongotherthings,thenumberofsharesofClassAcommonstocksoldandtheinitial
publicofferingpricepershareofClassAcommonstockinthisoffering.Assuminganinitialpublicofferingpriceof$18.50pershare,
whichisthemidpointoftherangesetforthonthecoverpageofthisprospectus,andassumingallinterestispaidincashthroughthe
conversiondateandthecompletionoftheexchangetransactionontheoneyearanniversaryofthisoffering,weexpecttoissuean
aggregateof25,437,202sharesofClassAcommonstock.DependingonwhenandinwhatmannerthesharesofSeriesAPreferredStock
areconverted,thesharesofClassAcommonstockissueduponconversionmayormaynotbesubjecttoanylockupagreementsandmay
besoldpursuanttoRule144undertheSecuritiesAct,dependingontheirholdingperiodandsubjecttorestrictionsinthecaseofshares
heldbypersonsdeemedtobeouraffiliates.Asrestrictionsonresaleend,themarketpriceofourClassAcommonstockcoulddeclineif
theholdersofrestrictedsharessellthemorareperceivedbythemarketasintendingtosellthem.FormoreinformationonourSeriesA
PreferredStock,see"DescriptionofCapitalStockPreferredStockSeriesAPreferredStock."
AsofSeptember30,2016,aftergivingeffecttotherecapitalizationofourexistingcommonstockintoanequivalentnumberofshares
ofourClassBcommonstockandtheauthorizationofourClassAcommonstock,133,300,971sharesofourClassBcommonstockwere
outstanding,inadditionto31,905sharesofClassBcommonstockthataresubjecttoforfeitureandsubstantialrestrictionsontransfer(the
"restrictedshares").Suchamountexcludes5,432,438sharesofClassBcommonstockissuableupontheexerciseofoutstandingvested
stockoptionsunderthe2007StockIncentivePlan(the"2007Plan"),91,874sharesofClassBcommonstocksubjecttooutstanding
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stockoptionsunderthe2007StockIncentivePlan(the"2007Plan"),91,874sharesofClassBcommonstocksubjecttooutstanding
unvestedstockoptionsunderthe2007Plan,2,469,551sharesofClassBcommonstockissuableupontheexerciseofoutstandingvested
stockoptionsunderthe2013LongTermIncentivePlan(the"2013Plan"),2,866,662sharesofClassBcommonstocksubjectto
outstandingunvestedstockoptionsunderthe2013Plan,1,296,621sharesofClassAcommonstockand/orClassBcommonstock
reservedforfutureissuanceunderthe2013Plan,7,431sharesofClassBcommonstockreservedforfutureissuanceunderthePost2004
DCP,2,773,098sharesofClassBcommonstockissuableuponexerciseofoptionstobegrantedtoMr.Beckerattheconsummationofthis
offeringinexchangefortheliquidationofcertainofhisExecutiveProfitsInterests,inbothcasesassuminganinitialpublicofferingprice
of$18.50pershare,whichisthemidpointoftherangesetforthonthecoverpageofthisprospectusandallsharesofClassAcommon
stockissuableuponconversionoftheSeriesAPreferredStock.See"ExecutiveCompensation"forinformationrelatingtothetermsofthe
restrictedshares,thePost2004DCP,Mr.Becker'sExecutiveDCPandMr.Becker'sExecutiveProfitsInterests.Allofouroutstanding
sharesofClassBcommonstock(otherthantherestrictedshares)willfirstbecomeeligibleforresale180daysafterthedateofthis
prospectus.SalesofasubstantialnumberofsharesofourClassBcommonstock,whichwillautomaticallyconvertintoClassAcommon
stockuponsale,couldcausethemarketpriceofourClassAcommonstocktodecline.
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Becausewehavenocurrentplanstopaycashdividendsonourcommonstockfortheforeseeablefuture,andourdebtarrangementsand
theSeriesAPreferredStockplacecertainrestrictionsonourabilitytodoso,youmaynotreceiveanyreturnoninvestmentunlessyou
sellyourClassAcommonstockforapricegreaterthanthatwhichyoupaidforit.
Wemayretainfutureearnings,ifany,forfutureoperation,expansion,debtrepaymentandthepossiblemandatoryredemptionofthe
sharesofSeriesAPreferredStockpursuanttothetermsofthecertificateofdesignationsgoverningourSeriesAPreferredStock(the
"CertificateofDesignations")andhavenocurrentplanstopayanycashdividendsfortheforeseeablefuture.Anydecisiontodeclareand
paydividendsinthefuturewillbemadeatthediscretionofourboardofdirectorsandwilldependon,amongotherthings,ourresultsof
operations,financialcondition,cashrequirements,contractualrestrictions,restrictionsondividendsimposedbytheCertificateof
Designationsandotherfactorsthatourboardofdirectorsmaydeemrelevant.Inaddition,ourabilitytopaydividendsmaybelimitedby
covenantsofanyexistingandfutureoutstandingindebtednessweoroursubsidiariesincur,includingourSeniorSecuredCreditFacilities
andtheindenturegoverningouroutstandingnotes,andthetermsofourSeriesAPreferredStock.See"DescriptionofCertain
Indebtedness"FormoreinformationonourSeriesAPreferredStock,see"DescriptionofCapitalStockPreferredStockSeriesA
PreferredStock."Inaddition,wearepermittedunderthetermsofourdebtinstrumentstoincuradditionalindebtedness,whichmayrestrict
orpreventusfrompayingdividendsonourcommonstock.Furthermore,ourabilitytodeclareandpaydividendsmaybelimitedby
instrumentsgoverningfutureoutstandingindebtednesswemayincur.Asaresult,youmaynotreceiveanyreturnonaninvestmentinour
ClassAcommonstockunlessyousellyourClassAcommonstockforapricegreaterthanthatwhichyoupaidforit.
Thedualclassstructureofourcommonstockascontainedinourcertificateofincorporationhastheeffectofconcentratingvoting
controlwiththosestockholderswhoheldourstockpriortothisoffering,includingWengenandourexecutiveofficers,employeesand
directorsandtheiraffiliates,andlimitingyourabilitytoinfluencecorporatematters.
EachshareofourClassBcommonstockwillbeentitledtotenvotespershare,andeachshareofourClassAcommonstock,whichis
theclassofstockweareoffering,hasonevotepershare.StockholderswhoholdsharesofClassBcommonstock,includingWengen,and
ourexecutiveofficers,employeesanddirectorsandtheiraffiliates,willtogetherholdapproximately97.9%ofthevotingpowerofour
outstandingcapitalstockfollowingthisoffering,andthereforewillhavesignificantinfluenceoverthemanagementandaffairsofthe
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Companyandcontroloverallmattersrequiringstockholderapproval,includingelectionofdirectorsandsignificantcorporate
transactions,suchasamergerorothersaleofourcompanyoritsassets,fortheforeseeablefuture.Becauseofthe10to1votingratio
betweenourClassBandClassAcommonstock,theholdersofourClassBcommonstockcollectivelywillcontinuetocontrolamajority
ofthecombinedvotingpowerofourcommonstockevenwhenthesharesofClassBcommonstockrepresentlessthanamajorityofthe
outstandingsharesofourClassAandClassBcommonstock.See"DescriptionofCapitalStock."
TheWengenInvestorswillhavecontroloverourdecisionstoenterintoanycorporatetransactionandtheabilitytopreventany
transactionthatrequiresstockholderapprovalregardlessofwhetherothersbelievethatthetransactionisinourbestinterests.Solongas
theWengenInvestorscontinuetohaveanindirectinterestinamajorityofouroutstandingClassBcommonstock,theywillhavethe
abilitytocontrolthevoteinanyelectionofdirectors.Thisconcentratedcontrolwilllimityourabilitytoinfluencecorporatemattersfor
theforeseeablefutureand,asaresult,themarketpriceofourClassAcommonstockcouldbemateriallyadverselyaffected.Inaddition,
upontheconsummationofthisofferingweexpecttoenterintoanamendmentandrestatementoftheWengenSecurityholders'Agreement
datedasofJuly11,2007,byandamongWengenandtheotherpartiesthereto(asamendedandrestatedfromtimetotime,the"Wengen
Securityholders'Agreement"),pursuanttowhichcertain
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oftheWengenInvestorswillhavecertainrightstoappointdirectorstoourboardofdirectorsanditscommittees.See"Certain
RelationshipsandRelatedPartyTransactionsAgreementswithWengen."
Inaddition,theWengenInvestorsareinthebusinessofmakingoradvisingoninvestmentsincompaniesandmayhold,andmayfrom
timetotimeinthefutureacquire,interestsinorprovideadvicetobusinessesthatdirectlyorindirectlycompetewithcertainportionsof
ourbusinessoraresuppliersorcustomersofours.
TheCertificateofDesignationsgoverningthetermsofourSeriesAPreferredStockcontainsrightsandprivilegesthatmayadversely
affecttheholdersofourClassAcommonstock,and,ifweareunabletoredeemthesharesofSeriesAPreferredStockwhenrequired,the
holdersofthesharesofSeriesAPreferredStockcouldtakecontrolofourboardofdirectorsandforceasaleoftheCompany.
SolongastherearesharesofSeriesAPreferredStockoutstanding,theholdersofsuchsecurityareentitledtoannualdividendsand
haveseniorityuponanydistributionoftheCompany'scashandotherassets.TheholdersofSeriesAPreferredStockalsohavevetopower
overcertaincorporatematters,suchas(i)amendingorrepealinganyprovisionofourcertificateofincorporationorbylawsthatwould
adverselyaffecttherights,preferences,privilegesorvotingpowersoftheSeriesAPreferredStock,includinganyamendmentthatwould
increaseordecreasetheauthorizednumberofsharesofSeriesAPreferredStock,(ii)ifitisnotafollowonpublicofferingafterthisoffering
inwhichtheholdersoftheSeriesAPreferredStockreceivenetproceedsnotlessthanthePriorityAmount,thefirstpublicofferingofour
commonstockfollowingaQPO(asdefinedbelow)oraninitialpublicofferingthatisnotaQPO,and(iii)anyproposedinitialpublic
offeringthatisnotaQPO.TheholdersofsharesoftheSeriesAPreferredStockmayhaveinterestsadversetoholdersofourClassA
commonstockandtheexerciseofsuchrightsmayhaveanegativeimpactonthevalueofClassAcommonstockortheamountofcashor
otherassetstheholdersofourcommonstockmayreceiveinconnectionwithadistributionormerger,consolidationorshareexchange.
Inaddition,ifwefailtoredeemthesharesofSeriesAPreferredStockwhenrequiredafterthefifthanniversaryoftheissuedate,the
holdersoftheSeriesAPreferredStockareentitledtoappointtwomemberstoourboardofdirectorsandthedividendrateincreasesto
18.0%perannum.Foraperiodof120daysfollowingtheappointmentofsuchdirectors,wemustworkingoodfaithwiththeholdersofthe
SeriesAPreferredStocktostructureamutuallyagreeablecapitalfundraisingtransactiontoredeemthethenoutstandingsharesofSeriesA
PreferredStock.If,aftersuch120dayperiod,anysharesofSeriesAPreferredStockremainoutstanding,theholdersoftheSeriesA
PreferredStockmaynominateanumberofindividualstoourboardofdirectorssuchthataftersuchnominationtheholdersoftheSeriesA
PreferredStockcontrolamajorityofourboardofdirectorsand,afterwhich,theholdersofSeriesAPreferredStockmaycauseasaleofthe 104/620
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PreferredStockcontrolamajorityofourboardofdirectorsand,afterwhich,theholdersofSeriesAPreferredStockmaycauseasaleofthe
Companyand/orcausetheCompanytoraisedebtorequitycapitalinanamountsufficienttoredeemtheremainingoutstandingsharesof
SeriesAPreferredStock.
FollowingClosing,andsolongasthesharesofSeriesAPreferredStockareoutstanding,wewillbesubjecttocertainfinancial
covenantsrelatingtototalnetleverageandtrailing12monthsrevenueandAdjustedEBITDA(asdefinedintheStockholdersAgreement).
FailurebytheCompanytosatisfythesecovenantswouldresultintheholdersoftheSeriesAPreferredStockobtainingcertainremedies,
including(i)theabilitytoappointanindividualtoadvisetheboardofdirectorsonimprovingtheCompany'sgrowthandprofitabilityand
(ii)consentto(A)theincurrenceofadditionalindebtednessandacquisitionsofassetsand(B)theestablishmentofnewschoolsbythe
Company.Inaddition,wewouldberequiredtoimplementaonetimecostreductionprogram.
FormoreinformationonourSeriesAPreferredStock,see"DescriptionofCapitalStockPreferredStockSeriesAPreferredStock."
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Wewillincurincreasedcostsasaresultofbeingapubliccompany,andtherequirementsofbeingapubliccompanymaydivert
management'sattentionfromourbusinessandmateriallyadverselyaffectourfinancialresults.
Asapubliccompany,wewillbesubjecttoanumberofadditionalrequirements,includingthereportingrequirementsoftheSecurities
ExchangeActof1934,asamended(the"ExchangeAct"),theSarbanesOxleyAct,theDoddFrankWallStreetReformandConsumer
ProtectionActof2010andtheNasdaqlistingstandards.Theserequirementswillcauseustoincurincreasedcostsandmightplaceastrain
onoursystemsandresources.TheExchangeActrequires,amongotherthings,thatwefileannual,quarterlyandcurrentreportswith
respecttoourbusinessandfinancialcondition.TheSarbanesOxleyActrequires,amongotherthings,thatwemaintaineffective
disclosurecontrolsandproceduresandinternalcontroloverfinancialreporting.Inordertomaintainandimprovetheeffectivenessofour
disclosurecontrolsandproceduresandinternalcontroloverfinancialreporting,significantresourcesandmanagementoversightwillbe
required.Asaresult,ourmanagement'sattentionmightbedivertedfromotherbusinessconcerns,whichcouldhaveamaterialadverse
effectonourbusiness,resultsofoperationsandfinancialcondition.Wemaynotbesuccessfulinimplementingtheserequirementsand
implementingthemcouldmateriallyadverselyaffectourbusiness,resultsofoperationsandfinancialcondition.Furthermore,wemight
notbeabletoretainourindependentdirectorsorattractnewindependentdirectorsforourcommittees.
Inaddition,theneedtoestablishthecorporateinfrastructuredemandedofapubliccompanymaydirectmanagement'sattention,from
implementingourbusinessstrategy,whichcouldpreventusfromimprovingourbusiness,financialconditionandresultsofoperations.
Wehavemade,andwillcontinuetomake,changestoourinternalcontrols,includinginformationtechnologycontrols,andproceduresfor
financialreportingandaccountingsystemstomeetourreportingobligationsasapubliccompany.However,themeasureswetakemaynot
besufficienttosatisfyourobligationsasapubliccompany.Ifwedonotcontinuetodevelopandimplementtherightprocessesandtools
tomanageourchangingenterpriseandmaintainourculture,ourabilitytocompetesuccessfullyandachieveourbusinessobjectivescould
beimpaired,whichcouldmateriallyadverselyaffectourbusiness,financialconditionandresultsofoperations.Inaddition,wecannot
predictorestimatetheamountofadditionalcostswemayincurtocomplywiththeserequirements.Weanticipatethatthesecostswill
materiallyincreaseourgeneralandadministrativeexpenses.
Wearea"controlledcompany"withinthemeaningoftheNasdaqrulesand,asaresult,willqualifyfor,andintendtorelyon,
exemptionsfromcertaincorporategovernancerequirements.Youwillnothavethesameprotectionsaffordedtostockholdersof
companiesthataresubjecttosuchrequirements.
Aftercompletionofthisoffering,Wengenwillcontinuetocontrolamajorityofthevotingpowerofouroutstandingcommonstock.
Asaresult,wearea"controlledcompany"withinthemeaningoftheNasdaqcorporategovernancestandards.Undertheserules,a
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Asaresult,wearea"controlledcompany"withinthemeaningoftheNasdaqcorporategovernancestandards.Undertheserules,a
companyofwhichmorethan50%ofthevotingpowerisheldbyanindividual,grouporanothercompanyisa"controlledcompany"and
mayelectnottocomplywithcertaincorporategovernancerequirements,including:
therequirementthatamajorityoftheboardofdirectorsconsistofindependentdirectors
therequirementthatwehaveanominating/corporategovernancecommitteethatiscomposedentirelyofindependent
directorswithawrittencharteraddressingthecommittee'spurposeandresponsibilities
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therequirementthatwehaveacompensationcommitteethatiscomposedentirelyofindependentdirectorswithawritten
charteraddressingthecommittee'spurposeandresponsibilitiesand
therequirementforanannualperformanceevaluationofthenominating/corporategovernanceandcompensation
committees.
Followingthisoffering,weintendtoutilizetheseexemptions.Asaresult,wewillnothaveamajorityofindependentdirectors,our
nominating/corporategovernancecommitteeandcompensationcommitteewillnotconsistentirelyofindependentdirectorsandsuch
committeeswillnotbesubjecttoannualperformanceevaluations.See"Management."Accordingly,forsolongaswearea"controlled
company,"youwillnothavethesameprotectionsaffordedtostockholdersofcompaniesthataresubjecttoallofthecorporategovernance
requirementsofNasdaq.
Provisionsinourcertificateofincorporation,CertificateofDesignationsandbylawsandtheDelawareGeneralCorporationLawcould
makeitmoredifficultforathirdpartytoacquireusandcoulddiscourageatakeoverandadverselyaffecttheholdersofourClassA
commonstock.
Provisionsofouramendedandrestatedcertificateofincorporationandamendedandrestatedbylaws,aswellasprovisionsof
Delawarelawcoulddiscourage,delayorpreventamerger,acquisitionorotherchangeincontroloftheCompany,evenifsuchchangein
controlwouldbebeneficialtotheholdersofourClassAcommonstock.Theseprovisionsinclude:
thedualclassstructureofourcommonstock
authorizingtheissuanceof"blankcheck"preferredstockthatcouldbeissuedbyourboardofdirectorstoincreasethe
numberofoutstandingsharesandthwartatakeoverattempt
prohibitingtheuseofcumulativevotingfortheelectionofdirectors
asapublicbenefitcorporation,requiringatwothirdsmajorityvoteoftheoutstandingstocktoeffectanoncashmerger
withanentitythatisnotapublicbenefitcorporationwithanidenticalpublicbenefit
limitingtheabilityofstockholderstocallspecialmeetingsoramendourbylaws
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followingtheconversionofallofourClassBcommonstockintoClassAcommonstock,requiringallstockholderactions
tobetakenatameetingofourstockholders
establishingadvancenoticeanddurationofownershiprequirementsfornominationsforelectiontotheboardofdirectorsor
forproposingmattersthatcanbeacteduponbystockholdersatstockholdermeetingsand
certainprotectiveprovisionsinfavoroftheholdersofSeriesAPreferredStock.
Theseprovisionscouldalsodiscourageproxycontestsandmakeitmoredifficultforyouandotherstockholderstoelectdirectorsof
yourchoosingandcauseustotakeothercorporateactionsyoudesire.Inaddition,becauseourboardofdirectorsisresponsiblefor
appointingthemembersofourmanagementteam,theseprovisionscouldinturnaffectanyattemptbyourstockholderstoreplacecurrent
membersofourmanagementteam.
Wemayissueadditionalsharesofpreferredstockinthefuture,whichcouldmakeitdifficultforanothercompanytoacquireusorcould
otherwiseadverselyaffectholdersofourClassAcommonstock,whichcoulddepressthepriceofourClassAcommonstock.
Ouramendedandrestatedcertificateofincorporationwillauthorizeustoissueoneormoreadditionalseriesofpreferredstock.Our
boardofdirectorswillhavetheauthoritytodeterminethe
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preferences,limitationsandrelativerightsofanyadditionalsharesofpreferredstockandtofixthenumberofsharesconstitutingany
seriesandthedesignationofsuchseries,withoutanyfurthervoteoractionbyourstockholders.Ouradditionalseriesofpreferredstock
couldbeissuedwithvoting,liquidation,dividendandotherrightssuperiortotherightsofourClassAcommonstock.Thepotential
issuanceofanadditionalseriesofpreferredstockmaydelayorpreventachangeincontrolofus,discouragebidsforourClassAcommon
stockatapremiumtothemarketprice,andmateriallyadverselyaffectthemarketpriceandthevotingandotherrightsoftheholdersof
ourClassAcommonstock.
TheprovisionofourcertificateofincorporationrequiringexclusivevenueintheCourtofChanceryintheStateofDelawareforcertain
typesoflawsuitsmayhavetheeffectofdiscouraginglawsuitsagainstourdirectorsandofficers.
Ouramendedandrestatedcertificateofincorporationwillrequire,tothefullestextentpermittedbylaw,that(a)anyderivativeaction
orproceedingbroughtonourbehalf,(b)anyactionassertingaclaimofbreachofafiduciarydutyowedbyanyofourdirectors,officersor
otheremployeestousorourstockholders,(c)anyactionassertingaclaimagainstusarisingpursuanttoanyprovisionoftheDelaware
GeneralCorporationLaw(the"DGCL")orouramendedandrestatedcertificateofincorporationorthebylawsor(d)anyactionassertinga
claimagainstusgovernedbytheinternalaffairsdoctrinewillhavetobebroughtonlyintheCourtofChanceryintheStateofDelaware.
Anypersonorentitypurchasingorotherwiseacquiringanyinterestinsharesofourcapitalstockisdeemedtohavenoticeofandtohave
consentedtotheprovisionsofouramendedandrestatedcertificateofincorporationdescribedabove.Thischoiceofforumprovisionmany
limitastockholder'sabilitytobringaclaiminajudicialforumthatitfindsfavorablefordisputeswithusoranyofourdirectors,officers,
otheremployeesorstockholders,whichmaydiscouragelawsuitswithrespecttosuchclaims.Alternatively,ifacourtweretofindthe
choiceofforumprovisioncontainedinourcertificateofincorporationtobeinapplicableorunenforceableinanaction,wemayincur
additionalcostsassociatedwithresolvingsuchactioninotherjurisdictions,whichcouldmateriallyadverselyaffectourbusiness,
Ifsecuritiesanalystsdonotpublishresearchorreportsaboutourbusinessoriftheypublishunfavorablecommentaryaboutusorour
industryordowngradeourClassAcommonstock,thetradingpriceofourClassAcommonstockcoulddecline.
WeexpectthatthetradingpriceforourClassAcommonstockwillbeaffectedbyanyresearchorreportsthatsecuritiesanalysts
publishaboutusorourbusiness.Ifoneormoreoftheanalystswhomayelecttocoverusorourbusinessdowngradetheirevaluationsof
ourClassAcommonstock,thepriceofourClassAcommonstockwouldlikelydecline.Wemaybeunableorslowtoattractresearch
coverageandifoneormoreanalystsceasecoverageofourcompany,wecouldlosevisibilityinthemarketforourClassAcommonstock,
whichinturncouldcauseourstockpricetodecline.
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SPECIALNOTEREGARDINGFORWARDLOOKINGSTATEMENTS
Thisprospectuscontains"forwardlookingstatements"withinthemeaningofthefederalsecuritieslaws,whichinvolverisksand
uncertainties.Youcanidentifyforwardlookingstatementsbecausetheycontainwordssuchas"believes,""expects,""may,""will,"
"should,""seeks,""approximately,""intends,""plans,""estimates"or"anticipates"orsimilarexpressionsthatconcernourstrategy,plansor
intentions.Allstatementswemakerelatingtoestimatedandprojectedearnings,costs,expenditures,cashflows,growthratesandfinancial
resultsareforwardlookingstatements.Inaddition,we,throughourseniormanagement,fromtimetotimemakeforwardlookingpublic
statementsconcerningourexpectedfutureoperationsandperformanceandotherdevelopments.Alloftheseforwardlookingstatements
aresubjecttorisksanduncertaintiesthatmaychangeatanytime,and,therefore,ouractualresultsmaydiffermateriallyfromthosewe
expected.Wederivemostofourforwardlookingstatementsfromouroperatingbudgetsandforecasts,whicharebaseduponmany
detailedassumptions.Whilewebelievethatourassumptionsarereasonable,wecautionthatitisverydifficulttopredicttheimpactof
knownfactors,and,ofcourse,itisimpossibleforustoanticipateallfactorsthatcouldaffectouractualresults.Importantfactorsthatcould
causeactualresultstodiffermateriallyfromourexpectationsaredisclosedunder"RiskFactors"andelsewhereinthisprospectus,
including,withoutlimitation,inconjunctionwiththeforwardlookingstatementsincludedinthisprospectus.Allsubsequentwrittenand
oralforwardlookingstatementsattributabletous,orpersonsactingonourbehalf,areexpresslyqualifiedintheirentiretybythefactors
discussedinthisprospectus.Someofthefactorsthatwebelievecouldaffectourresultsinclude:
therisksassociatedwithouroperationofanincreasinglyglobalbusiness,includingcomplexmanagement,foreign
currency,legal,taxandeconomicrisks
ourabilitytoeffectivelymanagethegrowthofourbusiness
ourabilitytocontinuetomakeacquisitionsandtosuccessfullyintegrateandoperateacquiredbusinesses
thedevelopmentandexpansionofourglobaleducationnetworkandtheeffectofnewtechnologyapplicationsinthe
educationalservicesindustry
theeffectofexistinglawsgoverningourbusinessorchangesinthoselaws
changesinthepolitical,economicandbusinessclimateintheinternationalortheU.S.marketswhereweoperate
risksofdownturnsingeneraleconomicconditionsandintheeducationalservicesandeducationtechnologyindustries
possibleincreasedcompetitionfromothereducationalserviceproviders
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marketacceptanceofnewserviceofferingsbyusorourcompetitorsandourabilitytopredictandrespondtochangesinthe
marketsforoureducationalservices
theeffectonourbusinessandresultsofoperationsfromfluctuationsinthevalueofforeigncurrencies
ourabilitytoattractandretainkeypersonnel
thefluctuationsinrevenuesduetoseasonality
ourabilitytogenerateanticipatedsavingsfromourEiPprogramorourSSOs
ourabilitytomaintainproperandeffectiveinternalcontrolsorremediateanyofourcurrentmaterialweaknessesnecessary
toproduceaccuratefinancialstatementsonatimelybasis
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ourfocusonaspecificpublicbenefitpurposeandproducingapositiveeffectforsocietymaynegativelyinfluenceour
financialperformanceand
thefuturetradingpricesofourClassAcommonstockandtheimpactofanysecuritiesanalysts'reportsontheseprices.
Wecautionyouthattheforegoinglistofimportantfactorsmaynotcontainallofthematerialfactorsthatareimportanttoyou.In
addition,inlightoftheserisksanduncertainties,themattersreferredtointheforwardlookingstatementscontainedinthisprospectus
maynotinfactoccur.Weundertakenoobligationtopubliclyupdateorreviseanyforwardlookingstatementasaresultofnew
information,futureeventsorotherwise,exceptasotherwiserequiredbylaw.
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USEOFPROCEEDS
Weestimatethatournetproceedsfromthesaleof29,000,000shares(or33,350,000sharesiftheunderwritersexerciseinfulltheir
optiontopurchaseadditionalsharesofClassAcommonstock)ofourClassAcommonstockbeingofferedbyuspursuanttothis
prospectusatanassumedinitialpublicofferingpriceof$18.50pershare,whichisthemidpointoftherangesetforthonthecoverpageof
thisprospectus,afterdeductingestimatedunderwritingdiscountsandcommissionsandestimatedofferingexpensespayablebyus,willbe
approximately$496.7million(or$572.5millioniftheunderwritersexerciseinfulltheiroptiontopurchaseadditionalsharesofClassA
commonstock).A$1.00increaseordecreaseintheassumedinitialpublicofferingpriceof$18.50persharewouldincreaseordecreasethe
netproceedstousfromtheofferingbyapproximately$27.3million,assumingthenumberofsharesofferedbyus,assetforthonthecover
pageofthisprospectus,remainsthesameandafterdeductingtheestimatedunderwritingdiscountsandcommissionsandestimated
offeringexpensespayablebyus.Similarly,anincreaseordecreaseofonemillionsharesinthenumberofsharesofClassAcommonstock
offeredbyuswouldincreaseordecreasethenetproceedstousfromthisofferingbyapproximately$17.4million,assumingtheassumed
initialpublicofferingpriceremainsthesameandafterdeductingestimatedunderwritingdiscountsandcommissionsandestimated
offeringexpensespayablebyus.
Weintendtousethenetproceedsfromthisofferingtorepay,redeemorrepurchaseouroutstandingSeniorNotes,ourtermloansunder
ourSeniorSecuredCreditFacilitiesand/orthesellernotesusedtopartiallyfinancetheacquisitionofFMUGroup.Wehavenotyet
determinedwhetherwewillrepaytheSeniorNotesthroughtenderoffers,openmarketrepurchasesorredemption.Iftheunderwriters
exerciseinfulltheiroptiontopurchaseadditionalsharesofClassAcommonstock,weintendtousesuchproceedsforgeneralcorporate
purposes,includingthefurtherrepayment,redemptionorrepurchaseofcertainofourindebtedness.
Asofthedatehereof,thereisapproximately$1.4billionaggregateprincipalamountofSeniorNotesoutstanding,whichbearinterest
atarateof9.250%perannumandmatureonSeptember1,2019.Asofthedateofthisprospectus,wehavenotcausedaregistration
statementtobedeclaredeffectivetocompletetheregistrationrequirementforanexchangeofferforourSeniorNotes.Accordingly,special
interestisaccruingonsuchindebtednessatarateequalto0.75%perannum.Thereisapproximately$1.5billionoftermloans
outstandingunderourSeniorSecuredCreditFacilitieswithapproximately$282.6millionoutstandingthathaveamaturitydateof
June16,2018,whichasofSeptember30,2016,bearsinterestatarateof5.0%perannum.TheFMUsellernoteshaveanoutstanding
balanceof$97.6million,matureonSeptember12,2017,andbearinterestofapproximately14%basedontheCertificadosdeDepositos
Interbancarios("CDI")rate,apublishedindex,asofSeptember30,2016.
AffiliatesofcertainoftheunderwritersholdaportionoftheSeniorNotesand/orthetermloansunderourSeniorSecuredCredit
Facilities,andasaresult,mayreceiveaportionoftheproceedsfromthisoffering.See"Underwriting."
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DIVIDENDPOLICY
WecurrentlydonotanticipatepayinganycashdividendsonourClassAcommonstockorClassBcommonstockintheforeseeable
future.Weexpecttoretainourfutureearnings,ifany,foruseintheoperationandexpansionofourbusiness.Thetermsofoursenior
securedcreditagreementgoverningourSeniorSecuredCreditFacilities,theindenturegoverningouroutstandingSeniorNotesandthe
CertificateofDesignationsgoverningourSeriesAPreferredStocklimitourabilitytopaycashdividendsincertaincircumstances.
Furthermore,ifweareindefaultundertheseniorsecuredcreditagreementgoverningourSeniorSecuredCreditFacilitiesortheindenture
governingouroutstandingSeniorNotes,ourabilitytopaycashdividendswillbelimitedintheabsenceofawaiverofthatdefaultoran
amendmenttosuchagreementorsuchindenture.Inaddition,ourabilitytopaycashdividendsonsharesofourClassAcommonstock
maybelimitedbyrestrictionsonourabilitytoobtainsufficientfundsthroughdividendsfromoursubsidiaries.Formoreinformationon
ourseniorsecuredcreditagreementgoverningourSeniorSecuredCreditFacilitiesandtheindenturegoverningouroutstandingSenior
Notes,see"DescriptionofCertainIndebtedness"andformoreinformationonourSeriesAPreferredStock,see"DescriptionofCapital
StockPreferredStockSeriesAPreferredStock."Subjecttotheforegoing,thepaymentofcashdividendsinthefuture,ifany,willbeat
thediscretionofourboardofdirectorsandwilldependuponsuchfactorsasearningslevels,capitalrequirements,ouroverallfinancial
conditionandanyotherfactorsdeemedrelevantbyourboardofdirectors.
Wemadecashdistributionsonourcommonstockinanaggregateamountof$19.0million,$5.3millionand$22.9millionin2015,
2014and2013,respectively.
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CAPITALIZATION
ThefollowingtableshowsourcashandcashequivalentsandourcapitalizationasofSeptember30,2016on:
anactualbasis
anadjustedbasisgivingeffecttotheissuanceoftheSeriesAPreferredStockandtheapplicationofthenetproceeds
therefromand
anasfurtheradjustedbasisgivingeffecttotheissuanceofClassAcommonstockinthisofferingandtheapplicationofthe
netproceedsfromthisofferingasdescribedunder"UseofProceeds."Doesnotreflecttheanticipatedexchangeof
$250.0millioninaggregateprincipalamountofSeniorNotesforsharesofClassAcommonstockwithinoneyearandone
dayfollowingcompletionofthisofferingpursuanttotheNoteExchangeAgreements.See"SummaryRecent
DevelopmentsSeniorNoteExchangeTransaction."
Youshouldreadthistabletogetherwith"UseofProceeds,""SelectedHistoricalConsolidatedFinancialandOtherData,"
"Management'sDiscussionandAnalysisofFinancialConditionandResultsofOperations"andourconsolidatedfinancialstatementsand
relatednotesincludedelsewhereinthisprospectus.
Cashandcashequivalents(includesVIEamountsof$164.9million)
Indebtedness
SeniorSecuredCreditFacilities:
Multicurrencyrevolvingcreditfacility(2)
Termloanfacilities(3)
SeniorNotesdue2019(4)
Otherdebt,includingsellernotes(5)
Totaldebt(6)
ConvertibleRedeemablePreferredStock,SeriesA,$0.001parvaluenosharesauthorized,
issuedandoutstanding,actual512,000sharesauthorized,400,000sharesissuedand
outstanding,asadjustedandasfurtheradjusted(7)
TotalConvertibleRedeemablePreferredStock(8)
Stockholders'equity
Preferredstock,$0.001parvalue50,000,000sharesauthorized,nosharesissuedand
outstanding,actual,49,488,000sharesauthorized,nosharesissuedandoutstanding,as
adjustedandasfurtheradjusted
ClassAcommonstock,$0.004parvalue:nosharesauthorized,issuedandoutstanding,
actualnosharesauthorized,issuedandoutstanding,asadjustedand
700,000,000sharesauthorized,29,000,000sharesissuedandoutstanding,asfurther
adjusted
ClassBcommonstock,$0.004parvalue:nosharesauthorized,issuedandoutstanding,
actualnosharesauthorized,issuedandoutstanding,asadjustedand
175,000,000sharesauthorized,133,300,971sharesissuedandoutstanding,asfurther
adjusted
Commonstock,$0.004parvalue:175,000,000sharesauthorized,133,300,971shares
issuedandoutstanding,actualandasadjustedand700,000,000sharesauthorized,
nosharesissuedoroutstanding,asfurtheradjusted
Additionalpaidincapital
Accumulatedothercomprehensiveloss
Accumulateddeficit
TotalLaureateEducation,Inc.stockholders'equity(7)
AsFurther
Actual
AsAdjusted
Adjusted(1)
(Dollaramountsinmillions)
(unaudited)
481.5 $
704.5 $
1,201.1

160.0 $
$
1,501.7
1,501.7
1,501.7
1,376.7
1,376.7
1,376.7
1,251.7
1,251.7
1,251.7
4,290.1
4,130.1
4,130.1
400.0
400.0

400.0
400.0
0.1
0.5
0.5
2,714.2
(984.2)
(1,079.0)
651.5
0.5
2,714.2
(984.2)
(1,079.0)
651.5
3,210.7
(984.2)
(1,079.0)
1,148.2
112/620
1/20/2017
TotalLaureateEducation,Inc.stockholders'equity(7)
Totalcapitalization
(1)
651.5
4,941.6 $
651.5
5,181.6 $
1,148.2
5,678.3
A$1.00increaseordecreaseintheassumedinitialpublicofferingpriceof$18.50pershare,whichisthemidpointoftherangesetforthonthecoverpageof
thisprospectus,wouldincreaseordecreasetheamountofasadjustedcashandcash
97
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equivalents,additionalpaidincapital,totalLaureateEducation,Inc.stockholders'equityandtotalcapitalizationbyapproximately$27.3million,assuming
thenumberofsharesofferedbyus,assetforthonthecoverpageofthisprospectus,remainsthesameandafterdeductingtheestimatedunderwriting
discountsandcommissionsandestimatedofferingexpensespayablebyus.Similarly,anincreaseordecreaseofonemillionsharesinthenumberofsharesof
ClassAcommonstockofferedbyuswouldincreaseordecreasecashandcashequivalents,additionalpaidincapital,totalLaureateEducation,Inc.
stockholders'equityandtotalcapitalizationbyapproximately$17.4million,assumingtheassumedinitialpublicofferingpriceremainsthesameandafter
deductingestimatedunderwritingdiscountsandcommissionsandestimatedofferingexpensespayablebyus.
(2)
(3)
(4)
(5)
(6)
(7)
(8)
Consistsofa$325.0millionseniorsecuredmulticurrencyrevolvingcreditfacilitywithamaturitydateofJune2019.AsofSeptember30,2016,wehad
borrowed$160.0millionandhad$0.9millionofoutstandinglettersofcreditwhichdecreaseavailability,andassuch,wehad$164.1millionofavailability
underthisfacility.See"DescriptionofCertainIndebtedness."
Weintendtousethenetproceedsfromthisofferingtorepay,redeemorrepurchaseouroutstandingSeniorNotes,ourtermloansunderourSeniorSecured
CreditFacilitiesand/orthesellernotesusedtopartiallyfinancetheacquisitionofFMUGroup.See"UseofProceeds."
AsofSeptember30,2016,consistsofa$282.6milliontermloanwithamaturitydateofJune2018anda$1,219.1milliontermloanwithamaturitydate
ofMarch2021.See"DescriptionofCertainIndebtedness."
PursuanttotheNoteExchangeAgreements,within60daysaftertheconsummationofthisoffering,theExistingHoldersmayrequireustorepurchaseupto
anadditional$62.5millionaggregateprincipalamountofSeniorNotesattheredemptionpricesetforthintheindenturegoverningtheSeniorNotesthatis
applicableasofthedateofpricingofthisoffering,plusaccruedandunpaidinterestandspecialinterest.See"ProspectusSummaryRecentDevelopments
SeniorNoteExchangeAgreement."InaccordancewithanagreementweenteredintowithMr.BeckeronDecember30,2016,onthe2016ExecutiveDCP
ClosingDate(asdefinedbelow),wesatisfiedthe2016ExecutiveDCPObligation(asdefinedbelow)toMr.Beckerbypayinghim$11.1million,including
$0.5millionininterestfromSeptember17,2015tothe2016ExecutiveDCPClosingDate.Thepaymentconsistedof$4.6millionincashand
$6.4millionaggregateprincipalamountofSeniorNotes.See"ExecutiveCompensationArrangementswithCertainNamedExecutiveOfficersChairman
andChiefExecutiveOfficerCompensationExecutiveDCP."
Consistsof$259.7millionincapitalleaseobligations(includingsaleleasebackfinancings),$706.6millioninnotespayable,$220.7millioninsellernotes
and$64.7millioninborrowingsagainstlinesofcredit.See"DescriptionofCertainIndebtednessOtherDebt."
Presentedgrossof$47.9millionofunamortizeddeferredfinancingcosts.
OnDecember20,2016,weissuedtheinitialtrancheof$343millionofSeriesAPreferredStock.Weexpectthatasecondtrancheof$57millionofSeriesA
PreferredStockwillbeissuednolaterthanJanuary23,2017.See"ProspectusSummaryRecentDevelopmentsSeriesAPreferredStockOffering."The
amountpresentedinthetableaboveincludesthegrossproceedsfromtheissuanceofbothtranchesoftheSeriesAPreferredStock,butdoesnotreflectthe
impactofofferingexpensesandarrangingandstructuringfeesofapproximately$17million,whichwillreducethecarryingamountoftheSeriesAPreferred
Stockonourbalancesheet.WearecurrentlyassessingcertainprovisionsoftheSeriesAPreferredStock,includingcertaincontingentredemptionand
conversionprovisions,whichmayresultintheidentificationofembeddedderivativesand/orbeneficialconversionfeatures.Ifembeddedderivativesinthe
SeriesAPreferredStockarerequiredtobebifurcatedonourbalancesheet,theembeddedderivativeswillbereportedasliabilitiesinourconsolidatedbalance
sheetsasofDecember31,2016and/orasofthedateoftheconsummationofthisoffering.Additionally,ifabeneficialconversionfeatureisrequiredtobe
recorded,thisamountwouldalsobebifurcatedandrecordedinadditionalpaidincapitalatthetimeoftheoffering.Thisbifurcationwouldalsoresultina
reductionofthecarryingvalueofSeriesAPreferredStockrecordedintemporaryequity.Thevalueofanyliabilitiesidentifiedmaybematerial.
Inourfinancialstatementsissuedaftertheconsummationofthisoffering,anyitemsrecordedasaliabilitywillberequiredtoberemeasuredtotheirthen
currentfairvalue,withthechangestothemeasuredfairvalue,whichchangesmayalsobematerial,reportedinourcurrentearnings.Inaddition,theaccretion
ofthediscountedvalueofthepreferredstockwillalsoaffecttheCompany'searningspershare.Theseitemswouldresultinchangestoourreportednet
income(loss)aswellastotherelatedearnings(loss)pershareinfutureperiods.
ExceptfortheConvertibleRedeemablePreferredStock,excludesredeemablenoncontrollinginterestsandequityof$21.4million,whicharelocatedbetween
liabilitiesandequityontheSeptember30,2016consolidatedbalancesheetincludedelsewhereinthisprospectus.
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DILUTION
IfyouinvestinourClassAcommonstock,yourinvestmentwillbedilutedimmediatelytotheextentofthedifferencebetweenthe
publicofferingpricepershareofourClassAcommonstockandthenettangiblebookvaluepershareofourClassAandClassBcommon
stockafterthisoffering.OurnettangiblebookvalueasofSeptember30,2016wasadeficitofapproximately$2.7billion,or$(20.14)per
shareofClassAandClassBcommonstock.Nettangiblebookvaluepersharerepresentstheamountofourtotaltangibleassets,lessour
totalliabilities,dividedbythenumberofsharesofClassAandClassBcommonstockoutstandingasofSeptember30,2016.Total
tangibleassetsrepresentstotalassetsreducedbygoodwill,tradenames,andotherintangibleassets,net.
Nettangiblebookvaluedilutionpersharetonewinvestorsrepresentsthedifferencebetweentheamountpersharepaidbypurchasers
ofsharesofClassAcommonstockinthisofferingandthenettangiblebookvaluepershareofClassAandClassBcommonstock
immediatelyafterthecompletionofthisoffering.AftergivingeffecttooursaleofsharesofClassAcommonstockinthisofferingatan
assumedinitialpublicofferingpriceof$18.50pershare,whichisthemidpointoftherangesetforthonthecoverpageofthisprospectus,
andafterdeductingestimatedunderwritingdiscountsandcommissionsandestimatedofferingexpensespayablebyus,ournettangible
bookvalueasofSeptember30,2016wouldhavebeenadeficitofapproximately$2.2billion,or$(13.48)pershare.Thisrepresentsan
immediateincreaseinnettangiblebookvalueof$6.66persharetoexistingstockholdersandanimmediatedilutioninnettangiblebook
valueof$(31.98)persharetoinvestorspurchasingClassAcommonstockinthisoffering,asillustratedinthefollowingtable:
AssumedinitialpublicofferingpricepershareofClassAcommonstock
NettangiblebookvaluepershareasofSeptember30,2016
Increasepershareattributabletothisoffering
Nettangiblebookvaluepershare,asadjustedtogiveeffecttothisoffering
Dilutionpersharetonewinvestors
$ 18.50
$ (20.14)
$
6.66
$ (13.48)
$ (31.98)
A$1.00increaseordecreaseintheassumedinitialpublicofferingpriceof$18.50pershare,whichisthemidpointoftherangeset
forthonthecoverpageofthisprospectus,wouldincreaseordecreaseourasadjustednettangiblebookvaluepershareby$0.17,assuming
thenumberofsharesofferedbyus,assetforthonthecoverpageofthisprospectus,remainsthesameandafterdeductingtheestimated
underwritingdiscountsandcommissionsandestimatedofferingexpensespayablebyus.Similarly,anincreaseordecreaseofonemillion
sharesinthenumberofsharesofClassAcommonstockofferedbyuswouldincreaseordecreaseourasadjustednettangiblebookvalue
pershareby$0.19,assumingtheassumedinitialpublicofferingpriceremainsthesameandafterdeductingestimatedunderwriting
discountsandcommissionsandestimatedofferingexpensespayablebyus.
IftheunderwritersexercisetheiroptiontopurchaseadditionalsharesofourClassAcommonstockinfull,theasadjustednettangible
bookvaluepersharewouldbe$(12.67)pershare,theincreaseinnettangiblebookvaluepersharetoexistingstockholderswouldbe
$7.47pershareandthedilutionpersharetonewinvestorspurchasingsharesinthisofferingwouldbe$(31.17)pershare.
Thefollowingtablepresents,onaproformabasisasofSeptember30,2016,aftergivingeffecttothesaleof29,000,000sharesof
ClassAcommonstockandtherecapitalizationofallofourcommonstockinto133,300,971sharesofClassBcommonstockimmediately
priortotheeffectivenessoftheregistrationstatementofwhichthisprospectusisapart,thedifferencesbetweentheexisting
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stockholdersandthepurchasersofsharesinthisofferingwithrespecttothenumberofsharespurchasedfromus,thetotalconsideration
paidandtheaveragepricepaidpershare:
Existingstockholders
Newinvestors
Total
SharesPurchased
Number
Percent
Total
Consideration
Amount
Percent
133,300,971 82.1%$ 2,714,764,000 84.5%$

29,000,000 17.9%$ 496,651,250 15.5%$

162,300,971 100.0 % $ 3,211,415,250 100.0 % $
Average
PricePer
Share
20.37
17.13
19.79
A$1.00increaseordecreaseintheassumedinitialpublicofferingpriceof$18.50pershare,whichisthemidpointoftherangeset
forthonthecoverpageofthisprospectus,wouldincreaseordecreasetotalconsiderationpaidbynewinvestorsby$27,332,500,total
considerationpaidbyallstockholdersby$27,332,500andtheaveragepricepersharepaidbyallstockholdersby$0.17,ineachcase
assumingthenumberofsharesofferedbyus,assetforthonthecoverpageofthisprospectus,remainsthesameandafterdeductingthe
estimatedunderwritingdiscountsandcommissionsandestimatedofferingexpensespayablebyus.Similarly,anincreaseordecreaseof
onemillionsharesinthenumberofsharesofClassAcommonstockofferedbyuswouldincreaseordecreasetotalconsiderationpaidby
newinvestorsby$17,436,250,totalconsiderationpaidbyallstockholdersby$17,436,250andtheaveragepricepersharepaidbyall
stockholdersby$0.01,ineachcaseassumingtheassumedinitialpublicofferingpriceremainsthesameandafterdeductingestimated
underwritingdiscountsandcommissionsandestimatedofferingexpensespayablebyus.
Totheextentthatanyoutstandingoptionsareexercised,newinvestorswillexperiencefurtherdilution.Ifalloftheseoptionswere
exercised,thenourexistingstockholders,includingtheholdersoftheseoptions,wouldown80.0%andournewinvestorswouldown
20.0%ofthetotalnumberofsharesofourClassAandClassBcommonstockoutstandingupontheclosingofthisoffering.Thenet
tangiblebookvaluepershareafterthisofferingwouldbe$(12.67),causingdilutiontonewinvestorsof$(31.17)pershare.
Theabovetablesreflecta4to1reversestocksplitofourcommonstockthatweintendtoeffectpriortotheeffectivenessofthe
registrationstatementofwhichthisprospectusisapart.ThetablesdonotreflectanysharesofourClassACommonStockissuedupon
exchangefortheSeniorNotesoruponconversionofsharesofourSeriesAPreferredStock.
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SELECTEDHISTORICALCONSOLIDATEDFINANCIALANDOTHERDATA
SetforthbelowareselectedconsolidatedfinancialdataofLaureateEducation,Inc.,atthedatesandfortheperiodsindicated.The
selectedhistoricalstatementsofoperationsdataandstatementsofcashflowsdataforthefiscalyearsendedDecember31,2015,2014and
2013andbalancesheetdataasofDecember31,2015and2014havebeenderivedfromourhistoricalauditedconsolidatedfinancial
statementsincludedelsewhereinthisprospectus.Theselectedhistoricalstatementsofoperationsdataandstatementsofcashflowsdata
forthefiscalyearsendedDecember31,2012and2011andbalancesheetdataasofDecember31,2013,2012and2011havebeenderived
fromourhistoricalauditedconsolidatedfinancialstatementsnotincludedinthisprospectus.Theunauditedhistoricalconsolidated
statementofoperationsdataandstatementofcashflowsdatafortheninemonthsendedSeptember30,2016and2015andtheunaudited
consolidatedbalancesheetdataasofSeptember30,2016havebeenderivedfromourhistoricalunauditedconsolidatedfinancial
statementsincludedelsewhereinthisprospectus.Wehavepreparedtheunauditedfinancialinformationonthesamebasisastheaudited
consolidatedfinancialstatementsandhaveincluded,inouropinion,alladjustmentsthatweconsidernecessaryforafairpresentationof
thefinancialinformationsetforthinthosestatements.Thesegmentdatareflectstheoperatingsegmentchangediscussedinthesection
entitled"PresentationofFinancialInformation."Ourhistoricalresultsarenotnecessarilyindicativeofourfutureresults.Thedatashould
bereadinconjunctionwiththeconsolidatedfinancialstatements,relatednotes,andotherfinancialinformationincludedtherein.See
accompanyinghistoricalfinancialstatementsofFMUGroupandSociedadeEducacionalSulRioGrandenseLtda.,whichareincluded
becausethesetwoacquisitionsmetthesignificancethresholdsofRule305ofRegulationSX.
Theselectedhistoricalconsolidatedfinancialdatashouldbereadinconjunctionwith"Management'sDiscussionandAnalysisof
FinancialConditionandResultsofOperations"andourconsolidatedfinancialstatementsandrelatednotesincludedelsewhereinthis
prospectus.
ConsolidatedStatementsof
Operations:
$ 3,068,299 $ 3,141,156

2,697,820 2,795,027
Revenues
Costsandexpenses:
Directcosts
Generalandadministrative
expenses
Operatingincome
Interestincome
Interestexpense
Settlementofstockholders
litigation(1)
Lossfromregulatorychanges(2)
Foreigncurrencyexchangegain
(loss),net
Gainonsaleofsubisidaries,net(3)
operationsbeforeincometaxes
andequityinnetincome(loss)
ofaffiliates
Equityinnetincome(loss)of
affiliates,netoftax
operations
Incomefromdiscontinued
operations,netoftaxof$0,$0,
$0,$0,$0,$787and$1,089,
respectively
operations,netoftaxof$0,$0,
$0,$0,$1,864,$179and$0,
respectively
Netincome(loss)
Net(income)lossattributableto
NineMonths
EndedSeptember30,
2016
2015
(unaudited)
158,566
211,913
13,305
(314,383)
(17,363)
(8,235)
134,103
212,026
9,924
(300,145)
(1,263)
(2,618)
2015
FiscalYearEndedDecember31,
2014
2013
2012
2011
$ 4,291,659 $ 4,414,682
3,760,016 3,838,179
$ 3,913,881 $ 3,567,117
3,418,449 3,148,530
$ 3,370,350
2,943,732
101,383
108,467
216,768
20,020
(276,943)
(3,755)
15,242
194,686
336,957
13,328
(398,042)
(1,263)
(2,607)
151,215
125,788
299,500
21,822
(385,754)
(22,984)
(3,101)
141,197
33,582
320,653
21,805
(350,196)
(1,361)
6,631
110,078
58,329
250,180
19,467
(307,728)
(4,421)
(63,234)

(964)

1,268

195

(1,184)

7,499

(43,716)
(5,533)
(10,000)
5,194
80,263
398,412
(139,416)

(149,178)

(109,970)

(3,102)

14,401

(32,424)
362,948
(35,246)
(220,224)
(81,587)
(200,610)
(117,730)
(201,671)
39,060
1,929
(91,246)
(140,584)
(68,061)
(65,898)
(50,230)
20
2,106
2,495
158
(905)
(8,702)
(1,392)
327,722
(299,705)
(315,845)
(162,453)
(90,222)
(217,347)
(117,520)
796
4,384
3,215

327,722

(299,705)

(315,845)

(162,453)
4,350
(85,076)
3,308
(209,655)
(114,305)
116/620
1/20/2017

Netincome(loss)attributableto
$
2,817
124
(403)
4,162
15,398
8,597
9,120
330,539 $
(299,581) $
(316,248) $
(158,291) $
(69,678) $
(201,058) $
(105,185)
101
TableofContents
ConsolidatedStatementsofCash
Flows:

activitiesofcontinuing
operations
Netcashprovidedby(usedin)
investingactivitiesofcontinuing
operations
Netcash(usedin)providedby
financingactivitiesofcontinuing
operations
operatingactivitiesof
discontinuedoperations
Netcashusedininvesting
activitiesofdiscontinued
operations
discontinuedoperations
Effectsofexchangeratechangeson
cash
Businessacquisitions,netofcash
acquired
Paymentsofcontingent
considerationforacquisitions
NineMonths
Ended
September30,
2016
2015
(unaudited)
2015

195,970 $

220,295 $

170,486 $

269,156 $

277,202 $

245,653 $
341,069
392,330
(41,324)
(173,642)
(489,181)
(899,083)
(453,747)
(405,585)
(572,684)
12,056
34,424
172,586
756,663
124,825
155,483
344
(6,190)
4,861
(149)
(2,321)
344
(6,339)
2,540
7,182
(34,221)
(34,179)
(50,877)
(12,531)
2,712
(21,619)
(6,705)
(6,705)
(287,945)
(177,550)
203
(22,301)
1,738,315
331,754
309,874
697,872
(9,516)
3,068,299
329,440
25,735
36,346
189,496
(100,255)
480,762
2,532,451
533,862
405,555
954,494
(11,680)
4,414,682
541,975
72,777
30,130
222,998
(94,355)
773,525
752,000
53,000
77,000
77,000
959,000
834,000
54,000
86,000
73,000
1,047,000
809,000
53,000
83,000
81,000
1,026,000
794,000
62,000
84,000
81,000
1,021,000
389,400
8,900
38,300
33,200
469,800
384,600
9,600
39,300
33,800
467,300
(1,275)
2,415,641
486,235
422,134
979,920
(12,271)
4,291,659
463,691
78,439
49,869
226,804
(115,395)
703,408
1,775,287
321,081
312,928
737,914
(6,054)
3,141,156
323,143
23,630
37,823
175,150
(83,881)
475,865
2011
SegmentData(4):
Revenues:
LatAm
Europe
AMEA
GPS
Corporate
Totalrevenues
AdjustedEBITDA(5):
LatAm
Europe
AMEA
GPS
Corporate
TotalAdjustedEBITDA(5)
OtherData:
Totalenrollments(roundedtothe
nearestthousand):
LatAm
Europe
AMEA
GPS
Total
Newenrollments(roundedtothe
nearesthundred):
LatAm
Europe
AMEA
GPS
Total
2014
2013
2012
393,200
25,400
42,800
43,200
504,600
344,700
21,400
42,500
41,000
449,600
(5,674)
2,340,867
501,398
202,251
872,426
(3,061)
3,913,881
466,664
72,745
(4,843)
205,581
(93,675)
646,472
617,000
49,000
61,000
76,000
803,000
315,400
19,600
21,000
39,000
395,000
2,135,176
461,322
165,245
820,270
(14,896)
3,567,117
380,254
71,960
(5,990)
192,944
(92,135)
547,033
2,009,151
440,362
144,970
782,786
(6,919)
3,370,350
413,722
57,596
(13,389)
204,367
(86,277)
576,019
559,000
43,000
45,000
74,000
721,000
509,000
42,000
42,000
69,000
662,000
300,700
17,500
18,100
40,100
376,400
266,200
16,400
15,600
38,700
336,900
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(Dollaramountsin
thousands)
Asof
September30,
2016
ConsolidatedBalance
Sheets:

Cashandcash
equivalents
Restrictedcashand
investments(6)
Networkingcapital
(deficit)(including
cashandcash
equivalents)
Propertyand
equipment,net
Goodwill
Tradenames
Otherintangibleassets,
net
Totalassets
Totaldebt,including
duetoshareholders
ofacquired
companies(7)
Totalliabilities,
excludingdebt,due
toshareholdersof
acquiredcompanies
andderivative
instruments
Redeemable
noncontrolling
interestsandequity
TotalLaureate
Education,Inc.
stockholders'equity
(1)
(2)
(3)
(4)
(5)
AsofDecember31,
2015
2014
2013
2012
2011
481,471 $ 458,673 $ 461,584 $ 559,900 $ 427,305 $ 511,049
176,235
160,585
149,438
361,832
130,953
101,173
(422,130) (412,499) (515,877) (205,692) (363,050) (308,696)
2,177,596 2,290,900 2,514,319 2,656,726 2,353,014 2,108,438

2,009,278 2,115,897 2,469,795 2,376,678 2,301,138 2,229,485
1,325,613 1,361,125 1,461,762 1,519,737 1,526,339 1,553,984
51,084
52,197
93,064
29,973
14,915
31,164
7,508,457 7,439,116 8,358,124 8,356,675 7,680,047 7,330,706
4,242,255 4,698,007 4,734,834 4,401,461 3,608,509 3,391,271

31,804
32,343 115,575 188,394 182,119 173,175
2,548,387 2,313,923 2,498,611 2,350,067 2,284,464 2,086,055
21,365
651,530
51,746
43,876
42,165
53,225
70,518
324,759 1,017,068 1,465,755 1,596,097 1,701,965
Representsa$10.0millionexpenseinconnectionwiththesettlementofstockholderlitigationin2011relatedtoour
leveragedbuyoutin2007.
Representsalossof$43.7millionfromregulatorychangesresultingfromthedeconsolidationofUDLAEcuadorat
theendofthethirdquarterof2012.
Representsagainofapproximately$249.1million,subjecttocertainadjustments,resultingfromtheSwiss
OnJanuary10,2017,weannouncedthatweplantocombineourEuropeandAMEAoperations,effectiveMarch31,
2017.TheCompanyiscurrentlyevaluatingtheimpactofthiscombinationonitsoperatingsegments.See
"PresentationofFinancialInformation."
WedefineAdjustedEBITDAasnetloss,beforegainonsalesofdiscontinuedoperations,netoftax,incomefrom
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gainonsaleofsubsidiaries,net,foreigncurrencyexchangeloss(income),net,other(income)expense,net,settlement
ofstockholderslitigation(for2011),lossfromregulatorychanges(for2012),loss(gain)onderivatives,lossondebt
extinguishment,interestexpenseandinterestincome,plusdepreciationandamortization,stockbasedcompensation
expense,lossonimpairmentofassetsandexpensesrelatedtoimplementationofourEiPinitiative.Whenwereview
AdjustedEBITDAonasegmentbasis,weexcludeintersegmentrevenuesandexpensesthateliminatein
consolidation.AdjustedEBITDAisusedinadditiontoandinconjunctionwithresultspresentedinaccordancewith
GAAPandshouldnotbereliedupontotheexclusionofGAAPfinancialmeasures.
WehaveincludedAdjustedEBITDAinthisprospectusbecauseitisakeymeasureusedbyourmanagementand
boardofdirectorstounderstandandevaluateourcoreoperatingperformanceandtrends,toprepareandapproveour
annualbudgetandtodevelopshortandlongtermoperationalplans.Inparticular,theexclusionofcertainexpenses
incalculatingAdjustedEBITDAcanprovideausefulmeasureforperiodtoperiodcomparisonsofourcorebusiness.
Additionally,AdjustedEBITDAisakeyinputusedbythecompensationcommitteeofourboardofdirectorsandour
ChiefExecutiveOfficerinconnectionwiththepaymentofincentivecompensationtoourexecutiveofficersand
othermembersofourmanagementteam.Accordingly,webelievethatAdjustedEBITDAprovidesusefulinformation
toinvestorsandothersinunderstandingandevaluatingouroperatingresultsinthesamemannerasourmanagement
andboardofdirectors.
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OuruseofAdjustedEBITDAhaslimitationsasananalyticaltool,andyoushouldnotconsideritinisolationorasa
substituteforanalysisofourresultsasreportedunderGAAP.Someoftheselimitationsare:
althoughdepreciationandamortizationarenoncashcharges,theassetsbeingdepreciatedand
amortizedmayhavetobereplacedinthefuture,andAdjustedEBITDAdoesnotreflectcashcapital
expenditurerequirementsforsuchreplacementsorfornewcapitalexpenditurerequirements
AdjustedEBITDAdoesnotincludeimpairmentchargesonlonglivedassets
AdjustedEBITDAdoesnotreflectchangesin,orcashrequirementsfor,ourworkingcapitalneeds
AdjustedEBITDAdoesnotconsiderthepotentiallydilutiveimpactofequitybasedcompensation
AdjustedEBITDAdoesnotreflectexpensesrelatedtoimplementationofourEiPprogramtooptimize
andstandardizeourprocessesand
AdjustedEBITDAdoesnotreflecttaxpaymentsthatmayrepresentareductionincashavailabletous.
OthercompaniesmaycalculateAdjustedEBITDAdifferentlythanthewaywedo,limitingtheusefulnessofthese
itemsascomparativemeasures.WebelievethattheinclusionofAdjustedEBITDAinthisprospectusisappropriateto
provideadditionalinformationtoinvestorsaboutourbusiness.Whilemanagementbelievesthatthesemeasures
provideusefulinformationtoinvestors,theSECmayrequirethatAdjustedEBITDAbepresenteddifferentlyornotat
allinfilingsmadewiththeSEC.
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Becauseoftheselimitations,youshouldconsiderAdjustedEBITDAalongsideotherfinancialperformancemeasures,
includingvariouscashflowmetrics,netlossandourotherGAAPresults.Thefollowingunauditedtablesetsfortha
reconciliationofAdjustedEBITDAtonetlossfortheperiodsindicated:
(Dollaramountsin
thousands)
NineMonths
Ended
September30,
2016
2015
(unaudited)
Netincome(loss)
Plus:
Gainonsalesof
discontinued
operations,net
oftax
Incomefrom
discontinued
operations,net
oftax
Income(loss)
from
continuing
operations
Plus:
Equityinnet
(income)loss
ofaffiliates,net
oftax
Incometax
expense
(benefit)
Income(loss)
from
continuing
operations
beforeincome
taxesand
equityinnet
(income)loss
ofaffiliates
Plus:
Settlementof
stockholders
litigation(a)
Lossfrom
regulatory
changes(b)
Gainonsaleof
subsidiaries,
net(c)
Foreigncurrency
exchange
(income)loss,
net
Otherexpense
(income),net
Loss(gain)on
derivatives
Lossondebt
extinguishment
Interestexpense
Interestincome
Operating
income
2015
2014
2013
2012
2011
$ 327,722 $(299,705) $(315,845) $(162,453) $ (85,076) $(209,655) $(114,305)
(4,350)
(3,308)
(796)
(4,384)
(3,215)
327,722 (299,705) (315,845) (162,453) (90,222) (217,347) (117,520)
(20)
35,246
(2,106)
905
8,702
1,392
81,587 117,730 (39,060) 91,246
68,061
50,230
(2,495)
(158)
362,948 (220,224) (200,610) (201,671)
1,929 (140,584) (65,898)

10,000
43,716
(398,412)
3,102 (14,401)
32,424
(80,263) 139,416 149,178 109,970
964
(1,268)
(195)
1,184
(7,499)
8,235
2,618
2,607
3,101
(6,631)
17,363
1,263
1,263
22,984
1,361
5,533
(5,194)
63,234 (15,242)
4,421
3,755
314,383 300,145 398,042 385,754 350,196 307,728 276,943

(13,305) (9,924) (13,328) (21,822) (21,805) (19,467) (20,020)
211,913 212,026 336,957 299,500 320,653 250,180 216,768
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income
Plus:
Depreciationand
amortization
expense
EBITDA
Plus:
Stockbased
compensation
expense(d)
Losson
impairmentof
assets(e)
EiPexpenses(f)
Adjusted
EBITDA
(a)
(b)
(c)
(d)
(e)
(f)
211,913 212,026 336,957 299,500 320,653 250,180 216,768
202,735 209,390 282,946 288,331 242,725 221,235 228,678

414,648 421,416 619,903 587,831 563,378 471,415 445,446
28,939
27,222
39,021

37,175

27,227
125,788 33,582
44,484 10,716

49,190 49,512
17,289
22,106
58,329 108,467

$ 480,762 $ 475,865 $ 703,408 $ 773,525 $646,472 $ 547,033 $ 576,019
Representsnoncashchargesrelatedtoimpairmentsoflonglivedassets.Forfurtherdetailsoncertainimpairment
items,see"Management'sDiscussionandAnalysisofFinancialConditionandResultsofOperations."
EiPimplementationexpensesarerelatedtoourenterprisewideinitiativetooptimizeandstandardizeour
processes,creatingverticalintegrationofprocurement,informationtechnology,finance,accountingandhuman
resources,whichbeganin2014andisexpectedtobesubstantiallycompletedbytheendof2017.EiPincludes
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theestablishmentofregionalSSOsaroundtheworld,aswellasimprovementstooursystemofinternalcontrols
overfinancialreporting.
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(6)
Restrictedcashandinvestmentsincludescashequivalentsheldtocollateralizestandbylettersofcreditinfavorof
theDOEinordertoallowourU.S.InstitutionstoparticipateintheTitleIVprogram.Inaddition,wemayhave
restrictedcashinescrowpendingpotentialacquisitiontransactions,orotherwisehavecashthatisnotimmediately
availableforuseincurrentoperations.
Includescurrentportionoflongtermdebtandcurrentportionofduetoshareholdersofacquiredcompanies.
(7)
ReturnonIncrementalInvestedCapital("ROIIC")isnotarecognizedmeasureunderGAAP.WebelieveROIICisa
relevantmetricforinvestorsbecauseitmeasureshoweffectivelywedeploycapitaltogenerateoperatingprofit.Wedefine
ROIICasthechangeinoperatingincome(asadjusted)forthefouryearperiodendedDecember31,2015dividedbythe
changeinnetinvestedcapitalforthefouryearperiodendedDecember31,2014.Webelievecomparingthechangein
operatingincome(asadjusted)forthefouryearperiodendedDecember31,2015versusthechangeinnetinvestedcapital
forthefouryearperiodendedDecember31,2014isarepresentativereflectionofthereturnsourincrementalcapital
investmentsgeneratebecauseitonlyincludescapitaldeployedformorethan12months,resultinginafullyearimpacton
operatingincome(asadjusted).Webelieveafouryearmeasurementperiodismorerepresentativeofthereturnsweexpectto
generateonourinvestments.OurmethodofcalculatingROIICmaydifferfromthemethodsothercompaniesusetocalculate
ROIICandmaybecalculatedoverdifferenttimeperiods.Weencourageyoutounderstandthemethodsothercompaniesuse
tocalculateROIICbeforecomparingtheirROIICtoours.ThefollowingtablepresentsthecalculationofROIIC:
(Dollarsinthousands):
NUMERATOR:
Operatingincome
EiPimplementationexpenses
Cashtaxes(a)
Foreigncurrencyexchangeimpact
onoperatingincome
2011
101,200
389,136
$

336,957

44,484
(93,505)
248,632 $
Operatingincome(asadjusted)
$
Changeinoperatingincome(asadjusted)
2015

216,768 $
108,467

(76,603)
140,504
DENOMINATOR:
Totalassets
Cashandcashequivalents
Totalliabilities,excludingdebt,due
toshareholdersofacquired
companiesandderivative
instruments
Saleleasebacktransaction(b)
2010
Impairmentofassets(c)
Netinvestedcapital
Changeinnetinvestedcapital

8,358,124
(461,584)
(2,498,611)
(137,878)
195,543
521,709
5,281,830 $
5,781,760
$
(1,926,174)

2014
(b)
ROIICfortheperiodfrom2011to2015
(a)
(c)
AsofDecember31,

7,454,657 $
(442,196)
499,930
28.1%
In2014,includesanadjustmentof$14.8millionduetotimingoftaxpaymentsinMexicoresultingfromtaxreformchangesthatbecameeffectivein
January2014.
RepresentsassetsclassifiedasheldforsaleasofDecember31,2014,relatedtoasaleleasebackagreementforportionsofthecampusesoftwoofour
institutionsinSwitzerland.Theassetsalewascompletedin2015.
In2010,representstheimpairmentofassetsincurredforJanuary1,2010toDecember31,2010.In2014,representsthecumulativeimpairmentofassets
incurredfromJanuary1,2010throughDecember31,2014.
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MANAGEMENT'SDISCUSSIONANDANALYSISOF
FINANCIALCONDITIONANDRESULTSOFOPERATIONS
Youshouldreadthefollowingdiscussionofourresultsofoperationsandfinancialconditionwiththe"SelectedHistorical
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ConsolidatedFinancialandOtherData"andtheauditedandunauditedhistoricalconsolidatedfinancialstatementsandrelatednotes
includedelsewhereinthisprospectus.Thisdiscussioncontainsforwardlookingstatementsandinvolvesnumerousrisksand
uncertainties,including,butnotlimitedto,thosedescribedinthe"RiskFactors"sectionofthisprospectus.Actualresultsmaydiffer
materiallyfromthosecontainedinanyforwardlookingstatements.See"SpecialNoteRegardingForwardLookingStatements."
Introduction
ThisManagement'sDiscussionandAnalysisofFinancialConditionandResultsofOperations(the"MD&A")isprovidedtoassist
readersofthefinancialstatementsinunderstandingtheresultsofoperations,financialconditionandcashflowsofLaureate
Education,Inc.ThisMD&Ashouldbereadinconjunctionwiththeconsolidatedfinancialstatementsandrelatednotesincluded
elsewhereinthisprospectus.OurMD&Aispresentedinthefollowingsections:
Overview
InternalControloverFinancialReporting
ResultsofOperations
LiquidityandCapitalResources
ContractualObligations
OffBalanceSheetArrangements
CriticalAccountingPoliciesandEstimates
RecentlyIssuedAccountingPronouncements
QuantitativeandQualitativeDisclosuresAboutMarketRisk
OtherMatters
Overview
in2015,accordingtoGSV.Webelievetheglobalhighereducationmarketpresentsanattractivelongtermopportunity,primarilybecause
ofthelargeandgrowingimbalancebetweenthesupplyanddemandforqualityhighereducationaroundtheworld.Advancededucation
opportunitiesdrivehigherearningspotential,andwebelievetheprojectedgrowthinthemiddleclasspopulationworldwideandlimited
governmentresourcesdedicatedtohighereducationcreatesubstantialopportunitiesforhighqualityprivateinstitutionstomeetthis
growingandunmetdemand.Ouroutcomesdrivenstrategyisfocusedonenablingmillionsofstudentsgloballytoprosperandthrivein
thedynamicandevolvingknowledgeeconomy.
education,basedonthenumberofstudents,institutionsandcountries
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makingupournetwork.Ourglobalnetworkof71institutionscomprises59institutionsweownorcontrol,andanadditional12
institutionsthatwemanageorwithwhichwehaveotherrelationships.Wehavefourreportingsegmentsasdescribedbelow.Wegroupour
institutionsbygeographyinLatinAmerica("LatAm"),Europe("Europe")andAsia,MiddleEastandAfrica("AMEA")forreporting
purposes.OurGlobalProductsandServicessegment("GPS")includesourfullyonlineinstitutionsandourcampusbasedinstitutionsin
theUnitedStates.
OurSegments
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institutioninItaly,NABA,includingDomusAcademy,movedfromourGPSsegmentintoourEuropesegment.MDS,locatedinNew
Zealand,movedfromourGPSsegmentintoourAMEAsegment.OurGPSsegmentnowfocusesonLaureate'sfullyonlineglobal
operationsandonitscampusbasedinstitutionsintheUnitedStates.Oursegmentinformationforallperiodspresentedhasbeenrevisedto
reflectthischange.Wedetermineouroperatingsegmentsbasedoninformationutilizedbyourchiefoperatingdecisionmakertoallocate
resourcesandassessperformance.
TheLatAmsegmentincludesinstitutionsinBrazil,Chile,CostaRica,Honduras,Mexico,PanamaandPeruandhascontractual
relationshipswithalicensedinstitutioninEcuador.Theinstitutionsgeneraterevenuesbyprovidinganeducationthatemphasizes
professionalorientedfieldsofstudywithundergraduateandgraduatedegreeprogramsinawiderangeofdisciplines.Theprogramsat
theseinstitutionsaremainlycampusbasedandareprimarilyfocusedonlocalstudents.Inaddition,theinstitutionsinourLatAmsegment
havebegunintroducingonlineandhybrid(acombinationofonlineandinclassroom)coursesandprogramstotheircurriculum.Brazil
andChilehavegovernmentsupportedfinancingprograms,whileinothercountriesstudentsgenerallyfinancetheirowneducation.
TuitionandexpensesperstudentarelessthanintheEuropeandGPSsegments,butthevolumeofenrollmentsishigher.
TheEuropesegmentincludesinstitutionsinCyprus,Germany,Italy,Morocco,Portugal,SpainandTurkey.Theinstitutionsgenerate
revenuesbyprovidingprofessionalorientedfieldsofstudywithundergraduateandgraduatedegreeprogramsinawidevarietyof
disciplines.Theprogramsattheseinstitutionsaremainlycampusbased,butseveralinstitutionshavebeguntointroduceonlineand
hybridprograms.WhileahigherpercentageoftheeligiblepopulationinEuropeparticipatesinhighereducationthaninLatAm,Europe's
populationisolderandgrowingmoreslowlythaninthecountriesinourLatAmandAMEAsegments.Thegreateravailabilityinthese
locationsofestablished,andinsomeinstancesnearlyfree,publicuniversitiesresultsinamorecompetitivemarketforincreasedand
sustainedenrollments.Theinstitutionsinthissegmentenrolllocalandinternationalstudents.AsmostcountriesintheEuropesegmentdo
nothavegovernmentfinancingforprivateeducation,moststudentsfinancetheirowneducation.Tuitionandexpensesperstudentare
higher,withlowerenrollmentthaninourLatAmandAMEAsegments.
TheAMEAsegmentconsistsofcampusbasedinstitutionswithoperationsinAustralia,China,India,Malaysia,NewZealand,South
AfricaandThailand.AMEAalsomanagesninelicensedinstitutionsintheKingdomofSaudiArabiaandmanagesoneadditional
institutioninChinathroughajointventurearrangement.Theprogramsattheseinstitutionsgeneraterevenuesbyprovidinganeducation
thatemphasizesprofessionalorientedfieldsofstudywithundergraduateandgraduatedegreeprogramsinawiderangeofdisciplines.The
programsattheseinstitutionsaremainlycampusbasedandareprimarilyfocusedonlocalstudents.IncertainmarketsintheAMEA
segmenttherearevariousformsofgovernmentsupportedstudentfinancingprogramshowever,moststudentsfinancetheirown
education.TheAMEAsegmenthasacombinationoffastgrowingeconomies,suchasChinaandMalaysia.Tuitionandexpensesper
studentarelessthaninourEuropeandGPSsegments.Inthe
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KingdomofSaudiArabia,thegovernmentawardeduscontractswith11licensedinstitutions,includingeightundertheCollegesof
Excellenceprogram.Thecontractsareeachfiveyearsinlength,andwemayapplyforrenewalwiththegovernmentuponexpirationof
eachcontract.Thefirstcontract,underwhichweprovideservicestoapproximately300students,expiredinOctober2015however,itwas
renewedonatemporarybasis.TheboardofdirectorsofRiyadhPolytechnicInstituterecentlydecidedtoendoperationsatthatinstitution
byJuly2017.Twooftheremainingcontractsendedduringthesecondquarterof2016andwillnotberenewed.Fourofthecontractsfor
theCollegesofExcellencewillexpireinAugust2018andfourwillexpireinAugust2019.Accordingly,asofSeptember30,2016,we
manageninelicensedinstitutionsunderthesecontracts.
TheGPSsegmentincludesourfullyonlineinstitutionsoperatinggloballyandourU.S.campusbasedinstitutions.TheGPSsegment
providesprofessionalorientedfullyonlinedegreeprogramsintheUnitedStatesofferedthroughWaldenUniversity,aU.S.based
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providesprofessionalorientedfullyonlinedegreeprogramsintheUnitedStatesofferedthroughWaldenUniversity,aU.S.based
accreditedinstitution,andthroughtheUniversityofLiverpoolandtheUniversityofRoehamptonintheUnitedKingdom.Additionally,
withintheGPSsegmentwehavesmallercampusbasedinstitutionsintheUnitedStates.Theonlineinstitutionsprimarilyserveworking
adultswithundergraduateandgraduatedegreeprograms,whilethecampusbasedinstitutionsprimarilyservetraditionalstudentsseeking
undergraduateandgraduatedegrees.StudentsintheUnitedStatesfinancetheireducationinavarietyofways,includingTitleIV
programs.
Corporateisanonoperatingbusinessunitwhosepurposeistosupportoperations.Itsdepartmentsareresponsibleforestablishing
operationalpoliciesandinternalcontrolstandardsimplementingstrategicinitiativesandmonitoringcompliancewithpoliciesand
controlsthroughoutouroperations.OurCorporatesegmentisaninternalsourceofcapitalandprovidesfinancial,humanresource,
informationtechnology,insurance,legalandtaxcomplianceservices.TheCorporatesegmentalsocontainstheeliminationsofinter
segmentrevenuesandexpenses.
ThefollowinginformationforouroperatingsegmentsispresentedasofSeptember30,2016,exceptwhereotherwiseindicated:
Countries
Institutions
Enrollments(roundedtonearestthousand)
LTMendedSeptember30,2016Revenues
($inmillions)
%ContributiontoLTMendedSeptember30,
2016Revenues
LatAm
Europe
AMEA
GPS
Total
8
7
8
2
25
29
14
21
7
71
834,000 54,000 86,000 73,000 1,047,000
$ 2,378.7 $
56%
496.9 $
419.1 $
939.9 $
12%
10%
22%
4,218.8
100%
Challenges
Ourglobaloperationsaresubjecttocomplexbusiness,economic,legal,political,taxandforeigncurrencyrisks,whichmaybe
difficulttoadequatelyaddress.ThemajorityofouroperationsareoutsidetheUnitedStates.Asaresult,wefacerisksthatareinherentin
internationaloperations,including:fluctuationsinexchangerates,possiblecurrencydevaluations,inflationandhyperinflationprice
controlsandforeigncurrencyexchangerestrictionspotentialeconomicandpoliticalinstabilityinthecountriesinwhichweoperate
expropriationofassetsbylocalgovernmentskeypoliticalelectionsandchangesingovernmentpoliciesmultipleandpossibly
overlappingandconflictingtaxlawsandcompliancewithawidevarietyofforeignlaws.Weplantocontinuetogrowourbusiness
globallyby
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acquiringorestablishingprivatehighereducationinstitutions.Oursuccessingrowingourbusinesswilldependontheabilityto
anticipateandeffectivelymanagetheseandotherrisksrelatedtooperatinginvariouscountries.
RegulatoryEnvironment
Ourbusinessissubjecttoregulationbyvariousagenciesbasedontherequirementsoflocaljurisdictions.Theseagenciescontinueto
reviewandupdateregulationsastheydeemnecessary.Wecannotpredicttheformoftherulesthatultimatelymaybeadoptedinthefuture
orwhateffectstheymighthaveonourbusiness,financialcondition,resultsofoperationsandcashflows.Wewillcontinuetodevelopand
implementnecessarychangesthatenableustocomplywithsuchregulations.See"RiskFactorsRisksRelatingtoOurHighlyRegulated
IndustryintheUnitedStates,""RiskFactorsRisksRelatingtoOurBusinessOurinstitutionsaresubjecttouncertainandvaryinglaws
andregulations,andanychangestotheselawsorregulationsortheirapplicationtousmaymateriallyadverselyaffectourbusiness,
financialconditionandresultsofoperations,""RiskFactorsRisksRelatingtoOurBusinessPoliticalandregulatorydevelopmentsin
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financialconditionandresultsofoperations,""RiskFactorsRisksRelatingtoOurBusinessPoliticalandregulatorydevelopmentsin
Chilemaymateriallyadverselyaffectouroperations"and"IndustryRegulation"foradetaileddiscussionofourdifferentregulatory
environmentsandNote19,LegalandRegulatoryMatters,inourconsolidatedfinancialstatementsincludedelsewhereinthisprospectus.
KeyBusinessMetrics
Enrollment
Enrollmentisourleadrevenueindicatorandrepresentsourmostimportantnonfinancialmetric.Wedefine"enrollment"asthe
numberofstudentsregisteredinacourseonthelastdayoftheenrollmentreportingperiod.Newenrollmentsprovideanindicationof
futurerevenuetrends.Totalenrollmentisafunctionofcontinuingstudentenrollments,newstudentenrollmentsandenrollmentsfrom
acquisitions,offsetbygraduations,attritionandenrollmentsrelatedtodispositions.Attritionisdefinedasastudentleavingtheinstitution
beforecompletionoftheprogram.Tominimizeattrition,wehaveimplementedprogramsthatinvolveassistingstudentsinremedial
education,mentoring,counselingandstudentfinancing.
Eachofourinstitutionshasanenrollmentcyclethatvariesbygeographicregionandacademicprogram.Duringeachacademicyear,
eachinstitutionhasa"PrimaryIntake"periodinwhichthemajorityoftheenrollmentoccurs.Mostinstitutionsalsohaveoneormore
smaller"SecondaryIntake"periods.ThefirstcalendarquartergenerallycoincideswiththePrimaryIntakesforourinstitutionsinCentral
America,theAndeanRegion,Brazil,Australia,NewZealand,SouthAfricaandSaudiArabia.Thethirdcalendarquartergenerally
coincideswiththePrimaryIntakesforourinstitutionsinMexico,Europe,China,India,Malaysia,ThailandandtheGPSsegment.
Thefollowingchartshowsourenrollmentcycles.Shadedareasinthechartrepresentperiodswhenclassesaregenerallyinsessionand
revenuesarerecognized.Areasthatarenotshadedrepresentsummerbreaksduringwhichrevenuesarenottypicallyrecognized.Thelarge
circlesindicatethe
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PrimaryIntakestartdatesofourinstitutions,andthesmallcirclesrepresentSecondaryIntakestartdates.
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Pricing
Wecontinuallymonitormarketconditionsandcarefullyadjustourtuitionratestomeetlocaldemandlevels.Weproactivelyseekthe
bestpriceandcontentcombinationstoensurethatweremaincompetitiveinallthemarketsinwhichweoperate.
PrincipalComponentsofIncomeStatement
Revenues
Tuitionisthelargestcomponentofourrevenuesandwerecognizetuitionrevenuesonaweeklybasis,asclassesarebeingtaught.The
amountoftuitiongeneratedinagivenperioddependsonthepricepercredithourandthetotalcredithoursorpriceperprogramtakenby
theenrolledstudentpopulation.Deferredrevenueandstudentdepositsonourconsolidatedbalancesheetsconsistoftuitionpaidpriorto
thestartofacademicsessionsandunearnedtuitionamountsrecordedasaccountsreceivableafteranacademicsessionbegins.Theprice
percredithourvariesbyprogram,bymarket,andbydegreelevel.Additionally,varyinglevelsofdiscountsandscholarshipsareoffered
dependingonmarketspecificdynamicsandindividualachievementsofourstudents.Revenuesarereportednetofscholarships,other
discounts,refunds,waiversandthefairvalueofanyguaranteesmadebyLaureaterelatedtostudentfinancingprograms.Inadditionto
tuitionrevenues,wegenerateotherrevenuesfromancillaryproductsales,dormitory/residencyfees,studentfeesandothereducation
relatedservices.Theseotherrevenuesarelessmaterialtoouroverallfinancialresultsandhaveatendencytotrendwithtuitionrevenues.
Themaindriversofchangesinrevenuesbetweenperiodsarestudentenrollmentandprice.
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DirectCosts
Ourdirectcostsincludeinstructionalandservicesexpensesaswellasmarketingandpromotionalexpenses.Ourinstructionaland
servicescostsconsistprimarilyoflaborandoperatingcostsassociatedwiththedeliveryofservicestoourstudents,includingthecostof
wages,payrolltaxes,andbenefitsforinstitutionemployees,depreciationandamortization,rent,utilitiesandbaddebtexpenses.
Marketingandpromotionalcostsconsistprimarilyofadvertisingexpensesandlaborcostsformarketingpersonnelattheinstitutions.In
general,asignificantportionofourdirectcoststendtobevariableinnatureandtrendwithenrollment,andmanagementcontinuesto
monitorandimprovetheefficiencyofinstructionaldelivery.Conversely,ascampusesexpand,directcostsmaygrowfasterthan
enrollmentgrowthasinfrastructureinvestmentsaremadeinanticipationoffutureenrollmentgrowth.
GeneralandAdministrativeExpenses
Ourgeneralandadministrativeexpensesprimarilyconsistofcostsassociatedwithcorporatedepartments,includingexecutive
management,accounting,legal,businessdevelopmentandotherdepartmentsthatdonotprovidedirectoperationalservices.
FactorsAffectingComparability
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FactorsAffectingComparability
Acquisitions
Ourpastexperiencesprovideuswiththeexpertisetofurtherourmissionofprovidinghighquality,accessibleandaffordablehigher
educationtostudentsbyexpandingintonewmarkets,primarilythroughacquisitions.Acquisitionsaffectthecomparabilityofour
financialstatementsfromperiodtoperiod.Acquisitionscompletedduringoneperiodimpactcomparabilitytoapriorperiodinwhichwe
didnotowntheacquiredentity.Therefore,changesrelatedtosuchentitiesareconsidered"incrementalimpactofacquisitions"forthefirst
12monthsofourownership.SeeNote4,Acquisitions,inourconsolidatedfinancialstatementsincludedelsewhereinthisprospectusfor
detailsofouracquisitionsandothertransactions.
Dispositions
CertainstrategicinitiativesmayincludethesaleofinstitutionssuchastheFrenchInstitutionSaleandtheSwissInstitutionSale.Such
dispositionsaffectthecomparabilityofourfinancialstatementsfromperiodtoperiod.Dispositionscompletedduringoneperiodimpact
comparabilitytoapriorperiodinwhichweownedthedivestedentity.Therefore,changesrelatedtosuchentitiesareconsidered
"incrementalimpactofdispositions"forthefirst12monthssubsequenttothedisposition.
ForeignExchange
ThemajorityofourinstitutionsarelocatedoutsidetheUnitedStates.Theseinstitutionsenterintotransactionsincurrenciesother
thantheU.S.dollar("USD")andkeeptheirlocalfinancialrecordsinafunctionalcurrencyotherthantheUSD.Wemonitortheimpactof
foreigncurrencymovementsandthecorrelationbetweenthelocalcurrencyandtheUSD.Ourrevenuesandexpensesaregenerally
denominatedinlocalcurrency.TheUSDisourreportingcurrencyandoursubsidiariesoperateinvariousotherfunctionalcurrencies,
including:AustralianDollar,BrazilianReal,ChileanPeso,ChineseRenminbi,CostaRicanColon,Euro,HonduranLempira,Indian
Rupee,MalaysianRinggit,MexicanPeso,MoroccanDirham,NewZealandDollar,PeruvianNuevoSol,PolishZoty,SaudiRiyal,South
AfricanRand,ThaiBahtandTurkishLira.Theprincipalforeignexchangeexposureistheriskrelatedtothetranslationofrevenuesand
expensesincurredineachcountryfromthelocalcurrencyintoUSD.FortheyearsendedDecember31,2013,December31,2014,
December31,2015andtheninemonthsandLTMendedSeptember30,2016,theimpactofchangingforeigncurrencyexchangerates
reduced
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consolidatedrevenuesbyapproximately$54million,$225million,$689million,$181millionand$397million,respectively,as
comparedtothecomparableprecedingperiod.FortheyearsendedDecember31,2013,December31,2014,December31,2015andthe
ninemonthsandLTMendedSeptember30,2016,theimpactofchangingforeigncurrencyexchangeratesreducedconsolidatedAdjusted
EBITDAbyapproximately$8million,$46million,$142million,$6millionand$61million,respectively,ascomparedtothe
comparableprecedingperiod.WeexperiencedaproportionallygreaternegativeimpactrelatedtotheyearsendedDecember31,2014and
December31,2015andthefirsthalfof2016,whichresultedfromthesignificantweakeningagainsttheU.S.dollarexperiencedbymost
currencieswherewehavesignificantoperations,whichbeganinthesecondhalfof2014.See"RiskFactorsRisksRelatingtoOur
BusinessOurreportedrevenuesandearningsmaybenegativelyaffectedbythestrengtheningoftheU.S.dollarandcurrencyexchange
rates."
Seasonality
Mostoftheinstitutionsinournetworkhaveasummerbreakduringwhichclassesaregenerallynotinsessionandminimalrevenues
arerecognized.Inadditiontothetimingofsummerbreaks,holidayssuchasEasteralsohaveanimpactonouracademiccalendar.
Operatingexpenses,however,donotfullycorrelatetotheenrollmentandrevenuecycles,astheinstitutionscontinuetoincurexpenses
duringsummerbreaks.Giventhegeographicdiversityofourinstitutionsanddifferencesintimingofsummerbreaks,oursecondand
fourthquartersarestrongerrevenuequartersasthemajorityofourinstitutionsareinsessionformostoftheserespectivequarters.Ourfirst
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thesetwoquarters.Duetothisseasonality,revenuesandprofitsinanyonequarterarenotnecessarilyindicativeofresultsinsubsequent
quartersandmaynotbecorrelatedtonewenrollmentinanyonequarter.Foradiscussionofourrevenuerecognitionaccountingpolicy,
seeNote2,SignificantAccountingPolicies,inourconsolidatedfinancialstatementsincludedelsewhereinthisprospectus.
IncomeTaxExpense
Ourconsolidatedincometaxprovisionisderivedbasedonthecombinedimpactoffederal,stateandforeignincometaxes.Thetax
provisionsfortheninemonthsendedSeptember30,2016and2015werebasedonestimatedfullyeareffectivetaxratesthatincorporate
theforecastedearningsforthevariousjurisdictionsandtaxpayingandtaxexemptentitieswithinourorganizationalstructure,aswellas
significantdiscreteitemsrelatedtotheinterimperiods.Laureatehasoperationsinmultiplecountries,manyofwhichhavestatutorytax
rateslowerthantheUnitedStates.Generally,lowertaxratesintheseforeignjurisdictions,alongwithLaureate'sintentandabilityto
indefinitelyreinvestforeignearningsoutsideoftheUnitedStates,resultsinaneffectivetaxratelowerthanthestatutoryrateintheUnited
States.Further,discreteitemscanariseinthecourseofouroperationsthatcanfurtherimpacttheCompany'seffectivetaxrateforthe
period.
Ourtaxratefluctuatesfromperiodtoperiodduetochangesintheforecastedmixofearningsbetweenourtaxpayingentities,ourtax
exemptentitiesandourlossmakingentitiesforwhichitisnotmorelikelythannotthatataxbenefitwillberealizedontheloss.Before
theimpactofdiscreteitems,theestimatedannualtaxexpensefortheninemonthsendedSeptember30,2016was$82.7million.Thepre
taxresultfromourprofitableentitiesfortheninemonthsendedSeptember30,2016was$452.0million.Forcomparison,beforethe
impactofdiscreteitems,theestimatedannualtaxexpensefortheninemonthsendedSeptember30,2015was$75.1million.Thepretax
resultfromourprofitableentitiesfortheninemonthsendedSeptember30,2015was$229.0million.Asignificantdriverofthelowertax
expenseascomparedtopretaxincomeisthenontaxablegainonthesaleofcertainoperationsinEuropethatisincludedinpretax
income.Afterconsiderationofyeartodatediscreteevents,ofwhichthematerialeventsarediscussedbelowin"ResultsofOperations,"
ouryeartodatetaxexpensewas$35.2million.
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InternalControloverFinancialReporting
WehaveidentifiedmaterialweaknessesthatexistedasofDecember31,2015and/orSeptember30,2016.Amaterialweaknessisa
deficiency,oracombinationofdeficiencies,ininternalcontroloverfinancialreporting,suchthatthereisareasonablepossibilitythata
materialmisstatementofourannualorinterimconsolidatedfinancialstatementswillnotbepreventedordetectedonatimelybasis.
AsofDecember31,2015,weidentifiedamaterialweaknessinourinternalcontroloverfinancialreportingrelatedtoinadequate
controlsoverkeyreportsandspreadsheets.Specifically,wedidnotdesignadequatecontrolstoaddressthecompletenessandaccuracyof
keyreportsandkeyspreadsheets.Thismaterialweakness,incombinationwithotherpriormaterialweaknesses,contributedtoarevisionto
ourauditedfinancialstatementsfortheyearendedDecember31,2013.Thismaterialweaknesscouldresultinadditionalmisstatementsto
theaccountsanddisclosuresthatwouldresultinamaterialmisstatementofourconsolidatedfinancialstatementsthatwouldnotbe
preventedordetected.
AsofSeptember30,2016,weidentifiedthreeadditionalmaterialweaknesses,asfollows:
Weidentifiedamaterialweaknessinourriskassessmentprocess,whichwedeterminedwasnotoperatingadequatelyto
identifyandaddresstheriskstoourbusinessandtoestablishappropriatecontrolobjectivesgiventheenvironmentin
whichweoperateandthedecentralizedstructureusedtomanageouroperatingactivities.Thismaterialweaknessinourrisk
assessmentprocesswasafactorcontributingtotwoadditionalmaterialweaknesseswhichwehavefurtherdescribedbelow:
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Weidentifiedamaterialweaknessinthatwedidnotappropriatelyassesstherisksrelatingtoourcontracting
processesanddidnothavecontrolsthatwereproperlydesignedoroperatingeffectivelytodetectandpreventfraud.
Specifically,ourcontrolsovercontractingprocesseswerenotdesignedoroperatingeffectivelytoincorporate
appropriatelevelsofduediligence,requisitemanagementapprovals,segregationofdutiesorongoingmonitoring.
ThismaterialweaknessallowedfortheoccurrenceoftheincidentinournetworkinstitutioninTurkeyasdiscussed
in"IndustryRegulationTurkishRegulationandInternalInvestigation,"aswellascertainothercontracting
irregularitiesatothernetworkinstitutionsthatalsonecessitatedaninternalinvestigation.Thiscontroldeficiency
couldresultinmaterialmisstatementsoftheaccountsanddisclosuresthatwouldresultinamaterialmisstatementof
ourconsolidatedfinancialstatementsthatwouldnotbepreventedordetected.
Weidentifiedamaterialweaknessinthatwedidnotmaintaineffectivecontrolsovertheoperatingeffectivenessof
informationtechnology("IT")generalcontrolsforinformationsystemsthatarerelevanttothepreparationofour
financialstatements.Specificallywedidnot:
(i)
maintainprogramchangemanagementcontrolstoensurethatITprogramanddatachangesaffectingfinancialIT
applicationsandunderlyingaccountingrecordsareidentified,tested,authorizedandimplementedappropriately
(ii)
maintainuseraccesscontrolstoensureappropriatesegregationofdutiesandthataccesstofinancialapplications
anddataisadequatelyrestrictedtoappropriatepersonneland
(iii)
maintaincomputeroperationscontrolstoensurethatprivilegesareappropriatelygranted,anddatabackupsare
authorizedandmonitored.
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TheseITdeficienciesdidnotresultinamaterialmisstatementtothefinancialstatements,however,thedeficiencies,
whenaggregated,couldimpacttheeffectivenessofITdependentcontrols(suchasautomatedcontrolsthataddress
theriskofmaterialmisstatementtooneormoreassertions,alongwiththeITcontrolsandunderlyingdatathat
supporttheeffectivenessofsystemgenerateddataandreports)thatcouldresultinmisstatementspotentially
affectingallfinancialstatementaccountsanddisclosuresthatwouldnotbepreventedordetectedinatimely
manner.
Wehavecommencedtheremediationofeachofthesematerialweaknesses,includingmakingsignificantinvestmentstodevelop
trainingprogramsforourglobalorganization,changingtheorganizationaldesignandupgradingthequalificationsofpersonnelwhere
necessary,anddesigningandimplementingimprovedprocessesandinternalcontrols,someofwhicharemanual.Wehavebegunan
enterprisewideriskassessmentwherebyrisksthroughouttheorganizationwillbeidentified,assessedandprioritized.Thisenterprisewide
riskassessmentwillbeperiodicallyupdatedandleveragedasanongoingmechanismtomanagethebroadsetofriskstheCompanyfaces.
Wewillleveragetheresultsofthisentitywideriskassessmentasinputforthedeterminationoffutureinitiativesandtotailorourfuture
activitiesaroundtheimplementationassessment,andmonitoringofinternalcontrolsforallentities,includingVIEs.Wehavealso
commencedaremediationprocessthatincludes,amongotherthings,enhancementofourcontractmanagementpolicy,communication
andtrainingontheenhancedpolicy,andincreasedoversight.Weareintheprocessofensuringthatthedesignofourpoliciesand
procedureshavebeenfullyimplementedandareoperational,includingmonitoringofaccess,changemanagementandsegregationof
dutiesrelatingtoITdevelopmentandproductionroles.Weareintheprocessofdesigningandimplementingprocedurestoaddressthe
designdeficienciesrelatingtothecompletenessandaccuracyofourkeyreportsandspreadsheets.
Inadditiontotheremediationactionsdiscussedabove,wearecontinuingwithourongoingEiPinitiative,whichisanticipatedtobe
completedbytheendof2017andincludesimplementingaglobalenterpriseresourceplanningsystemandcompletingthevertical
integrationofourfinanceorganizationthroughtheestablishmentofregionalSSOs.
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integrationofourfinanceorganizationthroughtheestablishmentofregionalSSOs.
Oureffortstoremediatethesematerialweaknessesmaynotbeeffectiveorpreventanyfuturematerialweaknessinourinternalcontrol
overfinancialreporting.See"RiskFactorsRisksRelatingtoOurBusinessWecurrentlyhavefourmaterialweaknessesinourinternal
controloverfinancialreportingthat,ifnotcorrected,couldresultinmaterialmisstatementsofourfinancialstatements,"and"RiskFactors
RisksRelatingtoOurBusinessIfwefailtomaintainproperandeffectiveinternalcontrols,ourabilitytoproduceaccuratefinancial
statementsonatimelybasiscouldbemateriallyadverselyaffected."
Asapubliccompany,wewillberequiredtodevotesignificantresourcestocompletetheassessmentanddocumentationofour
internalcontroloverfinancialreportingunderSection404oftheSarbanesOxleyAct,includinganassessmentofthedesign,
implementationandoperatingeffectivenessofourinformationsystemsassociatedwithourinternalcontroloverfinancialreporting.We
willincurmaterialcoststoremediatethematerialweaknessesdescribedabove,aswellasensuringcompliancewithSection404ofthe
SarbanesOxleyAct.
ResultsofOperations
Thefollowingdiscussionoftheresultsofouroperationsisorganizedasfollows:
SummaryComparisonofConsolidatedResults
NonGAAPFinancialMeasure
SegmentResults
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SummaryComparisonofConsolidatedResultsfortheNineMonthsEndedSeptember30,2016and2015
DiscussionofSignificantItemsAffectingtheConsolidatedResultsfortheNineMonthsEndedSeptember30,2016and2015
NineMonthsEndedSeptember30,2016
OnJune14,2016,wesoldtheoperationsofGlioninSwitzerlandandtheUnitedKingdom,andtheoperationsofLesRochesin
SwitzerlandandtheUnitedStates,aswellasHautecolespcialiseLesRochesGruyreSA("LRG")inSwitzerland,LesRochesJinJiang
inChina,RoyalAcademyofCulinaryArts("RACA")inJordanandLesRochesMarbellainSpain,whichresultedinagainonsaleof
approximately$249.1million.Thisgainisincludedinothernonoperatingincomeinthetablesbelow.
OnJuly20,2016,wesoldtheoperationsofcoleSuprieureduCommerceExtrieur("ESCE"),InstitutFranaisdeGestion("IFG"),
EuropeanBusinessSchool("EBS"),coleCentraled'Electronique("ECE"),andCentred'tudesPolitiquesetdelaCommunication
("CEPC"),whichresultedinagainonsaleofapproximately$149.0million.Thisgainisincludedinothernonoperatingincomeinthe
tablesbelow.
NineMonthsEndedSeptember30,2015
OnMarch5,2015,wecompletedthesaleofourinterestinHSMGroupManagementFocusEuropeGlobalS.L.("HSM").We
recognizedanetgainof$2.0millioninequityinnetincomeofaffiliates,netoftax,fortheninemonthsendedSeptember30,2015.
DuringtheninemonthsendedSeptember30,2015,wereassessedourpositionregardingcertainongoingSpanishtaxauditsand,asa
resultofrecentadversedecisionsfromtheSpanishSupremeCourtandSpanishNationalCourtoncasesfortaxpayerswithsimilarfacts,it
wasdeterminedthatwecouldnolongersupportamorelikelythannotpositionandthusrecordedaprovisionof$42.1millionrelatingto
thesetaxaudits.
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thesetaxaudits.
ComparisonofConsolidatedResultsfortheNineMonthsEndedSeptember30,2016and2015
ThefollowingtablepresentsouroperatingresultsfortheninemonthsendedSeptember30,2016and2015:
(inmillions)
2016
Revenues
Directcosts
Operatingincome
Interestexpense,netofinterestincome
Othernonoperatingincome(expense)
Income(loss)fromcontinuingoperationsbeforeincometaxesand
equityinnetincomeofaffiliates
Incometaxexpense
Equityinnetincomeofaffiliates,netoftax
Netincome(loss)
Netlossattributabletononcontrollinginterests
Netincome(loss)attributabletoLaureateEducation,Inc.
2015
%Change
Better/(Worse)
2016vs.2015
$ 3,068.3 $ 3,141.2
2,697.8 2,795.0
158.6
134.1
211.9
212.0
(301.1) (290.2)
452.1 (142.0)
362.9
(35.2)
327.7
2.8
330.5
(220.2)
(81.6)
2.1
(299.7)
0.1
(299.6)
(2)%
3%
(18)%
nm
(4)%
nm
nm
57%
(100)%
nm
nm
nm
nmpercentagechangesnotmeaningful
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ComparisonofConsolidatedResultsfortheNineMonthsEndedSeptember30,2016totheNineMonthsEndedSeptember30,2015
Revenuesdecreasedby$72.9millionto$3,068.3millionfortheninemonthsendedSeptember30,2016(the"2016fiscalperiod")
from$3,141.2millionfortheninemonthsendedSeptember30,2015(the"2015fiscalperiod").Thisrevenuedecreasewasdrivenbythe
effectofanetchangeinforeigncurrencyexchangerates,whichdecreasedrevenuesby$181.0millionandtheincrementalimpactof
dispositionswhichreducedrevenueby$57.3million.Partiallyoffsettingthisdecreaseinrevenueswastheincrementalimpactof
acquisitions,whichincreasedrevenuesby$3.4million,andincreasedaveragetotalenrollmentatamajorityofourinstitutions,which
increasedrevenuesby$87.5million.Theeffectofchangesintuitionratesandenrollmentsinprogramsatvaryingpricepoints("product
mix"),pricingandtimingresultedina$77.9millionincreaseinrevenuescomparedtothe2015fiscalperiodthisincreasewasnetofa
negativeimpacttorevenuesofapproximately$18.0millionthatoccurredasaresultofclassdisruptionsattwoofourinstitutionsinChile
duringanationwidestudentprotestthatlastedseveralweeks.Theprotestbeganinthesecondquarterof2016andendedinJuly2016.The
disruptedclassesareanticipatedtobefullycompletebeforetheendoftheyear.OtherCorporatechangesaccountedforadecreasein
revenuesof$3.4million.
Directcostsandgeneralandadministrativeexpensescombineddecreasedby$72.7millionto$2,856.4millionforthe2016fiscal
periodfrom$2,929.1millionforthe2015fiscalperiod.Thedirectcostsdecreasewasduetotheeffectofanetchangeinforeigncurrency
exchangerates,whichdecreasedcostsby$188.4millionforthe2016fiscalperiodcomparedtothe2015fiscalperiod.Inthe2016fiscal
period,theincrementalimpactofdispositionsdecreasedcostsby$62.5million.
Offsettingthesedirectcostdecreaseswastheincrementalimpactofacquisitions,whichincreasedcostsby$2.2million,andoverall
higherenrollmentsandexpandedoperationswhichincreasedcostsby$156.5million.Acquisitioncontingentliabilitiesfortaxesother
thanincometax,netofchangesinrecordedindemnificationassetsincreaseddirectcostsby$8.8millioninthe2016fiscalperiodand
increaseddirectcostsby$2.3millioninthe2015fiscalperiod,increasingexpensesby$6.5millioninthe2016fiscalperiodcomparedto
the2015fiscalperiod.OtherCorporateexpensesaccountedforanincreaseincostsof$13.0millioninthe2016fiscalperiodcomparedto
the2015fiscalperiod.
Operatingincomedecreasedby$0.1millionto$211.9millionforthe2016fiscalperiodfrom$212.0millionforthe2015fiscal
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Operatingincomedecreasedby$0.1millionto$211.9millionforthe2016fiscalperiodfrom$212.0millionforthe2015fiscal
period.TheincreaseinoperatingincomewastheresultofincreasedoperatingincomeinourGPS,EuropeandLatAmsegments,partially
offsetbydecreasedoperatingincomeinourAMEAandCorporatesegments.
Interestexpense,netofinterestincomeincreasedby$10.9millionto$301.1millionforthe2016fiscalperiodfrom$290.2millionfor
the2015fiscalperiod.Theincreaseininterestexpensewasprimarilyattributabletohigherinterestratesonouroutstandingdebtbalances,
partiallyoffsetbyloweraveragebalancesoutstandingduringthe2016fiscalperiod.
Othernonoperatingincome(expense)increasedby$594.1milliontoincomeof$452.1millionforthe2016fiscalperiodfrom
expenseof$142.0millionforthe2015fiscalperiod.Thisincreasewasprimarilyattributabletoagainonsalesofsubsidiariesinthe2016
fiscalperiodof$398.4millionandagainonforeigncurrencyexchangeinthe2016fiscalperiodcomparedtoalossinthe2015fiscal
periodforachangeof$219.7million.Thischangewaspartiallyoffsetbyanincreaseinthelossondebtextinguishmentrecognizedinthe
2016fiscalperiodcomparedtothe2015fiscalperiodof$16.1million,increasedlossonderivativeinstrumentsof$5.6millioninthe
2016fiscalperiodcomparedtothe2015fiscalperiodandachangeinothernonoperatingincome(expense)of$2.3millioninthe2016
fiscalperiodcomparedtothe2015fiscalperiod.
Incometaxexpensedecreasedby$46.4millionto$35.2millionforthe2016fiscalperiodfrom$81.6millionforthe2015fiscal
period.Theyearoveryeardecreaseinexpensewasprimarilytheresultofrecognizingacontingentliabilityin2015of$42.1million
relatedtotheSpanishtaxaudits.In
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addition,the2016fiscalperiodhadadiscretebenefitof$7.9millionrelatedtothedeferredtaxesincludedwithintheaccountingforthe
saleofthehospitalitymanagementschools,andareleaseofanincometaxcontingencyrelatedtoPeruof$21.2million.Therewasalsoa
changeinthemixofpretaxbookincomeattributabletotaxableentities,taxexemptentities,andlossmakingentitiesforwhichnotax
benefitcanbederivedamongvarioustaxingjurisdictions,partiallyoffsettingthedecreasesabove.
Equityinnetincomeofaffiliates,netoftaxdecreasedby$2.1millionto$0.0millionforthe2016fiscalperiodfrom$2.1millionfor
the2015fiscalperiod.WerecognizedanetgainonthesaleofHSMfor$2.0millioninthe2015fiscalperiod.Otherequitymethod
investmentsresultedinachangeof$0.1millionforthe2016fiscalperiodcomparedtothe2015fiscalperiod.
Netlossattributabletononcontrollinginterestsincreasedby$2.7millionto$2.8millionforthe2016fiscalperiodfrom$0.1million
forthe2015fiscalperiod.TheincreaseprimarilyrelatedtoincreasednetlossatObeikan,decreasednetincomeatSt.Augustineasaresult
ofacquiringtheremainingnoncontrollinginterestin2016,andachangefromnetincometonetlossatPearlAcademy.Theseincreases
werepartiallyoffsetbychangesfromnetlosstonetincomeatHIEUandtheclosureofNationalHispanicUniversity("NHU")inAugust
2015,whichhadlossesinthe2015fiscalperiod.
SummaryComparisonofConsolidatedResultsfortheYearsEndedDecember31,2015,2014and2013
DiscussionofSignificantItemsAffectingtheConsolidatedResultsfortheYearsEndedDecember31,2015,2014and2013
YearEndedDecember31,2015
OnMarch5,2015,wecompletedthesaleofourinterestinHSM.Werecognizedanetgainof$2.0millioninequityinnetincome
(loss)ofaffiliates,netoftax,fortheyearendedDecember31,2015.
DuringthequarterendedJune30,2015,wereassessedourpositionregardingcertainongoingSpanishtaxauditsand,asaresultof
recentadversedecisionsfromtheSpanishSupremeCourtandSpanishNationalCourtoncasesfortaxpayerswithsimilarfacts,itwas
determinedthatwecouldnolongersupportamorelikelythannotpositionandthusrecordedaprovisionof$42.1millionrelatingto
thesetaxaudits.
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ThefiscalreformthatwasenactedinMexicoinDecember2013subjectsourMexicoentitiestocorporateincometaxandalsorequires
themtocomplywithprofitsharinglegislation,whereby10%ofthetaxableincomeofourMexicanentitieswillbesetasideasemployee
compensation.In2013,weestablishedanassetforadeferredbenefitrelatedtothismatter.During2014,werevisedourestimateregarding
therealizabilityofthisassetand,accordingly,recordedanetdecreaseinoperatingexpensefortheyearendedDecember31,2014of
$22.8million.During2015,werevisedourestimateregardingtherealizabilityofthisassetand,accordingly,recordedanetincreasein
operatingexpensefortheyearendedDecember31,2015of$0.9million.
Duringthefourthquarterof2015,weapprovedaplanofrestructuring,whichprimarilyincludedworkforcereductionsinorderto
reduceoperatingcostsinresponsetoovercapacityatcertainlocations.Weincurredemployeeterminationcostsof$15.5millionresulting
fromareductioninforceatcertainlocations,including$5.4millioninourLatAmsegment,$4.1millioninourEuropesegment,
$2.5millioninourAMEAsegment,$3.2millioninourGPSsegmentand$0.3millionincurredatCorporate.
Inthefirstquarterof2014,weannouncedthebeginningofateachoutprocessatNHU,aninstitutioninourGPSsegmentthatclosed
inAugust2015,andwillnolongerenrollnewstudents.In
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connectionwiththisteachout,werecordeddirectcostsof$6.6millionfor2014toensureanorderlyandsuccessfultransitionforour
students.
Inthesecondquarterof2014,corporateexpenseswerereducedby$3.4millionrelatedtoproceedsreceivedfromthesettlementof
earthquakerelatedinsuranceclaims.Inthefourthquarterof2014,corporateexpenseswerefurtherreducedby$1.4millionrelatedto
additionalproceedsreceivedfromthesettlementofearthquakerelatedinsuranceclaims.
Werecordedalossondisposalofpropertyof$4.4millionatHIEU,aninstitutioninourAMEAsegment,towriteoffthecarrying
valueofseveralparcelsoflandforwhichitnolongerhaslanduserights.
Inthesecondquarterof2014,werecordedabenefittodirectcostsof$11.3millioninourLatAmsegmentrelatedtothesettlementof
apreacquisitionlosscontingencyafterreceivingafavorablecourtrulingwithrespecttotheuseofgrantfundsbythepriorownersof
UniversidadeAnhembiMorumbi("UAMBrazil").
Inthesecondquarterof2014,wedetermineditwasprobablethatperformancetargetswouldbeachievedforcontingentconsideration
payableunderthetermsofthe2013purchaseagreementforTHINK:EducationGroupPty.Ltd.("THINK"),aninstitutioninourAMEA
segment,thereforeweaccruedthiscontingentconsiderationatitsestimatedfairvalueof$3.8million,whichwechargedtooperating
expenses.
Inthethirdquarterof2014,anentityintheKingdomofSaudiArabiainourAMEAsegmentrecordedabenefittodirectcostsof
$2.8million,primarilyrelatedtocashpaymentsreceivedforfullyreservedreceivables.
In2014,weincurredemployeeterminationcostsof$18.0millionresultingfromareductioninforceatcertainlocations,including
$11.5millioninourLatAmsegment,$4.7millioninourEuropesegmentand$1.8millioninourGPSsegment.
In2014,wereachedanarbitrationsettlementrelatedtocertainindemnificationclaimswiththeformerownersofaninstitutionin
Brazilandrecordedagainof$6.7millioninourLatAmsegment.
Duringthefourthquarterof2014,werecordedanoperatingexpenseof$18.0millionforadonationtoafoundationforaninitiative
supportedbytheTurkishgovernment.ThisdonationwasmadebyournetworkinstitutioninTurkeytosupportourongoingoperations.
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During2013,werecordedaliabilityof$11.8millionforasocialsecuritytaxmatterinourEuropesegmentfortheyears2009through
2012.In2014,wereversed$2.1millionofthesocialsecuritytaxliabilityduetostatuteoflimitationsexpirations.
ThefiscalreformthatwasenactedinMexicoinDecember2013subjectsourMexicoentitiestocorporateincometaxandalsorequires
themtocomplywithprofitsharinglegislation,whereby10%ofthetaxableincomeofourMexicanentitieswillbesetasideasemployee
compensation.In2013,wehadestablishedanassetforadeferredbenefitrelatedtothismatter.During2014,werevisedourestimate
regardingtherealizabilityofthisassetand,accordingly,recordedanetdecreaseinoperatingexpensefortheyearendedDecember31,
2014of$22.8million.
Impairment
In2014,werecordedatotalimpairmentlossof$125.8million.Tradenameswereimpairedintheaggregateamountof$47.7million
relatedtotwoChileaninstitutionsinourLatAmsegment.AlsoinourLatAmsegment,goodwillwasimpairedintheamountof
$77.1million,whichrelatedtoourinstitutionsinCostaRica,Honduras,andPanama.OurLatAmandGPSsegmentsrecordedimpairments
oflonglivedassetsof$0.7millionand$0.1million,respectively.OurEuropesegmentrecordedimpairmentsofdeferredcostsof
$0.3million.
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UDLAChilerecordedimpairmentof$16.4millionfortradenames.Thisisanadditionalimpairmenttothechargetakenin2013.The
primarydriverforthisadditionalchargewasthesecondaryintakeofenrollmentthatoccurredduringthethirdquarterof2014,which
provideduswithadditionalinformationregardingtheprojectedfinancialperformanceofUDLAChileandthatindicatedthatthefinancial
impactofthelossofaccreditationwaslargerthaninitiallyestimated.UNABrecordedanimpairmentchargefortradenamesof
$31.3millionthatresultedfromourexpectationofreducedmarginsandlowerpricing.Thelowerprojectionsreflectweakeroperating
performancecomparedtothepriorlongrangeplan,combinedwithreducedexpectationsasaresultofaregulatoryenvironmentthat
favorspublicratherthanprivatesupplyinhighereducation.
Thegoodwillimpairmentof$77.1millioninLatAmatourinstitutionsinCostaRica,Honduras,andPanamacanbeattributedtoa
weakerlongrangeoutlookascomparedtotheassumptionscontainedinthemodelspreviouslyusedtovaluetheintangibleassets.The
primarydriverofthisweakeroutlookisashortfallin2014enrollmentswhichhascausedustodecreaseourlongtermenrollment
projections.Thesoftenedenrollmentoutlookhasalsoresultedinpricingpressureonrevenue.
Inthesecondhalfof2010,Ecuadoradoptedanewhighereducationlawthat,uponitsimplementation,requiredustomodifythe
governancestructureofourinstitutioninthatcountry.Whiletheconstitutionalityofcertainprovisionsofthehighereducationlawis
currentlybeingchallengedinEcuador'scourtsystem,thelawhasbeenimplemented.Inthefourthquarterof2012,theCES,therelevant
regulatorybody,commencedreviewingandissuingcommentsonbylawssubmittedbyotherEcuadorianhighereducationinstitutions,
implementingandenforcingthecogovernanceprovisionsofthenewlaw.InaccordancewithASC810101510,webelievedthatcontrol
nolongerresidedwithLaureategiventhegovernmentallyimposeduncertainties.Asaresult,UDLAEcuadorwasdeconsolidatedinthe
fourthquarterof2012.Asaresultofthedeconsolidation,thenetreductioninconsolidatedrevenuesfor2013was$20.8million,
consistingofadecreaseintheLatAmsegmentof$28.7million,partiallyoffsetbyanincreaseof$7.9millionincorporateand
eliminationsfromroyaltyrevenuesandothersupportchargesrecognizedfor2013.Additionally,directcostsintheLatAmsegment
decreasedby$16.2million.
OnJanuary18,2013,weborrowedanadditional$250.0millionintermloansunderourSeniorSecuredCreditFacilities.This
additionalamountwasissuedatanoriginaldebtdiscountof$1.3million,andwepaiddebtissuancecostsof$2.9million,allofwhich
wasamortizedtointerestexpenseoverthetermoftheloan.OnDecember16,2013,weborrowedanadditional$200.0millioninterm
loansunderourSeniorSecuredCreditFacilities.Thisadditionalloanwasissuedatadiscountof$0.5million,andwepaiddebtissuance
costsof$2.2million,allofwhichwasamortizedtointerestexpenseoverthetermoftheloan.Additionally,thirdpartycostsof
$1.5millionwerechargedtogeneralandadministrativeexpenses.
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OnJanuary23,2013,wesoldUniversidadDelDesarrolloProfessional,SC("UNIDEP")forapproximately$40.6millionand
recognizedagainonthesaleof$4.4million,netofincometaxexpenseof$1.9millionintheconsolidatedstatementofoperations.
UNIDEPwasclassifiedasadiscontinuedoperationintheconsolidatedfinancialstatementsincludedelsewhereinthisprospectus.
Duringthefirstquarterof2013,auniversityinourEuropesegmentsoldnonoperatingassetsfor$4.1millionandrecognizedagain
onthesaleof$3.9millioninother(expense)income,netintheconsolidatedstatementofoperations.
TheplannedMarch2013openingofanewcampusbuildingatUNABinourLatAmsegmentwasdelayed,resultingintheneedto
relocatestudentstotemporaryfacilitiesuntilthebuildingwascompleted.During2013,weincurred$6.2millionofexpensestorentthe
temporaryfacilitiesandoperatethemasclassrooms.Thisalsocausedadelaytothestartofthe2013academiccalendaryear
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forthesestudents.Asaconcessionfortheinconvenienceexperiencedbythestudentswhowereaffected,weagreedtoaonetime
settlementintheformofdiscountsonthosestudents'tuition.Thissettlementwasrecognizedasareductionofrevenuesandtotaled
$10.1millionfortheyearendedDecember31,2013.
During2013,werecordedanaccrualof$11.8millionforasocialsecuritytaxmatterfortheyears2009through2012inourEurope
segment.
OnApril23,2013,weborrowedanadditional$310.0millionintermloansunderourSeniorSecuredCreditFacilities.Thisadditional
amountwasissuedatapremiumof$1.6million,andwepaiddebtissuancecostsof$3.9million,bothofwhichwillbeamortizedto
interestexpenseoverthetermoftheloan.Additionally,thirdpartycostsof$0.4millionwerechargedtogeneralandadministrative
expenses.Theproceedsfromthisborrowingwereusedtorepayalloftheoutstandingseniorsubordinatednotes(the"SeniorSubordinated
Notes").Wepaidatotalof$17.1millionoftenderpremiumsandfeesandcallpremiumswhichwerecapitalizedasdebtissuancecosts.
InMay2013,weexitedaleasedfacilityatoneinstitutioninourEuropesegmentandasaresultreceivedanearlytermination
settlementof$4.8million,whichdecreaseddirectcosts.
During2012,werecordedanaccrualforataxcontingencyinBrazil,asdiscussedfurtherbelow.During2013,wesettledthisBrazil
taxcontingencyandrecordedadditionalexpenseof$3.8millionindirectcostsinourLatAmsegment.
Inthethirdquarterof2013,wewrotedownourinvestmentinHSMof$3.1milliontoacarryingvalueofzero,whichresultedina
chargetoequityinnetincome(loss)ofaffiliates,netoftaxfortheyearendedDecember31,2013.Weconcludedthattheimpairmentin
thevalueofitsinvestmentinHSMwasotherthantemporary.
OnDecember20,2013,weacquiredtheremaining80%interestofTHINKandremeasuredourequitymethodinvestmentinTHINKto
afairvalueofapproximately$18.5million,recordinganonoperatinggainof$5.9million.
AsaresultofthefiscalreformenactedinMexicoinDecember2013,werecordedanetincreaseinoperatingexpensefortheyear
endedDecember31,2013of$8.4millioninourLatAmsegment.
InDecember2013,werecordeda$2.5milliongainontheterminationofasaleleasebackarrangementinourEuropesegment.
Impairment
In2013,werecordedatotalimpairmentlossof$33.6million.Tradenameswereimpairedintheaggregateamountof$25.7million
relatedtoinstitutionsinourLatAm,EuropeandGPSsegments,whichrecordedimpairmentsof$22.0million,$1.1millionand
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relatedtoinstitutionsinourLatAm,EuropeandGPSsegments,whichrecordedimpairmentsof$22.0million,$1.1millionand
$2.6million,respectively.OurAMEAsegmentrecordedimpairmentsoflonglivedassetsof$2.0millionforcertainbuildingsthatwere
impairedin2013.OurGPSsegmentalsorecordedimpairmentsoflonglivedassetsof$1.4millionandimpairmentsofotherintangible
assetsof$4.5million.
TheimpairmentoftradenamesinLatAmrelatedtoUDLAChile.Theprimarydriverforthischargewasareductioninthisinstitution's
projectedrevenueandincomefollowingUDLAChile'slossofaccreditation,asdiscussedinNote2,SignificantAccountingPolicies,in
ourconsolidatedfinancialstatementsincludedelsewhereinthisprospectus.Theimpairmentchargewasbasedonmanagement'sbest
estimatesusingavailableandknowableinformationabouttheshortandlongtermimplicationstotheUDLAChilefinancialforecast.
Thetradenamesimpairmentof$1.1millioninourEuropesegmentrelatedtooneinstitutioninItaly.TheimpairmentattheItalian
institutionresultedfromourexpectationofreducedmargins,ascomparedtotheassumptionscontainedinthemodelspreviouslyusedto
valuetheintangibleassets.
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ThereducedmarginexpectationsresultprimarilyfromtheongoingweaknessintheEuropeaneconomies,whichhascausedpricing
decreasesatcertainoftheinstitutionsincludedinthissegment,aswellasenrollmentdeclinesascomparedtotheprojectionsusedtovalue
theintangibleassets.
Thetradenamesimpairmentof$2.6millioninourGPSsegmentrelatedtotwoinstitutionsintheUnitedStates.Oneoftheinstitutions
recordedatradenamesimpairmentof$1.3million,whichprimarilyresultedfromourexpectationoffurtherreducedmarginsandcash
flowsascomparedtoourinitialprojectionscontainedinthepreviousmodelusedtovaluetheintangibleassetsatthisinstitutionduring
our2012impairmenttesting.Theseexpectationsoffurtherreducedmarginsandcashflowswerelargelyduetothepooreconomic
conditionsintheUnitedStates,continuedmediafocusonthecostofeducationascomparedtoearningspotential,aswellasthe
regulatoryenvironment,whicharediscussedinNote19,LegalandRegulatoryMatters,inourconsolidatedfinancialstatementsincluded
elsewhereinthisprospectus.Allofthesefactorshavecausedustoreduceourexpectationoffutureperformanceforthisinstitution.Inthe
firstquarterof2014,oneofourU.S.Institutions,NHU,decidedtostopenrollingnewstudentsandteachouttheexistingcohortof
students.Thisdecisionwasdriveninpartbycertainregulatorychanges.Asaresult,wehavewrittenofftheentiretradenamesvalueof
$1.3millionrelatedtothisinstitution.Inaddition,NHU,alsowrotedowncapitalizedcurriculum,whichisrecordedindeferredcosts,net
by$4.5millionandsoftware,whichisrecordedinpropertyandequipment,by$1.3million,asitwasdeterminedthatthecurriculumand
softwarecannotberedeployed.TherewasalsoanimpairmentofotherlonglivedassetsintheGPSsegmentof$0.1million.
ComparisonofConsolidatedResultsfortheYearsEndedDecember31,2015,2014and2013
ThefollowingtablepresentsouroperatingresultsforthefiscalyearsendedDecember31,2015,2014and2013:
(inmillions)
2015
2014
Revenues
$ 4,291.7 $ 4,414.7
Directcosts
3,760.0 3,838.2
194.7
151.2

125.8
Operatingincome

337.0
299.5
Interestexpense,netofinterestincome (384.7) (363.9)
Othernonoperating(expense)income (152.9) (137.2)
(Loss)incomefromcontinuing
operationsbeforeincometaxesand
equityinnetincome(loss)of
affiliates
(200.6) (201.7)
(117.7)
39.1
Equityinnetincome(loss)ofaffiliates,
netoftax

2.5
0.2
%ChangeBetter/(Worse)
2015vs.2014 2014vs.2013
2013
$ 3,913.9
3,418.4
141.2
33.6
320.7
(328.4)
9.7
(3)%
2%
(29)%
nm
13%
(6)%
(11)%
13%
(12)%
(7)%
nm
(7)%
(11)%
nm
1.9
(91.2)
1%
nm
nm
143%
(0.9)
nm
122%
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netoftax
operations,netoftax
Netloss
NetlossattributabletoLaureate
Education,Inc.
0.8
nm
nm

(315.8)

(162.5)
4.4
(85.1)
nm
(94)%
nm
(91)%
(0.4)
4.2
15.4
(110)%
(73)%
(316.2) $
(158.3) $
(69.7)
(100)%
(127)%
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ComparisonofConsolidatedResultsfortheYearEndedDecember31,2015totheYearEndedDecember31,2014
Revenuesdecreasedby$123.0millionto$4,291.7millionfortheyearendedDecember31,2015from$4,414.7millionfortheyear
endedDecember31,2014.Thisrevenuedecreasewasdrivenbytheeffectofanetchangeinforeigncurrencyexchangerates,which
decreasedrevenuesby$688.9million.Partiallyoffsettingthisdecreaseinrevenueswastheoverallincreasedaveragetotalenrollmentata
majorityofourinstitutions,whichincreasedrevenuesby$299.8milliontheincrementalimpactofacquisitions,whichincreasedrevenues
by$114.8millionandtheeffectofchangesinproductmix,pricingandtiming,whichincreasedrevenuesby$151.9million.Other
Corporatechangesaccountedforadecreaseinrevenuesof$0.6million.
Directcostsandgeneralandadministrativeexpensescombineddecreasedby$34.7millionto$3,954.7millionfor2015from
$3,989.4millionfor2014.Thedirectcostsdecreasewasduetotheeffectofanetchangeinforeigncurrencyexchangerates,which
decreasedcostsby$587.9millionfor2015comparedto2014.Duringthefourthquarterof2014,werecordedanoperatingexpenseof
$18.0millionforadonationtoafoundationforaninitiativesupportedbytheTurkishgovernmentinourEuropesegment.Employee
terminationcostsincreaseddirectcostsby$15.5millionin2015and$18.0millionin2014,decreasingcostsyearoveryearby
$2.5million.InconnectionwithateachoutatNHU,aninstitutioninourGPSsegmentthatclosedinAugust2015,werecordedcostsof
$6.6millionin2014toensureanorderlyandsuccessfultransitionforourstudents.Additionally,in2014,HIEU,aninstitutioninour
AMEAsegment,recordeda$4.4millionlossondisposalofpropertytowriteoffthecarryingvalueofseveralparcelsoflandforwhichit
nolongerhaslanduserights.In2014,wedetermineditwasprobablethatTHINK,aninstitutioninourAMEAsegment,wouldmeet
performancetargetsthatwerepartofasharepurchaseagreementandaccruedforacontingentearnoutof$3.8million.
Offsettingthesedirectcostdecreaseswastheincrementalimpactofacquisitions,whichincreasedcostsby$110.4millionandoverall
higherenrollmentsandexpandedoperationswhichincreasedcostsby$403.3million.Acquisitioncontingentliabilitiesfortaxesother
thanincometax,netofchangesinrecordedindemnificationassetsincreaseddirectcostsby$5.6millionin2015anddecreaseddirect
costsby$4.6millionin2014,increasingexpensesby$10.2millionin2015comparedto2014.Werecordedanincreaseindirectcostsfor
aprofitsharingplaninMexicoof$0.9millionin2015andadecreaseindirectcostsof$22.8millionin2014,increasingcostsby
$23.7millionin2015comparedto2014.Additionallyduring2014,werecordedabenefitinourLatAmsegmentof$11.3millionrelated
tothesettlementofapreacquisitionlosscontingencyafterreceivingafavorablecourtruling.In2014,wereachedanarbitration
settlementrelatedtoindemnificationclaimswiththeformerownersofauniversityinBrazilinourLatAmsegmentandrecordedagainof
$6.7million.In2014,anentityintheKingdomofSaudiArabiainourAMEAsegmentrecordedabenefitof$2.8million,primarilyrelated
tocashpaymentsreceivedforfullyreservedreceivables.In2014,corporateexpenseswerereducedby$4.8millionrelatedtoproceeds
receivedfromthesettlementofearthquakerelatedinsuranceclaims.OtherCorporateexpensesaccountedforanincreaseincostsof
$15.3millionin2015comparedto2014.
Operatingincomeincreasedby$37.5millionto$337.0millionfor2015from$299.5millionfor2014.Theincreaseinoperating
incomewasrelatedtoadecreaseinthelossonimpairmentof$125.8millionbetween2015and2014andincreasedoperatingincomefrom
ourGPSsegmentcombinedwithlessoperatinglossinourAMEAandEuropesegments.Theincreaseinoperatingincomewaspartially
offsetbyadecreaseinouroperatingincomeforourLatAmsegment,whichwassignificantlyimpactedbytheweakeningofforeign
currencyagainsttheUSD,andincreasedCorporateexpenses.
Interestexpense,netofinterestincomeincreasedby$20.8millionto$384.7millionfor2015from$363.9millionfor2014.The
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increaseininterestexpensewasprimarilyattributabletohigherdebtbalancesandincreasedspecialinterestexpensesinceourregistration
statementwasnotdeclaredeffectivebyJuly25,2014.
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Othernonoperating(expense)incomeincreasedby$15.7milliontoexpenseof$152.9millionfor2015fromexpenseof
$137.2millionfor2014.Thisincreasewasprimarilyattributabletoalargerlossonforeigncurrencyexchangein2015comparedto2014
foranincreaseinexpenseof$39.2million.Thisincreasewasoffsetbyadecreaseinthelossondebtextinguishmentof$21.7million
combinedwithadecreasedlossonderivativeinstrumentsin2015comparedto2014of$0.5millionandanchangeinothernonoperating
(expense)incomeof$1.3millionin2015comparedto2014.
Incometax(expense)benefitincreasedby$156.8milliontoexpenseof$117.7millionfor2015fromabenefitof$39.1millionfor
2014.Wehaveoperationsinmultiplecountries,manyofwhichhavestatutorytaxrateslowerthantheUnitedStates.Themainreasonsfor
thisyearoveryearincreaseinexpensewerereleasesofvaluationallowancesin2014,therecordingofthetaxcontingencyrelatedtothe
ICEauditmattersin2015,asdiscussedinNote15,IncomeTaxes,inourconsolidatedfinancialstatementsincludedelsewhereinthis
prospectus,andsignificanttaxratechangesinmultiplejurisdictionsondeferredtaxbalances,partiallyoffsetbyachangeinthemixof
taxableandnontaxableentitiesinvarioustaxingjurisdictions.
Equityinnetincome(loss)ofaffiliates,netoftaxincreasedby$2.3milliontoincomeof$2.5millionfor2015fromincomeof
$0.2millionfor2014.WerecognizedanetgainonthesaleofHSMfor$2.0millionin2015.Otherequitymethodinvestmentsresultedin
achangeof$0.3millionfor2015comparedto2014.
Net(income)lossattributabletononcontrollinginterestsincreasedby$4.6milliontonetincomeof$0.4millionfor2015fromanet
lossof$4.2millionfor2014.Theincreaseinnet(income)lossattributabletononcontrollinginterestsprimarilyrelatedtochangesfrom
netlosstonetincomeatObeikanandHIEUcombinedwithincreasednetincomeatSt.AugustineandlessnetlossatNHU,whichclosed
inAugust2015.TheseincreaseswereoffsetbyahighernetlossatMonashandlessnetincomeatINTI.
ComparisonofConsolidatedResultsfortheYearEndedDecember31,2014totheYearEndedDecember31,2013
Revenuesincreasedby$500.8millionto$4,414.7millionfortheyearendedDecember31,2014from$3,913.9millionfortheyear
endedDecember31,2013.Thisrevenuegrowthwasdrivenbyoverallincreasedaveragetotalenrollmentatamajorityofourinstitutions,
whichincreasedrevenuesby$315.3milliontheincrementalimpactofacquisitions,whichincreasedrevenuesby$275.9millionthe
effectofchangesinproductmix,pricingandtiming,whichincreasedrevenuesby$132.9millionanda2013settlementintheformof
tuitiondiscounts,whichdecreasedrevenuesby$10.1millionin2013inourLatAmsegment.Partiallyoffsettingthisrevenuegrowthwas
theeffectofanetchangeinforeigncurrencyexchangerates,whichdecreasedrevenuesby$224.8million.OtherCorporatechanges
accountedforadecreaseinrevenuesof$8.6million.
Directcostsandgeneralandadministrativeexpensescombinedincreasedby$429.8millionto$3,989.4millionfor2014from
$3,559.6millionfor2013.Thedirectcostincreasewasduetotheincrementalimpactofacquisitionsincreasingcostsby$242.5million
andoverallhigherenrollmentsandexpandedoperationsincreasingcostsby$403.7million.Duringthefourthquarterof2014,we
recordedanoperatingexpenseof$18.0millionforadonationtoafoundationforaninitiativesupportedbytheTurkishgovernmentin
ourEuropesegment.In2014,employeeterminationcostsrelatedtoareductioninforceincreaseddirectcostsby$18.0million.In
connectionwithateachoutatNHU,aninstitutioninourGPSsegmentthatclosedinAugust2015,werecordedcostsof$6.6millionin
2014toensureanorderlyandsuccessfultransitionforourstudents.Additionally,in2014,HIEU,aninstitutioninourAMEAsegment,
recordeda$4.4millionlossondisposalofpropertytowriteoffthecarryingvalueofseveralparcelsoflandforwhichitnolongerhasland
userights.In2014,wedetermineditwasprobablethatTHINK,aninstitutioninourAMEAsegment,wouldmeetperformancetargetsthat
werepartofasharepurchaseagreementandaccruedforacontingentearnoutof$3.8million.Inour
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werepartofasharepurchaseagreementandaccruedforacontingentearnoutof$3.8million.Inour
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Europesegment,weexitedaleasedfacilityatoneinstitutionandasaresult,receivedanearlyterminationsettlementof$4.8million,
decreasingexpensein2013,andwerecordeda$2.5milliongainontheterminationofasaleleasebackarrangementin2013.Acquisition
contingentliabilitiesfortaxesotherthanincometax,netofchangesinrecordedindemnificationassetsdecreaseddirectcostsby
$4.6millionin2014and$7.2millionin2013,increasingexpensesby$2.6millionin2014comparedto2013.
Offsettingthesedirectcostincreaseswasanetchangeinforeigncurrencyexchangerates,whichdecreasedcostsby$193.3millionfor
2014comparedto2013.In2013,werecordedtheinitialestablishmentofaprofitsharingplanrelatedtothefiscalreforminMexico,
increasingexpenseby$8.4millioninourLatAmsegment.During2014,werecordedadecreaseindirectcostsof$22.8millionforthis
profitsharingplan.Additionally,during2014,werecordedabenefitinourLatAmsegmentof$11.3millionrelatedtothesettlementofa
preacquisitionlosscontingencyafterreceivingafavorablecourtruling.In2014,wereachedanarbitrationsettlementrelatedto
indemnificationclaimswiththeformerownersofauniversityinBrazilinourLatAmsegmentandrecordedagainof$6.7million.In2014,
anentityintheKingdomofSaudiArabiainourAMEAsegmentrecordedabenefitof$2.8million,primarilyrelatedtocashpayments
receivedforfullyreservedreceivables.TheplannedMarch2013openingofanewcampusbuildingforUNABinChilewasdelayedand
additionalexpensesof$6.2millionwereincurredinourLatAmsegmentin2013torenttemporaryfacilitiesandoperatethemas
classrooms.In2013,werevisedanestimateforaBraziltaxmatter,resultinginadditionalexpenseof$3.8millioninourLatAmsegment.
Additionally,during2013,werecorded$11.8millionforasocialsecuritytaxmatterfortheyears2009through2012inourEurope
segment.In2014,wereversed$2.1millionofthissocialsecuritytaxliabilityduetostatuteoflimitationsexpirations.In2014,corporate
expenseswerereducedby$4.8millionrelatedtoproceedsreceivedfromthesettlementofearthquakerelatedinsuranceclaimsand
$1.9millionfordebtmodificationcostsincurredin2013.OtherchangesinCorporateexpensesaccountedforadecreaseincostsof
$1.2millionin2014comparedto2013.
Operatingincomedecreasedby$21.2millionto$299.5millionfor2014from$320.7millionfor2013.Thedecreaseinoperating
incomewasprimarilytheresultofalossonimpairmentof$125.8millionfor2014comparedtoalossonimpairmentof$33.6millionfor
2013.Thedecreaseinoperatingincomewasalsoaffectedbythechangesintherecordedvaluesofcertaintaxcontingentliabilitiesand
indemnificationassetsfrom2013to2014,whichincreasedexpensesby$2.6million.Thedecreaseinoperatingincomewaspartially
offsetbyincreasedoperatingincomeprimarilyduetoincreasedrevenuesgreaterthanincreaseddirectcostsinourLatAmandGPS
segments.
AsofDecember31,2014,ourbalancesheetincludedliabilitiesof$121.9millioninotherlongtermliabilitiesfortaxesotherthan
incometax,principallypayrolltaxrelateduncertaintiesduetoacquisitionsofcompaniesprimarilyinLatinAmerica.AsofDecember31,
2013,werecorded$53.7millionforthisliability.Thechangesinthisliabilityfrom2013to2014wererelatedtoacquisitions,interestand
penaltyaccruals,changesintaxlaws,expirationsofstatutesoflimitations,settlementsandchangesinforeigncurrencyexchangerates.
Thetermsofthestatutesoflimitationsonthesecontingenciesvarybutcanbeuptotenyears.Inmostcases,wehavereceived
indemnificationfromtheformerownersand/ornoncontrollinginterestholdersoftheacquiredbusinessesforthesecontingenciesand
therefore,wedonotbelievewewillsustainaneconomiclossevenifwearerequiredtopaytheseadditionalamounts.Ifthese
contingenciesexpireunchallenged,thereversaloftherelatedliabilitieswouldincreaseoperatingincomeandreduceinterestexpense.For
acquisitionsmadepriorto2009,anindemnifiedcontingencywouldresultinareductionofrecordedgoodwilltotheextentofrecoveries
madeundertheindemnificationagreement.ForacquisitionscompletedfromandafterJanuary1,2009,indemnificationassetsarerecorded
asoftheacquisitiondateonthesamemeasurementbasisastheindemnifiedcontingency.Totheextentthesecontingenciesexpire
unchallenged,thereversaloftherelatedliabilitieswouldincreaseoperatingincomeandreduceinterestexpenseandthecorresponding
indemnificationassetreversalwouldreduceoperatingincome.
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increaseininterestexpensewasprimarilyattributabletohigherdebtbalances.
Othernonoperating(expense)incomeincreasedby$146.9milliontoexpenseof$137.2millionfor2014fromincomeof
$9.7millionfor2013.Thisincreasewasprimarilyattributabletoalargerlossonforeigncurrencyexchangein2014comparedto2013for
anincreaseinexpenseof$106.9millioncombinedwithalossonderivativeinstrumentsin2014comparedtoagainin2013foran
increaseinexpenseof$9.7millionandanincreaseinthelossondebtextinguishmentof$21.6millionin2014comparedto2013.Other
itemsof$8.7millionaccountedforanadditionalincreaseinothernonoperatingexpensefor2014ascomparedto20132013includeda
gainrelatedtotheacquisitionoftheremaining80%interestofTHINKof$5.9millionandagainonthesaleofnonoperatingassetsof
$3.9million.
Incometaxbenefit(expense).Wehaveoperationsinmultiplecountries,manyofwhichhavestatutorytaxrateslowerthantheUnited
States.Ourtaxprovisiondecreasedby$130.3milliontoabenefitof$39.1millionfor2014,fromexpenseof$91.2millionfor2013.The
mainreasonsforthisdecreaseinexpensewerethereleaseofvaluationallowancesondeferredtaxassetsandtheimpactofthefiscalreform
inMexico.
Equityinnetincome(loss)ofaffiliates,netoftaxincreasedby$1.1milliontoincomeof$0.2millionfor2014fromalossof
$0.9millionfor2013.In2013,wewrotedownourinvestmentinHSMby$3.1millionandrecorded$0.9millioninequityinnetincome
ofaffiliateforTHINK.WeacquiredtheremainingownershipinterestinTHINKinDecember2013.Otherequitymethodinvestments
resultedinchangesof$1.1millionfor2014comparedto2013.
Incomefromdiscontinuedoperations,netoftaxdecreasedby$0.8millionfor2014comparedto2013.UNIDEPwasclassifiedasa
discontinuedoperationintheaccompanyingconsolidatedfinancialstatements.Thedecreaseinincomefromdiscontinuedoperationswas
relatedtothesaleofUNIDEPinJanuary2013.
Gainonsalesofdiscontinuedoperations,netoftaxdecreasedby$4.4millionfor2014comparedto2013.During2013,we
recognizedagainonthesaleofUNIDEPof$4.4million.
Netlossattributabletononcontrollinginterestsdecreasedby$11.2millionto$4.2millionfor2014,from$15.4millionfor2013.
ThedecreaseinnetlossattributabletononcontrollinginterestsprimarilyrelatedtoournoncontrollinginterestinUAMBrazil.In2013,we
recognized$6.6millionofnetlossattributabletoUAMBrazil.WeacquiredtheremaininginterestofUAMBrazilinApril2013.We
acquired80%ofSt.AugustineinNovember2013andin2014,werecognized$1.0millionofnetincomeattributabletoSt.Augustine.
Additionally,werecognized$1.5millionnetlossattributabletoObeikanintheKingdomofSaudiArabiafor2014comparedto
$2.5millionnetlossattributabletoObeikanfor2013.Othernoncontrollinginterestsresultedinchangesof$2.6millionfor2014
comparedto2013.
NonGAAPFinancialMeasure
WedefineAdjustedEBITDAasnetincome(loss),beforegainonsalesofdiscontinuedoperations,netoftax(for2013),andincome
fromdiscontinuedoperations,netoftax(for2013),equityinnet(income)lossofaffiliates,netoftax,incometaxexpense(benefit),gain
onsaleofsubsidiaries,net,foreigncurrencyexchangeloss(income),net,other(income)expense,net,loss(gain)onderivatives,losson
debtextinguishment,interestexpenseandinterestincome,plusdepreciationandamortization,stockbasedcompensationexpense,losson
impairmentofassetsandexpensesrelatedtoimplementationofourEiPinitiative.WhenwereviewAdjustedEBITDAonasegmentbasis,
weexcludeintersegmentrevenuesandexpensesthateliminateinconsolidation.AdjustedEBITDAisusedinadditiontoandin
conjunctionwithresultspresentedinaccordancewithGAAPandshouldnotbereliedupontotheexclusionofGAAPfinancialmeasures.
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WehaveincludedAdjustedEBITDAinthisprospectusbecauseitisakeymeasureusedbyourmanagementandboardofdirectorsto
understandandevaluateourcoreoperatingperformanceandtrends,toprepareandapproveourannualbudgetandtodevelopshortand
longtermoperationalplans.Inparticular,theexclusionofcertainexpensesincalculatingAdjustedEBITDAcanprovideausefulmeasure
forperiodtoperiodcomparisonsofourcorebusiness.Additionally,AdjustedEBITDAisakeyinputintotheformulausedbythe
compensationcommitteeofourboardofdirectorsandourChiefExecutiveOfficerinconnectionwiththepaymentofincentive
compensationtoourexecutiveofficersandothermembersofourmanagementteam.Accordingly,webelievethatAdjustedEBITDA
providesusefulinformationtoinvestorsandothersinunderstandingandevaluatingouroperatingresultsinthesamemannerasour
managementandboardofdirectors.
ComparisonofAdjustedEBITDAfortheNineMonthsEndedSeptember30,2016and2015
ThefollowingtablepresentsAdjustedEBITDAandreconcilesnetincome(loss)toAdjustedEBITDAfortheninemonthsended
September30,2016and2015:
(inmillions)
2016
362.9 (220.2)

(398.4)

(80.3) 139.4
1.0
(1.3)
8.2
2.6
17.4
1.3
314.4 300.1
(13.3)
(9.9)
211.9 212.0

202.7 209.4
414.6 421.4
28.9
27.2
37.2
27.2
$ 480.7 $ 475.8
327.7
35.2
%Change
Better/(Worse)
2016v2015
Netincome(loss)
Plus:
Incometaxexpense
Income(loss)fromcontinuingoperationsbeforeincometaxesand
equityinnetincomeofaffiliates
Plus:
Gainonsaleofsubsidiaries,net
Foreigncurrencyexchange(gain)loss,net
Lossonderivatives
Interestexpense
Interestincome
Operatingincome
Plus:
Depreciationandamortization
EBITDA
Plus:
Stockbasedcompensationexpense(a)
EiPimplementationexpenses(b)
AdjustedEBITDA
2015
$ (299.7)
(2.1)
81.6
nm
(100)%
57%
nm
nm
158%
(177)%
nm
nm
(5)%
34%
nm
3%
(2)%
(6)%
(37)%
1%
(a)
(b)
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financialreporting.
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ComparisonofDepreciationandAmortization,StockbasedCompensationandEiPImplementationExpensesfortheNineMonthsEnded
September30,2016and2015
Depreciationandamortizationdecreasedby$6.7millionto$202.7millionforthe2016fiscalperiodfrom$209.4millionforthe
2015fiscalperiod.Theincrementalimpactofdispositionsdecreaseddepreciationandamortizationexpenseby$3.8million.Theeffects
offoreigncurrencyexchangedecreaseddepreciationandamortizationexpenseby$13.4millionforthe2016fiscalperiodcomparedto
the2015fiscalperiod.Otheritemsaccountedforadecreaseinamortizationexpenseof$5.8million,primarilyrelatedtointangiblesthat
werefullyamortizedin2015.Theincrementalimpactfromacquisitionsresultedina$0.2millionincreaseindepreciationexpenseand
amortizationexpenseforthe2016fiscalperiodcomparedtothe2015fiscalperiod.Otheritemsaccountedforanincreaseindepreciation
expenseof$16.1million,primarilyrelatedtocapitalexpenditures.
Stockbasedcompensationexpenseincreasedby$1.7millionto$28.9millionforthe2016fiscalperiodfrom$27.2millionforthe
2015fiscalperiod.Thisincreasewasprimarilyduetoanincreaseinstockoptionexpenserelatedtoanequityawardmodificationinthe
2016fiscalperiodthiswaspartiallyoffsetbyadecreaseinexpenserecordedforthedeferredcompensationarrangementas$87.1million
waspaidinDecember2015with$37.1millionincashand$50.0millioninnotes.
EiPimplementationexpensesincreasedby$10.0millionto$37.2millionforthe2016fiscalperiodfrom$27.2millionforthe2015
fiscalperiod.Theseincreasedexpensesrepresentincreasedspendingrelatedtoanenterprisewideinitiativetooptimizeandstandardize
ourprocesses,creatingverticalintegrationofprocurement,informationtechnology,finance,accountingandhumanresources.Itincludes
theestablishmentofregionalSSOsaroundtheworld,aswellasimprovementstooursystemofinternalcontrolsoverfinancialreporting.
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ComparisonofAdjustedEBITDAfortheYearsEndedDecember31,2015,2014and2013
ThefollowingtablepresentsAdjustedEBITDAandreconcilesnetlosstoAdjustedEBITDAfortheyearsendedDecember31,2015,
2014,and2013:
(inmillions)
Netloss
Plus:
Gainonsalesofdiscontinuedoperations,
netoftax
Incomefromdiscontinuedoperations,net
oftax
Lossfromcontinuingoperations
Equityinnet(income)lossofaffiliates,net
oftax
Incometaxexpense(benefit)
(Loss)incomefromcontinuingoperations
beforeincometaxesandequityinnet
(income)lossofaffiliates
Plus:
Foreigncurrencyexchangeloss,net
Other(income)expense,net
Loss(gain)onderivatives
Interestexpense
Interestincome
Operatingincome
Plus:
EBITDA
Plus:
Stockbasedcompensationexpense(a)
Lossonimpairmentofassets(b)
EiPimplementationexpenses(c)
AdjustedEBITDA
2015
2014
2015vs.2014 2014vs.2013
2013
$ (315.8) $ (162.5) $ (85.1)
(94)%

(91)%
(4.4)
nm
(100)%

(315.8) (162.5)
(0.8)
(90.2)
nm
(94)%
(100)%
(80)%
0.9
91.2
nm
nm
122%
143%
(2.5)
117.7
(0.2)
(39.1)
(200.6) (201.7)
1.9

149.2 110.0
3.1
(0.2)
1.2
(7.5)
2.6
3.1
(6.6)
1.3
23.0
1.4
398.0 385.8 350.2
(13.3)
(21.8) (21.8)
337.0 299.5 320.7

282.9 288.3 242.7
619.9 587.8 563.4
39.0
49.2 49.5
125.8 33.6
44.5
10.7

$ 703.4 $ 773.5 $ 646.5
1%

(36)%
117%
16%
94%
(3)%
(39)%
13%

2%
5%

21%
nm
nm
(9)%
nm
nm
(116)%
(147)%
nm
(10)%
%
(7)%
(19)%
4%
1%
nm
nm
20%
(a)
(b)
(c)
Representsnoncashchargesrelatedtoimpairmentsoflonglivedassets.Forfurtherdetailsoncertainimpairment
items,see"DiscussionofSignificantItemsAffectingtheConsolidatedResultsImpairments."
financialreporting.
ComparisonofDepreciationandAmortization,StockbasedCompensationandEiPImplementationExpensesfortheYearsEnded
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ComparisonofDepreciationandAmortization,StockbasedCompensationandEiPImplementationExpensesfortheYearsEnded
December31,2015and2014
Depreciationandamortizationdecreasedby$5.4millionto$282.9millionfor2015from$288.3millionfor2014.Theeffectsof
foreigncurrencyexchangedecreaseddepreciationandamortizationexpenseby$40.7millionfor2015comparedto2014.The
incrementalimpactfromacquisitionsresultedina$5.5millionincreaseindepreciationexpenseandamortizationexpensefor2015
comparedto2014.Newcapitalexpendituresprimarilyaccountedforanincreaseindepreciation
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expenseof$25.5million.Otheritemsaccountedfortheremainingchangeinamortizationexpenseof$4.3million.
Stockbasedcompensationexpensedecreasedby$10.2millionto$39.0millionfor2015from$49.2millionfor2014.Thisdecrease
wasprimarilyduetothefollowing:(1)adecreaseinrestrictedstockawardsexpensein2015ascomparedto2014duetoaccelerated
expenserecognitionundergradedvesting,primarilyrelatedtoalargetrancheofperformancebasedrestrictedstockawardsthatvestedon
December31,2014(2)adecreaseinexpenserecordedforthedeferredcompensationarrangementas$81.0millionwaspaidinSeptember
2014and(3)adecreaseinstockoptionexpenseresultingfromamodificationchargerecordedfora30%specialvestingtranchein2014.
EiPimplementationexpensesincreasedby$33.8millionto$44.5millionfor2015from$10.7millionfor2014.Theseincreased
expensesrepresentincreasedspendingrelatedtoanenterprisewideinitiativetooptimizeandstandardizeourprocesses,creatingvertical
integrationofprocurement,informationtechnology,financing,accountingandhumanresources.Itincludestheestablishmentofregional
SSOsaroundtheworld,aswellasimprovementstooursystemofinternalcontrolsoverfinancialreporting.
ComparisonofDepreciationandAmortizationandStockbasedCompensationExpensefortheYearsEndedDecember31,2014
and2013
Depreciationandamortizationincreasedby$45.6millionto$288.3millionfor2014from$242.7millionfor2013.Theincremental
impactfromacquisitionsresultedina$14.7millionincreaseindepreciationexpensefor2014comparedto2013.Otheritemsaccounted
foranincreaseindepreciationexpenseof$34.8million,primarilyrelatedtonewcapitalexpenditures.Theincrementalimpactfrom
acquisitionsresultedina$10.9millionincreaseinamortizationexpensefor2014comparedto2013.Theeffectsofforeigncurrency
exchangedecreaseddepreciationandamortizationexpenseby$14.3millionfor2014comparedto2013.Otheritemsaccountedforthe
remainingdecreaseinamortizationexpenseof$0.5million.
Stockbasedcompensationexpensedecreasedby$0.3millionto$49.2millionfor2014from$49.5millionfor2013.Thisdecrease
wasprimarilyduetoadecreaseinstockoptionsexpenseof$9.7milliondueto:$4.0millionrecordedforanequityrestructuring
modificationinthefourthquarterof2013$4.9millionrecordedforaspecial30%performanceoptiontranchebecomingprobabletovest
during2013and$0.8millionrecordedforoptionsmodifiedin2013asaresultof2007Planperformancetargetmodification.Otheritems
accountedforadecreaseinexpenseof$0.8millionfor2014comparedto2013.Thisdecreasewasoffsetbyanincreaseinexpenserelated
torestrictedstockunitawardsof$10.2millionfor2014comparedto2013duetoanequitygrantinOctober2013.
SegmentResults
Wehavefouroperatingsegments,LatAm,Europe,AMEAandGPS.OnMay2,2016,weannouncedachangetoouroperating
segmentsinordertoalignourstructuremoregeographically.OurinstitutioninItaly,NABA,includingDomusAcademy,movedfrom
ourGPSsegmentintoourEuropesegment.MDS,locatedinNewZealand,movedfromourGPSsegmentintoourAMEAsegment.OurGPS
segmentnowfocusesonLaureate'sfullyonlineglobaloperationsandonitscampusbasedinstitutionsintheUnitedStates.Oursegment
informationforallperiodspresentedhasbeenrevisedtoreflectthischange.Wedetermineouroperatingsegmentsbasedoninformation
utilizedbyourchiefoperatingdecisionmakertoallocateresourcesandassessperformance.
reflectourbeliefthatwewillbeabletooperatetheinstitutionsinthoseoperationsmoresuccessfullyandefficientlyundercommon
management.TheCompanyiscurrentlyevaluatingtheimpactofthiscombinationonitsoperatingsegments.Allinformationinthis
prospectusispresentedconsistentlywithouroperatingsegmentsasineffectonSeptember30,2016,andonthedateofthisprospectus,
anddoesnotreflectanypossiblesegmentrealignment.
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Forpurposesofthefollowingcomparisonofresultsdiscussion,"segmentdirectcosts"representdirectcostsbysegmentastheyare
includedinAdjustedEBITDA,suchthatdepreciationandamortizationexpense,impairmentchargesonlonglivedassets,stockbased
compensationexpenseandourEiPimplementationexpenseshavebeenexcluded.Inthesegmenttablespresentedbelow,totalsegment
directcostsaresegregatedintoinstructionalandservicesandmarketingandpromotionalexpenses.Forafurtherdescriptionofour
segments,see"Overview."
SummaryComparisonofSegmentResultsfortheNineMonthsEndedSeptember30,2016and2015
Thefollowingtable,derivedfromourconsolidatedfinancialstatements,presentsselectedfinancialinformationofoursegmentsfor
theninemonthsendedSeptember30,2016and2015:
(inmillions)
2016
Revenues:
LatAm
Europe
AMEA
GPS
Corporate
ConsolidatedTotalRevenues
AdjustedEBITDA:
LatAm
Europe
AMEA
GPS
Corporate
ConsolidatedTotalAdjustedEBITDA

$ 1,738.3 $ 1,775.3
331.8
321.1
309.9
312.9
697.9
737.9
(9.5)
(6.1)
$ 3,068.3 $ 3,141.2

$ 329.4 $ 323.1
25.7
23.6
36.3
37.8
189.5
175.2
(100.3)
(83.9)
$ 480.7 $ 475.8
2015
%Change
Better/(Worse)
2016
vs.2015
(2)%
3%
(1)%
(5)%
(56)%
(2)%
2%
9%
(4)%
8%
(20)%
1%
LatAm
OperatingresultsforourLatAmsegmentfortheninemonthsendedSeptember30,2016and2015wereasfollows:
(inmillions)
2016
Segmentrevenues
Segmentdirectcosts:
Instructionalandservices
Marketingandpromotional
AdjustedEBITDA
2015
%Change
Better/(Worse)
2016vs.2015
$ 1,738.3 $ 1,775.3

1,330.1 1,368.3
78.8
83.9
$ 329.4 $ 323.1
(2)%
3%
6%
2%
ComparisonofLatAmResultsfortheNineMonthsEndedSeptember30,2016totheNineMonthsEndedSeptember30,2015
LatAmsegmentrevenuesforthe2016fiscalperioddecreasedby$37.0millionto$1,738.3million,comparedtothe2015fiscal
period.OurLatAmsegmentoperatesinseveralcountriesandissubjecttotheeffectsofforeigncurrencyexchangeratesineachofthose
countries.Forthe2016fiscalperiod,the
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effectsofcurrencytranslationsdecreasedrevenuesby$156.5million,primarilyduetotheweakeningoftheMexicanPeso,BrazilianReal,
ChileanPesoandPeruvianNuevoSolrelativetotheUSD.Onaverage,organicenrollmentexcludingacquisitionsincreasedduringthe
2016fiscalperiodby3%forthissegment,increasingrevenuesby$50.1millioncomparedtothe2015fiscalperiod.Eachinstitutionin
thesegmentofferstuitionatvariouspricesbasedupondegreeprogram.Theeffectsofproductmix,pricingandtimingresultedina
$69.4millionincreaseinrevenuescomparedtothe2015fiscalperiodthisincreasewasnetofanegativeimpacttorevenuesof
approximately$18.0millionthatoccurredasaresultofclassdisruptionsattwoofourinstitutionsinChileduringanationwidestudent
protestthatlastedseveralweeks.Theprotestbeganinthesecondquarterof2016andendedinJuly2016.Thedisruptedclassesare
anticipatedtobefullycompletebeforetheendoftheyear.LatAmrevenuesrepresented56%ofourtotalrevenuesforthe2016fiscal
periodcomparedto57%forthe2015fiscalperiod.
LatAmsegmentdirectcostsdecreasedby$43.3millionto$1,408.9million,or81%ofLatAmrevenuesforthe2016fiscalperiod,
comparedto$1,452.2million,or82%ofLatAmrevenuesforthe2015fiscalperiod.Theeffectsofcurrencytranslationsdecreased
expensesby$153.6million,primarilyduetotheweakeningoftheMexicanPeso,BrazilianReal,ChileanPesoandPeruvianNuevoSol
relativetotheUSD.Offsettingthesedirectcostsdecreases,higherenrollmentsandexpandedoperationsatourLatAminstitutions
increaseddirectcostsby$103.7millioninthe2016fiscalperiodcomparedtothe2015fiscalperiodduetoincreasedlaborcoststoservice
theenrollmentgrowth,increasedcompliancecoststoaddressregulatorychangesandincreaseddirectcostsassociatedwiththegrowthin
theLatAmsegmentduring2016.Acquisitioncontingentliabilitiesfortaxesotherthanincometax,netofchangesinrecorded
indemnificationassets,increasedexpensesby$6.6millionforthe2016fiscalperiodcomparedtothe2015fiscalperiod.
LatAmsegmentAdjustedEBITDAincreasedby$6.3millionto$329.4millioninthe2016fiscalperiodfrom$323.1millioninthe
2015fiscalperiod,asdescribedabove.
Europe
OperatingresultsforourEuropesegmentfortheninemonthsendedSeptember30,2016and2015wereasfollows:
(inmillions)
2016
Segmentrevenues
Segmentdirectcosts:
AdjustedEBITDA
2015
%Change
Better/(Worse)
2016vs.2015
$ 331.8 $ 321.1

279.1 271.5
27.0 26.0
$ 25.7 $ 23.6
3%
(3)%
(4)%
9%
ComparisonofEuropeResultsfortheNineMonthsEndedSeptember30,2016totheNineMonthsEndedSeptember30,2015
Europesegmentrevenuesforthe2016fiscalperiodincreasedby$10.7millionto$331.8million,comparedtothe2015fiscalperiod.
Theincrementalimpactofacquisitionsresultedina$3.4millionincreaseinrevenuesinthe2016fiscalperiod.Onaverage,organic
enrollmentexcludingacquisitionsincreasedduringthe2016fiscalperiodby12%forthissegment,increasingrevenuesby$27.7million
comparedtothe2015fiscalperiod.Theincrementalimpactofdispositionsdecreasedrevenuesby$11.3millioninthe2016fiscalperiod.
Forthe2016fiscalperiod,theeffectsofproductmix,pricingandtimingresultedina$1.9milliondecreaseinrevenuescomparedtothe
2015fiscalperiod.Thesegmentoperatesinseveralcountriesandissubjecttotheeffectsofforeigncurrencyexchangeratesin
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eachofthosecountries.Forthe2016fiscalperiod,theeffectsofcurrencytranslationsdecreasedrevenuesby$7.2millionduetothe
weakeningoftheTurkishLirarelativetotheUSD.Europerevenuesrepresented11%ofourtotalrevenuesforthe2016fiscalperiod
comparedto10%forthe2015fiscalperiod.
Europesegmentdirectcostsincreasedby$8.6millionto$306.1million,or92%ofEuroperevenuesforthe2016fiscalperiod,
comparedto$297.5million,or93%ofEuroperevenuesforthe2015fiscalperiod.Theincrementalimpactofacquisitionsincreased
segmentdirectcostsby$2.0millioninthe2016fiscalperiodcomparedtothe2015fiscalperiod.Higherenrollmentsandexpanded
operationsatourinstitutionsintheEuropesegmentincreaseddirectcostsby$25.3millioninthe2016fiscalperiodcomparedtothe2015
fiscalperiod,drivenprimarilybyincreasedlaborcostsandstudentsupportactivitiestoservicetheenrollmentgrowthexperiencedduring
the2016fiscalperiod.Inthe2016fiscalperiod,theincrementalimpactofdispositionsdecreaseddirectcostsby$12.7million.Theeffects
ofcurrencytranslationsdecreasedexpensesby$5.8millionduetotheweakeningoftheTurkishLirarelativetotheUSD.Acquisition
contingentliabilitiesfortaxesotherthanincometax,netofchangesinrecordedindemnificationassets,decreasedexpensesby
$0.2millionforthe2016fiscalperiodcomparedtothe2015fiscalperiod.
EuropesegmentAdjustedEBITDAincreasedby$2.1millionto$25.7millioninthe2016fiscalperiod,from$23.6millioninthe2015
fiscalperiod,asdescribedabove.
AMEA
OperatingresultsforourAMEAsegmentfortheninemonthsendedSeptember30,2016and2015wereasfollows:
(inmillions)
2016
Segmentrevenues
Segmentdirectcosts:
AdjustedEBITDA
2015
%Change
Better/(Worse)
2016vs.2015
$ 309.9 $ 312.9

244.9 250.2
28.7 24.9
$ 36.3 $ 37.8
(1)%
2%
(15)%
(4)%
ComparisonofAMEAResultsfortheNineMonthsEndedSeptember30,2016totheNineMonthsEndedSeptember30,2015
AMEAsegmentrevenuesforthe2016fiscalperioddecreasedby$3.0millionto$309.9million,comparedtothe2015fiscalperiod.
Thesegmentoperatesinseveralcountriesandissubjecttotheeffectsofforeigncurrencyexchangeratesineachofthosecountries.Forthe
2016fiscalperiod,theeffectsofcurrencytranslationsdecreasedrevenuesby$14.7million,primarilyduetotheweakeningofthe
MalaysianRinggit,SouthAfricanRand,IndianRupee,ChineseRenminbiandAustralianDollarrelativetotheUSD.Onaverage,organic
enrollmentexcludingacquisitionsincreasedduringthe2016fiscalperiodby5%forthissegment,increasingrevenuesby$2.8million
comparedtothe2015fiscalperiod.Forthe2016fiscalperiod,theeffectsofproductmix,pricingandtimingresultedinan$8.9million
increaseinrevenuescomparedtothe2015fiscalperiod.AMEArevenuesrepresented10%ofourtotalrevenuesforthe2016and2015
fiscalperiods.
AMEAsegmentdirectcostsdecreasedby$1.5millionto$273.6million,or88%ofAMEArevenuesforthe2016fiscalperiod,
comparedto$275.1million,or88%ofAMEArevenuesforthe2015fiscalperiod.Forthe2016fiscalperiod,theeffectsofcurrency
translationsdecreasedexpensesby$13.2million,primarilyduetotheweakeningoftheMalaysianRinggit,SouthAfricanRand,Indian
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Rupee,ChineseRenminbiandAustralianDollarrelativetotheUSD.Increasedcoststosupportthegrowthinouroperationsincreased
costsby$11.7millioninthe2016fiscalperiodcomparedtothe2015fiscalperiod.
AMEAsegmentAdjustedEBITDAdecreasedby$1.5millionto$36.3millioninthe2016fiscalperiod,from$37.8millioninthe2015
fiscalperiod,asdescribedabove.
GPS
OperatingresultsforourGPSsegmentfortheninemonthsendedSeptember30,2016and2015wereasfollows:
(inmillions)
2016
Segmentrevenues
Segmentdirectcosts:
AdjustedEBITDA
2015
697.9
404.2
104.2
189.5
%Change
Better/(Worse)
2016vs.2015
$ 737.9

470.9
91.8
$ 175.2
(5)%
14%
(14)%
8%
ComparisonofGPSResultsfortheNineMonthsEndedSeptember30,2016totheNineMonthsEndedSeptember30,2015
GPSsegmentrevenuesforthe2016fiscalperioddecreasedby$40.0millionto$697.9million,comparedtothe2015fiscalperiod.
Theincrementalimpactofdispositionsdecreasedrevenuesby$46.0millioninthe2016fiscalperiod.Theeffectsofcurrencytranslations
decreasedrevenuesby$2.6millioninthe2016fiscalperiod,comparedtothe2015fiscalperiod,primarilyduetotheweakeningofthe
SwissFrancrelativetotheUSD.Onaverage,organicenrollmentexcludingacquisitionsincreasedduringthe2016fiscalperiodby2%,
increasingrevenuesby$6.9millioncomparedtothe2015fiscalperiod.Forthe2016fiscalperiod,theeffectsofproductmix,pricingand
timingresultedina$1.7millionincreaseinrevenuescomparedtothe2015fiscalperiod.GPSsegmentrevenuesrepresented23%ofour
totalrevenuesforthe2016and2015fiscalperiods.
GPSsegmentdirectcostsdecreasedby$54.3millionto$508.4million,or73%oftotalGPSsegmentrevenuesforthe2016fiscal
period,comparedto$562.7million,or76%oftotalGPSsegmentrevenuesforthe2015fiscalperiod.Inthe2016fiscalperiod,the
incrementalimpactofdispositionsdecreaseddirectcostsby$46.0million.Theeffectsofcurrencytranslationsdecreasedsegmentdirect
costsby$2.4millioninthe2016fiscalperiodcomparedtothe2015fiscalperiod,duetotheweakeningoftheSwissFrancrelativetothe
USD.GPSdirectcostsdecreasedby$7.0millionforthe2016fiscalperiodcomparedtothe2015fiscalperiod,primarilyaresultofcost
reductionsatthesharedservicecenter.Higherenrollmentsandexpandedoperations,partiallyoffsetbydecreasedexpensesfromthe
closureofNHUinAugust2015,increasedexpensesby$1.1millionduringthe2016fiscalperiodcomparedtothe2015fiscalperiod.
GPSsegmentAdjustedEBITDAincreasedby$14.3millionto$189.5millionforthe2016fiscalperiod,from$175.2millionforthe
2015fiscalperiod,asdescribedabove.
Corporate
CorporaterevenuesrepresentamountsfromcontractualarrangementswithUDLAEcuador,ourconsolidatedjointventurewiththe
UniversityofLiverpoolandCorporatebillingsforcentralizedITcostsbilledtovarioussegments,offsetbytheeliminationofinter
segmentrevenues.
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OperatingresultsforCorporatefortheninemonthsendedSeptember30,2016and2015wereasfollows:
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(inmillions)
2016
Revenues
Expenses
AdjustedEBITDA
2015
%Change
Better/(Worse)
2016vs.2015
$
(9.5) $ (6.1)

90.8 77.8
$ (100.3) $ (83.9)
(56)%
(17)%
(20)%
ComparisonofCorporateResultsfortheNineMonthsEndedSeptember30,2016totheNineMonthsEndedSeptember30,2015
CorporateAdjustedEBITDAdecreasedby$16.4millionto$(100.3)millionforthe2016fiscalperiod,comparedto$(83.9)million
forthe2015fiscalperiod.ThisdecreaseinAdjustedEBITDAprimarilyresultedfromincreasesinconsultingandlaborcostsof
$17.8million,partiallyoffsetbyotheritemsof$1.4million.
SummaryComparisonofSegmentResultsfortheYearsEndedDecember31,2015,2014and2013
Thefollowingtable,derivedfromourconsolidatedfinancialstatements,presentsselectedfinancialinformationofoursegmentsfor
theyearsendedDecember31,2015,2014,and2013:
(inmillions)
Revenues:
LatAm
Europe
AMEA
GPS
Corporate
ConsolidatedTotalRevenues
AdjustedEBITDA:
LatAm
Europe
AMEA
GPS
Corporate
ConsolidatedTotalAdjustedEBITDA
2015
2014
2015vs.2014 2014vs.2013
2013

$ 2,415.6 $ 2,532.5 $ 2,340.9
486.2
533.9
501.4
422.1
405.6
202.3
979.9
954.5
872.4
(12.3)
(11.7)
(3.1)
$ 4,291.7 $ 4,414.7 $ 3,913.9

$ 463.7 $ 542.0 $ 466.7
78.4
72.8
72.7
49.9
30.1
(4.8)
226.8
223.0
205.6
(115.4)
(94.4)
(93.7)
$ 703.4 $ 773.5 $ 646.5

(5)%
(9)%
4%
3%
(5)%
(3)%

(14)%
8%
66%
2%
(22)%
(9)%
8%
6%
100%
9%
nm
13%
16%
%
nm
8%
(1)%
20%
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LatAm
OperatingresultsforourLatAmsegmentfortheyearsendedDecember31,2015,2014,and2013wereasfollows:
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(inmillions)
2015
2014
2015vs.2014 2014vs.2013
2013
Segmentrevenues
Segmentdirectcosts:
AdjustedEBITDA
$ 2,415.6 $ 2,532.5 $ 2,340.9

1,837.9 1,868.5 1,755.6
114.0
122.0
118.6
$ 463.7 $ 542.0 $ 466.7
(5)%
2%
7%
(14)%
8%
(6)%
(3)%
16%
ComparisonofLatAmResultsfortheYearEndedDecember31,2015totheYearEndedDecember31,2014
LatAmsegmentrevenuesfor2015decreasedby$116.9millionto$2,415.6million,comparedto2014.OurLatAmsegmentoperates
inseveralcountriesandissubjecttotheeffectsofforeigncurrencyexchangeratesineachofthosecountries.For2015,theeffectsof
currencytranslationsdecreasedrevenuesby$512.1million,primarilyduetotheweakeningoftheBrazilianReal,MexicanPeso,Chilean
Peso,PeruvianNuevoSolandHonduranLempirarelativetotheUSD.Theincrementalimpactofacquisitionsresultedina$106.1million
increaseinrevenuesin2015.Onaverage,organicenrollmentexcludingacquisitionsincreasedduring2015by7%forthissegment,
increasingrevenuesby$169.0millioncomparedto2014.Eachinstitutioninthesegmentofferstuitionatvariouspricesbasedupon
degreeprogram.For2015,theeffectsofproductmix,pricingandtimingresultedina$120.1millionincreaseinrevenuescomparedto
2014.LatAmrevenuesrepresented56%ofourtotalrevenuesfor2015comparedto57%for2014.
LatAmsegmentdirectcostsdecreasedby$38.6millionto$1,951.9million,or81%ofLatAmrevenuesfor2015,comparedto
$1,990.5million,or79%ofLatAmrevenuesfor2014.Theeffectsofcurrencytranslationsdecreasedexpensesby$394.9million,
primarilyduetotheweakeningoftheBrazilianReal,MexicanPeso,ChileanPeso,PeruvianNuevoSolandHonduranLempirarelativeto
theUSD.Employeeterminationcostswere$5.4millionin2015and$11.5millionin2014,whichresultedinadecreaseyearoveryearof
$6.1million.
Offsettingthesedirectcostsdecreases,theincrementalimpactofacquisitionsincreasedsegmentdirectcostsby$97.1millionin2015
comparedto2014.HigherenrollmentsandexpandedoperationsatourLatAminstitutionsincreaseddirectcostsby$213.5millionin
2015comparedto2014duetoincreasedlaborcoststoservicetheenrollmentgrowth,increasedcompliancecoststoaddressregulatory
changesandincreaseddirectcostsassociatedwiththegrowthintheLatAmsegmentduring2015.Acquisitioncontingentliabilitiesfor
taxesotherthanincometax,netofchangesinrecordedindemnificationassets,increasedexpensesby$10.1millionfor2015comparedto
2014.WerecordedanincreaseindirectcostsforaprofitsharingplaninMexicoof$0.9millionin2015andadecreaseindirectcostsof
$22.8millionin2014,therebyincreasingcostsby$23.7millionin2015comparedto2014.Additionallyduring2014,werecordeda
benefitof$11.3millionrelatedtothesettlementofapreacquisitionlosscontingencyafterreceivingafavorablecourtruling.In2014,we
reachedanarbitrationsettlementrelatedtoindemnificationclaimswiththeformerownersinBrazilandrecordedagainof$6.7million.
LatAmsegmentAdjustedEBITDAdecreasedby$78.3millionto$463.7millionin2015from$542.0millionin2014,asdescribed
above.
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ComparisonofLatAmResultsfortheYearEndedDecember31,2014totheYearEndedDecember31,2013
LatAmsegmentrevenuesfor2014increasedby$191.6millionto$2,532.5million,comparedto2013.Theincrementalimpactof
acquisitionsresultedina$77.2millionincreaseinrevenuesin2014.Onaverage,organicenrollmentexcludingacquisitionsincreased
during2014by10%forthissegment,increasingrevenuesby$201.7millioncomparedto2013.Eachinstitutioninthesegmentoffers
tuitionatvariouspricesbaseduponthedegreeprogram.For2014,theeffectsofproductmix,pricingandtimingresultedina
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tuitionatvariouspricesbaseduponthedegreeprogram.For2014,theeffectsofproductmix,pricingandtimingresultedina
$105.5millionincreaseinrevenuescomparedto2013.Additionally,asettlementintheformoftuitiondiscountsdecreasedrevenuesin
ourLatAmsegmentby$10.1millionin2013.OurLatAmsegmentoperatesinseveralcountriesandissubjecttotheeffectsofforeign
currencyexchangeratesineachofthosecountries.For2014,theeffectsofcurrencytranslationsdecreasedrevenuesby$202.9million,
primarilyduetotheweakeningoftheChileanPeso,BrazilianReal,MexicanPeso,PeruvianNuevoSolandCostaRicanColnrelativeto
theUSD.LatAmrevenuesrepresented57%ofourtotalrevenuesfor2014comparedto60%for2013.
LatAmsegmentdirectcostsincreasedby$116.3millionto$1,990.5million,or79%ofLatAmrevenuesfor2014,comparedto
$1,874.2million,or80%ofLatAmrevenuesfor2013.Theincrementalimpactofacquisitionsincreasedsegmentdirectcostsby
$66.8millionin2014comparedto2013.HigherenrollmentsandexpandedoperationsatourLatAminstitutionscontributedto
$254.1millionoftheincreasedexpensesduring2014comparedto2013dueto:increasedlaborcoststoservicetheenrollmentgrowth,
increasedcompliancecoststoaddressregulatorychangesandincreaseddirectcostsassociatedwiththegrowthintheLatAmsegment
during2014.Acquisitioncontingentliabilitiesfortaxesotherthanincometax,netofchangesinrecordedindemnificationassets,
increasedexpensesby$3.2millionfor2014comparedto2013.Employeeterminationcostsrelatedtoareductioninforceincreaseddirect
costsby$11.5millionfor2014.
Offsettingthesedirectcostsincreases,theeffectsofcurrencytranslationsdecreasedexpensesby$160.1million,primarilyduetothe
weakeningoftheChileanPeso,BrazilianReal,MexicanPeso,PeruvianNuevoSolandCostaRicanColnrelativetotheUSD.In2013,
werecordedtheinitialestablishmentofaprofitsharingplaninMexico,increasingexpenseby$8.4million.During2014,werecordeda
decreaseindirectcostsof$22.8millionforthisprofitsharingplan.Additionallyduring2014,werecordedabenefitof$11.3million
relatedtothesettlementofapreacquisitionlosscontingencyafterreceivingafavorablecourtruling.In2014,wereachedanarbitration
settlementrelatedtoindemnificationclaimswiththeformerownersinBrazilandrecordedagainof$6.7million.In2013,werevisedan
estimateforaBraziltaxmatter,resultinginadditionalexpenseof$3.8million.TheplannedMarch2013openingofanewcampus
buildingforUNABinChilewasdelayedandadditionalexpensesof$6.2millionwereincurredin2013torenttemporaryfacilitiesand
operatethemasclassrooms.
LatAmsegmentAdjustedEBITDAincreasedby$75.3millionto$542.0millionin2014from$466.7millionin2013,asdescribed
above.
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Europe
OperatingresultsforourEuropesegmentfortheyearsendedDecember31,2015,2014and2013wereasfollows:
(inmillions)
Segmentrevenues
Segmentdirectcosts:
2015
2014
2013
$ 486.2 $ 533.9 $ 501.4

2015vs.2014
2014vs.2013
(9)%

6%
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AdjustedEBITDA
374.3 426.2 392.3

33.5 34.9 36.4
$ 78.4 $ 72.8 $ 72.7
12%
4%
8%
(9)%
4%
%
ComparisonofEuropeResultsfortheYearEndedDecember31,2015totheYearEndedDecember31,2014
Europesegmentrevenuesfor2015decreasedby$47.7millionto$486.2million,comparedto2014.Thesegmentoperatesinseveral
countriesandissubjecttotheeffectsofforeigncurrencyexchangeratesineachofthosecountries.For2015,theeffectsofcurrency
translationsdecreasedrevenuesby$97.0millionduetotheweakeningoftheEuroandTurkishLirarelativetotheUSD.Theincremental
impactofacquisitionsresultedinan$8.2millionincreaseinrevenuesin2015.Onaverage,organicenrollmentexcludingacquisitions
increasedduring2015by10%forthissegment,increasingrevenuesby$35.5millioncomparedto2014.For2015,theeffectsofproduct
mix,pricingandtimingresultedina$5.6millionincreaseinrevenuescomparedto2014.Europerevenuesrepresented11%ofourtotal
revenuesfor2015comparedto12%for2014.
Europesegmentdirectcostsdecreasedby$53.3millionto$407.8million,or84%ofEuroperevenuesfor2015,comparedto
$461.1million,or86%ofEuroperevenuesfor2014.Theeffectsofcurrencytranslationsdecreasedexpensesby$82.1millionduetothe
weakeningoftheEuroandTurkishLirarelativetotheUSD.Duringthefourthquarterof2014,werecordedanoperatingexpenseof
$18.0millionforadonationtoafoundationforaninitiativesupportedbytheTurkishgovernment.Employeeterminationcostswere
$4.1millionin2015and$4.7millionin2014,whichresultedinadecreaseyearoveryearof$0.6millionin2015comparedto2014.
Offsettingthesedirectcostdecreases,theincrementalimpactofacquisitionsincreasedsegmentdirectcostsby$6.5millionin2015
comparedto2014.HigherenrollmentsandexpandedoperationsatourinstitutionsintheEuropesegmentincreaseddirectcostsby
$40.9millionin2015comparedto2014,drivenprimarilybyincreasedlaborcostsandstudentsupportactivitiestoservicetheenrollment
growthexperiencedduring2015.
EuropesegmentAdjustedEBITDAincreasedby$5.6millionto$78.4millionin2015,from$72.8millionin2014,asdescribed
above.
ComparisonofEuropeResultsfortheYearEndedDecember31,2014totheYearEndedDecember31,2013
Europesegmentrevenuesfor2014increasedby$32.5millionto$533.9million,comparedto2013.Theincrementalimpactof
during2014by9%forthissegment,increasingrevenuesby$32.8millioncomparedto2013.For2014,theeffectsofproductmix,pricing
andtimingresultedina$6.9millionincreaseinrevenuescomparedto2013.Thesegmentoperatesinseveralcountriesandissubjectto
theeffectsofforeigncurrencyexchangeratesineachofthosecountries.For2014,theeffectsofcurrencytranslationsdecreasedrevenues
by$17.1millionduetotheweakeningoftheTurkishLiraandtheEurorelativetotheUSD.Europerevenuesrepresented12%ofourtotal
revenuesfor2014comparedto13%for2013.
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Europesegmentdirectcostsincreasedby$32.4millionto$461.1million,or86%ofEuroperevenuesfor2014,comparedto
$428.7million,or86%ofEuroperevenuesfor2013.Theincrementalimpactofacquisitionsincreasedsegmentdirectcostsby
$8.8millionin2014comparedto2013.HigherenrollmentsandexpandedoperationsatourinstitutionsintheEuropesegment
contributedto$21.4millionoftheincreasedexpensesduring2014comparedto2013,drivenprimarilybyincreasedlaborcostsand
studentsupportactivitiestoservicetheenrollmentgrowthexperiencedduring2014.Duringthefourthquarterof2014,werecordedan
operatingexpenseof$18.0millionforadonationtoafoundationforaninitiativesupportedbytheTurkishgovernment.Employee
terminationcostsrelatedtoareductioninforceincreaseddirectcostsby$4.7millionfor2014.Wealsoexitedaleasedfacilityatone
institutioninEuropeandasaresultreceivedanearlyterminationsettlementof$4.8million,whichdecreaseddirectcostsin2013,and
recordeda$2.5milliongainontheterminationofasaleleasebackarrangementin2013.
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For2014,theeffectsofcurrencytranslationsdecreasedexpensesby$13.4millionduetotheweakeningoftheTurkishLiraandthe
EurorelativetotheUSD.Changesincontingentliabilitiesfortaxesotherthanincometax,netofchangesinrecordedindemnification
assets,decreasedexpensesby$0.5millionfor2014comparedto2013.During2013,werecorded$11.8millionforasocialsecuritytax
matterfortheyears2009through2012,whichincreaseddirectcostsfor2013.In2014,wereversed$2.1millionofthesocialsecuritytax
liabilityduetostatuteoflimitationsexpirations.
EuropesegmentAdjustedEBITDAincreasedby$0.1millionto$72.8millionin2014,from$72.7millionin2013,asdescribed
above.
AMEA
OperatingresultsforourAMEAsegmentfortheyearsendedDecember31,2015,2014,and2013wereasfollows:
(inmillions)
Segmentrevenues
Segmentdirectcosts:
AdjustedEBITDA
2015
2014
2015vs.2014
2014vs.2013
2013
$ 422.1 $ 405.6 $ 202.3

337.5 343.0 191.2
34.7 32.5 15.9
$ 49.9 $ 30.1 $ (4.8)
4%
2%
(7)%
66%
100%
(79)%
(104)%
nm
ComparisonofAMEAResultsfortheYearEndedDecember31,2015totheYearEndedDecember31,2014
AMEAsegmentrevenuesfor2015increasedby$16.5millionto$422.1million,comparedto2014.Theincrementalimpactof
during2015by9%forthissegment,increasingrevenuesby$65.7millioncomparedto2014.For2015,theeffectsofproductmix,pricing
andtimingresultedina$4.0millionincreaseinrevenuescomparedto2014.Thesegmentoperatesinseveralcountriesandissubjectto
theeffectsofforeigncurrencyexchangeratesineachofthosecountries.For2015,theeffectsofcurrencytranslationsdecreasedrevenues
by$53.7million,primarilyduetotheweakeningoftheAustralianDollar,MalaysianRinggit,SouthAfricanRandandIndianRupee
relativetotheUSD.AMEArevenuesrepresented10%ofourtotalrevenuesfor2015comparedto9%for2014.
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AMEAsegmentdirectcostsdecreasedby$3.3millionto$372.2million,or88%ofAMEArevenuesfor2015,comparedto
$375.5million,or93%ofAMEArevenuesfor2014.For2015,theeffectsofcurrencytranslationsdecreasedexpensesby$46.0million,
primarilyduetotheweakeningoftheAustralianDollar,MalaysianRinggit,SouthAfricanRand,andIndianRupeerelativetotheUSD.In
2014,wedetermineditwasprobablethatTHINKwouldmeetperformancetargetsthatwerepartofasharepurchaseagreementandaccrued
foracontingentearnoutof$3.8million.Additionally,during2014,HIEUrecordeda$4.4millionlossondisposalofpropertytowriteoff
thecarryingvalueofseveralparcelsoflandforwhichitnolongerhaslanduserights.Theincrementalimpactofacquisitionsincreased
segmentdirectcostsby$1.3millionin2015comparedto2014.Increasedcoststosupportthegrowthinouroperationsincreasedcostsby
$44.2millionin2015comparedto2014.In2014,anentityinSaudiArabiareceivedabenefitof$2.8million,primarilyrelatedtocash
paymentsreceivedforfullyreservedreceivables.Employeeterminationcostsincreaseddirectcostsby$2.5millionin2015.Changesin
contingentliabilitiesfortaxesotherthanincometax,netofchangesinrecordedindemnificationassets,increasedexpensesby
$0.1millionfor2015comparedto2014.
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AMEAsegmentAdjustedEBITDAincreasedby$19.8millionto$49.9millionin2015,from$30.1millionin2014,asdescribed
above.
ComparisonofAMEAResultsfortheYearEndedDecember31,2014totheYearEndedDecember31,2013
AMEAsegmentrevenuesfor2014increasedby$203.3millionto$405.6million,comparedto2013.Theincrementalimpactof
during2014by19%forthissegment,increasingrevenuesby$71.5millioncomparedto2013.For2014,theeffectsofproductmix,
pricingandtimingresultedina$0.5millionincreaseinrevenuescomparedto2013.Thesegmentoperatesinseveralcountriesandis
subjecttotheeffectsofforeigncurrencyexchangeratesineachofthosecountries.For2014,theeffectsofcurrencytranslationsdecreased
revenuesby$6.6millionduetotheweakeningoftheMalaysianRinggit,AustralianDollar,IndianRupeeandThaiBahtrelativetothe
USD.AMEArevenuesrepresented9%ofourtotalrevenuesfor2014comparedto5%for2013.
AMEAsegmentdirectcostsincreasedby$168.4millionto$375.5million,or93%ofAMEArevenuesfor2014,comparedto
$207.1million,or102%ofAMEArevenuesfor2013.Theincrementalimpactofacquisitionsincreasedsegmentdirectcostsby
$115.1millionin2014comparedto2013.Increasedcoststosupportthegrowthinouroperationscontributedto$55.0millionofthe
increasedexpensesduring2014comparedto2013.In2014,wedetermineditwasprobablethatTHINKwouldmeetperformancetargets
thatwerepartofasharepurchaseagreementandaccruedforacontingentearnoutof$3.8million.Additionally,HIEUrecordeda
$4.4millionlossondisposalofpropertytowriteoffthecarryingvalueofseveralparcelsoflandforwhichitnolongerhaslanduserights.
In2014,anentityintheKingdomofSaudiArabiareceivedabenefitof$2.8million,primarilyrelatedtocashpaymentsreceivedforfully
reservedreceivables.For2014,theeffectsofcurrencytranslationsdecreasedexpensesby$7.0million,primarilyduetotheweakeningof
theMalaysianRinggit,AustralianDollar,IndianRupeeandThaiBahtrelativetotheUSD.Changesincontingentliabilitiesfortaxes
otherthanincometax,netofchangesinrecordedindemnificationassets,decreasedexpensesby$0.1millionfor2014comparedto2013.
AMEAsegmentAdjustedEBITDAincreasedby$34.9millionto$30.1millionin2014,from$(4.8)millionin2013,asdescribed
above.
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GPS
OperatingresultsforourGPSsegmentfortheyearsendedDecember31,2015,2014and2013wereasfollows:
(inmillions)
Segmentrevenues
Segmentdirectcosts:
AdjustedEBITDA
2015
979.9
627.8
125.3
226.8
2014
954.5
602.3
129.2
223.0
2015vs.2014
2014vs.2013
2013
872.4
521.2
145.6
205.6
3%
(4)%
3%
2%
9%
(16)%
11%
8%
ComparisonofGPSResultsfortheYearEndedDecember31,2015totheYearEndedDecember31,2014
GPSsegmentrevenuesfor2015increasedby$25.4millionto$979.9million,comparedto2014.Onaverage,organicenrollment
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GPSsegmentrevenuesfor2015increasedby$25.4millionto$979.9million,comparedto2014.Onaverage,organicenrollment
excludingacquisitionsincreasedduring2015by3%,increasingrevenuesby$29.6millioncomparedto2014.For2015,theeffectsof
productmix,pricingandtimingresultedinan$21.1millionincreaseinrevenuescomparedto2014.For2015,theeffectsofcurrency
translationsdecreasedrevenuesby$26.1million,primarilyduetotheweakeningoftheEuroandSwissFrancrelativetotheUSD.GPS
SharedServiceandEliminationsrevenueincreasedby$0.8millionfor2015comparedto2014duetoincreasesinintersegmentrevenues
relatedtoamanagementservicearrangement.GPSsegmentrevenuesrepresented23%ofourtotalrevenuesfor2015comparedto22%for
2014.
GPSsegmentdirectcostsincreasedby$21.6millionto$753.1million,or77%oftotalGPSsegmentrevenuesfor2015,comparedto
$731.5million,or77%oftotalGPSsegmentrevenuesfor2014.Higherenrollmentsandexpandedoperationscontributedto$53.2million
oftheincreasedexpensesduring2015comparedto2014.Directcostsincludedemployeeterminationcostsof$3.2millionin2015and
$1.8millionin2014,resultinginayearoveryeardirectcostincreaseof$1.4million.Theeffectsofcurrencytranslationsdecreased
segmentdirectcostsby$24.2millionin2015,comparedto2014,duetotheweakeningoftheEuroandSwissFrancrelativetotheUSD.In
connectionwithateachoutatNHU,werecordedcostsof$6.6millionfor2014toensureanorderlyandsuccessfultransitionforour
students.GPSdirectcostsdecreasedby$2.2millionfor2015comparedto2014relatedtotheoperationofthesharedservicecenter.
GPSsegmentAdjustedEBITDAincreasedby$3.8millionto$226.8millionfor2015,from$223.0millionfor2014,asdescribed
above.
ComparisonofGPSResultsfortheYearEndedDecember31,2014totheYearEndedDecember31,2013
GPSsegmentrevenuesfor2014increasedby$82.1millionto$954.5million,comparedto2013.Theincrementalimpactof
acquisitionsresultedina$50.9millionincreaseinrevenuesfor2014.Onaverage,organicenrollmentexcludingacquisitionsincreased
during2014by1%,increasingrevenuesby$9.3millioncomparedto2013.For2014,theeffectsofproductmix,pricingandtiming
resultedina$20.8millionincreaseinrevenuescomparedto2013.For2014,theeffectsofcurrencytranslationsincreasedrevenuesby
$1.8million,primarilyduetothestrengtheningoftheSwissFrancrelativetotheUSD.GPSSharedServiceandEliminationsrevenue
decreased$0.7millionfor2014comparedto2013duetodecreasesinintersegmentrevenuesrelatedtoamanagementservice
arrangement.GPSsegmentrevenuesrepresented22%ofourtotalrevenuesfor2014and2013.
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GPSsegmentdirectcostsincreasedby$64.7millionto$731.5million,or77%oftotalGPSsegmentrevenuesfor2014,comparedto
$666.8million,or76%oftotalGPSsegmentrevenuesfor2013.Theincrementalimpactofacquisitionsincreasedsegmentdirectcostsby
$26.2millionfor2014comparedto2013.Higherenrollmentsandexpandedoperationscontributedto$27.3millionoftheincreased
expensesduring2014comparedto2013.Theeffectsofcurrencytranslationsincreasedsegmentdirectcostsby$1.5millionfor2014,
comparedto2013,duetothestrengtheningoftheSwissFrancrelativetotheUSD.InconnectionwithateachoutatNHU,werecorded
costsof$6.6millionfor2014toensureanorderlyandsuccessfultransitionforourstudents.Employeeterminationcostsrelatedtoa
reductioninforceincreaseddirectcostsby$1.8millionfor2014.GPSdirectcostsincreasedby$1.3millionfor2014comparedto2013
relatedtotheoperationofthesharedservicecenter.
GPSsegmentAdjustedEBITDAincreasedby$17.4millionto$223.0millionfor2014,from$205.6millionfor2013,asdescribed
above.
Corporate
CorporaterevenuesrepresentamountsfromcontractualarrangementswithUDLAEcuador,ourconsolidatedjointventurewiththe
UniversityofLiverpoolandCorporatebillingsforcentralizedITcostsbilledtovarioussegments,offsetbytheeliminationofinter
segmentrevenues.
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segmentrevenues.
OperatingresultsforCorporatefortheyearsendedDecember31,2015,2014and2013wereasfollows:
(inmillions)
Revenues
Expenses
AdjustedEBITDA
2015
2014
2015vs.2014
2014vs.2013
2013
$ (12.3) $ (11.7) $ (3.1)

103.1 82.7 90.6
$ (115.4) $ (94.4) $ (93.7)
(5)%
(25)%
(22)%
nm
9%
(1)%
ComparisonofCorporateResultsfortheYearEndedDecember31,2015totheYearEndedDecember31,2014
CorporateAdjustedEBITDAdecreasedby$21.0millionto$(115.4)millionfor2015,comparedto$(94.4)millionfor2014.This
decreaseinAdjustedEBITDAresultsprimarilyfromanincreaseinlaborcostsof$14.5millioncombinedwith$4.8millionofproceedsin
2014forthesettlementofearthquakerelatedinsuranceclaims.Additionally,in2015,werecognizedemployeeterminationcostsof
$0.3million.Otheritemsaccountedforachangeof$1.4million.
ComparisonofCorporateResultsfortheYearEndedDecember31,2014totheYearEndedDecember31,2013
CorporateAdjustedEBITDAdecreasedby$0.7millionto$(94.4)millionfor2014,comparedto$(93.7)millionfor2013.This
decreaseinAdjustedEBITDAresultsfromanincreaseinlaborcostsof$9.5million.Thisdecreasewaspartiallyoffsetbya$4.8million
gainrecordedforthesettlementofearthquakerelatedinsuranceclaimsand$1.9millionfordebtmodificationcostsincurredfor2013.
Otheritemsaccountedforachangeof$2.1million.
QuarterlyResultsofOperationsData
Thefollowingtablerepresentsdatafromourunauditedstatementsofoperationsforourmostrecentelevenquarters.Youshouldread
thefollowingtableinconjunctionwithourconsolidated
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TableofContents
financialstatementsandrelatednotesappearingelsewhereinthisprospectus.Theresultsofoperationsofanyquarterarenotnecessarily
indicativeoftheresultsthatmaybeexpectedforanyfutureperiod.
ThreeMonthsEnded
September30, June30, March31, December31, September30, June30, March31, December31, September30, June30, March31,
2016
2015
2015
2014
2014
2016 2016
2015 2015
2014 2014
$
929.9$ 1,231.9$
906.5$
1,150.5$
985.4$ 1,270.2$
885.6$
1,329.2$
968.9$ 1,238.5$
878.1
(inmillions)
Revenues
Operatingcosts
andexpenses
Operating
income(loss)
Income(loss)
from
continuing
operations
Less:Netloss
(income)
attributableto
noncontrolling
interests
Netincome
(loss)
attributableto
Laureate
Education,
917.4 1,021.3
917.7
1,025.6
952.1 1,037.5
939.5
1,208.3
1,004.5 1,001.0
901.4
33.3$ 232.6$
(53.9)$
120.9$
(35.6)$ 237.5$
(23.3)
(195.7)$ 109.0$
(123.4)
12.5
210.6
(11.2)
124.9$
80.9
349.2
(102.4)
(16.1)$
(130.4)$
56.9$
(226.2)$
47.6$
5.4
(1.8)
(0.7)
(0.5)
1.8
(1.9)
0.2
(0.7)
2.3
(0.8)
3.4
159/620
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Education,
Inc.
86.3$ 347.4$
(103.2)$
(16.7)$
(128.6)$
55.1$
(226.0)$
47.0$
(193.4)$ 108.2$
(120.0)
ThefollowingtablepresentsAdjustedEBITDAandreconcilesnetincome(loss)toAdjustedEBITDAforourmostrecenteleven
quarters.
ThreeMonthsEnded
September30, June30, March31, December31, September30, June30, March31, December31, September30, June30, March31,
(inmillions)
2016
2015
2015
2014
2014
2016 2016
2015 2015
2014 2014
Netincome(loss)$
80.9$ 349.2$ (102.4)$
(16.1)$
(130.4)$ 56.9$ (226.2)$
47.6$
(195.7)$ 109.0$ (123.4)
Plus:
Equityinnet
(income)loss
ofaffiliates,net
oftax
(0.3)
0.3
(0.4)
(0.3)
(1.8)
(0.3)
0.1
(0.6)
0.6
Incometax
(benefit)
expense
(3.1)
28.4
10.0
36.1
5.9
84.0
(8.3)
(93.5)
1.0
46.8
6.5
Income(loss)
from
continuing
operations
beforeincome
taxesand
equityinnet
(income)loss
ofaffiliates
77.8 377.4
(92.2)
19.6
(124.5) 140.6
(236.4)
(46.1)
(194.6) 155.3
(116.3)
Plus:
Gainonsaleof
subsidiaries,
net(a)
(155.2) (243.3)
Foreigncurrency
exchange(gain)
loss,net
(26.3) (26.3)
(27.7)
9.8
57.0
(4.0)
86.4
37.7
67.1
(4.8)
10.0
Other(income)
expense,net
(0.4)
1.3
1.1
(0.1)
(1.3)
0.1
1.1
0.2
(0.5)
0.4
(Gain)losson
derivatives
(0.5)
(2.0)
10.8
1.4
0.9
0.3
1.1
(0.3)
2.0
0.3
Lossondebt
extinguishment
15.7
1.7
0.3
0.9
23.0
Interestexpense
104.8 105.8
103.8
97.9
102.9
99.1
98.2
106.6
97.2
92.3
89.6
Interestincome
(3.4)
(4.1)
(5.8)
(3.4)
(3.8)
(2.7)
(3.5)
(2.5)
(5.2)
(6.8)
(7.3)
Operatingincome
(loss)
12.5 210.6
(11.2)
124.9
33.3 232.6
(53.9)
120.9
(35.6) 237.5
(23.3)
Plus:
Depreciationand
amortization
66.8
69.7
66.2
73.6
70.2
69.8
69.3
77.4
73.1
71.3
66.6
EBITDA
79.3 280.3
55.0
198.5
103.5 302.5
15.4
198.3
37.5 308.8
43.3
Plus:
Stockbased
compensation
expense(b)
8.0
13.7
7.2
11.8
8.3
8.6
10.4
12.4
13.0
12.9
10.9
Losson
impairmentof
assets(c)
109.3
16.4
0.1
EiP
implementation
expenses(d)
11.2
14.2
11.8
17.3
6.8
11.4
9.0
8.1
2.0
0.4
0.2
Adjusted
EBITDA
$
98.5$ 308.2$
74.0$
227.5$
118.6$ 322.5$
34.8$
328.1$
68.9$ 322.1$
54.5
(a)
(b)
(c)
(d)
Representsagainofapproximately$249.1million,subjecttocertainadjustments,resultingfromtheSwissInstitutionSalethatclosedonJune14,2016,
andagainofapproximately$149.0million,subjecttocertainadjustments,resultingfromtheFrenchInstitutionSalethatclosedonJuly20,2016.
Representsnoncashchargesrelatedtoimpairmentsoflonglivedassets.Forfurtherdetailsoncertainimpairmentitems,see"DiscussionofSignificant
ItemsAffectingtheConsolidatedResultsImpairments."
EiPimplementationexpensesarerelatedtoourenterprisewideinitiativetooptimizeandstandardizeourprocesses,creatingverticalintegrationof
procurement,informationtechnology,finance,accountingandhumanresources,whichbeganin2014andisexpectedtobesubstantiallycompletedbythe
endof2017.EiPincludestheestablishmentofregionalSSOsaroundtheworld,aswellasimprovementstooursystemofinternalcontrolsoverfinancial
reporting.
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LiquidityandCapitalResources
LiquiditySources
Webelievethatcashflowfromoperationsandavailablecashonhandwillbesufficienttomeetouroperatingrequirementsthrough
January31,2018.
Ourprimarysourceofcashisrevenuefromtuitionchargedtostudentsinconnectionwithourvariouseducationprogramofferings.
Themajorityofourstudentsfinancethecostsoftheirowneducationand/orseekthirdpartyfinancingprograms.Weanticipategenerating
sufficientcashflowfromoperationsinthemajorityofcountrieswhereweoperatetosatisfytheworkingcapitalandfinancingneedsofour
organicgrowthplansforeachcountry.Ifoureducationalinstitutionswithinonecountrywereunabletomaintainsufficientliquidity,we
wouldconsiderusinginternalcashresourcesorreasonableshorttermworkingcapitalfacilitiestoaccommodateanyshorttomedium
termshortfalls.
AsofSeptember30,2016,oursecondarysourceofcashwascashandcashequivalentsof$481.5million.Ourcashaccountsare
maintainedwithhighqualityfinancialinstitutionswithnosignificantconcentrationinanyoneinstitution.
TheCompanyalsomaintainsarevolvingcreditfacilitywithasyndicateoffinancialinstitutionsasathirdsourceofliquidity.The
revolvingcreditfacilityprovidesforborrowingsof$325.0millionifcertainfinancialcovenantsaremaintained,andamaturitydateof
June2019,subjecttocertainaccelerationprovisionsasfurtherdiscussedbelow.TheCompanywasincompliancewiththesecovenantsat
September30,2016.TheCompanycontinuestomaintainasubstantialunencumberedassetpoolthatitbelievescanbeusedforadditional
securedandunsecuredborrowings,andforsaleandsaleleasebacktransactions.Additionally,asignificantportionoftheCompany's
capitalexpendituresinanygivenyearareforgrowthinitiativesandarethereforediscretionary.
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capitalexpendituresinanygivenyearareforgrowthinitiativesandarethereforediscretionary.
Sincethebeginningof2016,theCompanyhastakennumerousactionstoreduceleverage,improveliquidityandincreasecashflow.
ThesaleofourSwissandFrenchoperations,asfurtherdiscussedbelow,resultedinnetproceedstotheCompanyofapproximately
$546million.Theseproceedswereusedtorepayapproximately$380millionoflongtermindebtedness,withtheremainingproceeds
usedtorepayaportionofourrevolvingcreditfacility,thusincreasingourliquidity.Inaddition,duringJuneandJuly2016theCompany
enteredintoamendmentstoourSeniorSecuredCreditFacilitieswhichaddressedasignificantportionoftheneartermdebtmaturitiesof
theCompanybyextending84%ofthetermloanmaturitiesoriginallyscheduledtomaturein2018to2021,andalloftherevolvingcredit
facilityto2019,bothsubjecttocertainaccelerationrightsasfurtherdiscussedbelow.TheCompanycontinuallyevaluatesitsdebt
maturitiesand,basedonmanagement'scurrentassessment,believesithasviablefinancingandrefinancingalternatives.
OnDecember4,2016,theCompanysignedtheSubscriptionAgreementpursuanttowhichweagreedtoissueandselltocertain
investorsanaggregateof400,000sharesofSeriesAPreferredStockinaprivateofferingfortotalexpectednetproceedsofapproximately
$383million,asfurtherdiscussedinNote19,SubsequentEvents,inourinterimconsolidatedfinancialstatementsincludedelsewherein
thisprospectus.FormoreinformationonourSeriesAPreferredStocksee"DescriptionofCapitalStockPreferredStockSeriesA
PreferredStock."ClosingofthefirsttrancheoffundingforthistransactionoccurredonDecember20,2016andwereceivednetproceeds,
afterissuancecosts,ofapproximately$328million.Oneinvestorwillfundaportionofitspurchasepriceequalto$57million
(approximately$55millionnetofissuancecosts)priortoJanuary23,2017.
TheproceedsfromtheSeriesAPreferredStockofferinghaveandwillbeusedprimarilyto,amongotherthings,repayaportionofour
outstandingdebt,includingourrevolvingcreditfacility,whichwillimproveourliquidity.See"DescriptionofCapitalStock"and"Certain
RelationshipsandRelatedPartyTransactions"foradetaileddescriptionoftheSeriesAPreferredStockandthedocumentsrelatedtothe
SeriesAPreferredStockoffering,whichincludetheSubscriptionAgreement,
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theStockholdersAgreementandtheSeriesARegistrationRightsAgreement(asdefinedbelow)thatwereexecutedbytheCompanyatthe
Closing.
OnJune14,2016,wesoldtheoperationsofGlioninSwitzerlandandtheUnitedKingdom,theoperationsofLesRochesin
SwitzerlandandtheUnitedStates,HautecolespcialiseLesRochesGruyreSA("LRG")inSwitzerland,LesRochesJinJianginChina,
RoyalAcademyofCulinaryArts("RACA")inJordanandLesRochesMarbellainSpain.Asaresultofthissale,wereceivednetproceeds
ofapproximately$332.8million,netofcashsoldof$14.5million,andafteradjustmentsforliabilitiesassumedbythebuyerand
transactionrelatedcosts.InSeptember2016,wereceivedadditionalproceedsfromthebuyerofapproximately$5.8millionafter
finalizationoftheworkingcapitaladjustmentrequiredbythepurchaseagreement.Inaddition,ontheJune14,2016closingdate,we
settledthedealcontingentforwardexchangeswapagreementforapaymentof$10.3million.
OnJuly20,2016,wesoldtheoperationsofLIUFwhichcomprisedfiveinstitutionswithatotalstudentpopulationofapproximately
7,500:
coleSuprieureduCommerceExtrieur("ESCE")
InstitutFranaisdeGestion("IFG")
EuropeanBusinessSchool("EBS")
coleCentraled'Electronique("ECE")and
Centred'tudesPolitiquesetdelaCommunication("CEPC").
ThevalueofthetransactionwasEUR201.0million(approximately$228.0millionatthesigningdate),subjecttocertain
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ThevalueofthetransactionwasEUR201.0million(approximately$228.0millionatthesigningdate),subjecttocertain
adjustments.AtclosingonJuly20,2016,wereceivedtotalnetproceedsofapproximately$207.0million,netofcashsoldof$3.4million,
andadjustmentsforliabilitiesassumedbythebuyerandtransactionrelatedcosts.Inaddition,inJulywesettledtheforwardexchange
swapagreementsrelatedtothissale,resultingintotalproceedsof$4.6million.
During2014and2015theU.S.dollarhasstrengthenedsignificantlyagainstmostofthelocalcurrenciesincountrieswherewehave
significantoperations,whichhasnegativelyaffectedourcashflowsfromoperations.Thoughcurrencymovementscanunfavorablyimpact
ourcashflows,wehavetheabilitytoincreasecashflowandliquidity,ifneeded,throughreductionsincertaindiscretionaryspending
including,butnotlimitedto,growthcapitalexpenditures,investmentsinourEiPinitiativeandotherdiscretionaryinvestments.
FIESPaymentPlan
TheBraziliangovernmentimplementedchangestotheFIESprogramin2015whichincludedextendingthepaymentperiodfromthe
governmenttotheparticipatinginstitutions.OurtotalFIESreceivablebalanceatDecember31,2015wasapproximately$78.3million,
comparedtoabalanceofapproximately$24.0millionatDecember31,2014.TheincreaseintotalFIESreceivableswascausedbyadelay
inthereceiptoffundsfromtheBraziliangovernment.Thegovernmenthasimplementedapaymentplanforalloutstanding2015FIES
amounts.Wereceivedpaymentfor25percentoftheoutstanding2015FIESbalancesinJune2016.Weexpecttoreceivepaymentsonthe
remainingoutstanding2015FIESbalancesof25percentbyJune30,2017and50percentbyJune30,2018.Eachpaymentwillincludean
adjustmentbasedontheBrazilianinflationindex.Ifthepaymentsarenotreceivedbytheduedates,itwillhaveanegativeimpactonour
operatingcashflows.SeealsoNote19,LegalandRegulatoryMattersinourconsolidatedfinancialstatementsincludedelsewhereinthis
prospectus.
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LiquidityRestrictions
Ourliquidityisaffectedbyrestrictedcashandinvestmentsbalances,whichtotaled$176.2millionand$160.6millionasof
September30,2016andDecember31,2015,respectively.
Restrictedcashandinvestmentsalsoconsistsofcashequivalentsandshortterminvestmentsheldtocollateralizestandbylettersof
creditinfavoroftheDOE.TheselettersofcreditarerequiredbytheDOEinordertoallowourU.S.InstitutionstoparticipateintheTitle
IVprogramandtotaled$90.5millionand$86.6millionasofSeptember30,2016andDecember31,2015,respectively.
AsofSeptember30,2016andDecember31,2015,wehad$37.3millionand$36.5million,respectively,postedasacash
collateralizedletterofcreditinordertocontinuetheappealsprocesswiththeSTAwhochallengedtheholdingcompanystructureinSpain
andissuedafinalassessmentagainstICE,ourSpanishholdingcompany,ofEUR11.1million($12.4millionatSeptember30,2016),
includinginterest,fortheperiods2006and2007.InJuly2013,wewerenotifiedbytheSTAthatanauditoftheSpanishsubsidiarieswas
beinginitiatedfor2008through2010.InOctober2015,theSTAissuedafinalassessmenttoICEforapproximatelyEUR17.2million
($19.3millionatSeptember30,2016),includinginterest,forthosethreeyears.Wehaveappealedtheassessmentsand,inordertosuspend
thepaymentofthetaxassessmentsuntilthecourtdecision,weissuedcashcollateralizedlettersofcreditfortheassessmentamountsplus
interestandsurcharges.Webelievetheassessmentsinthiscasearewithoutmeritandintendtodefendvigorouslyagainstthem.Duringthe
secondquarterof2016,wewerenotifiedbytheSTAthattaxauditsoftheSpanishsubsidiarieswerealsobeinginitiatedfor2011and
2012noassessmentshaveyetbeenissuedfortheseyears.
IndefiniteReinvestmentofForeignEarnings
WeearnasignificantportionofourincomefromsubsidiarieslocatedincountriesoutsidetheUnitedStates.Aspartofourbusiness
strategies,wehavedeterminedthatallearningsfromourforeignoperationswillbedeemedindefinitelyreinvestedoutsidetheUnited
States.AsofDecember31,2015,ourundistributedearningsfromnonU.S.subsidiariestotaledapproximately$1,154.0million.Asof
September30,2016,$447.8millionofourtotal$481.5millionofcashandcashequivalentswereheldbyforeignsubsidiaries,including
$164.9millionheldbyVIEs.AsofDecember31,2015,$342.8millionofourtotal$458.7millionofcashandcashequivalentswereheld
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$164.9millionheldbyVIEs.AsofDecember31,2015,$342.8millionofourtotal$458.7millionofcashandcashequivalentswereheld
byforeignsubsidiaries,including$120.9millionheldbyVIEs.TheVIEs'cashandcashequivalentsbalancesaregenerallyrequiredtobe
usedonlyforthebenefitoftheoperationsoftheseVIEs.
Ourplanstoindefinitelyreinvestcertainearningsaresupportedbyprojectedworkingcapitalandlongtermcapitalrequirementsin
eachforeignsubsidiarylocationinwhichtheearningsaregenerated.Wehaveanalyzedourdomesticoperation'scashrepatriation
strategies,projectedcashflows,projectedworkingcapitalandliquidity,andtheexpectedavailabilitywithinthedebtorequitymarketsto
providefundsforourdomesticneeds.Asaresult,werelyonpaymentsfromcontractualarrangements,suchasintellectualproperty
royalty,networkfeeandmanagementservicesagreements,aswellasrepaymentsofintercompanyloanstomeetanyofourexistingor
futuredebtserviceandotherobligations,asubstantialportionofwhicharedenominatedinU.S.dollars.Basedonouranalysis,webelieve
wehavetheabilitytoindefinitelyreinvesttheseforeignearnings.
Ifourexpectationschangebasedonfuturedevelopmentssuchthatsomeoralloftheundistributedearningsofourforeignsubsidiaries
mayberemittedtotheUnitedStatesintheforeseeablefuture,wewillberequiredtorecognizedeferredtaxexpenseandliabilitiesonthose
amountsandpayadditionaltaxes.Inaddition,ifapplicableU.S.taxrulesaremodifiedtocauseU.S.corporationstopaytaxesonforeign
earnings,eveniftheearningsarenotremittedtotheUnitedStates,wemayincuradditionaltaxesintheUnitedStates.
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LiquidityRequirements
Ourshorttermliquidityrequirementsinclude:fundingfordebtservice(includingcapitalleases)operatingleaseobligations
paymentsofdeferredcompensationpaymentsduetoshareholdersofacquiredcompaniesworkingcapitaloperatingexpensespayments
ofthirdpartyobligationscapitalexpendituresandbusinessdevelopmentactivities.
Longtermliquidityrequirementsinclude:principalpaymentsoflongtermdebtoperatingleaseobligationspaymentsoflongterm
amountsduetoshareholdersofacquiredcompaniespaymentsofdeferredcompensationsettlementsofderivativesandbusiness
developmentactivities.
Debt
AsofSeptember30,2016,seniorlongtermborrowingstotaled$3,038.4millionandconsistedofthefollowing:
$1,661.7millionundertheSeniorSecuredCreditFacilitythat,asofSeptember30,2016,maturesinJune2018,June2019
andMarch2021and
$1,376.7millioninSeniorNotesthatmatureinSeptember2019.
AsofSeptember30,2016,otherdebtbalancestotaled$771.3million,andourcapitalleaseobligationsandsaleleasebackfinancings
were$259.7million.Otherdebtincludeslinesofcreditandshorttermborrowingarrangementsofsubsidiaries,mortgagespayable,and
notespayable.Asdiscussedfurtherbelow,theCompanyhasundertakenseveralinitiativestoreduceitsleverageandextendthematurities
ofitsobligations.Followingthecompletionofthisoffering,inadditiontotherepayment,redemptionorrepurchaseofcertainofour
indebtednessasdescribedin"UseofProceeds,"wemaytakeoneormoreactionstorefinancecertainofourexistingindebtedness.
SeniorSecuredCreditFacilities
WeenteredintotheSeniorSecuredCreditFacilitieswithasyndicateoflendersonAugust17,2007tofundtheleveragedbuyout
mergerbetweenLaureateandWengen.OnJune16,2011,weamendedandrestatedourcreditagreement(the"AmendedandRestated
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mergerbetweenLaureateandWengen.OnJune16,2011,weamendedandrestatedourcreditagreement(the"AmendedandRestated
CreditAgreement")inorderto,amongotherthings,extendmaturitydates.OnDecember22,2011,weincreasedtheborrowingcapacity
underourseniorsecuredmulticurrencyrevolvingcreditfacilityto$350.0millionandborrowedanadditional$25.0millioninterm
loans.OnJanuary18,2013,weborrowedanadditional$250.0millionintermloans.OnApril23,2013,weborrowedanadditional
$310.0millionintermloanstorepayalloftheoutstandingSeniorSubordinatedNotes,asnotedbelow.OnOctober3,2013,weamended
ourcreditagreementto,amongotherthings,reducetheinterestrateonthetermloans.OnDecember16,2013,weborrowedanadditional
$200.0millionintermloans.OnJuly7,2015,weenteredintoaFourthAmendmenttoAmendedandRestatedCreditAgreementand
AmendmenttotheU.S.ObligationsSecurityAgreementandU.S.PledgeAgreement(the"FourthAmendment").PursuanttotheFourth
Amendment,thematuritydateoftheseniorsecuredmulticurrencyrevolvingcreditfacilitywasextendedfromJune2016toMarch2018.
AsdiscussedinfurtherdetailinNote7,Debt,inourinterimconsolidatedfinancialstatementsincludedelsewhereinthisprospectus,
onJune3,2016,weenteredintotheFifthAmendmenttotheAmendedandRestatedCreditAgreementto,amongotherthings,obtainthe
commitmentofthetermloanlendersholdingapproximately$1,526.0millionoftheapproximately$1,810.1millionofthethen
outstandingtermloanstoextendthematuritydatesofthetermloansheldbysuchtermloanlendersfromJune2018toMarch17,2021.
Effectivenessofsuchtermloanextensionswassubjecttothesatisfactionofcertainconditionsincluding,(i)theclosingofthesaleofthe
GlionandLesRocheshospitalitymanagementschoolsandouroperationsinFrance,(ii)theprepaymentof$300.0millionofthe2021
ExtendedTermLoan,and(iii)thefurtheramendmentoftheAmendedandRestatedCreditAgreementpursuanttowhichcertainofthe
lendersthereunderholdingrevolvingcreditcommitments
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wouldhaveagreedtoextendthematuritydateoftherevolvinglineofcreditfacilitytoadateonorafterMarch8,2019.Theseconditions
havebeensatisfiedandtheFifthAmendmentbecameeffectiveonJuly29,2016.Theextendedtermloanswithamaturitydateof
March17,2021arereferredtoasthe2021ExtendedTermLoan,andthenonextendedtermloanswithamaturitydateofJune2018
continuetobereferredtoasthe2018ExtendedTermLoan.TheFifthAmendmentalsoprovidesthatifaqualifiedequityofferingora
qualifiedpublicofferingorcombinationthereof,oftheCompanydoesnotoccuronorbeforeAugust15,2017,theCompanywillbe
requiredtomake,onAugust16,2017,anadditionalscheduledpaymentofprincipalonthe2021ExtendedTermLoanintheamountof
$62.5million.Further,ifonthedatethatis91dayspriortoSeptember1,2019morethan$250.0millionoftheprincipalamountofthe
SeniorNotesdue2019isoutstanding,thenthe2021ExtendedTermLoanmaturitydateshallbethedatethatis91dayspriorto
September1,2019.Seealso"DescriptionofCertainIndebtednessSeniorSecuredCreditFacilities."
AsdiscussedinfurtherdetailinNote7,Debt,inourinterimconsolidatedfinancialstatementsincludedelsewhereinthisprospectus,
onJuly7,2016,weenteredintoaSixthAmendmenttotheAmendedandRestatedCreditAgreement(the"SixthAmendment")toextend
thematuritydateoftherevolvingcreditfacilitytoJune7,2019,subjecttotheclosingoftheFifthAmendmentandotherconditions
needingtobesatisfied.TheSixthAmendmentalsoreducedtheborrowingcapacityoftherevolvinglineofcreditfacilityfrom
$350.0millionto$325.0million.TheconditionsfortheeffectivenessoftheSixthAmendmentweresatisfiedandtheSixthAmendment
becameeffectiveonJuly29,2016.If,onthedatethatis91dayspriortoSeptember1,2019,morethan$250.0millionoftheprincipal
amountoftheSeniorNotesdue2019isoutstanding,thenthematuritydateoftherevolvinglineofcreditfacilityshallbethedatethatis
91dayspriortoSeptember1,2019.Further,if,onthedatethatis91dayspriortothematuritydateofthe2018ExtendedTermLoan,more
than$250.0millionoftheprincipalamountofthe2018ExtendedTermLoanisoutstanding,thenthematuritydateoftherevolvingline
ofcreditfacilityshallbethedatethatis91dayspriortothe2018ExtendedTermLoanmaturitydate.
AsofSeptember30,2016,theoutstandingbalanceunderourSeniorSecuredCreditFacilitieswas$1,661.7million,whichconsisted
of$160.0millionoutstandingunderourseniorsecuredmulticurrencyrevolvingcreditfacilityandanaggregateoutstandingbalanceof
$1,501.7million,netofadebtdiscount,underthetermloans.AsofSeptember30,2016,wehad$0.9millionofoutstandinglettersof
credit,whichdecreaseavailabilityonourrevolvingcreditfacility.Accordingly,asofSeptember30,2016,theavailableborrowing
capacityonour$325.0millionseniorsecuredmulticurrencyrevolvingcreditfacilitywasapproximately$164.1million.Asof
December31,2015,theoutstandingbalanceunderourSeniorSecuredCreditFacilitieswas$2,084.1million,whichconsistedof
$269.3millionoutstandingunderourseniorsecuredmulticurrencyrevolvingcreditfacilityandanaggregateoutstandingbalanceof
$1,814.8million,netofadebtdiscount,underthetermloans.
SeniorNotesdue2019
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OnJuly25,2012,wecompletedanofferingof$350.0millionof9.250%SeniorNotesdue2019.Thenetproceedsreceivedfromthe
debtofferingwereusedtorepayaportionofourseniorsecuredmulticurrencyrevolvingcreditfacility.OnNovember13,2012,we
completedanofferingof$1,050.0millionofadditionalSeniorNotes.Theseproceedswereusedtofullyrepaytheoutstandingbalancesof
certaintermloansoutstandingunderourSeniorSecuredCreditFacilities,whichtotaled$164.5millionasofDecember31,2011,andto
purchasealloftheoutstandingSeniorToggleNotesandtheSeniorCashPayNotes.OnDecember29,2015,weissued$50.0millionof
SeniorNotespursuanttotheindenturetotheparticipantsintheExecutiveDCPinpartialsettlementofdeferredpaymentobligations.
AsofSeptember30,2016andDecember31,2015,ouroutstandingbalanceunderourSeniorNoteswas$1,376.7millionand
$1,436.2million,respectively,netofadebtdiscount.TheSeniorNotesmatureonSeptember1,2019.
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OnApril15,2016,weenteredintoNoteExchangeAgreementswithcertainExistingHoldersoftheSeniorNotespursuanttowhichwe
willexchange$250.0millioninaggregateprincipalamountofSeniorNotesforsharesofourClassAcommonstock.Weexpectthe
stockissuablewillequal104.625%oftheaggregateprincipalamountofSeniorNotestobeexchanged,or$261.6million,dividedby
$,theinitialpublicofferingpricepershareofClassAcommonstockinthisoffering.
thatisapplicableasofthedateofpricingofthisoffering,plusaccruedandunpaidinterestandspecialinterest.
WeorouraffiliatesfromtimetotimemaypurchaseouroutstandingSeniorNotes,termloansunderourSeniorSecuredCredit
Facilitiesand/orotherofourindebtedness.Anysuchfuturepurchasesmaybemadethroughopenmarketorprivatelynegotiated
transactionswiththirdpartiesorpursuanttooneormoretenderorexchangeoffersorotherwise,uponsuchtermsandatsuchpricesaswell
aswithsuchconsiderationasweoranysuchaffiliatesmaydetermine.
Covenants
Ourseniorlongtermdebtcontainscertainnegativecovenantsincluding,amongothers:(1)limitationsonadditionalindebtedness
(2)limitationsondividends(3)limitationsonassetsales,includingthesaleofownershipinterestsinsubsidiariesandsaleleaseback
transactionsand(4)limitationsonliens,guarantees,loansorinvestments.Inconnectionwiththeextensionofourrevolvingcredit
facilityinJuly2015,wearenowsubjecttoaConsolidatedSeniorSecuredDebttoConsolidatedEBITDA,asdefinedintheAmendedand
RestatedCreditAgreement,financialmaintenancecovenantbeginninginthethirdquarterof2015.Themaximumratio,asdefined,is
5.30x,4.50xand3.50xatDecember31,2015,2016and2017,respectively.TheratiosasofSeptember30,2016andDecember31,2015
were3.44xand3.91x,respectively.Inaddition,notespayableatsomeofourlocationscontainfinancialmaintenancecovenants.Wearein
compliancewithourdebtcovenantsandexpecttobeincomplianceforthenext12months.
RegistrationofSeniorNotesdue2019
Weandourguarantorsagreedto(1)filearegistrationstatementwiththeSECwithrespecttoaregisteredoffertoexchangetheSenior
Notesfornewnoteshavingtermssubstantiallyidenticalinallmaterialrespectstotheoutstandingnotes(exceptthatthenewnoteswill
notcontaintransferrestrictionsorprovideforspecialinterest)or(2)fileashelfregistrationfortheresaleoftheSeniorNotes.Wewere
requiredtouseallcommerciallyreasonableeffortstocausetheregistrationstatementtobedeclaredeffectiveonorbeforeJuly25,2014.
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SincetheregistrationstatementwasnotdeclaredeffectivebyJuly25,2014,wehaveincurredspecialinterestatarateequalto0.25%per
annumforthefirst90dayperiodoftheoutstandingindentureindebtednessontheoutstandingnotes,0.50%perannumforthenext90
dayperiod,and0.75%thereafter,asliquidateddamagesuntiltheregistrationstatementisdeclaredeffectiveandtheexchangeofferis
completed.Accordingly,wehaverecordedaliabilityfortheamountofspecialinterestontheSeniorNotesthatwehavedeterminedtobe
probableandestimablebasedonourexpectedtimingofregistrationasofeachbalancesheetdate.AsofSeptember30,2016and
December31,2015,wehadatotalcontingentliabilityforspecialinterestontheSeniorNotesofapproximately$7.0millionand
$8.1million,respectivelyrecordedinaccruedexpensesinourconsolidatedbalancesheets.
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OtherDebt
Otherdebtincludeslinesofcreditandshorttermborrowingarrangementsofsubsidiaries,mortgagespayable,andnotespayable.
AsofSeptember30,2016andDecember31,2015,theaggregateoutstandingbalancesonourlinesofcreditwere$64.7millionand
$74.3million,respectively.
OnDecember21,2007,weenteredintoanotepayabletoacquireUniversidadTecnolgicadeMxico("UNITECMexico").Theloan
wasoriginallyscheduledtomatureonJuly1,2015.Inordertoalignthepaymentswiththenewloandescribedbelow,inMay2014,the
loanmaturitywasextendedtoMay15,2021,andtherepaymentsweresuspendeduntilMay16,2016.AsofDecember31,2015,the
balanceoutstandingonthisnotepayablewas$76.7million.InMay2016,thisloanwascombinedwiththeloanfromMay2012,asfurther
describedbelow.
WeenteredintoanotepayableinMay2012toacquiretheremaining10%interestinPlaneacindeSistemas,S.A.deC.V.("Plansi").
TheloanwasoriginallyscheduledtomatureonMay15,2019.InMay2014,theloanmaturitydatewasextendedtoMay15,2021,and
therepaymentsweresuspendeduntilMay16,2016.AsofDecember31,2015,thebalanceoutstandingonthisnotepayablewas
$52.1million.InMay2016,thisloanwascombinedwiththeloanfrom2007,asfurtherdescribedbelow.
OnMay12,2016,theoutstandingloansfrom2007and2012wererefinancedandcombinedintooneloan.Thematuritydateofthe
combinedloanwasextendedtoMay15,2023.Therepaymentsoftheprincipal,whichwereoriginallysuspendeduntilMay16,2016,
werefurthersuspendeduntilMay15,2018.Thenewrefinancedloancarriesavariableinterestratebasedonthe28dayMexican
InterbankingOfferRate("TIIE"),plustheapplicablemargin.Theapplicablemarginfortheinterestcalculationisestablishedbasedonthe
ratioofdebttoEBITDA,asdefinedintheagreement.InterestispaidmonthlycommencingonMay15,2016.AsofSeptember30,2016,
theinterestrateontheloanwas7.71%,andtheoutstandingbalanceontheloanwas$114.1million.
Inadditiontotheloansabove,inAugust2015,UVMMexicoenteredintoanagreementwithabankforaloanofMXN1,300million.
Theloancarriesavariableinterestrate(6.86%atSeptember30,2016)andmaturesinAugust2020.
WealsoobtainedfinancingtofundtheconstructionoftwonewcampusesatoneofourinstitutionsinPeru,UniversidadPeruanade
CienciasAplicadas("UPC").AsofSeptember30,2016andDecember31,2015,theoutstandingbalanceontheloanswas$51.9million
and$60.6million,respectively.TheseloanshavevaryingmaturitydateswiththefinalpaymentdueinOctober2022.
InMay2014,weobtained$7.5millionoffinancingtofundtheconstructionofanewcampusatoneofourinstitutionsinPanama.In
December2014,weborrowedanadditional$5.0million.InJune2015,weborrowedanadditional$12.5million.Asofboth
September30,2016andDecember31,2015,theoutstandingbalanceofthisloanwas$25.0million.Ithasafixedinterestrateof8.11%
andmaturesin2024.
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andmaturesin2024.
WehadoutstandingnotespayableatHIEUinChina.AsofSeptember30,2016andDecember31,2015,theoutstandingbalanceon
theloanswas$83.9millionand$90.4million,respectively.Thesenotesarerepayableininstallmentswiththefinalinstallmentduein
November2019.
WehadoutstandingnotespayableatarealestatesubsidiaryinChile.AsofSeptember30,2016andDecember31,2015,the
outstandingbalanceontheloanswas$65.2millionand$55.0million,respectively.Thesenotesarerepayableininstallmentswiththe
finalinstallmentdueinAugust2028.
WefinancedaportionofthepurchasepriceforTHINKbyborrowingAUD45.0million($34.5millionatSeptember30,2016)undera
syndicatedfacilityagreementintheformoftwotermloansofAUD22.5millioneach.Thesyndicatedfacilityagreementalsoprovidesfor
additionalborrowingsofuptoAUD20.0million($15.3millionatSeptember30,2016)underacapital
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expenditurefacilityandaworkingcapitalfacility.Thefirsttermloanhasatermoffiveyearsandprincipalispayableinquarterly
installmentsbeginningonMarch31,2014.Thesecondtermloanhasatermoffiveyearsandthetotalprincipalbalanceispayableatits
maturitydateofDecember20,2018.InJune2016,theseloanfacilitieswereamendedandrestated.Asaresultofthisamendmentanda
repaymentofAUD11.0million($8.1millionatthedateofpayment):
FacilityAhasbeenamendedtobeatermloanofAUD10.0million($7.7millionatSeptember30,2016),andprincipalis
repayableinquarterlyinstallmentsofAUD0.8million($0.6millionatSeptember30,2016)beginningonSeptember30,
2016.ThefinalbalanceisrepayableatitsmaturitydateofDecember20,2018and
FacilityBhasbeenamendedtobearevolvingfacilityofuptoAUD15.0million($11.5millionatSeptember30,2016)
andanybalanceoutstandingisrepayableatitsmaturitydateofDecember20,2018.Thisfacilitybearsinterestatavariable
rateplusamarginof2.75%.
AsofSeptember30,2016andDecember31,2015,$14.7millionand$25.7million,respectively,wasoutstandingundertheseloan
facilities.
WeacquiredFMUonSeptember12,2014andfinancedaportionofthepurchasepricebyborrowingamountsundertwoloansthat
totaledBRL259.1million($110.3millionattheborrowingdate).TheloansrequiresemiannualprincipalpaymentsbeginningatBRL
6.5millioninOctober2014andincreasingtoamaximumofBRL22.0millionbeginninginOctober2017andcontinuingthroughtheir
maturitydatesinApril2021.AsofSeptember30,2016andDecember31,2015,theoutstandingbalanceoftheseloanswas$66.5million
and$58.9million,respectively.
OnNovember18,2015,theCompanyenteredintoanagreementwithtwobankstoborrowatotalofEUR100million($106.5million
attheborrowingdate)asdescribedinNote9,Debt,inourconsolidatedfinancialstatementsincludedelsewhereinthisprospectus.
Leases
Weconductasignificantportionofouroperationsfromleasedfacilities.Thesefacilitiesincludeourcorporateheadquarters,other
officelocations,andmanyofourhighereducationfacilities.See"ContractualObligations"forasummaryofourcapitalandoperating
leaseobligations.
DuetoShareholdersofAcquiredCompanies
Onemethodofpaymentforacquisitionsistheuseofpromissorynotespayabletothesellersofacquiredcompanies.Asof
September30,2016andDecember31,2015,werecorded$220.7millionand$186.7million,respectively,fortheseliabilities.SeeNote5,
DuetoShareholdersofAcquiredCompanies,inourconsolidatedfinancialstatementsincludedelsewhereinthisprospectusforfurther
details.
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CapitalExpenditures
Capitalexpendituresconsistofpurchasesofpropertyandequipment,purchasesoflanduserightsandexpendituresfordeferredcosts.
Ourcapitalexpenditureprogramisacomponentofourliquidityandcapitalmanagementstrategy.Thisprogramincludesdiscretionary
spending,whichwecanadjustinresponsetoeconomicandotherchangesinourbusinessenvironment,togrowournetworkthroughthe
following:(1)capacityexpansionatinstitutionstosupportenrollmentgrowth(2)newcampusesforinstitutionsenteringnewgeographic
markets(3)informationtechnologytoincreaseefficiencyandcontrolsand(4)onlinecontentdevelopment.Ournondiscretionary
spendingincludesthemaintenanceofexistingfacilities.Wetypicallyfundourcapitalexpendituresthroughcashflowfromoperations
andexternalfinancing.
Ourcapitalexpenditureswere$146.9millionand$232.3millionduringtheninemonthsendedSeptember30,2016and2015,
respectively,and$366.9million,$436.4millionand$519.5millionduring
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2015,2014and2013,respectively.The37%decreaseincapitalexpendituresforthe2016fiscalperiodcomparedtothe2015fiscalperiod
relatedtodecreasesincapitalexpendituresinBrazil,Chile,Peru,Europe,GPSandAMEArelatedinparttoanongoingonlineinitiativeto
reducecapitalexpenditures.WealsoincreasedinformationtechnologyspendinginCorporate.Ouronlineinitiativeisdesignedtonot
onlyprovideourstudentswithaccesstothetechnologyplatformsandinnovativeprogramstheyexpect,butalsotoincreaseour
enrollmentinamorecapitalefficientmanner,leveragingcurrentinfrastructureandimprovingclassroomutilization.The16%decreasein
capitalexpendituresfor2015comparedto2014primarilyrelatedtosignificantdecreasesincapitalexpendituresinChile,Europeand
AMEA,partiallyoffsetbythecontinuedconstructionofnewcampusesandcapacityexpansionprojectsthroughouttherestofLatAmand
increasedinformationtechnologyspendinginCorporateandBrazil.The16%decreaseincapitalexpendituresfor2014comparedto2013
primarilyrelatedtosignificantdecreasesincapitalexpendituresinChile,Mexico,CentralAmericaandCorporate,partiallyoffsetbythe
continuedconstructionofnewcampusesandcapacityexpansionprojectsthroughouttherestofLatinAmericaandAMEA.
Derivatives
Inthenormalcourseofbusiness,ouroperationsareexposedtofluctuationsinforeigncurrencyvaluesandinterestratechanges.We
mitigateaportionoftheserisksthroughariskmanagementprogramthatincludestheuseofderivatives.Wewererequiredtomake
periodicnetcashpaymentsonourderivativestotaling$14.7millionand$8.5millionfortheninemonthsendedSeptember30,2016and
2015,respectively,and$11.3million,$38.5millionand$38.2millionfortheyearsendedDecember31,2015,2014and2013,
respectively.
SeeNote14,DerivativeInstruments,inourconsolidatedfinancialstatementsandNote12,DerivativeInstruments,inourinterim
consolidatedfinancialstatementsincludedelsewhereinthisprospectusforfurtherinformationonourderivatives.
RedeemableNoncontrollingInterestsandEquity
Inconnectionwithcertainacquisitions,wehaveenteredintoput/callarrangementswithcertainminorityshareholders,andwemaybe
requiredorelecttopurchaseadditionalownershipinterestsintheassociatedentitieswithinaspecifiedtimeframe.Certainofourcallrights
containminimumpaymentprovisions.Ifweexercisesuchcallrights,theconsiderationrequiredcouldbesignificantlyhigherthanthe
estimatedputvalues.Uponexerciseoftheseputsorcalls,ourownershipinterestsinthesesubsidiarieswouldincrease.
BusinessDevelopmentActivities
Ourgrowthplanshavehistoricallyincludedandmayincludefutureacquisitionactivity.Ouracquisitionshavehistoricallybeen
fundedprimarilythroughexistingliquidityandsellerfinancing.Weevaluatevariousalternativestoraiseadditionalcapitaltofund
potentialacquisitionsandotherinvestingactivities.Thesealternativesmayincludeissuingadditionalequityordebtandenteringinto
operatingorotherleasesrelatingtofacilitiesthatweuse,includingsaleleasebacktransactionsinvolvingneworexistingfacilities.Our
incurrencecovenantsinourdebtagreementsimposelimitationsonourabilitytoengageinadditionaldebtandsaleleaseback
transactions,aswellasoninvestmentsthatmaybemade.Intheeventthatweareunabletoobtainthenecessaryfundingorcapitalfor
potentialacquisitionsorotherbusinessinitiatives,itcouldhaveasignificantimpactonourlongtermgrowthstrategy.Webelievethatour
internalsourcesofcashandourabilitytoincursellerfinancingandadditionalthirdpartyfinancing,subjecttomarketconditions,willbe
sufficienttofundourinvestingactivities.
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sufficienttofundourinvestingactivities.
OnMarch27,2015,weacquiredfourhighereducationinstitutionsinPortugal,anotforprofitassociationandaforprofitservices
companythatconductsmarketresearch.Thetotalpurchasepriceforthisgroupofentitieswas$10.4million.Thepurchasepriceincluded
aninitialcashpaymentof
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$6.5million,asellernoteof$3.2millionandadeferredpaymentof$0.7millionrelatedtoaworkingcapitalsettlement.Thesellernote
carriesanannualinterestrateof3%andwillbepaidinthreeequalinstallmentsofEUR1.0millionat18monthsaftertheclosingdate,
36monthsaftertheclosingdate,and60monthsaftertheclosingdate.
InAugust2013,wemadeaninvestmentof$2.2millionfora25%ownershipinterestinaforprofitentitythatcontrolsMonashSouth
Africa("MSA"),anotforprofitinstitutioninSouthAfrica.InFebruary2014,weassumedcontrolofMSAforatotalownershipinterestin
theforprofitentityof75%andacquired100%ofanentitythatownstherealestateusedbyMSA,foratotalpurchasepriceof
$44.4million.Thepurchasepriceconsistedoftheinitialinvestmentof$2.2millionmadein2013,acashpaymentof$6.7million,and
deferredpaymentstotaling$35.4million.MSAwasconvertedtoaforprofitinstitutionduringthefirstquarterof2015.
OnAugust12,2014,weacquiredFaculdadePortoAlegrense("FAPA"),aninstitutioninPortoAlegre,Brazil.Thetotalpurchaseprice
was$4.1million,andwaspaidintheformoftwosellernoteswithatotaldiscountedpresentvalueofapproximately$3.0million,plusan
additionaldeferredpaymentofapproximately$1.1million.Thedeferredpaymentof$1.1millionwaspaidinSeptember2014.
OnSeptember12,2014,weacquiredFMU,anaffiliatedgroupofhighereducationalinstitutionsinBrazil.Thetotalpurchaseprice
was$387.6million,whichwaspaidwithsellernotestotaling$96.8millionandcashpaidatclosingof$290.6million,netofcash
acquiredof$0.1million.Thecashpaidatacquisitionincludedapproximately$231.0millionofcash,includingaccruedinterest,thathad
beenheldbyusinanescrowbankaccountpriortotheacquisitiondateandwasrecordedasrestrictedcashonourconsolidatedbalance
sheetsasofDecember31,2013.Theremainderofthecashpaidatclosingwasfinancedthroughborrowingsfromthirdpartylenders.
StockbasedDeferredCompensationArrangements
Immediatelypriortotheleveragedbuyoutmergerin2007,ourChiefExecutiveOfficerandanotherthenmemberoftheboardof
directorsheldvestedequitybasedawardswhichtheyexchangedonthedateofthemergerforunfunded,nonqualifiedstockbased
deferredcompensationarrangements("stockbasedDCPs")havinganaggregatefairvalueatthattimeof$126.7million.Priortothe
occurrenceofaninitialpublicoffering,eachofthestockbasedDCPsallowstheparticipantthepotentialtoearnanamount(atanytime,a
"PlanBalance")equaltotheproductof(A)thenumberof"phantomshares"creditedtotheparticipant'saccount,and(B)thelesserof
(i)thefairmarketvalueper"phantomshare"onthedateofthemergerplusa5%compoundedannualreturnthereon,and(ii)thefair
marketvalueper"phantomshare"ontheearlierofSeptember17,2014(the"DistributionDate")orachangeofcontrol.Onandafterthe
occurrenceofaninitialpublicoffering,eachofthestockbasedDCPsallowstheparticipantthepotentialtoearnaPlanBalanceequalto
theproductof(A)thenumberof"phantomshares"creditedtotheparticipant'saccountasoftheinitialpublicofferingand(B)thefair
marketvalueper"phantomshare"ontheDistributionDateorachangeofcontrol,asapplicable.Ifwehavenotconsummatedaninitial
publicofferingpriortothefirstorsecondanniversaryoftheDistributionDate,asapplicable,thescheduleddistributionwillbemadein
cash.DistributionsmadeafterLaureatehasconsummatedaninitialpublicofferingwouldgenerallybemadeinsharesofourcommon
stock,thenumberofwhichwilldependonthevalueofthesharesonthedateofdistribution.Notwithstandingtheforegoing,immediately
uponachangeofcontrol,thestockbasedDCPswillbeterminatedandliquidatedandthePlanBalanceswillbedistributedinalumpsum.
Achangeofcontrolwouldgenerallyoccurifallorsubstantiallyallofourassetsormorethan50%ofourequityinterestsaresold.
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UnderthesestockbasedDCPs,acashpaymentof$81.0millionwasmadeinSeptember2014.AsofDecember31,2014,thetotal
liabilityrecordedforthestockbasedDCPswas$99.7million,ofwhich$82.2millionwasrecordedasacurrentliabilityindeferred
compensationontheconsolidatedbalancesheetandtheremainingbalancewasnoncurrent.Underthetermsofthearrangement,
$85.9millionwaspayableonSeptember17,2015,andtheremainderwaspayableonSeptember17,2016.Theparticipantsagreedto
extendthepaymentdueonSeptember17,2015(the"2015Obligation"),thefirstanniversaryoftheDistributionDate,untilDecember31,
2015,inordertoagreewiththeCompanyonaformofpaymentthatwebelievemorecloselyalignswiththelongterminterestsofthe
Companyandoursecurityholders.OnDecember29,2015(the"2015ExecutiveDCPClosingDate"),wesatisfiedthe2015Obligationby
payingtheparticipantsatotalamountof$87.1million,including$6.1millionininterestfromtheDistributionDatetothe2015
ExecutiveDCPClosingDate.Thepaymentconsistedof$37.1millionincashand$50.0millionaggregateprincipalamountofSenior
Notes.TheparticipantsagreednottoofferorselltheirSeniorNotes,otherthantotheCompany,until12monthsafterthe2015Executive
DCPClosingDate.TheparticipantsalsoagreedtoextendthepaymentthatwasdueonSeptember17,2016(the"2016ExecutiveDCP
Obligation")untilDecember30,2016.AsofSeptember30,2016,thetotalliabilityrecordedforthestockbasedDCPswas$18.0million,
whichisrecordedasacurrentliabilityindeferredcompensationontheconsolidatedbalancesheet.OnDecember30,2016(the"2016
ExecutiveDCPClosingDate"),wesatisfiedthe2016ExecutiveDCPObligationbypayingtheparticipantsatotalamountof
$18.2million,including$0.2millionininterestfromSeptember17,2016tothe2016ExecutiveDCPClosingDate.Thepayment
consistedof$7.7millionincashand$10.5millionaggregateprincipalamountofSeniorNotes.Followingthesatisfactionofthe2016
ExecutiveDCPObligation,theCompany'sobligationsundertheDCPsweresatisfiedinfull.
ContributiontoNetworkInstitutioninTurkey
OnNovember4,2016,wemadeacontributiontoournetworkinstitutioninTurkey,aVIE,ofapproximately$13.0million(thevalue
of40.0millionTurkishLirasatthedateofthecontribution).Thisamounteliminatesinconsolidationinourfinancialstatements.See
"RiskFactorsRisksRelatingtoOurBusinessWeareconductinganinternalinvestigationofoneofournetworkinstitutionsfor
violationsoftheCompany'spolicies,andpossibleviolationsoftheU.S.ForeignCorruptPracticesActandotherapplicablelaws.A
violationoftheselawsandregulationscouldsubjectustopenalties,harmourreputationandmateriallyadverselyaffectourbusiness,
financialconditionandresultsofoperations."
CashFlows
Intheconsolidatedstatementsofcashflows,thechangesinoperatingassetsandliabilitiesarepresentedexcludingtheeffectsof
exchangeratechanges,acquisitions,andreclassifications,astheseeffectsdonotrepresentoperatingcashflows.Accordingly,theamounts
intheconsolidatedstatementsofcashflowsdonotagreewiththechangesoftheoperatingassetsandliabilitiesaspresentedinthe
consolidatedbalancesheets.Theeffectsofexchangeratechangesoncasharepresentedseparatelyintheconsolidatedstatementsofcash
flows.Cashpaidforacquisitions,netofcashacquired,isreportedininvestingactivitiesintheconsolidatedstatementsofcashflows.
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Thefollowingtablesummarizesourcashflowsfromoperating,investing,andfinancingactivitiesforeachoftheninemonthsended
September30,2016and2015:
(inmillions)
2016
Cashprovidedby(usedin):
Operatingactivities
Investingactivities
Financingactivities
Effectsofexchangeratechangesoncash
Netchangeincashandcashequivalents
2015
$ 196.0 $ 220.3
392.3 (41.3)
(572.7) 12.1
7.2 (34.2)
$
22.8 $ 156.8
ComparisonofCashFlowsfortheNineMonthsEndedSeptember30,2016totheNineMonthsEndedSeptember30,2015
OperatingActivities
Cashprovidedbyoperatingactivitiesdecreasedby$24.3millionto$196.0millionforthe2016fiscalperiod,comparedto
$220.3millionforthe2015fiscalperiod.Thedecreaseinoperatingcashflowsprimarilywasduetoanincreaseincashpaidforinterestof
$16.3million,from$289.8millionforthe2015fiscalperiodto$306.1millionforthe2016fiscalperiod.Thiswaspartiallyoffsetbya
decreaseincashpaidfortaxesof$13.6million,from$88.4millionforthe2015fiscalperiodto$74.8millionforthe2016fiscalperiod.
Otherworkingcapitalchanges,includingchangesinaccountsreceivableanddeferredrevenue,accountedfortheremainingchangeof
$21.6million.
InvestingActivities
Cashprovidedbyinvestingactivitiesincreasedby$433.6millionforthe2016fiscalperiodto$392.3million,fromaninvestingcash
usageof$(41.3)millioninthe2015fiscalperiod.Cashprovidedbyinvestingactivitieswashigherin2016thanin2015duetothe
following:(1)proceedsfromthesaleofpropertyandequipmentwere$364.9millionhigherin2016thanin2015,duetoproceeds
receivedin2016fiscalperiodfromthesaleoftheGlionandLesRochesHospitalityManagementschoolsandtheFrenchinstitutions,
partiallyoffsetbytheproceedsfromtheSwitzerlandsaleleasebackarrangementsreceivedinthe2015fiscalperiod(2)$85.4millionof
lowercapitalexpendituresduringthe2016fiscalperiodthaninthe2015fiscalperiodand(3)in2015,weusedcashforbusiness
acquisitionsof$6.7millionrelatedtothe2015Portugalacquisition.Thesechangeswerepartiallyoffsetby:(1)in2016,wesettled
derivativesrelatedtothesaleofoursubsidiariesfornetcashpaymentsof$5.7millionand(2)in2015,wereceivedproceedsof
$5.0millionrelatedtothesaleofHSM.Otheritemsaccountedfortheremainingchangeof$12.7million.
FinancingActivities
Cashusedinfinancingactivitiesincreasedby$(584.8)millionforthe2016fiscalperiodto$(572.7)million,comparedtoafinancing
cashinflowof$12.1millionforthe2015fiscalperiod.Thischangeinfinancingactivitieswasduetohighernetpaymentsoflongterm
debtduring2016versus2015of$578.0million,whichincludedtheprepaymentof$300.0millionrelatedtotheFifthAmendment,a
partialpaydownofourrevolvingcreditfacility,anda$62.5millionpaymentonourSeniorNotes.Inaddition,paymentstopurchase
noncontrollinginterestswerehigherin2016versus2015by$20.3million,primarilyrelatedtothe2016purchaseoftheremaining
noncontrollinginterestofSt.Augustine.Thesechangeswerepartiallyoffsetbya$10.9millionreductioninsellernotepaymentsduring
the2016fiscalperiodascomparedtothe2015fiscalperiod.Otheritemsaccountedfortheremainingchangeof$2.6million.
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Thefollowingtablesummarizesourcashflowsfromoperating,investing,andfinancingactivitiesforeachofthepastthreefiscal
years:
(inmillions)
Cashprovidedby(usedin):
Operatingactivities
Investingactivities
Financingactivities
Netcashprovidedby(usedin)discontinuedoperations
FortheYearsEnded
December31,
2015
2014
2013
$ 170.5 $ 269.2 $ 277.2

(173.6) (489.2) (889.1)
34.4 172.6 756.7

0.3
(34.2)
(50.9)
(12.5)
$
(2.9) $ (98.3) $ 132.6
ComparisonofCashFlowsfortheYearEndedDecember31,2015totheYearEndedDecember31,2014
OperatingActivities
Cashprovidedbyoperatingactivitiesdecreasedby$98.7millionto$170.5millionfor2015,comparedto$269.2millionfor2014.
Thedecreaseinoperatingcashflowsprimarilyincludedthefollowing:(1)AdjustedEBITDAin2015was$703.4million,adecrease
from2014of$70.1million(2)cashpaidforinterestincreasedby$30.4millionto$351.4millionfor2015comparedto$321.0million
for2014,primarilyduetohigheraveragedebtbalancesand(3)cashpaidfortaxesincreasedby$39.6millionto$108.3millionfor2015,
comparedto$68.7millionfor2014,dueprimarilytotimingoftaxpaymentsinMexicoresultingfromthetaxreformchangesthatbecame
effectiveinJanuary2014.
Thenetdecreaseinoperatingcashflowswaspartiallyoffsetbythefollowing:(1)during2014,wemadeacashpaymentof
$81.0millionforthedeferredcompensationarrangement,whilethe2015paymentforthedeferredcompensationarrangementwasmade
throughacombinationof$37.1millionofcashandtheissuanceof$50.0millionofSeniorNotes,resultinginyearoveryeardecreased
cashusageof$43.9millionand(2)otherworkingcapitalchangesaccountedfortheremainingchangeof$2.5million.
InvestingActivities
Cashusedininvestingactivitiesdecreasedby$315.6millionfor2015to$173.6million,comparedto$489.2millionfor2014.Cash
usageforinvestingactivitieswaslowerduring2015thanduring2014duetothefollowing:(1)proceedsfromthesaleofpropertyand
equipmentwere$199.5millionhigherin2015,whichwastheresultofthesaleleasebackarrangementsatcertaincampusesin
Switzerland(2)ourcapitalexpenditureswere$69.6millionlowerin2015thanin2014(3)in2015,ourproceedsfrominvestmentsin
affiliateswere$5.0million,relatedtothesaleofHSMand(4)in2015,ourcashusedforbusinessacquisitionswas$281.2millionless
thanin2014,dueprincipallytotheFMUacquisitioninSeptember2014.Thiswaspartiallyoffsetbyachangeinrestrictedcashof
$239.9million,primarilyrelatedtothereleaseoftheescrowdepositfortheFMUacquisition.Otheritemsaccountedfortheremaining
changeof$0.2million.
FinancingActivities
Cashprovidedbyfinancingactivitieswas$34.4millionfor2015,comparedto$172.6millionfor2014,anetdecreaseof
$138.2million.Thisdecreaseincashprovidedbyfinancingactivitieswasduetothefollowing:(1)netproceedsfromissuanceoflong
termdebtwere$130.9millionlessfor2015comparedto2014,primarilyrelatedtotheloansthatwereissuedduring2014topartially
financethe
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FMUacquisition(2)debtissuancecostsincreasedby$9.7millionin2015ascomparedto2014,relatedtotheextensionoftherevolving
lineofcreditfacilityinthe2015fiscalperiodand(3)cashdividendstoourshareholdersincreasedby$13.9million,whichisprimarily
relatedtoa2015cashdividendof$19.0million.Thesechangeswerepartiallyoffsetbya$15.5millionreductioninsellernotepayments
during2015comparedto2014.Otheritemsaccountedfortheremainingdifferenceof$0.8million.
ComparisonofCashFlowsfortheYearEndedDecember31,2014totheYearEndedDecember31,2013
OperatingActivities
Cashprovidedbyoperatingactivitiesdecreasedby$8.0millionto$269.2millionfor2014,comparedto$277.2millionfor2013.
Thedecreaseinoperatingcashflowsincludedthefollowing:(1)cashpaidforinterestincreasedby$28.2millionto$321.0million
for2014comparedto$292.8millionfor2013,primarilyduetohigheraveragedebtbalancesand(2)during2014,wemadeapaymentof
$81.0millionforthedeferredcompensationarrangement.
ThenetdecreaseinoperatingcashflowswaspartiallyoffsetbyanincreaseinAdjustedEBITDAof$127.0millionto$773.5million
for2014from$646.5millionfor2013.However,$12.7millionoftheperiodoverperiodincreaseinAdjustedEBITDArelatedtononcash
reversalsofliabilitiesfortaxesotherthanincometax.Inaddition,$31.2millionoftheyearoveryearincreaserelatedtotheAdjusted
EBITDAimpactofthefiscalreforminMexico,asnotedin"DiscussionofSignificantItemsAffectingtheConsolidatedResults"and
Note18,BenefitPlans,inourconsolidatedfinancialstatementsincludedelsewhereinthisprospectus.Also,$11.3millionoftheAdjusted
EBITDAincreaserelatedtoanoncashreversalofapreacquisitionlosscontingencyataninstitutioninourLatAmsegmentduring2014,
and$6.7millionoftheAdjustedEBITDAincreasewasfromanoncashsettlementthatwasreachedwiththeformerownersofoneofour
institutionsinBrazilrelatedtoataxcontingencymatter.Inadditiontothisnetincreaseof$65.1millionwerethefollowing:(1)cashpaid
forincometaxesdecreasedby$27.1millionto$68.7millionfor2014,comparedto$95.8millionfor2013,ofwhich$14.8millionwas
duetotaxreformchangesinMexicothatbecameeffectiveinJanuary2014andprovideeducationalinstitutionsrelieffrommaking
estimatedmonthlytaxpaymentsforoneyear(2)asnotedin"ResultsofOperationsSummaryComparisonofConsolidatedResultsfor
theYearsEndedDecember31,2014,2013and2012DiscussionofSignificantItemsAffectingtheConsolidatedResults,"during2013
wemadeapaymentofapproximately$21.5milliontosettleataxcontingencyinBrazil(3)during2013,wemadecashpaymentsof
approximately$5.7millionforcompensationtotheformerownersofUPN,asdiscussedinNote5,DuetoShareholdersofAcquired
Companies,inourconsolidatedfinancialstatementsincludedelsewhereinthisprospectusand(4)2014included$3.4millionof
operatingcashflowsthatwerenotincludedin2013,relatedtosettlementproceedsfromaninsurancecarrier.
Otherworkingcapitalchangesaccountedfortheremainingchangeof$21.6million.
InvestingActivities
Cashusedininvestingactivitiesdecreasedby$399.9millionfor2014to$489.2million,comparedto$889.1millionfor2013.Cash
usageforinvestingactivitieswashigherduring2013thanduring2014forthefollowing:(1)in2013,weused$235.8millionofrestricted
cashininvestingactivities,whichincludedthedepositofapproximately$231.0millionthatwasmadeinconnectionwiththe
commitmenttoacquireFMU(2)in2013,ournetcashusedforbusinessacquisitionswas$114.0millionhigher,whichrepresentsa
$110.4millionincreaseincashpaidforacquisitions,lessa$224.4millionchangeinrestrictedcashduetothereleaseoftheescrowforthe
FMUacquisition(3)ourcapitalexpenditureswere$84.1millionhigherin2013thanin2014,relatedtohighercampusconstructionand
capacityexpansionduring2013inChile,PeruandChina(4)in2013,wemadeinvestmentsinaffiliatesof
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$8.8million,whichincludedourinvestmentsinCoursera,MSA,andHSM(5)in2013wemadepaymentsofcontingentconsiderationfor
acquisitionsof$5.7millionrelatedtoUPNand(6)in2013ournetpaymentstorelatedpartieswere$11.5millionhigher.
Thesehighercashusesforinvestingactivitiesduring2013werepartiallyoffsetby$62.4millionoflesscashreceivedin2014thanin
2013fromthesaleofproperty,equipmentandsubsidiaries,duetothesaleofUNIDEPin2013.Otheritemsaccountedfortheremaining
changeof$2.4million.
FinancingActivities
Cashprovidedbyfinancingactivitieswas$172.6millionfor2014,comparedto$756.7millionfor2013,anetdecreaseof
$584.1million.Thisdecreaseincashprovidedbyfinancingactivitieswasduetothefollowing:(1)netproceedsfromlongtermdebtwere
$429.0millionlessfor2014comparedto2013,asaresultofthenewdebtissuancesduring2013(asdiscussedinNote9,Debt,inour
consolidatedfinancialstatementsincludedelsewhereinthisprospectus)(2)paymentsofdeferredpurchasepriceforacquisitionswere
$10.5millionhigherin2014thanin2013(3)in2013,wereceivednetproceedsof$199.7millionfromthesaleofcommonstockto
institutionalinvestors(4)in2013,capitalcontributionsfromourparenttoLaureateAsiawere$13.6millionand(5)netcapital
contributionsfromnoncontrollinginterestholdersofsubsidiarieswere$13.5millionhigherin2013thanin2014.
Partiallyoffsettingthisdecreaseincashprovidedbyfinancingactivitiesin2014comparedto2013werethefollowing:(1)payments
topurchasenoncontollinginterestswere$6.4millionlessin2014thanin2013,whenweacquiredtheremainingnoncontrollinginterest
ofUAMBrazilandCHHolding(2)paymentofdividendswere$16.3millionlessin2014thanin2013,primarilyrelatedtoless
dividendstocommonshareholders(3)paymentofdebtissuancecostswere$27.3millionhigherin2013thanin2014,duetodebt
issuancecostspaidinconnectionwiththeissuanceoftheSeriesBNewTermLoans(the"SeriesBNewTermLoans"),theSeriesB
AdditionalTermLoans(the"SeriesBAdditionalTermLoans"),andtheAdditionalNewSeries2018ExtendedTermLoans(the
"AdditionalNewSeries2018ExtendedTermLoans")during2013,aswelltheredemptionoftheSeniorSubordinatedNotesand(4)in
2013,wedisbursed$29.1milliontothelendersoftheSeniorNotes.Otheritemsaccountedfortheremainingdifferenceof$3.1million.
ContractualObligations
ThefollowingtablereflectsasummaryofourcontractualobligationsasofDecember31,2015:
(inmillions)
Total
Longtermdebt(b)(c)
Operatingleaseobligations
Interestpayments(d)
Capitalleaseobligations(e)
Duetoshareholdersofacquiredcompanies(f)
Otherobligations(g)
Total
(a)
Paymentsduebyperiod(a)
lessthan
1year
4,347.3
2,021.8
1,294.3
247.3
194.3
88.4
8,193.4
13years
180.9
206.6
351.4
11.5
21.4
38.9
810.7
35years
Morethan
5years
$ 2,311.5 $ 1,668.2 $
186.7
370.3
318.0 1,126.9
574.9
202.5
165.5
38.9
22.3
174.6
125.4
39.3
8.2
17.9
13.5
18.1
$ 3,438.9 $ 2,263.8 $ 1,680.0
OurcontractualobligationshavenotchangedmateriallysinceDecember31,2015,exceptthatonJuly29,2016,we
extendedthematuritydateof$1,526.0millionofourtermloansfromourSeniorSecuredCreditFacilityfromJune
2018toMarch17,2021andwealsoextendedthematuritydateofourrevolvinglineofcreditfacilitytoJune7,
2019.Bothofthesecontractualobligationsareincludedinlongtermdebtinthetableabove.
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(b)
(c)
(d)
(e)
(f)
(g)
Asdescribedunder"UseofProceeds,"weintendtousethenetproceedsfromthisofferingtorepay,redeemor
repurchaseouroutstandingSeniorNotes,ourtermloansunderourSeniorSecuredCreditFacilitiesand/ortheseller
notesusedtopartiallyfinancetheacquisitionofFMUGroup.
Includes$250.0millioninaggregateprincipalamountoftheoutstanding9.250%SeniorNotesdue2019thatcould
beexchangedforsharesofourcommonstockwithinoneyearaftertheconsummationofthisofferingofourcommon
stock,ifthisofferingoccursonorbeforeAugust15,2017.SeeNote7,Debt,inourinterimconsolidatedfinancial
statementsincludedelsewhereinthisprospectusformoreinformation.
Interestpaymentsrelatetolongtermdebt,capitalleaseobligationsandamountsduetoshareholdersofacquired
companies.Interestpaymentsforvariableratelongtermdebtwerecalculatedusingthevariableinterestrateineffect
atDecember31,2015.
Includesfailedsaleleasebacks.
Duetoshareholdersofacquiredcompaniesrepresentpromissorynotespayabletothesellersofcompaniesacquired
byus.Thesenotespayablearegenerallyinterestbearingandhavethereforebeenrecordedontheconsolidated
balancesheetsattheirdiscountedpresentvalueof$186.7million.
Otherobligationsconsistsprimarilyofcontractuallyowedservicerelatedcompensation,foreigntaxsettlement
payments,purchasecommitments,theremainingrestructuringliabilitieswhichweexpecttobepaidin2016,and
othercontractualobligations.Contractuallyowedservicerelatedcompensationincludes$17.5millionrelatedto
stockbaseddeferredcompensationagreements,asdescribedfurtherinNote13,SharebasedCompensation,inour
consolidatedfinancialstatementsincludedelsewhereinthisprospectusformoreinformation.
Theprecedingtabledoesnotreflectunrecognizedincometaxbenefits,includinginterestandpenalties,asofDecember31,2015of
approximately$142.7million.Weareunabletomakeareasonablyreliableestimateoftheperiodofanycashsettlements.Itisreasonably
possiblethatourliabilityforunrecognizedtaxbenefitscouldchangeduringthetimeperiod.
AsofDecember31,2015,FMUrecordedaprepaidassetof$4.9millionandaliabilityof$15.0millionrelatedtoBrazilianfederal
taxrelateddebtthatwillbepaidbasedonaninstallmentprogram,ProgramadeRecuperacoFiscal("REFIS").Thisprogramprovidesfor
reductionsinfines,penaltiesandinterestassociatedwithoutstandingtaxdebt.Theseoutstandingliabilitiesrelatetopreacquisitiontaxes
forwhichtheCompanyhasreceivedindemnificationfromthepriorowners.Weareunabletomakeareasonablyreliableestimateofthe
periodforthecashsettlementsastheREFISinstallmentpaymentshavenotyetbeenapprovedforthisliability.Asaresult,wehavenot
presentedthis$15.0millionREFISliabilityinthetableabove.
AsofDecember31,2015,werecordedatotalliabilityof$15.0millionforadeferredcompensationplanforcertainexecutive
employeesandmembersofourboardofdirectors.Thisamountisnotincludedinthetableaboveasthepayoutdatescannotbeestimated.
OffBalanceSheetArrangements
AsofDecember31,2015,wehadthefollowingoffbalancesheetarrangements:
NoncontrollingInterestCallOptions
Weholdvariouscalloptionsthatgiveustherighttopurchasetheremainingsharesownedbynoncontrollinginterestholdersof
certainacquiredsubsidiaries.ThesecalloptionshadnoimpactonourconsolidatedfinancialstatementsasofDecember31,2015.For
furtherdiscussionregardingcall
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options,seeNote11,CommitmentsandContingencies,andNote2,SignificantAccountingPolicies,inourconsolidatedfinancial
statementsincludedelsewhereinthisprospectus.
StudentLoanGuarantees
TheaccreditedChileaninstitutionsinournetworkalsoparticipateintheCAEProgram,agovernmentsponsoredstudentfinancing
program.AspartoftheCAEProgram,theseinstitutionsprovideguaranteeswhichresultincontingentliabilitiestothirdpartyfinancing
institutions,beginningat90%ofthetuitionloansmadedirectlytoqualifiedstudentsenrolledthroughtheCAEProgramanddecliningto
60%overtime.Theguaranteesbytheseinstitutionsareineffectduringtheperiodinwhichthestudentisenrolled.Themaximum
potentialamountofpaymentsourinstitutionscouldberequiredtomakeundertheCAEProgramwasapproximately$428.0millionand
$432.0millionatDecember31,2015and2014,respectively.ThismaximumpotentialamountassumesthatallstudentsintheCAE
Programdonotgraduate,sothatourguaranteewouldnotbeassignedtothegovernment,andthatallstudentsdefaultonthefullamount
oftheCAEqualifiedloanbalances.AsofDecember31,2015and2014,werecorded$18.8millionand$19.9million,respectively,as
estimatedlongtermguaranteeliabilitiesfortheseobligations.
SubsidiarySharesasCollateral
InconjunctionwiththepurchaseofUniversidadePotiguar("UnP"),wepledgedalloftheacquiredsharesasaguaranteeofour
paymentsofrentsastheybecomedue.Intheeventthatwedefaultonanypayment,thepledgeagreementprovidesforaforfeitureofthe
relevantpledgedshares.Intheeventofforfeiture,wemayberequiredtotransferthebooksandmanagementofUnPtotheformerowners.
Weacquiredtheremaining49%ownershipinterestinUAMBrazilinApril2013.Aspartoftheagreementtopurchasethe49%
ownershipinterest,wepledged49%ofourtotalsharesinUAMBrazilasaguaranteeofourpaymentobligationsunderthepurchase
agreement.Intheeventthatwedefaultonanypayment,theagreementprovidesforaforfeitureofthepledgedshares.
InconnectionwiththepurchaseofFMUonSeptember12,2014,wepledged75%oftheacquiredsharestothirdpartylendersasa
guaranteeofourpaymentobligationsundertheloansthatfinancedaportionofthepurchaseprice.Wepledgedtheremaining25%ofthe
acquiredsharestothesellersasaguaranteeofourpaymentobligationsunderthepurchaseagreementforthesellernotes.Intheeventthat
wedefaultonanypaymentoftheloansorthesellernotes,thepurchaseagreementprovidesforaforfeitureoftherelevantpledgedshares.
UponmaturityandpaymentofthesellernotesinSeptember2017,thesharespledgedtothesellerswillbepledgedtothethirdparty
lendersuntilfullpaymentoftheloans,whichmatureinApril2021.
StandbyLettersofCredit
AsofDecember31,2015,wehadoutstandinglettersofcredit("LOC")of$126.7million,whichprimarilyconsistedofthefollowing:
FullycashcollateralizedLOCsof$86.6millioninfavoroftheDOE,whichareincludedinrestrictedcash.TheseLOCs
wererequiredtoallowWalden,Kendall,NewSchool,St.AugustineandNHULLCtocontinueparticipatingintheDOE
TitleIVprogram.
FullycashcollateralizedLOCstotaling$36.5million,whichareincludedinrestrictedcash,issuedin2012and2015to
continuetheappealsprocesswiththeSpainTaxAuthoritieswhochallengedtheholdingcompanystructureinSpain.
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SuretyBonds
Aspartofournormaloperations,ourinsurersissuesuretybondsonourbehalf,asrequiredbyvariousstateeducationauthoritiesinthe
UnitedStates.Weareobligatedtoreimburseourinsurersforanypaymentsmadebytheinsurersunderthesuretybonds.Asof
December31,2015,thetotalfaceamountofthesefullycashcollateralizedsuretybondswas$3.4million.
CriticalAccountingPoliciesandEstimates
ThepreparationoftheconsolidatedfinancialstatementsinconformitywithGAAPrequiresourmanagementtomakeestimatesand
assumptionsthataffectthereportedamountsofassets,liabilities,revenuesandexpenses,andtherelateddisclosureofcontingentassets
andliabilities.Actualresultscoulddifferfromtheseestimates.OursignificantaccountingpoliciesarediscussedinNote2,Significant
AccountingPolicies,inourconsolidatedfinancialstatementsincludedelsewhereinthisprospectus.Webelievethefollowingcritical
accountingpoliciesrequirethemostsignificantjudgmentsandestimatesabouttheeffectofmattersthatareinherentlyuncertain.Asa
result,theseaccountingpoliciesandestimatescouldmateriallyaffectourfinancialstatementsandarecriticaltotheunderstandingofour
resultsofoperationsandfinancialcondition.Managementhasdiscussedtheselectionofthesecriticalaccountingpoliciesandestimates
withtheauditcommitteeoftheboardofdirectors.
VariableInterestEntities
Laureateconsolidatesinitsfinancialstatementscertaininternationallybasededucationalorganizationsthatdonothavesharesor
otherequityownershipinterests.Althoughtheseeducationalorganizationsmaybeconsiderednotforprofitentitiesintheirhome
countries,andtheyareoperatedincompliancewiththeirrespectivenotforprofitlegalregimes,webelievetheydonotmeetthedefinition
ofanotforprofitentityunderGAAP,andwetreatthemas"forprofit"entitiesforaccountingpurposes.Theseentitiesgenerallycannot
declaredividendsordistributetheirnetassetstotheentitiesthatcontrolthem.UnderASCTopic81010,"Consolidation,"wehave
determinedthattheseinstitutionsareVIEsandthatLaureateistheprimarybeneficiaryoftheseVIEsbecausewehave,asfurtherdescribed
below:(1)thepowertodirecttheactivitiesoftheVIEsthatmostsignificantlyaffecttheireducationalandeconomicperformance,and
(2)therighttoreceiveeconomicbenefitsfromcontractualandotherarrangementswiththeVIEsthatcouldpotentiallybesignificantto
theVIEs.WeaccountfortheacquisitionoftherighttocontrolaVIEinaccordancewithASC805,"BusinessCombinations."
Aswithallofoureducationalinstitutions,theVIEinstitutions'primarysourceofincomeistuitionfeespaidbystudents,forwhichthe
studentsreceiveeducationalservicesandgoodsthatareproportionatetothepricescharged.WemaintaincontroloftheseVIEsthrough
ourrightstodesignateamajorityofthegoverningentities'boardmembers,throughwhichwehavethelegalabilitytodirecttheactivities
oftheentities.LaureatemaintainsavariableinterestintheseVIEsthroughmutualcontractualarrangementsatmarketratesandtermsthat
providethemwithnecessaryproductsandservices,and/orintellectualproperty,andhastheabilitytoenterintoadditionalsuch
contractualarrangementsatmarketratesandterms.WealsohavetheabilitytotransferourrightstogoverntheseVIEs,ortheentitiesthat
possessthoserights,tootherparties,whichcouldyieldareturnifandwhentheserightsaretransferred.
WegenerallydonothavelegalentitlementtodistributethenetassetsoftheVIEs.Generally,intheeventofliquidationorthesaleof
thenetassetsoftheVIEs,thenetproceedscanonlybetransferredeithertoanotherVIEinstitutionwithsimilarpurposesortothe
government.IntheunlikelycaseofliquidationorasaleofthenetassetsoftheVIE,wemaybeabletoretaintheresidualvaluebynaming
anotherLaureatecontrolledVIEresidentinthesamejurisdictionastherecipient,ifoneexistshoweverwegenerallycannotnameafor
profitentityastherecipient.Moreover,because
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theinstitutiongenerallywouldberequiredtoprovideforthecontinuededucationofitsstudents,liquidationwouldnotbealikelycourse
ofactionandwouldbeunlikelytoresultinsignificantresidualassetsavailablefordistribution.However,weoperateourVIEsasgoing
concernenterprises,maintaincontrolinperpetuity,andhavetheabilitytoprovideadditionalcontractualarrangementsforeducational
andotherservicespricedatuptomarketrateswithLaureatecontrolledservicecompanies.Typically,wearenotlegallyobligatedtomake
additionalinvestmentsintheVIEinstitutions.
Laureateforprofitentitiesprovidenecessaryproductsandservices,and/orintellectualproperty,toallinstitutionsintheLaureate
InternationalUniversitiesnetwork,includingtheVIEinstitutions,throughcontractualarrangementsatmarketratesandterms,whichare
accretivetoLaureate.Weperiodicallymodifytherateswechargeunderthesearrangementstoensurethattheyarepricedatorbelowfair
marketvalueandtoaddadditionalservices.Ifitisdeterminedthatcontractualarrangementswithanyinstitutionarenotonmarketterms,
itcouldhaveanadverseregulatoryimpactonsuchinstitution.Webelievethesearrangementsimprovethequalityoftheacademic
curriculumandthestudents'educationalexperience.Therearecurrentlyfourtypesofcontractualarrangements:(i)intellectualproperty
("IP")royaltyarrangements(ii)networkfeearrangements(iii)managementservicesarrangementsand(iv)leasearrangements.
(i)
UndertheIProyaltyarrangements,institutionsintheLaureateInternationalUniversitiesnetworkpaytoLaureateroyalty
paymentsfortheuseofLaureate'stradenameandbestpracticespoliciesandprocedures.
(ii)
InstitutionsintheLaureateInternationalUniversitiesnetworkgainaccesstoothernetworkresources,includingacademic
content,supportwithcurriculumdesign,onlineprograms,professionaldevelopment,studentexchangeandaccesstodual
degreeprograms,throughnetworkfeearrangementswherebytheinstitutionspaystipulatedfeestoLaureateforsuchaccess.
(iii)
InstitutionsintheLaureateInternationalUniversitiesnetworkcontractwithLaureateandpayfeesundermanagement
servicesagreementsfortheprovisionofsupportandmanagerialservicesincludingaccesstomanagement,legal,tax,
finance,accounting,treasuryandotherservices,whichinsomecasesLaureateprovidesthroughsharedservice
arrangementsincertainjurisdictions.
(iv)
Laureateforprofitentities,includingforprofitentitiesinwhichtheVIEsareinvestors,ownvariouscampusrealestate
propertiesandhaveenteredintolongtermleasecontractswiththerespectiveinstitutionsintheLaureateInternational
Universitiesnetwork,wherebytheypaymarketbasedrentsfortheuseofthepropertiesintheconductoftheireducational
operations.
RevenuesrecognizedbyourforprofitentitiesfromthesecontractualarrangementswithourconsolidatedVIEswereapproximately
$106.0million,$113.5millionand$111.6millionfortheyearsendedDecember31,2015,2014and2013,respectively.Theserevenues
areeliminatedinconsolidation.
Underouraccountingpolicy,weallocatealloftheincomeorlossesoftheseVIEstoLaureateunlessthereisanoncontrollinginterest
wheretheeconomicsoftheVIEaresharedwithathirdparty.TheincomeorlossesoftheseVIEsallocatedtoLaureaterepresentthe
earningsafterdeductingchargesrelatedtocontractualarrangementswithourforprofitentitiesasdescribedabove.Webelievethatthe
incomeremainingattheVIEsafterthesechargesaccretesvaluetoourrightstocontroltheseentities.
Laureate'sVIEsaregenerallyexemptfromincometaxes.Asaresult,theVIEsgenerallydonotrecorddeferredtaxassetsorliabilities
orrecognizeanyincometaxexpenseinourconsolidatedfinancialstatementsincludedelsewhereinthisprospectus.Nodeferredtaxesare
recognizedbytheforprofitservicecompaniesfortheremainingincomeintheseVIEsasthelegalstatusoftheseentitiesgenerally
preventsthemfromdeclaringdividendsormakingdistributionstotheirsponsors.However,theseforprofitservicecompaniesrecord
incometaxesrelatedtorevenuesfromtheircontractualarrangementswiththeseVIEs.
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RisksinRelationtotheVIEs
WebelievethatalloftheVIEinstitutionsintheLaureatenetworkareoperatedinfullcompliancewithlocallawandthatthe
contractualarrangementswiththeVIEsarelegallyenforceablehowever,theseVIEsaresubjecttoregulationbyvariousagenciesbasedon
therequirementsoflocaljurisdictions.Theseagencies,aswellaslocallegislativebodies,reviewandupdatelawsandregulationsasthey
deemnecessaryorappropriate.Wecannotpredicttheformofanylawsthatmaybeenacted,orregulationsthatultimatelymaybeadopted
inthefuture,orwhateffectstheymighthaveonourbusiness,financialcondition,resultsofoperationsandcashflows.Iflocallawsor
regulationsweretochange,iftheVIEswerefoundtobeinviolationofexistinglocallawsorregulations,oriftheregulatorswereto
questionthefinancialsustainabilityoftheVIEsand/orwhetherthecontractualarrangementswereatfairvalue,localgovernmentagencies
could,amongotheractions:
voidorrestrictrelatedpartytransactions,suchasthecontractualarrangementsbetweenusandtheVIEinstitutions
imposefinesthatsignificantlyimpactbusinessperformanceorotherrequirementswithwhichtheVIEsmaynotbeableto
comply
requireustochangetheVIEs'governancestructures,suchthatwewouldnolongermaintaincontroloftheactivitiesofthe
VIEsor
disallowatransferofourrightstogoverntheseVIEs,ortheentitiesthatpossessthoserights,toathirdpartyfor
consideration.
Ourabilitytoconductourbusinesswouldbenegativelyaffectediflocalgovernmentsweretocarryoutanyoftheaforementionedor
othersimilaractions.Inanysuchcase,wemaynolongerbeabletoconsolidatetheVIEs.
SelectedconsolidatedstatementsofoperationsinformationfortheseVIEswasasfollows,netofthechargesrelatedtotheabove
describedcontractualarrangements:
FortheYearsEnded
December31,
2015
2014
2013
(inmillions)
SelectedStatementsofOperationsinformation:
Revenues,bysegment:
LatAm
Europe
AMEA
Revenues
Operatingincome(loss),bysegment:
LatAm
Europe
AMEA
Operatingincome(loss)
Netincome(loss)
417.7
128.6
136.1
682.4
53.0
(14.8)
13.6
9.2
8.1
11.8
11.5
458.1
130.4
139.1
727.6
54.8
(50.0)
(11.2)
4.4
(56.9)
(51.5)
(50.9)
$ 566.2
115.8
93.7
775.6
50.2
21.7
8.7
2.8
33.1
41.1
41.1
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Thefollowingtablereconcilesthenet(loss)incomeattributabletoLaureateEducation,Inc.aspresentedinthetableabove,tothe
amountsinourconsolidatedstatementsofoperationsincludedelsewhereinthisprospectus:
FortheYearsEnded
December31,
2015
2014
2013
(inmillions)
Variableinterestentities
Otheroperations
Corporateandeliminations
NetlossattributabletoLaureateEducation,Inc.
$
11.5 $ (50.9) $
41.1
118.0 291.2 211.7
(445.8) (398.6) (322.5)
$ (316.2) $ (158.3) $ (69.7)
ThefollowingtablepresentsselectedassetsandliabilitiesoftheconsolidatedVIEs.Exceptforgoodwill,theassetsinthetablebelow
includetheassetsthatcanbeusedonlytosettletheobligationsfortheVIEs.Theliabilitiesinthetableareliabilitiesforwhichthe
creditorsoftheVIEsdonothaverecoursetoourgeneralcredit.
SelectedconsolidatedbalancesheetamountsfortheseVIEswereasfollows:
BalanceSheetsData:
Othercurrentassets
Totalcurrentassets
Goodwill
Tradenames
Otherlongtermassets
Totalassets
Totalcurrentliabilities
Longtermdebtandotherlongtermliabilities
Totalliabilities
Totalstockholders'equity
Totalstockholders'equityattributabletoLaureate
Education,Inc.
December31,2015
VIE
Consolidated
(inmillions)

$ 120.9 $
186.1
307.0
196.9
105.0
738.0
1,346.9
305.1
150.3
455.3
891.5
874.6
December31,2014
VIE
Consolidated
458.7
677.0
1,135.7
2,115.9
1,361.1
52.2
2,774.2
7,439.1
1,548.2
5,483.8
7,031.9
355.4

$ 122.7 $
192.9
315.6
256.7
118.7
0.3
758.4
1,449.6
388.6
116.7
505.3
944.2
324.8
920.1
461.6
691.9
1,153.4
2,469.8
1,461.8
93.1
3,180.1
8,358.1
1,669.3
5,588.4
7,257.7
1,056.5
1,017.1
TheVIEs'cashandcashequivalentsbalancesaregenerallyrequiredtobeusedonlyforthebenefitoftheoperationsoftheseVIEs.
Thesebalancesareincludedincashandcashequivalentsinourconsolidatedbalancesheetsincludedelsewhereinthisprospectus.
BusinessCombinations
WeapplythepurchaseaccountingstandardsunderASC805,"BusinessCombinations,"toacquisitions.Thepurchasepriceofan
acquisitionisallocated,foraccountingpurposes,toindividualtangibleandidentifiableintangibleassetsacquired,liabilitiesassumedand
noncontrollinginterestsbasedontheirestimatedfairvaluesontheacquisitiondate.Anyexcesspurchasepriceovertheassignedvaluesof
netassetsacquiredisrecordedasgoodwill.Theacquisitiondateisthedateonwhichcontrolisobtainedbytheacquiringcompany.Any
nonmonetaryconsiderationtransferredandanypreviouslyheldnoncontrollingintereststhatarepartofthepurchaseconsiderationare
remeasuredatfairvalueontheacquisitiondate,withanyresultinggainorlossrecognizedinearnings.The
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preliminaryallocationsofthepurchasepricearesubjecttorevisioninsubsequentperiodsbasedonthefinaldeterminationoffairvalues,
whichmustbefinalizednolaterthanthefirstanniversaryofthedateoftheacquisition.Transactioncostsareexpensedasincurred.See
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whichmustbefinalizednolaterthanthefirstanniversaryofthedateoftheacquisition.Transactioncostsareexpensedasincurred.See
Note4,Acquisitions,inourconsolidatedfinancialstatementsincludedelsewhereinthisprospectusfordetailsofour2015,2014and2013
businesscombinations.
Incertaincases,weinitiallypurchaseamajorityownershipinterestinacompanyandusevariousputandcallarrangementswiththe
noncontrollinginterestholdersthatrequireorenableustopurchasealloraportionoftheremainingminorityownershipatalaterdate.In
accountingforthesearrangements,wearerequiredtomakeestimateswithregardtothefinalamountwewilleventuallypayforthe
additionalownershipinterestthatwewillacquire.Intheminorityputarrangements,thefinalsettlementvaluesareusuallybasedonfuture
earningsmeasurementsthatwerefertoas"nonGAAPearnings,"astheyarecalculatedusinganagreeduponsetofrulesthatarenot
necessarilyconsistentwithGAAP.WeusethecurrentvalueofamultipleofthecurrentperiodnonGAAPearningsasanestimateforthe
finalvaluethatwilleventuallybepaidtosettlethearrangement.Thesevaluesarethenadjustedannuallytoreflectchangesinthe
acquiredcompany'snonGAAPearningsaswellastheadditionalpassageoftimetomaturityforthearrangement.Totheextentthatthe
currentperiod'snonGAAPearningsaredifferentfromfutureperiods'nonGAAPearnings,thevalueoftheseobligationscanchange
significantlyandcanimpactourfinancialpositionandresultsofoperations.SeeNote11,CommitmentsandContingencies,inour
consolidatedfinancialstatementsincludedelsewhereinthisprospectusfordetailsofournoncontrollinginterestputarrangements.
GoodwillandIndefinitelivedIntangibleAssets
Weperformannualimpairmenttestsofindefinitelivedintangibleassets,primarilygoodwillandtradenames,asofOctober1ofeach
year.Wealsoevaluatetheseassetsonaninterimbasisifeventsorchangesincircumstancesbetweenannualtestsindicatethattheassets
maybeimpaired.Wehavenotmadematerialchangestothemethodologyusedtoassessimpairmentlossonindefinitelivedintangible
assetsduringthepastthreefiscalyears.
Wehavetheoptionoffirstperformingaqualitativeassessment(i.e.,stepzero)beforecalculatingthefairvalueofthereportingunit
(i.e.,steponeofthetwostepfairvaluebasedimpairmenttest).Ifwedetermineonthebasisofqualitativefactorsthatthefairvalueofthe
reportingunitismorelikelythannotlessthanthecarryingamount,thetwostepimpairmenttestisrequired.
Ifwedonotperformthequalitativeassessmentforareportingunitordeterminethatitismorelikelythannotthatthefairvalueofthe
reportingunitislessthanitscarryingamount,aquantitativetwostepfairvaluebasedtestisperformed.Inthefirststep,weestimatethe
fairvalueofeachreportingunit,utilizingaweightedcombinationofdiscountedcashflowanalysisandamarketmultiplesanalysis.A
reportingunitisdefinedasacomponentofanoperatingsegmentforwhichdiscretefinancialinformationisavailableandregularly
reviewedbymanagementofthatsegment.Iftherecordednetassetsofthereportingunitarelessthanthereportingunit'sestimatedfair
value,thenthereisnogoodwilldeemedtobeimpaired.Iftherecordednetassetsofthereportingunitexceeditsestimatedfairvalue,then
goodwillispotentiallyimpairedandwecalculatetheimpliedfairvalueofgoodwill,bydeductingtheestimatedfairvalueofalltangible
andidentifiableintangiblenetassetsofthereportingunitfromtheestimatedfairvalueofthereportingunit.Iftherecordedamountof
goodwillexceedsthisimpliedfairvalue,thedifferenceisrecognizedasalossonimpairmentofassetsintheconsolidatedstatementsof
operations.
Ourvaluationapproachutilizesaweightedcombinationofadiscountedcashflowanalysisandamarketmultiplesanalysis,where
available.Thediscountedcashflowanalysisreliesonhistoricaldata
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andinternalestimates,whicharedevelopedasapartofourlongrangeplanprocess,andincludesanestimateofterminalvaluebasedon
theseexpectedcashflowsusingthegenerallyacceptedGordonDividendGrowthformula,whichderivesavaluationusinganassumed
perpetualannuitybasedonthereportingunit'sresidualcashflows.ThediscountrateisbasedonthegenerallyacceptedWeightedAverage
CostofCapitalmethodology,andisderivedusingacostofequitybasedonthegenerallyacceptedCapitalAssetPricingModelandacost
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CostofCapitalmethodology,andisderivedusingacostofequitybasedonthegenerallyacceptedCapitalAssetPricingModelandacost
ofdebtbasedonthetypicalratepaidbymarketparticipants.Themarketmultiplesanalysisutilizesmultiplesofbusinessenterprisevalue
torevenues,operatingincomeandearningsbeforeinterest,taxes,depreciationandamortizationofcomparablepubliclytradedcompanies
andmultiplesbasedonfairvaluetransactionswherepublicinformationisavailable.Significantassumptionsusedinestimatingthefair
valueinclude:(1)discountandgrowthrates,and(2)ourlongrangeplan,whichincludesenrollment,pricing,plannedcapital
expendituresandoperatingmargins.Managementreviewsthesumoftheestimatedfairvalueofallourreportingunitstoourenterprise
valuetocorroboratetheresultsofourweightedcombinationapproachtodeterminingfairvalue.
Wealsoevaluatethesensitivityofachangeinassumptionsrelatedtogoodwillimpairment,assessingwhethera10%reductioninour
estimatesofrevenueora100basispointincreaseinourestimateddiscountrateswouldresultinimpairmentofgoodwill.Excludingthe
impactofourrecentacquisitionstotheirrespectivereportingunits,usingthecurrentestimatedcashflowsanddiscountrates,each
reportingunit'sestimatedfairvalueexceedsitscarryingvaluebyatleast15%.Wehavedeterminedthatnoneofourreportingunitswith
materialgoodwillwereatriskoffailingthefirststepofthegoodwillimpairmenttestasofSeptember30,2016.
Theimpairmenttestforindefinitelivedassetsgenerallyrequiresanewdeterminationofthefairvalueoftheintangibleassetusingthe
"relieffromroyalty"method.Thismethodestimatestheamountofroyaltyexpensethatwouldbeincurrediftheassetswerelicensedfroma
thirdparty.Weusepubliclyavailableinformationandproprietarythirdpartyarm'slengthagreementsthatwehaveenteredintowith
variouslicensorsindeterminingcertainassumptionstoassistusinestimatingfairvalueusingmarketparticipantassumptions.Ifthefair
valueoftheintangibleassetislessthanitscarryingvalue,theintangibleassetisadjustedtoitsnewfairvalue,andanimpairmentlossis
recognized.
Iftheestimatesandrelatedassumptionsusedinassessingtherecoverabilityofourgoodwillandindefinitelivedintangibleassets
decline,wemayberequiredtorecordimpairmentchargesforthoseassets.Webaseourfairvalueestimatesonassumptionsthatwebelieve
tobereasonablebutthatareunpredictableandinherentlyuncertain.Actualresultsmaydifferfromthoseestimates.Inaddition,wemake
certainjudgmentsandassumptionsinallocatingsharedassetsandliabilitiestodeterminethecarryingvaluesforeachofourreporting
units.
Asaresultofourimpairmenttesting,werecordednoimpairmentlossesfortheyearendedDecember31,2015.Fortheyearended
December31,2014,werecordedimpairmentlossesongoodwillandtradenames.FortheyearendedDecember31,2013,werecorded
impairmentlossesontradenames.See"ResultsofOperationsDiscussionofSignificantItemsAffectingtheConsolidatedResults"and
Note7,GoodwillandOtherIntangibleAssets,inourconsolidatedfinancialstatementsincludedelsewhereinthisprospectusforfurther
detailsoftheimpairments.
LongLivedAssetsandFiniteLivedIntangibleAssets
Weevaluateourlonglivedassets,includingpropertyandequipmentandfinitelivedintangibleassets,todeterminewhethereventsor
changesincircumstancesindicatethattheremainingestimatedusefullivesofsuchassetsmaywarrantrevisionorthattheircarrying
valuesmaynotbefullyrecoverable.
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Indicatorsofimpairmentinclude,butarenotlimitedto:
asignificantdeteriorationofoperatingresults
achangeinregulatoryenvironment
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asignificantchangeintheuseofanasset,itsphysicalcondition,orachangeinmanagement'sintendeduseoftheasset
anadversechangeinanticipatedcashflowsor
asignificantdecreaseinthemarketpriceofanasset.
Ifanimpairmentindicatorispresent,weevaluaterecoverabilitybyacomparisonofthecarryingamountoftheassetstofuture
undiscountednetcashflowsexpectedtoresultfromtheuseandeventualdispositionoftheassets.Iftheassetsaredeterminedtobe
impaired,theimpairmentrecognizedistheexcessofthecarryingamountoverthefairvalueoftheassets.Fairvalueisgenerally
determinedbythediscountedcashflowmethod.Thediscountrateusedinanyestimateofdiscountedcashflowsistheratecommensurate
withasimilarinvestmentofsimilarrisk.Weusejudgmentindeterminingwhetheratriggeringeventhasoccurredandinestimatingfuture
cashflowsandfairvalue.Changesinourjudgmentscouldresultinimpairmentsinfutureperiods.
Asaresultofourimpairmenttesting,werecordedimpairmentlossesonlonglivedassetsfortheyearsendedDecember31,2014and
2013,asdescribedin"ResultsofOperationsSummaryComparisonofConsolidatedResultsfortheYearsEndedDecember31,2015,
2014and2013DiscussionofSignificantItemsAffectingtheConsolidatedResults"andinNote7,GoodwillandOtherIntangibleAssets,
inourconsolidatedfinancialstatementsincludedelsewhereinthisprospectus.
DeferredCosts
Deferredcostsontheconsolidatedbalancesheetsconsistprimarilyofdirectcostsassociatedwithonlinecoursedevelopmentand
accreditation.Deferredcostsassociatedwiththedevelopmentofonlineeducationalprogramsarecapitalizedaftertechnological
feasibilityhasbeenestablished.Deferredonlinecoursedevelopmentcostsareamortizedtodirectcostsonastraightlinebasisoverthe
estimatedperiodthattheassociatedproductsareexpectedtogeneraterevenues.Deferredonlinecoursedevelopmentcostsareevaluated
onaquarterlybasisthroughreviewofthecorrespondingcoursecatalog.Ifacourseisnolongerlistedorofferedinthecurrentcourse
catalog,thenthecostsassociatedwithitsdevelopmentarewrittenoff.AsofDecember31,2015and2014,theunamortizedbalancesof
onlinecoursedevelopmentcostswere$54.5millionand$56.3million,respectively.Wedeferdirectandincrementalthirdpartycosts
incurredforobtaininginitialaccreditationandfortherenewalofaccreditations.Theseaccreditationcostsareamortizedtodirectcosts
overthelifeoftheaccreditationonastraightlinebasis.AsofDecember31,2015and2014,theunamortizedbalancesofaccreditation
costswere$3.7millionand$3.2million,respectively.
AtDecember31,2015and2014,ourtotaldeferredcostswere$156.0millionand$140.3million,respectively,withaccumulated
amortizationof$(97.9)millionand$(80.8)million,respectively.
Asaresultofourimpairmenttesting,werecordedimpairmentlossesondeferredcostsfortheyearsendedDecember31,2014and
2013,asdescribedin"ResultsofOperationsSummaryComparisonofConsolidatedResultsfortheYearsEndedDecember31,2014,
2013and2012DiscussionofSignificantItemsAffectingtheConsolidatedResults"andinNote7,GoodwillandOtherIntangibleAssets,
inourconsolidatedfinancialstatementsincludedelsewhereinthisprospectus.
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DebtIssuanceCosts
Debtissuancecostsarepaidasaresultofcertaindebttransactionsandarepresentedasadeductionfromdebt.Thesedebtissuance
costsareamortizedoverthetermoftheassociateddebtinstruments.TheamortizationexpenseisrecognizedasacomponentofInterest
expenseintheconsolidatedstatementsofoperations.Ifweextinguishourdebtbeforeitsfullterm,wemayneedtowriteoffalloraportion
ofthesedeferredfinancingcostsandrecognizealossonextinguishment.AsofDecember31,2015and2014,theunamortizedbalancesof
debtissuancecostswere$69.3millionand$80.1million,respectively.
IncomeTaxes
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IncomeTaxes
Werecordtheamountofincometaxespayableorrefundableforthecurrentyear,aswellasdeferredtaxassetsandliabilitiesforthe
expectedfuturetaxconsequencesofeventsthatwehaverecognizedinourconsolidatedfinancialstatementsortaxreturns.Weexercise
judgmentinassessingfutureprofitabilityandthelikelyfuturetaxconsequencesoftheseevents.
DeferredTaxes
Estimatesofdeferredtaxassetsandliabilitiesarebasedoncurrenttaxlaws,ratesandinterpretations,and,incertaincases,business
plansandotherexpectationsaboutfutureoutcomes.Wedevelopestimatesoffutureprofitabilitybaseduponhistoricaldataand
experience,industryprojections,forecastsofgeneraleconomicconditions,andourownexpectations.Ouraccountingfordeferredtax
consequencesrepresentsmanagement'sbestestimateoffutureeventsthatcanbeappropriatelyreflectedinouraccountingestimates.
Changesinexistingtaxlawsandrates,theirrelatedinterpretations,aswellastheuncertaintygeneratedbythecurrenteconomic
environmentmayimpacttheamountsofdeferredtaxliabilitiesorthevaluationsofdeferredtaxassets.
TaxContingencies
Wearesubjecttoregularreviewandauditbybothdomesticandforeigntaxauthorities.Weapplyamorelikelythannotthresholdfor
taxpositions,underwhichwemustconcludethatataxpositionismorelikelythannottobesustainedinorderforustocontinueto
recognizethebenefit.Thisassumesthatthepositionwillbeexaminedbytheappropriatetaxingauthorityandthatfullknowledgeofall
relevantinformationisavailable.Indeterminingtheprovisionforincometaxes,judgmentisused,reflectingestimatesandassumptions,in
applyingthemorelikelythannotthreshold.Achangeintheassessmentoftheoutcomeofataxrevieworauditcouldmaterially
adverselyaffectourconsolidatedfinancialstatementsincludedelsewhereinthisprospectus.
SeeNote15,IncomeTaxes,inourconsolidatedfinancialstatementsincludedelsewhereinthisprospectusfordetailsofourdeferred
taxesandtaxcontingencies.
IndefiniteReinvestmentofForeignEarnings
WeearnasignificantportionofourincomefromsubsidiarieslocatedincountriesoutsidetheUnitedStates.Deferredtaxliabilities
havenotbeenrecognizedforundistributedforeignearningsbecausemanagementbelievesthattheearningswillbeindefinitelyreinvested
outsidetheUnitedStatesunderourplannedtaxneutralmethods.ASC740,"IncomeTaxes,"requiresthatweevaluateourcircumstancesto
determinewhetherornotthereissufficientevidencetosupporttheassertionthatwewillreinvestundistributedforeignearnings
indefinitely.Ourassertionthatearningsfromourforeignoperationswillbeindefinitelyreinvestedissupportedbyprojectedworking
capitalandlongtermcapitalplansineachforeignsubsidiarylocationinwhichtheearningsaregenerated.Additionally,webelievethat
wehavetheabilitytoindefinitelyreinvestforeignearningsbasedonourdomesticoperation'scashrepatriationstrategies,projectedcash
flows,projectedworkingcapitalandliquidity,
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andtheexpectedavailabilityofcapitalwithinthedebtorequitymarkets.Ifourexpectationschangebasedonfuturedevelopmentssuch
thatsomeoralloftheundistributedearningsofourforeignsubsidiariesmayberemittedtotheUnitedStatesintheforeseeablefuture,we
willberequiredtorecognizedeferredtaxexpenseandliabilitiesonthoseamounts.Inaddition,ifapplicabletaxrulesintheUnitedStates
aremodifiedtocauseU.S.corporationstopaytaxesonforeignearningseveniftheearningsarenotremittedtotheUnitedStates,wemay
incuradditionaltaxexpense.
RevenueRecognition
Ourrevenuesprimarilyconsistoftuitionandeducationalservicerevenues.Wealsogeneraterevenuesfromstudentfees,
dormitory/residencyfees,andeducationrelatedactivities.Revenuesarereportednetofscholarshipsandotherdiscounts,refunds,waivers
andthefairvalueofanyguaranteesmadebyusrelatedtostudentfinancingprograms.Ourinstitutionshavevariousbillingandacademic
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andthefairvalueofanyguaranteesmadebyusrelatedtostudentfinancingprograms.Ourinstitutionshavevariousbillingandacademic
cycles.Collectabilityisdeterminedonastudentbystudentbasisatthetimeofenrollment.Generally,studentscannotreenrollforthe
nextacademicsessionwithoutsatisfactoryresolutionofanypastdueamounts.Tuitionrevenuesarerecognizedratablyonaweekly
straightlinebasisovereachacademicsession.Deferredrevenueandstudentdepositsonourconsolidatedbalancesheetsconsistoftuition
paidpriortothestartofacademicsessionsandunearnedtuitionamountsrecordedasaccountsreceivableafteranacademicsessionbegins.
Ifastudentwithdrawsfromaninstitution,ourobligationtoissuearefunddependsontherefundpolicyatthatinstitutionandthetiming
ofthestudent'swithdrawal.Generally,ourrefundobligationsarereducedoverthecourseoftheacademicterm.Werecordrefundsasa
reductionofdeferredrevenueandstudentdeposits,asapplicable.Onceastudentwithdraws,theCompanyrecognizesrevenueonacash
basisascollectabilityisnotreasonablyassured.Dormitoryrevenuesarerecognizedovertheoccupancyperiod.Revenuesfromthesaleof
educationalproductsaregenerallyrecognizedupondeliveryandwhencollectabilityisreasonablyassured.Studentfeesandother
revenues,whichincluderevenuesfromcontractualarrangementswithunconsolidatedinstitutions,arerecognizedasearnedoverthe
appropriateserviceperiod.
AllowanceforDoubtfulAccounts
Receivablesaredeemedtobeuncollectiblewhentheyhavebeenoutstandingfortwoyears,orearlierwhencollectioneffortshave
ceased,atwhichtimetheyarewrittenoff.Priortothat,werecordanallowancefordoubtfulaccountstoreduceourreceivablestotheirnet
realizablevalue.Ourallowanceestimationmethodologyisbasedontheageofthereceivables,thestatusofpastdueamounts,historical
collectiontrends,currenteconomicconditions,andstudentenrollmentstatus.Intheeventthatcurrentcollectiontrendsdifferfrom
historicaltrends,anadjustmentismadetotheallowanceaccountandbaddebtexpense.
Derivatives
Inthenormalcourseofbusiness,ouroperationshavesignificantexposuretofluctuationsinforeigncurrencyvaluesandinterestrate
changes.Accordingly,wemitigateaportionoftheserisksthroughariskmanagementprogramthatincludestheuseofderivativefinancial
instruments(derivatives).TheinterestandprincipalpaymentsforourseniorlongtermdebtarrangementsareprimarilypaidinUSD.
BecausethemajorityofouroperatingcashflowandrevenuescomesfrombusinessunitslocatedoutsidetheUnitedStateswithfunctional
currenciesotherthanUSD,ourabilitytomakedebtpaymentsandourearningsaresubjecttofluctuationsinthevalueoftheUSDrelative
toforeigncurrencies.Inordertomitigatetheseforeigncurrencyrisks,weselectivelyenterintoforeignexchangeforwardcontracts.
Additionally,borrowingsunderourSeniorSecuredCreditFacilitiesandcertainlocalcreditfacilitiesbearinterestatvariablerates.If
marketinterestratesincrease,variableratedebtwillcreatehigherdebtservicerequirements,whichcouldadverselyaffectourcashflow.
Therefore,wehaveenteredintofloatingtofixedinterestrateswapcontractsforcertaindebt
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arrangementsthataresubjecttofluctuationsininterestrates.Wedonotengageinspeculativeorleveragedtransactions,nordoweholdor
issuederivativesfortradingpurposes.
Wereportallderivativesontheconsolidatedbalancesheetsatfairvalue.Thevaluesarederivedusingvaluationmodelscommonly
usedforderivatives.Thesevaluationmodelsrequireavarietyofinputs,includingcontractualterms,marketprices,forwardpriceyield
curves,notionalquantities,measuresofvolatilityandcorrelationsofsuchinputs.Ourfairvaluemodelsincorporatethemeasurementof
ourownnonperformanceriskintoourcalculations.Ourderivativesexposeustocreditrisktotheextentthatthecounterpartymay
possiblyfailtoperformitscontractualobligationwhenweareinanetgainposition.Asaresult,ourvaluationmodelsreflect
measurementsforcounterpartycreditrisk.Wealsoactivelymonitorcounterpartycreditratingsforanysignificantchangesthatcould
impactthenonperformanceriskcalculationforourfairvalue.Wevaluederivativesusingmanagement'sbestestimateofinputswebelieve
marketparticipantswoulduseinpricingtheassetorliabilityatthemeasurementdate.Derivativeandhedgeaccountingrequiresjudgment
intheuseofestimatesthatareinherentlyuncertainandthatmaychangeinsubsequentperiods.Externalfactors,suchaseconomic
conditions,willimpacttheinputstothevaluationmodelovertime.Theeffectofchangesinassumptionsandestimatescouldmaterially
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conditions,willimpacttheinputstothevaluationmodelovertime.Theeffectofchangesinassumptionsandestimatescouldmaterially
impactourfinancialstatements.SeeNote14,DerivativeInstruments,inourconsolidatedfinancialstatementsincludedelsewhereinthis
prospectusfordetailsofourderivatives.
StockbasedCompensation
WeusetheBlackScholesMertonoptionpricingmodeltocalculatethefairvalueofstockoptions.Thisoptionvaluationmodel
requirestheuseofsubjectiveassumptions,includingtheestimatedfairvalueoftheunderlyingcommonstock,theexpectedstockprice
volatility,andtheexpectedtermoftheoption.Theestimatedfairvalueoftheunderlyingcommonstockisbasedonthirdparty
valuations.Ourvolatilityestimatesarebasedonapeergroupofcompanies.Weestimatetheexpectedtermofawardstobetheweighted
averagemidpointbetweenthevestingdateandtheendofthecontractualterm.Weusethismethodtoestimatetheexpectedtermsincewe
donothavesufficienthistoricalexercisedata.
Wehavegrantedrestrictedstock,restrictedstockunits,stockoptions,andperformanceawardsforwhichthevestingisbasedonour
annualperformancemetrics.Forinterimperiods,weuseouryeartodateactualresults,financialforecasts,andotheravailableinformation
toestimatetheprobabilityoftheawardvestingbasedontheperformancemetrics.Therelatedcompensationexpenserecognizedis
affectedbyourestimatesofthevestingpotentialoftheseperformanceawards.SeeNote13,SharebasedCompensation,inour
consolidatedfinancialstatementsincludedelsewhereinthisprospectusforfurtherdiscussionofthesearrangements.
RecentlyIssuedAccountingPronouncements
AccountingStandardsUpdateNo.201616("ASU201616"),IncomeTaxes(Topic740):IntraEntityTransfersofAssetsOtherThan
Inventory
InOctober2016,theFinancialAccountingStandardsBoard("FASB")issuedAccountingStandardsUpdate("ASU")201616inorder
toimprovetheaccountingforincometaxconsequencesforintraentitytransfersofassetsotherthaninventory.UndercurrentGAAP,the
recognitionofcurrentanddeferredincometaxesforanintraentitytransferisprohibiteduntiltheassethasbeensoldtoathirdparty.The
amendmentsinthisASUstatethatanentityshouldrecognizeincometaxconsequencesofanintraentitytransferwhenthetransferoccurs.
ThisalignstherecognitionofincometaxconsequencesforintraentitytransfersofassetswithInternationalFinancingReporting
Standards("IFRS").ThisASUiseffectiveforLaureatebeginningonJanuary1,2018andearlyadoptionispermitted.Theamendmentsin
thisASUshouldbeappliedonamodifiedretrospectivebasisthrougha
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cumulativeeffectadjustmentdirectlytoretainedearningsasofthebeginningoftheperiodofadoption.Wearecurrentlyevaluatingthe
impactofASU201616onourconsolidatedfinancialstatements.
AccountingStandardsUpdateNo.201615("ASU201615"),StatementofCashFlows(Topic230):ClassificationofCertainCash
ReceiptsandCashPayments
InAugust2016,theFASBissuedASU201615inordertoreducediversityaroundhowcertaincashreceiptsandcashpaymentsare
presentedandclassifiedontheStatementofCashFlows.ThisASUprovidesguidanceonthefollowingareas,forwhichcurrentGAAPis
eitherunclearordoesnotincludespecificguidance:
debtprepaymentordebtextinguishmentcosts
settlementofzerocoupondebtinstrumentsorotherdebtinstrumentswithcouponratesthatareinsignificantinrelationto
theeffectiveinterestrateoftheborrowing
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contingentconsiderationpaymentsmadeafterabusinesscombination
proceedsfromthesettlementofinsuranceclaims
proceedsfromthesettlementofcorporateownedlifeinsurancepolicies
distributionsreceivedfromequitymethodinvestees
beneficialinterestsinsecuritizationtransactionsand
separatelyidentifiablecashflowsandapplicationofthepredominanceprinciple.
ThisASUiseffectiveforLaureatebeginningonJanuary1,2018andearlyadoptionispermittedhowever,ifearlyadoptioniselected,
alloftheamendmentstotheareasabovemustbeadoptedatthesametime.TheamendmentsinthisASUshouldbeapplied
retrospectively.WearecurrentlyevaluatingtheimpactofASU201615onourconsolidatedfinancialstatements.
AccountingStandardsUpdateNo.201612("ASU201612"),RevenuefromContractswithCustomers(Topic606):Narrowscope
improvementsandpracticalexpedients
InMay2016,theFASBissuedASU201612toaddresscertainareasofimprovementaroundTopic606,RevenuefromContractswith
Customers.TheamendmentsinthisUpdatedonotchangethecoreprinciplesofTopic606,butdoaddressclarificationaroundthe
followingareas:
assessingthecollectibilitycriterionandaccountingforcontractsthatdonotmeetthecriteria
presentationofsalestaxesandothersimilartaxescollectedfromcustomers
noncashconsideration
contractmodificationsattransition
completedcontractsattransitionand
technicalcorrectionaroundretrospectiveapplication.
TheamendmentsinthisupdateaffecttheguidanceinASU201409,ContractswithCustomers(Topic606),whichisnotyeteffective,
andthereforefollowthesameeffectivedateandtransitionrequirements.ASU201409iseffectiveforLaureateonJanuary1,2018and
allowseitherafullretrospectiveadoptiontoallperiodspresentedoramodifiedretrospectiveadoptionapproachwiththecumulative
effectofinitialapplicationoftherevisedguidancerecognizedatthedateoftheinitialapplication.Wearecurrentlyevaluatingtheimpact
ofASU201612onourconsolidatedfinancialstatements.
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AccountingStandardsUpdateNo.201610("ASU201610"),RevenuefromContractswithCustomers(Topic606):Identifying
PerformanceObligationsandLicensing
InApril2016,theFASBissuedASU201610inresponsetoanissuecommunicatedbytheTransitionResourceGroupforRevenue
Recognition(the"TRG"),agroupwhichwasformedbytheFASBandtheInternationalAccountingStandardsBoard("IASB"),
(collectively,the"Boards"),whoseobjectiveistoinformtheBoardsofanyissuesthatcouldarisewiththeimplementationofaconverged
standardonrecognitionofrevenuefromcontractswithcustomers.ASU201610doesnotchangethecoreprincipaloftheguidancein
Topic606,butaddsclarificationaroundidentifyingperformanceobligationsandlicensing.
andthereforefollowsthesameeffectivedateandtransitionrequirements.ASU201409iseffectiveforLaureateonJanuary1,2018and
AccountingStandardsUpdateNo.201609("ASU201609"),CompensationStockcompensation(Topic718):Improvementsto
EmployeeSharebasedPaymentAccounting
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EmployeeSharebasedPaymentAccounting
OnMarch30,2016,theFASBissuedASU201609aspartofitsinitiativetoreducecomplexityinaccountingstandards.Theareasfor
simplificationinthisASUinvolveseveralaspectsoftheaccountingforemployeesharebasedpaymenttransactions,includingtheincome
taxconsequences,classificationofawardsaseitherequityorliabilities,andclassificationonthestatementofcashflows.Theguidanceis
effectiveforLaureatebeginningJanuary1,2017.Earlyadoptionispermittedinanyannualorinterimperiodforwhichfinancial
statementshavenotbeenissuedormadeavailableforissuance,butalloftheguidancemustbeadoptedinthesameperiod.Ifanentity
earlyadoptstheguidanceinaninterimperiod,anyadjustmentsmustbereflectedasofthebeginningofthefiscalyearthatincludesthat
interimperiod.WeareevaluatingtheimpactofASU201609onourconsolidatedfinancialstatements.
AccountingStandardsUpdateNo.201608("ASU201608"),RevenuefromContractswithCustomers(Topic606):PrincipalversusAgent
Considerations(ReportingRevenueGrossversusNet)
InMarch2016,theFASBissuedASU201608inresponsetoanissuecommunicatedbytheTRGregardingthedeterminationof
whethertheentityactsastheprincipaloranagentincertaintransactionswhereanotherparty,alongwiththeentity,isinvolvedin
providingagoodorservicetoacustomer.Theamendmentsinthisupdatedonotchangethecoreprincipleoftheexistingimplementation
guidanceinTopic606onprincipalversusagentconsiderations,butdoclarifyhowanentityshoulddeterminewhetheritisaprincipalor
anagentbyprovidingindicatorsthatassistintheassessmentofcontrol.Suchindicatorsmaybemoreorlessrelevanttothecontrol
assessmentandoneormoreindicatorsmaybemoreorlesspersuasivetothecontrolassessment,dependingonthefactsandcircumstances.
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AccountingStandardsUpdateNo.201602("ASU201602"),Leases(Topic842)
OnFebruary25,2016,theFASBissuedASU201602.Lesseeswillneedtorecognizeontheirbalancesheetarightofuseassetanda
leaseliabilityforvirtuallyalloftheirleases(otherthanleasesthatmeetthedefinitionofashorttermlease).Theliabilitywillbeequalto
thepresentvalueofleasepayments.Theassetwillbebasedontheliability,subjecttoadjustment,suchasforinitialdirectcosts.For
incomestatementpurposes,theFASBretainedadualmodel,requiringleasestobeclassifiedaseitheroperatingorfinance.Operating
leaseswillresultinstraightlineexpense(similartocurrentoperatingleases)whilefinanceleaseswillresultinafrontloadedexpense
pattern(similartocurrentcapitalleases).Classificationwillbebasedoncriteriathatarelargelysimilartothoseappliedincurrentlease
accounting,butwithoutexplicitbrightlines.ThestandardiseffectiveforLaureatebeginningJanuary1,2019.Earlyadoptionis
permitted.Thenewstandardmustbeadoptedusingamodifiedretrospectivetransition,andprovidesforcertainpracticalexpedients.
Transitionwillrequireapplicationofthenewguidanceatthebeginningoftheearliestcomparativeperiodpresented.Weareevaluating
theimpactofASU201602onourconsolidatedfinancialstatements.
AccountingStandardsUpdateNo.201601("ASU201601"),FinancialInstrumentsOverall(Subtopic81510)
InJanuary2016,theFASBissuedASU201601inordertoenhancethereportingmodelforfinancialinstrumentstoprovideusersof
financialstatementswithmoredecisionusefulinformation.TheamendmentsinthisASUrequireallequityinvestments(exceptthose
accountedforundertheequitymethodofaccountingorthosethatresultinconsolidationoftheinvestee)tobemeasuredatfairvalue,
withchangesinfairvaluerecognizedthroughnetincome.Inaddition,theamendmentsinthisASUrequirethatentitiesthathaveelected
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tomeasurefinancialinstrumentsatfairvaluemustdisclose,asaseparateitemincomprehensiveincome,theportionofthetotalchangein
fairvalueofaliabilityresultingfromachangeininstrumentspecificcreditrisk.
ThisASUiseffectiveforLaureatebeginningJanuary1,2018andamendmentsshouldbeappliedasacumulativeeffectadjustmentto
thebalancesheetasofthebeginningofthefiscalyearofadoption.Theamendmentsrelatedtoequitysecuritieswithoutreadily
determinablefairvaluesshouldbeappliedprospectivelytoequityinvestmentsthatexistasofthedateofadoptionoftheASU.Weare
currentlyevaluatingtheimpactofASU201601onourconsolidatedfinancialstatements.
AccountingStandardsUpdateNo.201517("ASU201517"),IncomeTaxes(Topic740)
InNovember2015,theFASBissuedASU201517asapartoftheSimplificationInitiativeandinresponsetoconcernsthatthecurrent
requirementthatentitiesseparatedeferredincometaxliabilitiesandassetsintocurrentandnoncurrentamountsresultsinlittleorno
benefittousersofthefinancialstatements.Thisclassificationdoesnotgenerallyalignwiththetimeperiodinwhichtherecognized
deferredtaxamountsareexpectedtoberecoveredorsettledandtherearecostsincurredbyanentitytoseparatedeferredincometax
liabilitiesandassetsintocurrentandnoncurrentamounts.TheamendmentsinthisASUaimtosimplifythispresentationbyrequiringthat
deferredtaxliabilitiesandassetsbeclassifiedasnoncurrentinaclassifiedstatementoffinancialposition,whichalignstheGAAP
presentationofdeferredincometaxassetsandliabilitieswithInternationalFinancialReportingStandards("IFRS").
ThisASUiseffectiveforLaureatebeginningJanuary1,2017,andmaybeappliedeitherprospectivelytoalldeferredtaxliabilities
andassetsorretrospectivelytoallperiodspresented.Earlyadoptionispermittedasofthebeginningofaninterimorannualreporting
period.WearecurrentlyevaluatingtheimpactofASU201517onourconsolidatedfinancialstatements.
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AccountingStandardsUpdateNo.201516("ASU201516"),BusinessCombinations(Topic805)
OnSeptember25,2015,theFASBissuedASU201516asapartoftheSimplificationInitiativeandinresponsetoconcernsthatthe
requirementtoretrospectivelyapplyadjustmentsmadetoprovisionalamountsrecognizedinabusinesscombinationaddscostsand
complexitytofinancialreporting,butdoesnotsignificantlyimprovetheusefulnessoftheinformationprovidedtousers.Theamendments
inthisASUrequirethatadjustmentstoprovisionalamountsthatareidentifiedbytheacquirerduringthemeasurementperiodbe
recognizedinthereportingperiodinwhichtheadjustmentamountsareidentified,ratherthanretrospectively.
TheamendmentsinthisASUalsorequirethattheacquirerrecord,inthesameperiod'sfinancialstatements,theeffectonearningsof
changesindepreciation,amortizationorotherincomeeffects,ifany,asaresultofthechangetotheprovisionalamounts,calculatedasif
theaccountinghadbeencompletedattheacquisitiondate.Theacquirermustalsopresentseparatelyonthefaceoftheincomestatement
ordisclosureinthenotestheportionoftheamountrecordedincurrentperiodearningsbylineitemthatwouldhavebeenrecordedin
previousreportingperiodsiftheadjustmenttotheprovisionalamountshadbeenrecognizedasoftheacquisitiondate.
TheguidanceiseffectiveforLaureatebeginningJanuary1,2016,andshouldbeappliedprospectively.Earlyadoptionispermitted
forfinancialstatementsthathavenotyetbeenmadeavailableforissuance.WedonotexpectASU201516tohaveamaterialimpacton
ourconsolidatedfinancialstatements.
AccountingStandardsUpdateNo.201507("ASU201507"),FairValueMeasurement(Topic820)DisclosuresforInvestmentsin
CertainEntitiesthatCalculateNetAssetValueperShare(orItsEquivalent)
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OnMay1,2015,theFASBissuedASU201507.UndertheamendmentsinthisASU,investmentsforwhichfairvalueismeasuredat
netassetvaluepershare(oritsequivalent)usingthepracticalexpedientshouldnotbecategorizedinthefairvaluehierarchy.Removing
thoseinvestmentsfromthefairvaluehierarchynotonlyeliminatesthediversityinpracticeresultingfromthewayinwhichinvestments
measuredatnetassetvaluepershare(oritsequivalent)withfutureredemptiondatesareclassified,butalsoensuresthatallinvestments
categorizedinthefairvaluehierarchyareclassifiedusingaconsistentapproach.
TheamendmentsinASU201507areeffectiveforpublicbusinessentitiesforfiscalyearsbeginningafterDecember15,2015,and
interimperiodswithinthosefiscalyears.Areportingentityshouldapplytheamendmentsretrospectivelytoallperiodspresented.The
retrospectiveapproachrequiresthataninvestmentforwhichfairvalueismeasuredusingthenetassetvaluepersharepracticalexpedient
beremovedfromthefairvaluehierarchyinallperiodspresentedinanentity'sfinancialstatements.WeplantoadoptASU201507on
January1,2016andbelievethisguidancewillapplytothedeferredcompensationplanassetsdiscussedinNote20,FairValue
Measurement,inourconsolidatedfinancialstatementsincludedelsewhereinthisprospectus.
AccountingStandardsUpdateNo.201503("ASU201503")InterestImputationofInterest(Subtopic83530):Simplifyingthe
PresentationofDebtIssuanceCosts
OnApril7,2015,theFASBissuedASU201503,whichsimplifiesthepresentationofdebtissuancecostsbyrequiringdebtissuance
coststobepresentedasadeductionfromdebt.Thiswillmakethepresentationofdebtissuancecostsconsistentwiththepresentationof
debtdiscountsorpremiums.Italsoaddressesthelongstandingconflictwiththeconceptualframework,sinceFASBConceptsStatement
No.6,ElementsofFinancialStatements,requiresthatassetsprovidefutureeconomicbenefit,whichdebtissuancecostsdonot.ASU2015
03willalsoalignGAAPwithIFRS,whichrequirestransactioncosts,includingthirdpartycostsandcreditorfees,tobedeductedfromthe
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carryingvalueofthefinancialliabilityandnotrecordedasaseparateasset.Thenewguidanceislimitedtosimplifyingthepresentationof
debtissuancecosts.Therecognitionandmeasurementguidancefordebtissuancecostsisnotaffected.Therefore,thesecostswillcontinue
tobeamortizedasinterestexpenseusingtheeffectiveinterestmethodpursuanttoASC83530352through353.
TheguidanceiseffectivebeginningJanuary1,2016.Uponadoption,anentitymustapplythenewguidanceretrospectivelytoall
priorperiodspresentedinthefinancialstatements.Anentityisalsorequiredintheyearofadoption(andininterimperiodswithinthat
year)toprovidecertaindisclosuresaboutthechangeinaccountingprinciple,includingthenatureofandreasonforthechange,the
transitionmethod,adescriptionofthepriorperiodinformationthathasbeenretrospectivelyadjustedandtheeffectofthechangeonthe
financialstatementlineitems(thatis,debtissuancecostassetandthedebtliability).
AccountingStandardsUpdateNo.201502("ASU201502")Consolidation(Topic810)
OnFebruary18,2015,theFASBissuedASU201502,inresponsetostakeholders'concernsabouttherequirementtoconsolidate
certainlegalentitieswherethereportingentity'scontractualrightsdonotgiveittheabilitytoactprimarilyonitsownbehalf,the
reportingentitydoesnotholdamajorityofthelegalentity'svotingrights,orthereportingentityisnotexposedtoamajorityofthelegal
entity'seconomicbenefitsorobligations.Financialstatementusersassertedthatincertainofthosesituationsinwhichconsolidationis
ultimatelyrequired,deconsolidatedfinancialstatementsarenecessarytobetteranalyzethereportingentity'seconomicandoperational
results.ASU201502affectsreportingentitiesthatarerequiredtoevaluatewhethertheyshouldconsolidatecertainlegalentities.This
ASUprovidesarevisedconsolidationmodelthatrequiresthefollowing:
1.
modifytheevaluationofwhetherlimitedpartnershipsandsimilarlegalentitiesareVIEsorvotinginterestentities
2.
eliminatethepresumptionthatageneralpartnershouldconsolidatealimitedpartnership
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2.
3.
affecttheconsolidationanalysisofreportingentitiesthatareinvolvedwithVIEs,particularlythosethathavefee
arrangementsandrelatedpartyrelationshipsand
4.
provideascopeexceptionfromconsolidationguidanceforreportingentitieswithinterestsinlegalentitiesthatarerequired
tocomplywithoroperateinaccordancewithrequirementsthataresimilartothoseinRule2a7oftheInvestmentCompany
Actof1940forregisteredmoneymarketfunds.
ASU201502iseffectiveforpublicbusinessentitiesforfiscalyears,andforinterimperiodswithinthosefiscalyears,beginningafter
December15,2015.Forallotherentities,ASU201502iseffectiveforfiscalyearsbeginningafterDecember15,2016,andforinterim
periodswithinfiscalyearsbeginningafterDecember15,2017.Earlyadoptionispermitted.WedonotexpectASU201502tohavea
materialimpactonourconsolidatedfinancialstatements.
AccountingStandardsUpdateNo.201409,("ASU201409"):RevenuefromContractswithCustomers(Topic606)
OnMay28,2014,theFASBissuedASU201409.ThisASUsupersedestherevenuerecognitionrequirementsinTopic605,"Revenue
Recognition"andmostindustryspecificguidance.ThecoreprincipleofASU201409isthatacompanywillrecognizerevenuewhenit
transferspromisedgoodsorservicestocustomersinanamountthatreflectstheconsiderationtowhichthecompanyexpectstobeentitled
inexchangeforthosegoodsorservices.OnJuly9,2015,theFASBdeferredtheeffectivedateofASU201409.Thenewrevenuestandard
iseffectiveforfiscalyears,andinterimperiodswithinthoseyears,beginningafterDecember15,2017(January1,2018forLaureate)and
allowseitherafullretrospectiveadoptiontoallperiodspresentedoramodifiedretrospectiveadoptionapproachwiththe
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cumulativeeffectofinitialapplicationoftherevisedguidancerecognizedatthedateofinitialapplication.Wearebeginningtoevaluate
theadoptionalternativesandtheimpactofASU201409onourconsolidatedfinancialstatements.
QuantitativeandQualitativeDisclosuresAboutMarketRisk
Weareexposedtomarketriskprimarilyfromfluctuationsininterestratesandforeigncurrencyexchangerates.Wemayseektocontrol
aportionoftheserisksthroughariskmanagementprogramthatincludestheuseofderivativestoreduceearningsandcashflowvolatility
associatedwithchangesininterestratesandforeigncurrencyexchangerates.Asapolicy,wedonotengageinspeculativeorleveraged
transactions,nordoweholdorissuederivativesfortradingpurposes.
InterestRateRisk
Wearesubjecttoriskfromfluctuationsininterestrates,primarilyrelatingtoourSeniorSecuredCreditFacilitiesandcertainlocal
creditfacilities,whichbearinterestatvariablerates.However,twofactorsservetomitigatethisrisk.First,weenterintofloatingtofixed
interestrateswapcontractsinordertofixaportionofourfloatingratedebt,andourcrosscurrencyswapincludesanembeddedfloating
tofixedratecomponent.Second,ourseniorsecuredcreditagreementcontainsaflooronLIBORcontractsandABRdraws.
BasedonouroutstandingvariableratedebtasofDecember31,2015andfactoringintheimpactofthederivatives,anincreaseof100
basispointsinourweightedaverageinterestratewouldresultinanincreaseininterestexpenseof$23.2milliononanannualbasis.
BasedonouroutstandingvariableratedebtasofDecember31,2015andfactoringintheimpactofthederivativesandtheLIBOR
floor,anincreaseof100basispointsininterestrateswouldresultinanincreaseininterestexpenseof$9.8milliononanannualbasis.
SeeNote14,DerivativeInstruments,inourconsolidatedfinancialstatementsincludedelsewhereinthisprospectusforfurther
discussionofourderivatives.
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ForeignCurrencyExchangeRisk
WeusetheUSDasourreportingcurrency.Wederivedapproximately83%ofourrevenuesfromstudentsoutsideoftheUnitedStates
fortheyearendedDecember31,2015.Ourbusinessistransactedthroughanetworkofinternationalanddomesticsubsidiaries,generally
inthelocalcurrency,consideredthefunctionalcurrencyforthatsubsidiary.
Ourforeigncurrencyexchangerateriskisrelatedtothefollowingitems:
Adjustmentsrelatingtothetranslationofourassetsandliabilitiesfromthesubsidiaries'functionalcurrenciestoUSD.These
adjustmentsarerecordedinaccumulatedothercomprehensiveincome(loss)onourconsolidatedbalancesheets.
Gainsandlossesresultingfromforeigncurrencyexchangeratechangesrelatedtointercompanyloansthataredeemedto
havethecharacteristicsofalongterminvestment.Thesegainsandlossesarerecordedinaccumulatedothercomprehensive
income(loss)onourconsolidatedbalancesheets.
Gainsandlossesresultingfromforeigncurrencyexchangeratechangesrelatedtointercompanyloansthatarenotdeemed
tohavethecharacteristicsofalongterminvestment.Thesegainsand
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lossesarerecordedinforeigncurrencyexchangegain(loss)onourconsolidatedstatementsofoperations.
Gainsandlossesonforeigncurrencytransactions.Thesegainsandlossesarerecordedinforeigncurrencyexchangegain
(loss)onourconsolidatedstatementsofoperations.
FortheyearendedDecember31,2015,ahypothetical10%adversechangeinaverageannualforeigncurrencyexchangerates,
excludingtheimpactsofourderivatives,wouldhavedecreasedoperatingincomeandAdjustedEBITDAbyapproximately$21.9million
and$71.1million,respectively.
Wemonitortheimpactofforeigncurrencymovementsrelatedtodifferencesbetweenoursubsidiaries'localcurrenciesandtheUSD.
OurU.S.debtfacilitiesareprimarilydenominatedinUSD.WeenterintoforeignexchangeforwardcontractstoprotecttheUSDvalueof
ourassetsandfuturecashflows,aswellastoreducetheearningsimpactofexchangeratefluctuationsonreceivablesandpayables
denominatedincurrenciesotherthanthefunctionalcurrencies.SeeNote14,DerivativeInstruments,inourconsolidatedfinancial
statementsincludedelsewhereinthisprospectusforadditionaldiscussionregardingourderivatives.
OtherMatters
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donation.
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InSeptember2016,wevoluntarilydisclosedtheinvestigationtotheDOJandtheSEC.TheCompanyintendstofullycooperatewith
theseagenciesandanyotherapplicableauthoritiesinanyinvestigationthatmaybeconductedinthismatterbythem.TheCompanyhas
internalcontrolsandcompliancepoliciesandproceduresthataredesignedtopreventmisconductofthisnatureandsupportcompliance
withlawsandbestpracticesthroughoutitsglobaloperations.TheCompanyistakingstepstoenhancetheseinternalcontrolsand
compliancepoliciesandprocedures.Theinvestigationisongoing,andwecannotpredicttheoutcomeatthistime,ortheimpact,ifany,to
theCompany'sconsolidatedfinancialstatementsorpredicthowtheresultingconsequences,ifany,mayimpactourinternalcontrolsand
compliancepoliciesandprocedures,business,abilityorrighttooperateinTurkey,resultsofoperationsorfinancialposition.Ifweare
foundtohaveviolatedtheFCPAorotherlawsgoverningtheconductofouroperations,wemaybesubjecttocriminalandcivilpenalties
andotherremedialmeasures,whichcouldmateriallyadverselyaffectourbusiness,financialcondition,resultsofoperationsandliquidity.
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BUSINESS
OurBusiness
in2015,accordingtoGSV.Webelievetheglobalhighereducationmarketpresentsanattractivelongtermopportunity,primarilybecause
ofthelargeandgrowingimbalancebetweenthesupplyanddemandforqualityhighereducationaroundtheworld.Advancededucation
opportunitiesdrivehigherearningspotential,andwebelievetheprojectedgrowthinthemiddleclasspopulationworldwideandlimited
governmentresourcesdedicatedtohighereducationcreatesubstantialopportunitiesforhighqualityprivateinstitutionstomeetthis
growingandunmetdemand.Ouroutcomesdrivenstrategyisfocusedonenablingmillionsofstudentsgloballytoprosperandthrivein
thedynamicandevolvingknowledgeeconomy.
education,basedonthenumberofstudents,institutionsandcountriesmakingupournetwork.Ourglobalnetworkof71institutions
comprises59institutionsweownorcontrol,andanadditional12institutionsthatwemanageorwithwhichwehaveotherrelationships.
Ourinstitutionsarerecognizedfortheirhighqualityacademics.Forexample,weownandoperateUVMMexico,thelargestprivate
universityinMexico,whichin2016wasrankedseventhamongallpublicandprivatehighereducationinstitutionsinthecountryby
GuaUniversitaria.Ourtrackrecordfordeliveringhighqualityoutcomestoourstudents,whilestressingaffordabilityandaccessibility,
hasbeenakeyreasonforourlongrecordofsuccess,including16consecutiveyearsofenrollmentgrowth.WehavegeneratedCAGRsin
totalenrollmentandrevenuesof10.4%and9.0%,respectively,from2009throughSeptember30,2016.
team.From2007toSeptember30,2016,wehaveexpandedinto12newcountries,addedover100campusesworldwideandgrown
enrollmentfromapproximately300,000tomorethanonemillionstudentswithacombinationofstrongorganicrevenuegrowthof9.3%
(averageannualrevenuegrowthfrom2007to2015excludingacquisitions)andthesuccessfulintegrationof41strategicacquisitions.Key
tothisgrowthwereexpansionsintoBrazil,whereweowned13institutionswithacombinedenrollmentofapproximately260,000
students,andexpansionsintoAsia,theMiddleEastandAfrica,whereweownedorcontrolled21institutionswithacombinedenrollment
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intechnologyandhumanresources,includingkeymanagementhires,andaredevelopingscalablebackofficeoperationstosupportthe
LaureateInternationalUniversitiesnetwork,includingimplementingaverticallyintegratedinformationtechnology,finance,accounting
andhumanresourcesorganizationthat,amongotherthings,aredesignedtoenhanceouranalyticalcapabilities.Finally,overthepast
severalyears,wehaveinvestedheavilyintechnologyenabledsolutionstoenhancethestudentexperience,increasepenetrationofour
hybridofferingsandoptimizeefficiencythroughoutournetwork.Webelievetheseinvestmentshavecreatedanintellectualproperty
advantagethathasfurtherdifferentiatedourofferingsfromlocalmarketcompetitors.
TheLaureateInternationalUniversitiesnetworkenablesustoeducateourstudentslocally,whileconnectingthemtoaninternational
communitywithaglobalperspective.Ourstudentscantakeadvantageofsharedcurricula,optionalinternationalprogramsandservices,
includingEnglishlanguageinstruction,dualdegreeandstudyabroadprogramsandotherbenefitsofferedbyotherinstitutionsin
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ournetwork.Webelievethatthebenefitsofthenetworktranslateintobettercareeropportunitiesandhigherearningspotentialforour
graduates.
campusbased,onlineandhybridprograms.Approximately93%ofourstudentsattendtraditional,campusbasedinstitutionsoffering
multiyeardegrees,similartoleadingprivateandpublichighereducationinstitutionsintheUnitedStatesandEurope.Inaddition,
approximatelytwothirdsofourstudentsareenrolledinprogramsoffourormoreyearsinduration.Ourprogramsaredesignedwitha
distinctemphasisonapplied,professionalorientedcontentforgrowingcareerfieldsandarefocusedonspecificacademicdisciplines,or
verticals,thatwebelievedemonstratestrongemploymentopportunitiesandprovidehighearningspotentialforourstudents,including:
Acrosstheseacademicdisciplines,wecontinuallyandproactivelyadaptourcurriculumtotheneedsofthemarket,including
emphasizingthecoreSTEM(science,technology,engineeringandmath)andbusinessdisciplines.WebelievetheSTEMandbusiness
disciplinespresentattractiveareasofstudytostudents,especiallyindevelopingcountrieswherethereexistsastrongandongoingfocus
todevelopandretainprofessionallytrainedindividuals.Since2009,wehavemorethandoubledourenrollmentofstudentspursuing
degreesinBusiness&Management,Medicine&HealthSciencesandEngineering&InformationTechnology,ourthreelargest
disciplines.Webelievetheworkofourgraduatesinthesedisciplinescreatesapositiveimpactonthecommunitiesweserveand
strengthensourinstitutions'reputationswithintheirrespectivemarkets.
Acrosstheworld,weoperateinstitutionsthataddressregional,nationalandlocalsupplyanddemandimbalancesinhighereducation.
Asthegloballeaderinhighereducation,webelieveweareuniquelypositionedtoeffectivelydeliverhighqualityeducationacross
differentbrandsandtuitionlevelsinthemarketsinwhichweoperate.Inmanydevelopingmarkets,traditionalhighereducationstudents
(definedas1824yearolds)havehistoricallybeenservedbypublicuniversities,whichhavelimitedcapacityandareoftenunderfunded,
resultinginaninabilitytomeetgrowingstudentdemandsandemployerrequirements.Ourinstitutionsinthesemarketsoffertraditional
highereducationstudentsaprivateeducationalternative,oftenwithmultiplebrandsandpricepointsineachmarket,withinnovative
programsandstrongcareerdrivenoutcomes.Inmanyofthesesamemarkets,nontraditionalstudentssuchasworkingadultsanddistance
learnershavelimitedoptionsforpursuinghighereducation.Throughtargetedprogramsandmultipleteachingmodalities,weareableto
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servethedifferentiatedneedsofthisuniquedemographic.OurflexibleapproachacrossgeographiesallowsLaureatetoaccessabroader
addressablemarketofstudentsbyefficientlytailoringinstitutionstomeettheneedsofaparticulargeographyandstudentpopulation.
Wehavefourreportingsegments,whicharesummarizedinthetablebelow.WegroupourinstitutionsbygeographyinLatinAmerica,
EuropeandAsia,MiddleEastandAfricaforreporting
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purposes.OurGPSsegmentincludesourfullyonlineuniversitiesandourcampusbasedinstitutionsintheUnitedStates.
ThefollowinginformationforouroperatingsegmentsispresentedasofSeptember30,2016,exceptwhereotherwiseindicated:
Countries
Institutions
Enrollments(roundedtonearestthousand)
LTMendedSeptember30,2016Revenues($
inmillions)
%ContributiontoLTMendedSeptember30,
2016Revenues
LatAm
Europe
AMEA
GPS
Total
8
7
8
2
25
29
14
21
7
71
834,000 54,000 86,000 73,000 1,047,000
$ 2,378.7 $
56%
496.9 $
419.1 $
939.9 $
12%
10%
22%
4,218.8
100%
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OurIndustry
Wearetheleaderintheglobalmarketforhighereducation,whichischaracterizedbyasignificantimbalancebetweensupplyand
demand,especiallyindevelopingeconomies.Inmanycountries,demandforhighereducationislargeandgrowing.GSVestimatesthat
highereducationinstitutionsaccountedfortotalrevenuesofapproximately$1.5trilliongloballyin2015,withthehighereducation
marketexpectedtogrowbyapproximately5%perannumthrough2020.Globalgrowthinhighereducationisbeingfueledbyseveral
demographicandeconomicfactors,includingagrowingmiddleclass,globalgrowthinservicesandtechnologyrelatedindustriesand
recognitionofthesignificantpersonalandeconomicbenefitsgainedbygraduatesofhighereducationinstitutions.Atthesametime,
manygovernmentshavelimitedresourcestodevotetohighereducation,resultinginadiminishedabilitybythepublicsectortomeet
growingdemand,andcreatingopportunitiesforprivateeducationproviderstoenterthesemarketsanddeliverhighqualityeducation.As
aresult,theprivatesectorplaysalarge
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andgrowingroleinhighereducationglobally.WhiletheLaureateInternationalUniversitiesnetworkisthelargestglobalnetworkof
degreegrantinghighereducationinstitutionsintheworld,ourtotalenrollmentofmorethanonemillionstudentsrepresentsonly0.5%of
worldwidehighereducationstudents.
Large,GrowingandUnderpenetratedPopulationofQualifiedHigherEducationStudents.AccordingtoUNESCO,198.6million
studentsworldwidewereenrolledinhighereducationinstitutionsin2013,nearlydoublethe99.7millionstudentsenrolledin2000,and
approximately90%ofthosestudentswereenrolledatinstitutionsoutsideoftheUnitedStatesasof2013.Inmanycountries,including
throughoutLatinAmerica,Asiaandotherdevelopingregions,thereisgrowingdemandforhighereducationbasedonfavorable
demographics,increasingsecondarycompletionratesandincreasinghighereducationparticipationrates,resultingincontinuedgrowthin
highereducationenrollments.Whileglobalparticipationrateshaveincreasedfortraditionalhighereducationstudents(definedas1824
yearolds),themarketforhighereducationisstillsignificantlyunderpenetrated,particularlyindevelopingcountries.Giventhelow
penetrationrates,manygovernmentsindevelopingcountrieshaveastatedgoalofincreasingthenumberofstudentsparticipatingin
highereducation.Forexample,Mexico'sparticipationrateincreasedfromapproximately16%toapproximately22%from2003to2013,
andtheMexicangovernmenthassetagoalofincreasingthenumberofstudentsenrolledinhighereducationby17%overthenextthree
years.Otherdevelopingcountrieswithlargeaddressablemarketsaresimilarlyunderpenetratedasevidencedbythefollowing
participationratesfor2013:SaudiArabia(36%),Brazil(32%),China(22%)andIndia(19%),allofwhicharewellbelowratesof
developedcountriessuchastheUnitedStatesandSpain,whichin2013hadparticipationratesofapproximately63%andapproximately
60%,respectively.
StrongEconomicIncentivesforHigherEducation.AccordingtotheBrookingsInstitution,approximately1.8billionpeopleinthe
worldcomposedthemiddleclassin2009,anumberthatisexpectedtomorethandoubleby2030toalmostfivebillionpeople.We
believethatmembersofthislargeandgrowinggroupseekadvancededucationopportunitiesforthemselvesandtheirchildrenin
recognitionofthevastdifferentialinearningspotentialwithandwithouthighereducation.AccordingtodatafromtheOECD,incertain
Europeanmarketsinwhichweoperate,theearningsfromemploymentforanadultcompletinghighereducationwereapproximately60%
higherthanthoseofanadultwithjustanuppersecondaryeducation,whileintheUnitedStatesthedifferentialwasapproximately76%.
Thisincomegapisevenmorepronouncedinmanydevelopingcountriesaroundtheworld,includingadifferentialofapproximately
139%inChileandapproximately152%inBrazil.OECDstatisticsalsoshowthatoverallemploymentratesaregreaterforindividuals
completinghighereducationthanforthosewhohavenotcompleteduppersecondaryeducation.Inaddition,webelieveaseconomies
aroundtheworldareincreasinglybasedontheservicessector,theywillrequiresignificantinvestmentinhumancapital,advanced
educationandspecializedtrainingtoproduceknowledgeableprofessionals.Webelievethecumulativeimpactoffavorabledemographic
andsocioeconomictrends,coupledwiththesuperiorearningspotentialofhighereducationgraduates,willcontinuetoexpandthemarket
forprivatehighereducation.
IncreasingRoleofthePrivateSectorinHigherEducation.Inmanyofourmarkets,theprivatesectorplaysameaningfulrolein
highereducation,bridgingsupplyanddemandimbalancescreatedbyalackofcapacityatpublicuniversities.Inadditiontocapacity
limitations,webelievethatlimitedpublicresources,andthecorrespondingpolicyreformstomakehighereducationsystemsless
dependentonthefinancialandoperationalsupportoflocalgovernments,haveresultedinincreasedenrollmentsinprivateinstitutions
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AccordingtotheOECD,from2003to2013,thenumberofstudentsenrolledinprivateinstitutionsgrewfromapproximately26%to
approximately31%oftotalenrollmentswithinOECDcountries.Forexample,BrazilandChilerelyheavilyuponprivateinstitutionsto
deliverqualityhighereducationto
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students,withapproximately71%(in2012)andapproximately84%(in2013),respectively,ofhighereducationstudentsinthese
countriesenrolledinprivateinstitutions.
Thedecreaseingovernmentfundingtopublichighereducationinstitutionsinrecentyearshasservedtospurthegrowthofprivate
institutions,astuitionshavebeenincreasinglyfundedbyprivatesources.Onaverage,OECDcountriesexperiencedadecreaseinpublic
fundingfromapproximately69%oftotalfundingin2000toapproximately65%in2012.Forexample,Mexicoexperiencedadecreasein
publicfundingasapercentageoftotalfundingofapproximatelytenpercentagepointsduringthesameperiod.Webelievethesetrends
haveincreaseddemandforcompetitiveprivateinstitutionsaspublicinstitutionsareunabletomeetthedemandofstudentsandfamilies
aroundtheworld,especiallyindevelopingmarkets.
GreaterAccessibilitytoHigherEducationthroughOnlineandHybridOfferings.ImprovingInternetbroadbandinfrastructureand
newinstructionmethodologiesdesignedfortheonlinemediumhavedrivenincreasedacceptanceoftheonlinemodalityglobally.
AccordingtoasurveyconductedbytheBabsonSurveyResearchGroup,approximately71%ofacademicleadersratedonlinelearning
outcomesasthesameorsuperiortoclassroomlearningin2014,upfromapproximately57%in2003.GSVestimatesthattheonlinehigher
educationmarketwillgrowbyaCAGRofapproximately25%,from$49billionin2012to$149billionin2017.Additionally,newonline
andhybrideducationofferingshaveenabledthecosteffectivedeliveryofhighereducation,whileimprovingoverallaffordabilityand
accessibilityforstudents.Webelievethatincreasingstudentdemand,coupledwithgrowingemployerandregulatoryacceptanceof
degreesobtainedthroughonlineandhybridmodalities,willcontinuetodrivesignificantgrowthintheonlineandhybridhigher
educationmarketglobally.
OurStrengthsandCompetitiveAdvantages
Webelieveourkeycompetitivestrengthsthatwillenableustoexecuteourgrowthstrategyincludethefollowing:
FirstMoverandLeaderinGlobalHigherEducation.In1999,wemadeourfirstinvestmentinglobalhighereducation.Sincethat
time,theLaureateInternationalUniversitiesnetworkhasgrowntoinclude71institutionsin25countriesthatenrollmorethanone
millionstudents,ofwhichapproximately95%areoutsideoftheUnitedStatesandover85%resideindevelopingcountries.Ourgrowth
hasbeentheresultofnumerousorganicinitiatives,supplementedbysuccessfullycompletingandintegrating41acquisitionssince
August2007,substantiallyallofwhichwerecompletedthroughprivatenegotiationsandnotaspartofanauctionprocess.Givenoursize
andstatusasthefirstmoverinmanyofourmarkets,wehavebeenabletoacquiremanymarqueeassets,whichwebelievewillhelpus
maintainourmarketleadingpositionduetotheconsiderabletimeandexpenseitwouldtakeacompetitortoestablishanintegrated
networkofinternationaluniversitiesofsimilarscalewiththebrands,intellectualpropertyandaccreditationsthatwepossess.
LongStandingandReputableUniversityBrandsDeliveringHighQualityEducation.Webelievewehaveestablishedareputation
forprovidinghighqualityhighereducationaroundtheworld,andthatourschoolsareamongthemostrespectedhighereducationbrands
intheirlocalmarkets.Manyofourinstitutionshaveover40yearhistories,withsomeinstitutionsapproaching100years.Inadditionto
longstandingpresencesintheirlocalcommunities,manyofourinstitutionsarerankedamongthebestintheirrespectivecountries.For
example,theBarmetrodelaEducacinSuperiorhasrankedUniversidadAndrsBelloasatopuniversityinChile.Similarly,inBrazil,
UniversidadeAnhembiMorumbiisrankedbyGuiadoEstudanteasoneofSoPaulo'stopuniversities,andinEurope,Universidad
EuropeadeMadridisthesecondlargestprivateuniversityinSpainandreceivedfourstarsintheprestigious2015QSStarsinternational
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universityrating.OurU.S.basedinstitutionshavebeenrecognizedfortheirqualityandvalue.WaldenUniversity,amemberofthe
LaureateInternationalUniversitiesnetwork,wassingledoutintheU.S.SenateReportonForProfitHigherEducationin2012
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as"perhapsthebestofanycompanyexamined."Morerecently,Waldenranked19thonthelistofthetop100universitiesforadult
learnersintheWashingtonMonthly2016CollegeRankings.
Ourstrongbrandsareperpetuatedbyourstudentcentricfocusandourmissiontoprovidegreateraccesstocosteffective,highquality
highereducation,whichallowsmorestudentstopursuetheiracademicandcareeraspirations.Wearecommittedtocontinuallyevaluating
ourinstitutionstoensureweareprovidingthehighestqualityeducationtoourstudents.Ourproprietarymanagementtool,LEAF,isused
toevaluateinstitutionalperformancebasedon44uniquecriteriaacrossfivedifferentcategories:Employability,LearningExperience,
PersonalExperience,Access&OutreachandAcademicExcellence.LEAF,inconjunctionwithadditionalexternalassessment
methodologies,suchasQSStars,allowsustoidentifykeyareasforimprovementinordertodriveacultureofqualityandcontinual
innovationatourinstitutions.Forexample,morethan86%ofstudentsattendingLaureateinstitutionsinBrazilareenrolledinan
institutionwithanIGCscore(anindicatorusedbytheBrazilianMinistryofEducationtoevaluatethequalityofhighereducation
institutions)thathasimprovedsince2010.Inaddition,ourBrazilianinstitutions'IGCscoreshaveincreasedbyapproximately16%on
averagefrom2010to2014,placingthreeofourinstitutionsinthetopquintile,andnine(encompassingapproximately96%ofourstudent
enrollmentinBrazil)inthetopthreequintilesofallprivatehighereducationinstitutionsinthecountry.
Manyofourinstitutionsandprogramshaveearnedthehighestaccreditationavailable,whichprovidesuswithastrongcompetitive
advantageinlocalmarkets.Forexample,weservemorethan200,000studentsinthefieldsofmedicineandhealthsciencesonover100
campusesthroughouttheLaureateInternationalUniversitiesnetwork,including22medicalschoolsand19dentalschools.Medical
schoollicensesareoftenthemostdifficulttoobtainandareonlygrantedtoinstitutionsthatmeetrigorousstandards.Webelievethe
existenceofmedicalschoolsatmanyofourinstitutionsfurthervalidatesthequalityofourinstitutionsandprograms.Similarly,other
institutionshavereceivednumerousspecializedaccreditations,includingthoseforPh.D.programs.Forexample,UNAB,UDLAEcuador,
andUPCarethreeofonly11universitiesinallofLatinAmericatoreceiveaU.S.accreditation,whicharehighlyregardedanddifficultto
attain.Finally,inadditiontoUniversidadEuropeadeMadrid,14institutionsinournetworkwerealsoratedbyQSStarsinternational
universityrating,whichisaprestigiousexternalassessment.In2015,manyLaureateinstitutionsreceivedthreeandfourstarsasindicated
below:
FourStars
EuropeanUniversityCyprus
UniversidadAndrsBello(UNAB)
ThreeStars
UniversidaddelValledeMxico(UVMMexico)
UniversidadPeruanadeCienciasAplicadas(UPC)
UniversidadTecnolgicadeMxico(UNITECMexico)
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UniversidadeAnhembiMorumbi(UAMBrazil)
UniversidadePotiguar(UnP)
UniversidadeSalvador(UNIFACS)
CentroUniversitrioRitterdosReis(UniRitter)
UniversidaddeLasAmricas(UDLAEcuador)
IstanbulBilgiUniversity
UniversityofPetroleumandEnergyStudies(UPES)
UniversidadLatinadeCostaRica(ULatina)
UniversidadTecnolgicaCentroamericana(UNITECHonduras)
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SuperiorOutcomesforOurStudents.Weofferhighqualityundergraduate,graduateandspecializedprogramsinawiderangeof
disciplinesthatgeneratestronginterestfromstudentsandprovideattractiveemploymentprospects.Wedesignourprogramstoprepare
studentstocontributeproductivelyintheirchosenprofessionsuponemployment.Ourcurriculumdevelopmentprocessincludesemployer
surveysandongoingresearchintobusinesstrendstodeterminetheskillsandknowledgebasethatwillberequiredbythoseemployersin
thefuture.Thisinformationresultsintimelycurriculumupgrades,whichhelpsensurethatourgraduatesacquiretheskillsthatwillmake
themmarketabletoemployers.In2014,wecommissionedastudybyMillwardBrown,aleadingthirdpartymarketresearchorganization,
ofgraduatesatLaureateinstitutionsrepresentingover60%oftotalLaureateenrollments.Graduatesat12ofour13surveyedinternational
institutionsachieved,onaverage,equalorhigheremploymentrateswithin12monthsofgraduationascomparedtograduatesofother
institutionsinthesamemarkets,andinallofourpremiuminstitutionssurveyed,graduatesachievedhigherstartingsalariesascompared
tograduatesofotherinstitutionsinthosesamemarkets(salarypremiumtomarketbenchmarksrangedfromapproximately6%to
approximately118%).Inaddition,ajointstudybyLaureateandtheIFC/WorldBankGroupin2014showedthatgraduatesofLaureate
institutionsinMexicoexperiencedhigherratesofsocialmobility,findingjobsandmovingupinsocioeconomicstatusthantheirpeersin
nonLaureateinstitutions.In2016,weconductedasimilarstudywiththeIFCinPerufortwoofournetworkinstitutions,Universidad
PeruanadeCienciasAplicadas("UPC")andCibertec,whichshowedthatgraduatesfromthelargerprogramsofbothinstitutionshadhigher
salariesthantheircontrolgroupcounterparts.Additionally,graduatesfromUPCwerefoundtoexperiencealargerpositivechangeintheir
socioeconomicstatusthantheirpeerswhocompletedstudiesatnonLaureateinstitutions.
In2016,WaldenUniversitycommissionedGalluptoconductasurveyofWaldenUniversity'sgraduatedegreealumniusingits
GallupPurdueIndex.ThesurveyexploredtherelationshipbetweenWaldenUniversity'sgraduates'experiencesandlongtermoutcomes
basedontheirresponses.Gallupadministeredacustomsurvey,developedinpartnershipwithWaldenUniversity,toWaldenUniversity
graduatedegreeholdersandanationalsampleofgraduatedegreeholderstoallowcomparisonofoutcomesintheareasofprofessional
success,returnoninvestmentandcivicengagement.Thestudyincluded8,677adultswhoreceivedgraduatedegreesfromWalden
Universitybetween1990and2015aswellas6,687graduatesfromthenationalsample.Withinthenationalsample,Gallupcreatedan
additionalcomparisongroupofgraduateswhocompletedhalformoreoftheirgraduatedegreeonline,the"halfplusgraduatealumni,"
morecloselyresemblingtheWaldenUniversitysamplesetofonlinealumni.TheWaldenUniversitysampleismorelikelythanthehalf
plusonlinegraduatealumnisampletobefemale(76%vs.60%)andfromaracialorethnicminoritygroup(36%vs.28%),andtheWalden
Universityalumniaremorelikelythanhalfplusonlinegraduatealumnitobethefirstgenerationintheirfamiliestoattendcollege(61%
vs.48%).Asevidencedbythedemographicdistinctions,WaldenUniversitygraduatesreflectamorediversepopulationcomparedwith
bothnationalcomparisongroups.ThesurveyresultsillustratehowmanyWaldenUniversitygraduateswentontoadvancetheircareers,
includingthatWaldenUniversitygraduatesweremorelikelythancomparisongroupstocitetheirdegreeasbeingimportantorvery
importanttowardgettingpromoted,achievingasalaryraiseandchangingcareers.TheGallupsurveystatesthathalfplusonlinegraduate
alumniaremorelikelythanWaldenUniversityalumnitohavedegreesinwellcompensatedprofessions,includingthosewithdegreesin
businessandmanagement(20%halfplusgraduatealumnivs.12%forWaldenUniversityalumni)andengineering(5%halfplusgraduate
alumnivs.0%forWaldenUniversityalumni).Conversely,WaldenUniversityalumniarepredominantlyinprofessionsthattypicallyearn
less:education(23%halfplusgraduatealumnivs.29%forWaldenUniversityalumni),teaching(8%halfplusgraduatealumnivs.14%
forWaldenUniversityalumni)andnursing(6%halfplusgraduatealumnivs.24%forWaldenUniversityalumni).AccordingtoGallup's
survey,careeradvancementfollowingreceiptofaWaldenUniversitygraduatedegreemaybecontributingtothevastmajorityofWalden
Universitygraduates(88%)sayingtheyaresatisfiedwiththeirpersonallifetoday,onparwithhalfplusonlinegraduatealumni(86%)and
graduatedegreeholdersnationally(89%).Additionally,
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83%ofWaldenUniversitygraduatesagreeorstronglyagreethattheywerechallengedacademicallybyWaldenUniversity,higherthan
the75%ofhalfplusonlinegraduatealumnisurveyedbutsimilartograduatedegreeholdersnationally(83%).
RobustTechnologyandIntellectualPropertyPlatform.Byvirtueofour17yearsofexperienceoperatinginaglobalenvironment,
managingcampusbasedinstitutionsacrossmultipledisciplinesanddevelopingandadministeringonlineprogramsandcurricula,wehave
developedanextensivecollectionofintellectualproperty.Webelievethiscollectionofintellectualproperty,whichincludesonline
capabilities,campusdesignandmanagement,recruitmentoftransnationalstudents,facultytraining,curriculumdesignandquality
assurance,amongotherproprietarysolutions,providesourstudentsatrulydifferentiatedlearningexperienceandcreatesasignificant
competitiveadvantageforourinstitutionsovercompetitors.
Acriticalelementofourintellectualpropertyisasuiteofproprietarytechnologysolutions.SelectexamplesincludeOneCampus,
whichconnectsstudentsacrossournetworkwithsharedonlinecoursesanddigitalexperiences,andSlingshot,anonlinecareerorientation
toolthatenablesstudentstoexplorecareerpathsthroughstateoftheartinterestassessmentandrichcontentabouthundredsofcareers.
Ourcommitmenttoinvestingintechnologyinfrastructure,softwareandhumancapitalensuresahighqualityeducationalexperiencefor
ourstudentsandfaculty,whilealsoprovidinguswiththeinfrastructuretomanageandscaleourbusiness.
Ourintellectualpropertyhasbeenakeydriverindevelopingpartnershipswithprestigiousindependentinstitutionsandgovernments
globally.Forexample,wehavepartneredwithothertraditionalpublicandprivatehighereducationinstitutionsasaproviderofonline
services.WehaveoperatedthismodelformorethantenyearswiththeUniversityofLiverpoolintheUnitedKingdomand,morerecently,
wehaveaddednewpartnershipswiththeUniversityofRoehamptonintheUnitedKingdomandtheUniversityofMiamiintheUnited
States.Additionally,in2013,theKingdomofSaudiArabialaunchedtheCollegeofExcellenceprogramwithalongtermgoalofopening
100newtechnicalcolleges,andsoughtprivateoperatorstomanagetheinstitutionsonitsbehalfunderanoperatingmodelinwhichthe
KingdomofSaudiArabiafundsthecapitalrequirementstobuildtheinstitutions,andtheprivateoperatorrunstheacademicoperations
underacontractmodel.AsofSeptember30,2016,wehavebeenawardedcontractstooperateeightofthe33collegesforwhichcontracts
havebeenawardedtodate,morethananyotherproviderintheKingdomofSaudiArabia.
ScaleandDiversificationofOurGlobalNetwork.TheLaureateInternationalUniversitiesnetworkisdiversifiedacross
25countries,71campusbasedandonlineinstitutionsandover2,500programs.Additionally,inmanymarkets,wehavemultiple
institutionsservingdifferentsegmentsofthepopulation,atdifferentpricepointsandwithdifferentacademicofferings.Althoughthe
majorityofourinstitutionsservethepremiumsegmentofthemarket,wealsohaveexpandedourportfolioofofferingsinmanymarketsto
includehighqualityvalueandtechnicalvocationalinstitutions.Byservingmultiplesegmentsofthemarket,allwithhighquality
offerings,weareabletocontinuetoexpandourenrollmentsduringvaryingeconomiccycles.Ourtopfivelargestmarkets,asmeasuredby
revenue,represented69%ofourconsolidatedrevenueand78%ofourtotalenrollmentsin2015.Ourtopfivelargestmarketsarehometo
17%oftheworld'shighereducationstudents.Webelievethereisnootherpublicorprivateorganizationthatcommandscomparable
globalreachorscale.
Ourglobalnetworkallowsourinstitutionstobringtheirdistinctiveidentitiestogetherwithourproprietaryinternationalcontent,
managerialbestpracticesandinternationalprograms.Throughcollaborationacrosstheglobalnetwork,wecanefficientlyshareacademic
curriculaandresources,createdualdegreeprogramsandstudentexchanges,developourfacultyandincorporatebestpracticesthroughout
theorganization.Inaddition,ourwiderangingnetworkallowsustocontinuetoscaleourbusinessbyfacilitatingtheexpansionof
existingprogramsandcampuses,thelaunchofnewprograms,theopeningofnewcampusesinareasofhighdemandandthestrategic
acquisitionandintegrationofnewinstitutionsintoournetwork.Forexample,theresourcesandsupportofourglobalnetworkhavehada
demonstratedimpactonourMedicine&HealthSciencesexpansioneffort,whichhasresultedin
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enrollmentgrowthfromapproximately75,000studentsin2009tomorethan200,000studentsasofSeptember30,2016.Furthermore,the
existingbreadthofournetworkallowsustoprovideahighqualityeducationalexperiencetoourstudents,whilesimultaneously
accessingthebroadestaddressablemarketforourofferings.
Inrecognitionofthebenefitsofourinternationalscale,andinordertoformalizeourorganizationalfocusontheopportunities
presentedbyourestablishednetwork,wecreatedtheLNOin2015.TheLNOisanimportantresourcethatallowsus,amongotherthings,
tobetterleverageourexpertiseintheonlinemodalitytoincreasethefrequencyandeffectivenessofonlineandhybridlearning
opportunitiesacrossthenetwork.
Tofurtherillustratethebreadthanddiversityofourglobalnetwork,thechartsbelowshowthemixofourgeographicrevenues,
programs,modalityandlevelsofstudy:
AttractiveFinancialModel.
StrongandConsistentGrowth.Wehaveaproventrackrecordofdeliveringstrongfinancialresultsthroughvarious
economiccycles.From2009to2015,ourrevenuesandAdjustedEBITDAgrewataCAGRof10.5%and11.3%,
respectively(13.5%and14.8%onaconstantcurrencybasis,respectively).From2009to2015,ournetlossincreasedata
CAGRof13.2%to$315.8millionfortheyearendedDecember31,2015.Duringthissameperiod,werealizedconstant
currencyrevenuegrowthofatleast10.3%everyyear.Adjustedforacquisitions,ouraverageannualorganicrevenuegrowth
overthesameperiodwas7.6%(10.4%onaconstantcurrencybasis).ForareconciliationofAdjustedEBITDAtonet
income(loss),see"ProspectusSummarySummaryHistoricalConsolidatedFinancialandOtherData."
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PrivatePayModel.Over75%ofourrevenuesfortheyearendedDecember31,2015weregeneratedfromprivatepay
sources.Webelievestudents'andfamilies'willingnesstoallocatepersonalresourcestofundhighereducationatour
institutionsvalidatesourstrongvalueproposition.
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RevenueVisibilityEnhancedbyProgramLengthandStrongRetention.Themajorityoftheacademicprogramsofferedby
ourinstitutionslastbetweenthreeandfiveyears,andapproximatelytwothirdsofourstudentswereenrolledinprogramsof
atleastfouryearsormoreinduration,asofSeptember30,2016.Thelengthofourprogramsprovidesuswithahighdegree
ofrevenuevisibility,whichhistoricallyhasledtomorepredictablefinancialresults.Giventhatourfallstudentintakeis
substantiallycompletedbytheendofSeptember,wehavevisibilityintoapproximately70%ofthefollowingyear's
revenues,assumingaconstantforeignexchangeenvironmentandassumingretentionandgraduationratesinlinewith
historicalperformance.Weactivelymonitorandmanagestudentretentionbecauseoftheimpactithasonstudentoutcomes
andourfinancialresults.Thehistoricalannualstudentretentionrate,whichwedefineastheproportionofprioryear
studentsreturninginthecurrentyear(excludinggraduatingstudents),ofover80%hasnotvariedbymorethanthree
percentagepointsinanyoneyearoverthelastfiveyears.Givenourhighdegreeofrevenuevisibility,weareabletomake
attractivecapitalinvestmentsandexecuteotherstrategicinitiativestohelpdrivesustainablegrowthinourbusiness.
AttractiveReturnonIncrementalInvestedCapital.Ourcapitalinvestmentssinceinceptionhavecreatedsignificantscale
andhavealsolaidthefoundationforcontinuedstrongorganicgrowth.Giventhatwehavealreadymadefoundational
infrastructureinvestmentsinmanyofourcoremarkets,weexpecttorecognizeattractivereturnsonincrementalinvested
capitaldeployed.AsofDecember31,2015,ourfouryearROIICwas28.1%.FormoreinformationonROIIC,see"Selected
HistoricalConsolidatedFinancialandOtherData."
ProvenManagementTeam.Wehaveanexperiencedandtalentedseniormanagementteam,withstronginternationalexpertisefrom
awidevarietyofindustryleadingglobalcompanies.Ourexecutiveofficershavebeenwithusanaverageof13yearsandhaveledour
transformationintothelargestglobalnetworkofdegreegrantinghighereducationinstitutionsintheworld.DouglasL.Becker,our
Chairman,ChiefExecutiveOfficerandfounder,hasledourCompanysinceitsinceptionin1989andhascultivatedanentrepreneurialand
collaborativemanagementculture.Thisentrepreneurialleadershipstylehasbeencomplementedbyanexecutivemanagementteamwith
broadglobalexperience,enablingustoinstitutestronggovernancepracticesthroughoutournetwork.Thestrengthofthemanagement
teamhasenabledthesharingofbestpractices,allowingustocapitalizeonfavorablemarketdynamicsandleadingtothesuccessful
integrationofnumerousinstitutionsintotheLaureateInternationalUniversitiesnetwork.Inaddition,wehavestrongregionalandlocal
managementteamswithadeepunderstandingofthelocalmarkets,thatarefocusedonmeetingtheneedsofourstudentsandcommunities,
andmaintainingkeyrelationshipswithregulatorsandbusinessleaders.Ourmanagementteamhasaproventrackrecordofgainingthe
trustandrespectofthemanyregulatoryauthoritiesthatarecriticaltoourbusiness.
OurGrowthStrategy
WeintendtocontinuetofocusongrowingtheLaureateInternationalUniversitiesnetworkthroughthefollowingkeystrategies:
ExpandPrograms,DemographicsandCapacity.Wewillcontinuetofocusonopportunitiestoexpandourprogramsandthetypeof
studentsthatweserve,aswellasourcapacityinourmarketstomeetlocaldemand.Wealsointendtocontinuetoimprovetheperformance
ofeachofourinstitutionsbyadoptingbestpracticesthathavebeensuccessfulatotherinstitutionsintheLaureateInternational
Universitiesnetwork.Webelievetheseinitiativeswilldriveorganicgrowthandprovideanattractivereturnoncapital.Inparticular,we
intendto:
AddNewProgramsandCourseOfferings.Wewillcontinuetodevelopnewprogramsandcourseofferingstoaddressthe
changingneedsinthemarketsweservebyusingsharedcurriculaavailablethroughthenetwork,andinconsultationwith
leadinglocalbusinesses.Newprograms
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andcourseofferingsenableustoconsistentlyprovideahighqualityeducationthatisdesiredbystudentsandprospective
employers.Asweoptimizeourofferingstodelivercoursesinhighdemanddisciplines,wealsobelievewewillbeableto
increaseenrollmentandimproveutilizationatinstitutionsacrossournetwork.
ExpandTargetStudentDemographics.Inmanyofourmarkets,weusesophisticatedanalyticaltechniquestoidentify
opportunitiestoprovidequalityeducationtoneworunderservedstudentpopulationswheremarketdemandisnotbeing
met,suchasnontraditionalstudents(e.g.,workingadults)whomayvalueflexibleschedulingoptions,aswellastraditional
students.Ourabilitytoprovidequalityeducationtotheseunderservedmarketshasprovidedadditionalgrowthtothe
LaureateInternationalUniversitiesnetworkandweintendtoleverageourmanagementcapabilitiesandlocalknowledge
tofurthercapitalizeonthesehighereducationopportunitiesinnewandexistingmarkets.Asweexpandinaparticular
countryorregion,weoftendeveloptailoredprogramstoaddresstheunmetneedsofthesemarkets.
IncreaseCapacityatExistingandNewCampusLocations.Wewillcontinuetomakedemanddriveninvestmentsin
additionalcapacitythroughouttheLaureateInternationalUniversitiesnetworkbyexpandingexistingcampusesand
openingnewcampuses,includinginnewcities.Weemployahighlyanalyticalprocessbasedoneconomicand
demographictrends,anddemanddataforthelocalmarkettodeterminewhenandwheretoexpandcapacity.Whenopening
anewcampusorexpandingexistingfacilities,weusebestpracticesthatwehavedevelopedovermorethanthepastdecade
tocosteffectivelyexpeditetheopeninganddevelopmentofthatlocation.
Wehavesuccessfullyimplementedthesestrategiesatmanyofourinstitutions.Forexample,atUVMMexicowegrewtotalenrollments
fromapproximately37,000studentsin2002toapproximately128,000in2015.Thisgrowthwastheresultoftheintroductionofnew
programs,includinginthefieldsofhealthsciences,engineeringandhospitality,theadditionof23newcampuslocations(from13in
2002to36in2015),andtheabilitytoservenewmarketsegmentssuchasworkingadults.WhileUVMMexicohasgrownintothelargest
privateinstitutioninMexico,ourrelentlessfocusonacademicqualityremains.Infact,UVMMexicohasimprovedfromthe9 thranked
institutionin2004tothe7 thrankedinstitutionin2016accordingtoGuaUniversitaria.Furtherexamplesofoursuccessesin
implementingthesestrategiesinclude:
AtUniversidadPeruanadeCienciasAplicadas("UPC")inPeru,enrollmentgrewfromapproximately4,000studentsin2004
toapproximately46,000in2015.Thisgrowthwastheresultoftheintroductionofnewprograms,includinginthefieldsof
healthsciencesandcommunications,theadditionofthreenewcampuslocations(fromonein2004tofourin2015),and
theabilitytoservenewmarketsegmentssuchasworkingadults.In2015,UPCreceivedthreestarsintheprestigious2015
QSStarsTMinternationaluniversityrating.In2016,UPCbecamethefirstPeruvianuniversityaccreditedatthehighestlevel
byanyofthesixaccreditationbodiesoftheUnitedStateswhenitwasaccreditedbytheCommissiononSeniorCollegesof
theWesternAssociationofSchoolsandColleges.
AtUniversidadeAnhembiMorumbi("UAMBrazil")inBrazil,enrollmentgrewfromapproximately21,000studentsin
2007toapproximately46,000in2015.Thisgrowthwastheresultoftheintroductionofnewprograms,includinghealth
sciences,theadditionoftwocampuslocations(fromfourin2007tosixin2015),andtheabilitytoservenewmarket
segments.UAMBrazilwasrankedasoneofthetoptenprivateuniversitiesinthecityofSoPaulobasedonresultsfrom
thendiceGeraldeCursos,asystematicevaluationadministeredbytheBrazilianMinistryofEducationtojudgethe
qualityofacademicdegreeprograms,andreceivedthreestarsintheprestigious2015QSStarsTMinternationaluniversity
rating.
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InSpain,atUniversidadEuropeadeMadrid,UniversidadEuropeadeValenciaandUniversidadEuropeadeCanarias,
enrollmentgrewfromapproximately6,000studentsin1999toapproximately15,000in2015.Thisgrowthwastheresultof
theintroductionofnewprogramsincludinginthefieldsofhealth,engineeringandcommunications,theadditionoffour
campuslocations(fromtwoin1999tosixin2015),andtheabilitytoservenewmarketsegmentssuchasworkingadults.
UniversidadEuropeadeMadridhasgrowntobecomethesecondlargestprivateuniversityinSpainandreceivedfourstars
intheprestigious2015QSStarsTMinternationaluniversityrating.
ExpandPenetrationofOnlineandHybridOfferings.Weintendtoincreasethenumberofourstudentswhoreceivetheireducation
throughfullyonlineorhybridprogramstomeetthegrowingdemandofyoungergenerationsthatcontinuetoembracetechnology.Over
thepastdecade,theglobalpopulationwithInternetaccesshascontinuedtogrow,andForresterestimatesatotalof3.5billionpeoplewill
haveInternetaccessby2017,representingnearlyhalfoftheworld'spopulation.Additionally,inmanyofourmarkets,onlineeducationis
becomingmoreacceptedbyregulatorsandeducationprofessionalsasaneffectivemeansofprovidingqualityhighereducation.Asthe
qualityandacceptanceofonlineeducationincreasesglobally,weplantocontinueinvestinginbothexpandingourstandaloneonline
courseofferingsandenhancingourtraditionalcampusbasedcourseofferingsviacomplementaryonlinedelivery,creatingahybrid
deliverymodel.WebelieveourhistoryofsuccesswithWaldenUniversity,afullyonlineinstitutionintheUnitedStates,andourwell
developedonlineprogramofferingswillprovideaconsiderableadvantageoverlocalcompetitors,enablingustocombineourstronglocal
brandswithourexperienceindeliveringonlineeducation.Bytheendof2019,ourgoalistoincreasethenumberofstudentcredithours
takenonline,whichwasapproximately11%asoftheendof2015,toapproximately25%.Someofournetworkinstitutionsarealready
implementingonlineprogramswithsignificantprogressbeingmade.Forexample,atUniversidadEuropeadeMadridinSpain,
approximately20%ofourstudentstookatleastoneonlinecourseasofJune30,2016.Ouronlineinitiativeisdesignedtonotonly
provideourstudentswithaccesstothetechnologyplatformsandinnovativeprogramstheyexpect,butalsotoincreaseourenrollmentina
morecapitalefficientmanner,leveragingcurrentinfrastructureandimprovingclassroomutilization.
ExpandPresenceinAMEA.AMEArepresentsthelargesthighereducationmarketopportunityintheworldwithmorethan
120millionstudentsenrolledinhighereducationinstitutionsin2013,accordingtoUNESCO.Despitethelargenumberofstudents
enrolled,participationratesintheregionsuggestsignificantlyunderpenetratedenrollmentgiventhestrongimbalancebetweenthesupply
anddemandforhighereducation.
In2008,weenteredtheAMEAhighereducationmarketwithouracquisitionofaninterestinINTIEducationGroupinMalaysia.In
thelasteightyears,wehavegrownourAMEAfootprinttoinclude21institutionsineightcountries,servingapproximately86,000
students,representinganenrollmentCAGRofapproximately20%sinceenteringtheregionin2008.RecentexpansionintheAMEA
regionincludeseightCollegesofExcellenceintheKingdomofSaudiArabia,andourfirstinstitutioninSubSaharanAfricain2013,
MonashSouthAfrica.Inanticipationofcontinuedgrowth,wehavemadesignificantinvestmentsintheregion,includinghiringan
experiencedregionalmanagementteamandestablishingtheinfrastructuretohelpfacilitategrowthandfurtherexpandourfootprintinthe
region.WeplantocontinuetoexpandourpresenceinAMEAbyprioritizingmarketsbasedondemographic,marketandregulatory
factors,whileseekingattractivereturnsoncapital.
AcceleratePartnershipandServicesModelGlobally.Asthegloballeaderinhighereducation,webelievewearewellpositionedto
capitalizeonadditionalopportunitiesintheformofpartnershipandservicemodelsthataredesignedtoaddressthegrowingneedsof
traditionalinstitutionsandgovernmentsaroundtheworld.
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Increasinglymorecomplexservicesandoperatingcapabilitiesarerequiredbyhighereducationinstitutionstoaddresstheneedsof
studentseffectively,andwebelieveourexpertiseandknowledgewillallowustoleverageourintellectualpropertyandtechnologyto
servethismarketneed.Wehavepartneredwithtraditionalpublicandprivateeducationinstitutionsasaproviderofonlineservicesandwe
believetherewillbeopportunitiestoexpandthatplatformundersimilarrelationshipswithotherprestigiousindependentinstitutionsin
thefuture.Additionally,wearecontinuallyaddingtooursuiteofsolutions,andwebelievemanyoftheseproductsandserviceswill
provideadditionalcontractualandlicensingopportunitiesforusinthefuture.Forexample,inrecentyearswehavesignificantly
advancedourdigitalteachingandlearningeffortsthroughproprietarytechnologyenabledsolutionssuchas:
OneFolio,anonlinetoolthatconnectsLaureatefacultymembers,instructionaldesigners,andlearningarchitectsto
valuabledigitalresourcestheycanusetoenhancethestudentlearningexperience.
LaureateLanguages,whichprovidesdigitallanguagelearningsolutionstoourstudentsandfacultyintheareasofGeneral
English,ProfessionalEnglishandEnglishforAcademicPurposes,aswellasteachertrainingandassessment.
Additionally,governmentsaroundtheworldareincreasinglyfocusedonincreasingparticipationratesandoftendonothavean
establishedorscalablepublicsectorplatformwiththenecessaryexpertisetoaccomplishthatobjective,andthereforearewillingtofund
privatesectorsolutions.WebelieveourcurrentpartnershipwiththeKingdomofSaudiArabia,wherewewereselectedastheirlargest
partnerfortheCollegesofExcellenceprogram,isademonstrationofhowourdistinctportfolioofsolutionsdifferentiatesusfromother
providerswhoparticipatedintheselectionprocess.Weareinactivediscussionwithothergovernmentsregardingsimilarpartnerships,as
wellasothersolutionsthatwecanprovidetoexistingandnewpartners,andweanticipatethiscouldbeasourceofadditionalrevenuefor
usinthefuture.
IncreaseOperatingEfficienciesthroughCentralizationandStandardization.In2014,welaunchedEiPasanenterprisewide
initiativetooptimizeandstandardizeourprocessestoenablesustainedgrowthandmarginexpansion.Theprogramaimstoenablevertical
integrationofprocurement,informationtechnology,finance,accountingandhumanresources,thusenablingustofullyleveragethe
growingsizeandscopeofourlocaloperations.Specifically,wehavedevelopedandbeguntodeployregionalSSOsaroundtheworld,
whichwillprocessmostbackofficeandnonstudentfacingtransactionsfortheinstitutionsintheLaureateInternationalUniversities
network,suchasaccounting,financeandprocurement.TheimplementationofEiPandregionalSSOsareexpectedtogeneratesignificant
costsavingsthroughoutthenetworkasweeliminateredundantprocessesandbetterleverageourglobalscale.Inaddition,centralized
informationtechnology,productdevelopmentandcontentmanagementwillallowustopropagatebestpracticesthroughouttheLaureate
InternationalUniversitiesnetworkandcapitalizeonefficienciestohelpimproveperformance.WeanticipateEiPwillrequirean
investmentofapproximately$180millionfrom2015to2017,withthefirstsignificantinvestmentsalreadyhavingbeenmadein2015.
Theseinvestmentshavealreadybeguntogeneratecostsavingsand,uponcompletionoftheproject,weexpecttheseefficienciesto
generateapproximately$100millioninannualcostsavingsin2019,whilealsoenhancingourinternalcontrolsandthespeedof
integrationofnewacquisitions.Wealsobelievetheseinitiativeswillenhancethestudentexperiencebyimprovingthequalityofour
operationsandbyenablingadditionalreinvestmentinfacilities,facultyandcourseofferings.
TargetStrategicAcquisitions.SincebeingtakenprivateinAugust2007,wehavemade41acquisitionswithanaggregatepurchase
priceofapproximately$2.0billion,includingassumeddebt.Substantiallyalloftheseacquisitionswerecompletedthroughprivate
negotiationsandnotaspartofanauctionprocess,whichwebelievedemonstratesourstandingasapartnerofchoice.Weintendto
continuetoexpandthroughtheselectiveacquisitionofinstitutionsinnewandexistingmarkets.Weemployahighlydisciplined
approachtoacquisitionsbyfocusingonkeycharacteristicsthatmakecertainmarketsparticularlyattractiveforprivatehighereducation,
suchasdemographics,economicand
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socialfactors,thepresenceofastablepoliticalenvironmentandaregulatoryclimatethatvaluesprivatehighereducation.Whenweenter
anewmarketorindustrysector,wetargetinstitutionswithwellregardedreputationsandwhicharewellrespectedbyregulators.Wealso
investtimeandresourcestounderstandthemanagerial,financialandacademicresourcesoftheprospectandtheresourceswecanbringto
thatinstitution.Afteranacquisition,wefocusonorganicgrowthandfinancialreturnsbyapplyingbestpracticesandintegrating,both
operationallyandfinancially,theinstitutionintotheLaureateInternationalUniversitiesnetwork,andwehaveastrongtrackrecordof
success.Foralltheinstitutionsweacquiredbetween1999andDecember31,2010,weachievedaverageenrollmentandrevenueCAGRs
ofapproximately15%andapproximately19%,respectively,inthefourfullyearsfollowingthefirstanniversaryoftheacquisition.
Further,weachievedoperatingincomeCAGRs(adjustedforimpairmentcharges)ofapproximately40%,translatingintoamargin
expansionofnearlysixpercentagepointsforthesameperiod.Additionally,webringprogramsandexpertisetoincreasethequalityand
reputationofinstitutionsafterweacquirethem,andassisttheminearningnewformsoflicensesandaccreditations.Webelieveour
experiencedmanagementteam,historyofstrongfinancialperformancerootedinthesuccessfulintegrationofpreviousacquisitions,local
contactsandculturalunderstandingmakesustheleadingchoiceforhighereducationinstitutionsseekingtojoinaninternational
educationalnetwork.
OurHistory
Wewerefoundedin1989asSylvanLearningSystems,Inc.,aproviderofabroadarrayofsupplementalandremedialeducational
services.In1999,wemadeourfirstinvestmentinglobalhighereducationwithouracquisitionofUniversidadEuropeadeMadrid,andin
2001weenteredthemarketforonlinedeliveryofhighereducationservicesintheUnitedStateswithouracquisitionofWalden
University.In2003,wesoldtheprincipaloperationsthatmadeupourthenK12educationalservicesbusinessandcertainventure
investmentsdeemednotstrategictoourhighereducationbusiness,andin2004wechangedournametoLaureateEducation,Inc.Between
thetimewesoldtheK12educationalservicesbusinessin2003andAugust2007,weacquirednineinstitutionsforanaggregatepurchase
priceofapproximately$160million,includingassumeddebt,andenteredsevennewcountries.
InAugust2007,wewereacquiredinaleveragedbuyoutbytheWengenInvestorsforanaggregatetotalpurchasepriceof$3.8billion,
including$1.7billionofdebt,allofwhichhasbeenrefinancedorreplaced.See"RiskFactorsRisksRelatingtoOurIndebtednessThe
factthatwehavesubstantialdebtcouldmateriallyadverselyaffectourabilitytoraiseadditionalcapitaltofundouroperationsandlimit
ourabilitytopursueourgrowthstrategyortoreacttochangesintheeconomyorourindustry."Webelievethattheseinvestorshave
embracedourmission,commitmenttoacademicqualityandongoingfocustoprovideasocialbenefittothecommunitiesweserve.
team.SinceAugust2007,wehavecompleted41acquisitionswithanaggregatepurchasepriceofapproximately$2billion,including
assumeddebt,andentered12newcountries,andwenowhaveatotalinstitutioncountof71.
Inearly2013,theIFCInvestorscollectivelyinvested$200millioninourcommonstock.IFCisaglobaldevelopmentinstitutionthat
helpsdevelopingcountriesachievesustainablegrowthbyfinancinginvestmentintheprivatesectorandprovidingadvisoryservicesto
businessesandgovernments.TheinvestmentinLaureatereceivedtheunanimousapprovaloftheBoardofDirectorsoftheIFCin2012.
WebelievethattheIFCmadeitsinvestmentinourcommonstocktounderscoreitslongtermcommitmenttosupportingeducationwith
strategicclientsthathavetheabilitytodevelopmuchneededjobmarketskills,becauseofoursubstantialpresenceinemergingmarkets
andbecauseofitsbeliefthatworkingwithuswouldhaveasignificantimpactonhumandevelopmentinthecountrieswhereweoperate.
TwoLaureateinstitutionsreceivedIFCinvestmentsevenbeforetheiraffiliationwithLaureate.
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InDecember2013,theboardsofdirectorsofWengenandLaureateauthorizedthecombinationofLaureateandLaureateAsia.
LaureateAsiawasasubsidiaryofWengenthatprovidedhighereducationprogramsandservicestostudentsthroughanetworkoflicensed
institutionslocatedinAustralia,China,India,MalaysiaandThailand.Wengentransferred100%oftheequityofLaureateAsiato
Laureate.Thetransactionisaccountedforasatransferbetweenentitiesundercommoncontroland,accordingly,theaccountsofLaureate
Asiaareretrospectivelyincludedinthefinancialstatementsandnotestheretoincludedelsewhereinthisprospectus.
CertifiedBCorporation
WhilenotrequiredbyDelawarelaworthetermsofourcertificateofincorporation,wehaveelectedtohaveoursocialand
profitorganization.Asaresultofthisassessment,wehavebeendesignatedasa"CertifiedBCorporation TM"underthestandardssetbyan
independentorganization,whichreferstocompaniesthatarecertifiedasmeetingcertainlevelsofsocialandenvironmentalperformance,
accountabilityandtransparency.
Thefollowingdescriptionofthecertificationprocessesandstandardswasprovidedtousbytheindependentorganizationthat
designatedusasaCertifiedBCorporation.ThefirststepinbecomingaCertifiedBCorporationistakingandpassingacomprehensive
andobjectiveassessmentofabusiness'spositiveimpactonsocietyandtheenvironment.Theassessmentvariesdependingonthe
company'ssize(numberofemployees),sectorandlocation.Thestandardsintheassessmentarecreatedandrevisedbyanindependent
governingbodythatdetermineseligibilitytobeaCertifiedBCorporation.
Bycompletingasetofover200questions,whicharecustomizedforthecompanybeingassessed,thatreflectimpactindicators,best
practicesandoutcomes,acompanyreceivesacompositescoreona200pointscalerepresentativeofitsoverallimpactonitsemployees,
customers,communitiesandtheenvironment.Representativeindicatorsintheassessmentrangefrompaymentabovealivingwage,
employeebenefits,charitablegiving/communityservice,useofrenewableenergyand,inthecaseofeducationalinstitutionslike
Laureate,studentoutcomessuchasretention,graduationandemploymentrates.
CertificationasaCertifiedBCorporationrequiresthatacompanyachieveareviewedassessmentscoreofatleastan80.Thereview
processincludesaphonereview,arandomselectionofindicatorsforverifyingdocumentationandarandomselectionofcompany
locationsforonsitereviews,includingemployeeinterviewsandfacilitytours.InthecaseofLaureate'sassessment,eachsubsidiary,aswell
asthecorporateofficeinBaltimore,wasrequiredtocompleteanindividualassessmentforreviewthatwouldbeaggregatedbasedonsize
tocalculateanoverallscore.Theassessmentalsoincludesadisclosurequestionnaire,includinganysensitivepractices,finesand
sanctionsrelatedtothecompanyoritspartners.
ForLaureate,certificationalsorequiredustoadoptthepublicbenefitcorporationstructure,astepwehavealreadycompleted.Once
certified,everyCertifiedBCorporationmustmakeitsassessmentscoretransparentontheindependentnonprofitorganization'swebsite.
AcceptanceasaCertifiedBCorporationandcontinuedcertificationisatthesolediscretionoftheindependentorganization.
SocialResponsibility
Weareseriousaboutmakinganenduringcommitmenttothecommunitiesweserve.Wedothisthrougharangeofscholarshipsand
awards,donationstononprofitsalignedwithourmissionandthroughcreatinginternationalopportunitiesforourstudents.
Aspartofthiscommitment,since2003,wehaveprovidedfinancialsupporttotheInternationalYouthFoundation("IYF")directlyand
throughouraffiliatedcharitablefoundation.TheIYFwas
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foundedin1990withagrantfromtheW.K.KelloggFoundation.IYFisahighlyregardedinternationalnonprofit,withamissiontobuild 210/620
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foundedin1990withagrantfromtheW.K.KelloggFoundation.IYFisahighlyregardedinternationalnonprofit,withamissiontobuild
partnerships,initiatives,andcurriculathatprepareyoungwomenandmentosucceedascitizens,employees,entrepreneurs,andchange
makersaroundtheworld.
IYFwasstartedbeforewemadeourfirstinvestmentinhighereducationand13yearsbeforeweprovideditwithanyfinancialsupport.
NeitherwenorourfounderMr.BeckercontrolsormanagesIYF,whichisanindependentandrespectedcharitableorganization.
Mr.BeckerhasservedasanunpaidvolunteermemberoftheIYF's14memberboard,andtheonlyIYFboardmemberaffiliatedwithus,
since2003andastheboard'schairsince2006.IYFhasalongstandingrelationshipwiththeUnitedStatesAgencyforInternational
Development("USAID"),datingto1999,andwascitedforexcellencebyUSAIDduringtheGeorgeW.Bushadministration.IYFhas
workedinpartnershipwithUSAID,theU.S.governmentagencythatprovidesforeignassistanceandpromotesdemocracyinover
100countries,onyouthcapacitybuilding,employabilityandcivicengagementprogramsallacrosstheworld.Thesegrantsareawarded
onacompetitivebasis,basedonanorganization'sproventrackrecordusingfundingtoaccomplishUSAIDgoals.
Since2003,weandouraffiliatedfoundationhavedonatedapproximately$9milliontoIYF.Wehaveneverreceivedanyfundsfrom
IYF.
SupportofRecognizedWorldLeaders
In2010,formerU.S.PresidentBillClintonsignedafiveyearcontracttoserveastheLaureateInternationalUniversitiesnetwork's
HonoraryChancellor.Headvisedthenetworkonissueslikesocialresponsibility,youthleadershipandcivicengagement,whilealso
speakingtostudents,facultyandstaffworldwide.Duringhisterm,PresidentClintonvisited19Laureatecampusesin14countries.
Immediatelyfollowingtheendofhistermonitsoriginallyscheduledexpirationdate,theformerpresidentofMexico,ErnestoZedillo,
assumedthesimilarroleofPresidentialCounselorfortheLaureateInternationalUniversitiesnetwork.
OurPrograms
Webelievethediversityaffordedbyourprogramofferingshelpsinsulateusagainstaneconomicdownturninanyoneareaofstudy.
Weofferourprogramsthroughtraditionalclassroominstructionaswellaspartiallyorfullyonlinemethodsthatwebelieveareattractiveto
bothtraditionalstudentsandworkingadults,afastgrowingcohortthatweexpecttorepresentanincreasingpartofourrevenuemixinthe
future.Ourfullyonlineprogramsofferourstudentsaconvenientandcosteffectivealternativetotraditionalclassroominstructionand
currentlyenrollstudentsfromover175countriesworldwide.Oureducationalinstitutionsofferadiverserangeofacademicprograms,at
theundergraduateandgraduatelevel,including:
Business&Management:UndergraduateandgraduateprogramsinAccounting,Economics,Finance,HumanResources,
InternationalBusiness,ManagementandMarketing.
Medical&HealthSciences:UndergraduateandgraduateprogramsinAesthetics,Dentistry,Medicine,Nursing,Nutrition,
Optometry,Pharmacy,PhysicalTherapy,PsychologyandVeterinarySciences.
Engineering&InformationTechnology:UndergraduateandgraduateprogramsinCivilEngineering,Electrical
Engineering,EnvironmentalEngineering,ComputerNetworks,IndustrialEngineering,MechanicalEngineering,
RenewableEnergies,SoftwareDevelopmentandTelecommunications.
Architecture,Art&Design:UndergraduateandgraduateprogramsinArchitecture,ContemporaryArt,Culture,Dance,
FashionDesign,GameDesign,GraphicDesign,InteriorDesign,MusicandTheater.
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Education:UndergraduateandgraduateprogramsinmultiplefieldsincludingEducationalTheory,History,Languageand
Literature,Music,PostsecondaryEducation,Primary&SecondaryEducation,SciencesandSpecialEducation.
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Law&LegalStudies:UndergraduateandgraduateprogramsinBusinessLaw,ContractLaw,CriminalJusticeStudies,
IntellectualPropertyandRealEstateLaw.
Communications:UndergraduateandgraduateprogramsinCommunicationSciences,CorporateCommunications,
Journalism,MediaManagementandPublicRelations.
HospitalityManagement:UndergraduateandgraduateprogramsinCulinaryArts,EventManagement,HotelManagement
andTourismManagement.
OureducationalinstitutionsalsoofferuppersecondaryprogramsinMexico.Ouroperationalinfrastructureandmanagementapproach
arehighlyflexibleandenableustoadaptquicklytouniquesituationsandevolvinginternationalmarkettrends.Wecontinuallymonitor
ourprogramsthathavebeensuccessfulintheirnativemarketsandassesstheabilitytosuccessfullyprovideasimilarofferinginother
markets.Thisapproachallowsustoreadilydisseminateglobalbestpracticesacrossdifferentfieldsofstudy,optimizeoureducational
deliveryforthebenefitofourstudentsandfurtherdifferentiateusfromourlocallybasedcompetition.Wealsoprovideconvenientand
flexibleinstructionaldeliverymethodsthatallowstudentstoattendclasses,completecourseworkandpursueadegreepartiallyorentirely
viadistancelearning,therebyincreasingtheconvenience,accessibilityandflexibilityofourcampusbasededucationalprograms.We
expecttoleverageouralreadystrongstandingintheseprogramareasthroughthecontinueddevelopmentofrichmediacontent,while
bolsteringourdegreeprogramsinotherareasofstudy.Webelievetheseflexibleofferingsdistinguishusfrommanytraditionaluniversities
thatcurrentlydonoteffectivelyaddresstheflexibilityrequiredbystudents.
Manyofourinstitutionshavemedical,dentalandotherhealthsciencesprogramsthatincludeprovidingclinicaltrainingtotheir
students.Aspartofourcommitmenttocivicengagement,weprovidefreeorlowcostmedicalcaretolocalcommunitymembers.In2015,
approximately150,000patientswereservedbyourinstitutions.
OurOperatingSegments
institutioninItaly,NABA,includingDomusAcademy,movedfromourGPSsegmentintoourEuropesegment.MDS,locatedinNew
Zealand,movedfromourGPSsegmentintoourAMEAsegment.OurGPSsegmentnowfocusesonLaureate'sfullyonlineglobal
operationsandonitscampusbasedinstitutionsintheUnitedStates.Wedetermineouroperatingsegmentsbasedoninformationutilized
byourchiefoperatingdecisionmakertoallocateresourcesandassessperformance.
LatAm
Asofthedateofthisprospectus,ourLatAmsegmentconsistsof29licensedhighereducationinstitutionsandhasoperationsin
Brazil,Chile,CostaRica,Honduras,Mexico,PanamaandPeruatwhichweenrolledapproximately834,000studentsasofSeptember30,
2016.OurLatAmsegmentincludesoneinstitutioninEcuadorwithwhichwehavecontractualarrangementsthataremanagedwithinthe
segment.Theinstitutionsprimarilyserve18to24yearoldstudentsandofferaneducationthatemphasizesprofessionalorientedfieldsof
studywithundergraduateandgraduatedegreesinawiderangeofdisciplines,includingbusiness,education,hospitalitymanagement,law,
healthsciences,informationtechnologyandengineering.
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ThefollowingtablepresentsinformationabouttheinstitutionsinourLatAmsegment(unlessotherwisenoted,weowneachofthese
institutions):
YearJoined
Laureate
Year
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Country
Brazil
Chile
CostaRica
Ecuador
Honduras
Mexico
Panama
Peru
HigherEducationInstitution
UniversidadePotiguar(UnP)
FaculdadedosGuararapes(FG)
FaculdadeInternacionaldaParaba(FPB)
BusinessSchoolSoPaulo(BSP)
CentroUniversitriodoNorte(UniNorte)
FaculdadedeDesenvolvimentodoRioGrandedoSul(Fadergs)
InstitutoBrasileirodeMedicinadeReabilitao(UniIBMR)
UniversidadeSalvador(UNIFACS)
CentroUniversitrioRitterdosReis(UniRitter)
FaculdadedosGuararapesdeRecife(FGR)
FMUEducationGroup(FMU)
FaculdadePortoAlegrense(FAPA)
UniversidaddeLasAmricas(UDLAChile)
InstitutoProfesionalAIEP(AIEP)
UniversidadAndrsBello(UNAB)
InstitutoProfesionalEscuelaModernadeMsica(EMM)
UniversidadViadelMar(UVMChile)
UniversidadLatinadeCostaRica(ULatina)
UniversidadAmericana(UAMCostaRica)
UniversidaddeLasAmricas(UDLAEcuador)
UniversidadTecnolgicaCentroamericana(UNITECHonduras)
UniversidaddelValledeMxico(UVMMexico)
UniversidadInteramericanadePanam(UIP)
UniversidadPeruanadeCienciasAplicadas(UPC)
CIBERTEC
UniversidadPrivadadelNorte(UPN)
InstitutoTecnolgicodelNorte(ITN)
Laureate
Network
Year
Founded
2005
2007
2007
2007
2008
2008
2008
2009
2010
2010
2012
2014
2014
2000 *
2003
2003*
2008
2009*
2003
2008
2003
2005 *
2000
2008
2003
2004
2004
2007
2007
1970
1981
2002
2005
1994
1994
2004
1974
1972
1971
1990
1968
2008
1988
1960
1989
1940
1988
1989
1998
1995
1987
1960
1966
1994
1994
1983
1994
1984
NotforprofitinstitutionconsolidatedbyLaureateasavariableinterestentity.
NotforprofitinstitutionnotconsolidatedbyLaureate.
OurLatAminstitutionsconsistof:
Brazil
UniversidadeAnhembiMorumbi(UAMBrazil).Foundedin1970,UAMBrazilprovidesundergraduateandgraduate
degreesinarchitecture,arts,businessadministration,communications,design,education,engineering/technology,health
sciences,medicineandhospitalitymanagement.UAMBrazilislocatedinSoPaulo,StateofSoPaulo.
UniversidadePotiguar(UnP).Foundedin1981,UnPoffersundergraduateandgraduatedegreesinbusiness
administration,engineering/technology,healthsciences,medicine,lawandsocialsciences.UnPhascampuseslocatedin
NatalandMossor,RioGrandedoNorte.
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FaculdadedosGuararapes(FG).Foundedin2002,FGoffersundergraduateandgraduatedegreeprogramsinbusiness
administration,education,healthsciences,law,engineeringandtechnologytoitsstudents.FGislocatedinJaboatodos
Guararapes,Pernambuco.
FaculdadeInternacionaldaParaba(FPB).FPBwasfoundedin2005anddeliversundergraduatedegreeprogramsin
businessadministration,law,nutrition,nursing,environmentalengineeringandgastronomy.FPBislocatedinJooPessoa,
Paraba.
BusinessSchoolSoPaulo(BSP).Foundedin1994,BSPfocusesonthedevelopmentofbusinessleaderswithastrong
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BusinessSchoolSoPaulo(BSP).Foundedin1994,BSPfocusesonthedevelopmentofbusinessleaderswithastrong
internationalperspective.BSPoffersmastersofbusinessadministration,certificatesandexecutiveeducationprogramsin
management,leadership,internationalbusinessandstrategy.BSPislocatedinSoPaulo,StateofSoPaulo.
CentroUniversitriodoNorte(UniNorte).Foundedin1994,UniNorteoffersundergraduateandgraduatedegreesin
architecture,business,education,healthsciences,socialsciencesandtechnology.UniNorteislocatedinManaus,
Amazonas.
FaculdadedeDesenvolvimentodoRioGrandedoSul(Fadergs).Foundedin2004,Fadergs(formerlyknownasESADE)
offersundergraduateandgraduatecoursesinaccounting,businessadministration,economics,lawandpsychology.Fadergs
islocatedinPortoAlegre,RioGrandedoSul.
InstitutoBrasileirodeMedicinadeReabilitao(UniIBMR).Foundedin1974,UniIBMRdeliversundergraduateand
graduatedegreesinbusinessadministration,hospitalitymanagementandhealthsciences.UniIBMRislocatedinRiode
Janeiro,StateofRiodeJaneiro.
UniversidadeSalvador(UNIFACS).Foundedin1972,UNIFACSstudentsareenrolledinundergraduateandgraduate
programsinarchitecture,businessadministration,communication,computerscience,design,engineering,healthsciences
andlaw.UNIFACShascampuseslocatedinSalvador,Bahia.
CentroUniversitrioRitterdosReis(UniRitter).Foundedin1971,UniRitteroffersundergraduateandgraduatedegreesin
architecture,business,designandlaw.UniRitterhascampuseslocatedinPortoAlegreandCanoas,RioGrandedoSul.
FaculdadedosGuararapesdeRecife(FGR).Foundedin1990,FGRoffersundergraduateprogramsinbusiness
administration,civilengineering,architectureandurbanism.FGRislocatedinRecife,Pernambuco.FGRalsooffers
programsthrough:
CEDEPEBusinessSchool(CEDEPE).Foundedin1990,CEDEPEoffersgraduatebusinessprograms.CEDEPEis
locatedinRecife,Pernambuco.
FMUEducationGroup(FMU).Foundedin1968,FMUoffersundergraduate,graduate,andcontinuingeducationprograms
inartsandhumanities,accounting,business,communications,design,engineering,informationtechnology,law,health
sciences,marketing,socialsciencesandveterinarymedicine.With70,000studentsateightcampusesandonlineinSo
Paulo,StateofSoPaulo,FMUisthelargestLaureatenetworkinstitutioninBrazil.
FaculdadePortoAlegrense(FAPA).Foundedin2008,FAPAoffersundergraduateandgraduatedegreeprogramsin
businessandeducation.FAPAislocatedinPortoAlegre,RioGrandedoSul.
Chile
UniversidaddeLasAmricas(UDLAChile).Foundedin1988,UDLAChileoffersundergraduateandgraduateprogramsin
agriculturalandenvironmentalsciences,architecture,designandarts,businessadministration,education,engineering,law,
healthsciencesandsocial
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sciences.UDLAChilehascampuseslocatedinSantiago,Concepcin(southernChile)andViadelMar(centralChile).
InstitutoProfesionalAIEP(AIEP).Foundedin1960,AIEPofferstechnicalandprofessionalcertificatesinbusiness,
informationtechnology,communications,constructionandcivilworks,cosmetology,fashiondesign,healthsciences,
socialdevelopment,theater,sportsandsoundandtelevision.AIEPhas20campuseslocatedin16citiesthroughoutChile.
UniversidadAndrsBello(UNAB).Foundedin1989,UNABoffersundergraduateandgraduatedegreesinarchitectureand
design,businessadministration,communication,ecologyandnaturalresources,education,engineeringandinformation
technology,healthsciences,hospitality,humansciences,lawandmaritimestudies.UNABhascampusesinSantiago,
ConcepcinandViadelMar.
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IEDEEscueladeNegocios(IEDEChile).Foundedin1994asasatellitecampusofIEDEinSpain,IEDEChile
providesawiderangeofgraduatedegreeandmanagementtrainingprogramsfocusedonbusinessadministration.
IEDEChileislocatedinSantiago.
InstitutoProfesionalEscuelaModernadeMsica(EMM).Foundedin1940,EMMdeliverscertificateandprofessional
programsindanceandmusic.EMMislocatedinSantiagoandViadelMar.
UniversidaddeViadelMar(UVMChile).UVMChilewasfoundedin1988andoffersundergraduatedegreesinavariety
offieldsincludingarchitecture,agriculturalsciences,artanddesign,communications,education,engineering,geography,
healthsciences,history,law,nursingandtechnology.UVMChilehascampusesinViadelMar.
CostaRica
UniversidadLatinadeCostaRica(ULatina).ULatinawasfoundedin1989and,in2010,wascombinedwithUniversidad
InteramericanadeCostaRica,whichwasfoundedin1986andjoinedtheLaureateInternationalUniversitiesnetworkin
2003.ULatinaoffersundergraduate,graduateanddoctorateprogramsinbusinessadministration,education,engineering
andarchitecture,healthsciences,socialsciencesandhospitalitymanagement.ULatinahascampusesinSanJosand
regionalsiteslocatedthroughoutCostaRica.
UniversidadAmericana(UAMCostaRica).Foundedin1998,UAMCostaRicaoffersundergraduateandgraduatedegrees
inadvertising,businessadministration,education,engineering,graphicdesignandphysicaltherapy.UAMCostaRicahas
campuseslocatedinSanJos,CartagoandHeredia,CostaRica.
Ecuador
UniversidaddeLasAmricas(UDLAEcuador).Foundedin1995,UDLAEcuadorofferstechnical/vocational,
undergraduateandgraduateprogramsinarchitecture,businessadministrationandeconomics,communications,
engineeringandagriculturalsciences,gastronomy,healthsciences,hotelmanagementandtourism,law,medicineand
socialsciences.UDLAEcuadorislocatedinQuito,Ecuador.
Honduras
UniversidadTecnolgicaCentroamericana(UNITECHonduras).Foundedin1987,UNITECHondurasoffers
technical/vocational,undergraduateandgraduateprogramsinbusinessadministration,communications,engineeringand
informationtechnologyandhealthsciences.UNITECHonduraslaunchedCentroUniversitarioTecnolgico(CEUTEC)in
2005toprovideworkingadultswithbusinessadministration,accounting,graphicdesignandinformation
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technologydegreeprograms.UNITECHondurashascampuseslocatedinTegucigalpa,LaCebaandSanPedroSula.
Mexico
UniversidaddelValledeMxico(UVMMexico).Foundedin1960,UVMMexicodelivershighschool,undergraduate
(traditionalandworkingadult)andgraduateprogramsinartsandhumanities,economics/businessadministration,
hospitalitymanagement,engineering,healthsciencesandsocialsciences.UVMMexicoisthelargestprivateuniversityin
MexicoandthelargestinstitutionintheLaureateInternationalUniversitiesnetwork.Ithascampuseslocatedthroughout
Mexico.
UniversidadTecnolgicadeMxico(UNITECMexico).Foundedin1966,UNITECMexicooffershighschool,
undergraduateandgraduateprogramsinartanddesign,healthsciences,businessadministration,engineering,sciencesand
socialsciences.UNITEChascampusesintheFederalDistrictofMexicoCity,theStateofMexico,theStateofGuanajuato
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socialsciences.UNITEChascampusesintheFederalDistrictofMexicoCity,theStateofMexico,theStateofGuanajuato
andtheStateofJalisco.
Panama
UniversidadInteramericanadePanam(UIP).Foundedin1994,UIPoffersundergraduate,graduateandcontinuing
educationprogramsinadministrativesciences,art,designandarchitecture,businessadministration,engineering,
gastronomy,hotelmanagement,humanresources,informationtechnology,law,maritimeadministrationandtourism.In
2014,UniversidadLatinoamericanadeCienciayTecnologa(ULACIT),whichwasfoundedin1991andbecameapartof
theLaureateInternationalUniversitiesnetworkin2004wasintegratedintoUIP.UIPislocatedinPanamaCity,Panama.
Peru
UniversidadPeruanadeCienciasAplicadas(UPC).Foundedin1994,UPCoffersundergraduateandgraduatedegree
programsinarchitecture,businessadministration,communications,design,economics,educationandlearning
management,engineering,medicineandhealthsciences,music,hospitalitymanagement,lawandpsychology.UPCis
locatedinLima,Peru.
CIBERTEC.Foundedin1983,CIBERTECofferstechnicalandvocationalprogramsinautomotivemechanics,business
administration,industrialelectronics,electricalandconstructionengineering,graphicdesignandinformationtechnology.
CIBERTEChascampusesinLimaandArequipa,Peru.
UniversidadPrivadadelNorte(UPN).Foundedin1994,UPNoffersundergraduateandgraduatedegreeprogramsin
businessadministration,architecture,communications,engineering,lawandhealthsciences.UPNhascampusesinTrujillo,
CajamarcaandLima,Peru.
InstitutoTecnolgicodelNorte(ITN).Foundedin1984,ITNprovidesbusinessadministration,industrialelectronics,
electricalandconstructionengineering,graphicdesignandinformationtechnologydegreeprograms.ITNislocatedin
Trujillo,Peru.
TuitionandFees
TuitionvariesateachofthehighereducationinstitutionsinourLatAmsegmentdependingonthecurriculumandtypeofprogram.
Tuitionpaymentoptionsvarybyinstitutionandprimarilyincludemonthlyinstallmentpaymentplansandlumpsumpaymentsatthe
beginningoftheacademicperiod.Historically,wehaveincreasedtuitionaseducationalcostsandinflationhaverisen.Studentsare
generallyresponsiblefortransportationandhousingexpensesandcostsrelatedtotextbookandsupply
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purchasesrequiredfortheireducationalprograms.Atsomeoftheinstitutions,weoffertheseservicestothestudentbody,whichgenerates
incrementalrevenues.
Studentsandtheirfamiliestypicallyselffinancetheireducationorseekthirdpartyfinancingprograms.However,incertainmarkets
inLatinAmericatherearevariousformsofgovernmentsupportedstudentfinancingprogramsasdiscussedbelow.
GovernmentSponsoredStudentFinancingPrograms
TheCAEProgramwasenactedbytheChileangovernmentin2005andformallyimplementedin2006topromotehighereducationin
Chileforlowersocioeconomiclevelstudentswithgoodacademicstanding.ChileaninstitutionsintheLaureateInternational
Universitiesnetwork(universitiesandtechnicalvocationalschools)participateinthisprogram.TheCAEPrograminvolvestuition
financingandguaranteesthataresharedbyourinstitutionsandthegovernment.Aspartoftheprogram,Chileaninstitutionsprovide
guaranteesresultingincontingentliabilitiestothirdpartyfinancinginstitutionsrangingfrom90%to60%ofthetuitionloansmade
directlytoqualifiedstudentsenrolledthroughtheCAEProgram.Theguaranteesbytheinstitutionsarefortheperiodduringwhichthe
studentisenrolled,andtheguaranteesareassumedentirelybythegovernmentuponthestudent'sgraduation.Additionally,whena
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studentleavesoneofourinstitutionsandenrollsinanotherCAEqualifiedinstitution,ourinstitutionwillremainguarantorofthetuition
loansthathavebeengrantedtohimuptosuchdate,anduntilthestudent'sgraduationfromthenewCAEqualifiedinstitution.Allloans
undertheCAEProgramhaveaninterestrateof2%perannum,containrepaymenttermsthatwouldnotrequireagraduatetomake
combinedprincipalandinterestpaymentsofmorethan10%ofhisorhermonthlyincomeinanymonthduringthe180monthrepayment
periodandprovidethatanybalanceremainingbeforgivenattheendofthe180monthrepaymentperiod.Institutionalaccreditationby
theNationalAccreditationCommissionisrequiredfornewstudentstoparticipateintheCAEProgram.UDLAChilelostitsaccreditation
fortheperiodfromJanuary2014toMarch2016sonewstudentsatthatinstitutioncouldnotparticipateintheCAEProgramduringthat
period.UDLAChile'saccreditationwasreinstatedinMarch2016forthreeyears,untilMarch2019.TheNuevoMilenioscholarship
programwascreatedbytheChileangovernmentin2001tosupportaccesstovocationalandtechnicaleducationforstudentsinthelowest
twoincomequintileswhometorexceededcertainacademicstandards.Originally,itprovidedeligiblestudentswithanannualscholarship
grantofuptoCLP360,000.Overtheyears,eligibilitywasextendedfirsttostudentsinthethreelowestincomequintilesandthen,in
2015,tothelowest70%whometorexceededcertainacademicstandards,andtheannualamountofthescholarshipwasraised
incrementallytoCLP600,000.For2016,theNMSwasdividedintothreeparts:(i)NMSI,whichgrantseligiblestudentsscholarshipsof
uptoCLP600,000peryear(ii)NMSII,whichgrantsstudentsscholarshipsofuptoCLP850,000peryear,providedthestudentscome
fromthefirstfiveincomedecilesandthetech/vocinstitutioninwhichtheyareenrolledisorganizedasanotforprofitlegalentityor,if
thetech/vocinstitutionisnotsoorganized,theinstitutionhasstatedinwritingitsintentiontobecomeanotforprofitentityandtobe
accreditedand(iii)NMSIII,whichgrantsstudentsscholarshipsofuptoCLP900,000peryear,providedthatsuchstudentsandthe
institutioninwhichtheyenrollmeettherequirementsforNMSIIandthetech/vocinstitutionwas,onDecember31,2015,accreditedfor
fouryearsormore.TheChileantech/vocinstitutionsintheLaureateInternationalUniversitiesnetworkdonotmeeteachofthesetests,so
studentsattheseinstitutionsareonlyeligibleforNMSIscholarshipsunderthecurrentlaw.
ThereisnoassurancethatanylegislationthatisintroducedorpassedbytheChileanCongresswillconformtothegovernment's
proposal.See"RiskFactorsRisksRelatingtoOurBusinessOurinstitutionsaresubjecttouncertainandvaryinglawsandregulations,
andanychangestotheselawsorregulationsortheirapplicationtousmaymateriallyadverselyaffectourfinancialconditionandresults
ofoperations."
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InBrazil,therearetwomainfederalgovernmentprogramsthatprovideeitherfinancingorfinancialsupporttostudents,FIESand
PROUNI.BothareusedbysubstantiallyallofourBrazilianinstitutions.FIESprovidesdirectfinancingtostudents.PROUNIisa
governmentprogramthatprovidesfederaltaxesincentivestoeducationalinstitutionsinexchangeforprovidingscholarshipstolower
incomestudents.Inpreviousyears,theBraziliangovernmentmadeeffortstoimprovetheoperationofFIESandtoincreaseoverall
participation,creatingmorehighereducationopportunitiesfortheeconomicallydisadvantaged.However,duetoaseriesofrecent
programmaticchangesdescribedbelow,weexperiencedadecreaseintheenrollmentofstudentsparticipatinginFIESin2015.
FIEStargetsstudentsfromlowsocioeconomicbackgroundsenrolledatprivatepostsecondaryinstitutions.Eligiblestudentsreceive
loanswithbelowmarketinterestratesthatarerequiredtoberepaidafteran18monthgraceperiodupongraduation.FIESpays
participatingeducationalinstitutionstaxcreditswhichcanbeusedtopaycertainfederaltaxesandsocialcontributions.FIESrepurchases
excesscreditsforcash.Aspartoftheprogram,ourinstitutionsareobligatedtopayupto15%ofanystudentdefault.Thedefault
obligationincreasestoupto30%ofanystudentdefaultiftheinstitutionisnotcurrentwithitsfederaltaxes.Inthepast,FIESwithheld
between1%and3%oftuitionpaidtotheinstitutionstocoveranypotentialstudentdefaults("holdback").Ifthestudentpays100%ofhis
orherloan,thewithheldamountswillbepaidtotheparticipatingeducationinstitutions.
SinceFebruary2014,allnewstudentswhoparticipateinFIESmustalsoenrollinFGEDUC.FGEDUCisagovernmentmandated,
privateguaranteefundadministeredbytheBankofBrazilthatallowsparticipatingeducationalinstitutionstoinsurethemselvesfor90%
(or13.5%of15%)oftheirlossesrelatedtostudentdefaultsundertheFIESprogram.Thecostoftheprogramis6.25%oftheamount
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(or13.5%of15%)oftheirlossesrelatedtostudentdefaultsundertheFIESprogram.Thecostoftheprogramis6.25%oftheamount
covered,whichrepresents5.63%ofastudent'sfulltuition.SimilartoFIES,theadministratorwithholds5.63%ofastudent'sfulltuitionto
fundtheguaranteebyFGEDUC.
AsofDecember31,2015,approximately21%ofourstudentsinBrazilparticipatedinFIES,representingapproximately26%ofour
Brazilrevenues.
InDecember2014,theBrazilianMinistryofEducation("MEC")alongwiththeBrazilianFundforEducationDevelopment("FNDE"),
theagencythatdirectlyadministersFIES,announcedseveralsignificantrulechangestotheFIESprogrambeginningin2015.These
changeslimitthenumberofnewparticipantsandtheannualbudgetoftheprogram,anddelaypaymentstopostsecondaryinstitutions
withmorethan20,000FIESstudentsthatwouldotherwisehavebeenduein2015.Thefirstchangeimplementsaminimumscoreonthe
highschoolachievementexaminordertoenrollintheprogram.Thesecondchangealtersthescheduleforthepaymentandrepurchaseof
creditsaswellaslimitstheopportunitiesforpostsecondaryinstitutionstosellanyunusedcreditssuchthatthereisasignificantdelay
betweenthetimethepostsecondaryinstitutionprovidestheeducationalservicestothestudentsandthetimeitreceivespaymentfromthe
governmentfor2015.Inadditiontotheserulechanges,FNDEimplementedapolicyforcurrentstudents'loanrenewalsfor2015,which
providesthatreturningstudentsmaynotfinanceanamountthatincreasesbymorethan6.41%,whichwaslaterincreasedto8.5%,fromthe
amountfinancedintheprevioussemester,regardlessofanyincreasesintuitionorinthenumberofcoursesinwhichthestudentis
enrolled,apolicythatwebelieveviolatestheapplicablelaw.For2016,MECannouncedthattherewillbenolimitationtothetuition
increase.Moreover,inthefirstandsecondintakesof2015,theonlineenrollmentandreenrollmentsystemthatallpostsecondary
institutionsandstudentsmustusetoaccesstheprogramhasexperiencednumeroustechnicalandprogrammingfaultsthathavealso
interferedwiththeenrollmentandreenrollmentprocess.Numerouschallengestothesechangesandrequestsforjudicialrelieffromthe
system'sfaultshavebeenfiledintheBraziliancourts,mostofwhicharepending.The2016enrollmentandreenrollmentschedulehas
beenreleasedand,sofar,thesystemhasnotpresentedanymajorissues.
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InOctober2015,FNDEinitiatednegotiationswiththeBrazilianAssociationofPostSecondaryInstitutions("ABRAES")aimingat
settlingtheFIESpaymentsthatweredelayedin2015.TheproposalfromMEC,whichwasacceptedbyABRAES,wastodividethetotal
amountdueintothreeannualinstallmentstobepaidonefourthin2016,onefourthin2017andhalfin2018.Thepartiesalsoagreedthat
theyearlyinstallmentswillbepaidinJuneofeachyear,andtheamountswillbeadjustedtoreflectaninflationindexfromthedateofthe
respectivematurityuntiltheeffectivepayment.FNDEalsoagreednottotakeanydiscriminatorymeasuresinthefuturerelatedtothe
paymentduetothepostsecondaryinstitutions,andnottoimposeanylimitationontheissuanceofcertificatesandrepurchaseofcredits
duetothepostsecondaryinstitutions,whichbasicallymeansthatallcertificateswillbeissuedandrepurchasedintheirrespectivefiscal
years,exceptforthoseintendedtobeissuedandrepurchasedinDecember,whichwillbepaidinJanuaryofthefollowingyear.Theparties
executedthesettlementagreementonJanuary28,2016anditwasapprovedbytheofficeoftheAttorneyGeneralofBrazilonFebruary3,
2016.TheFederalCourtofBrasiliaratifiedthesettlementagreementonMarch17,2016.OurpostsecondaryinstitutionsinBrazilare
associatedwithABRAESandsignedthesettlementagreementaswelltherefore,itwillapplytous.
OnDecember11,2015,MECissuednewFIESregulations("NormativeOrdinanceNo.13"),whichsupersedeinallsignificantaspects
therulespreviouslyinforce.NormativeOrdinanceNo.13definedandclarifiedsomerulesforstudenteligibilityandclassification,higher
educationinstitutionparticipationandselectionofthevacanciesthatwillbeofferedtothestudentsinthefirstintakeof2016.
Amongotherchanges,itcreateda"waitinglist"conceptforstudentsnotselectedinthefirstselectioncall.Italsoinstitutedarulethat
allowstheremainingvacanciesthatwerenotfilledinbythewaitingliststudentstoberedistributedamongotherprogramsofthepost
secondaryinstitution.
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Therulesforstudenteligibilityaretohaveagrosshouseholdincomeofnotmorethan2.5timestheminimumwagepercapita(which
wasraisedbytheMECto3.0timesonJune17,2016)andtohavetakentheNationalHighSchoolProficiencyExamatleastoncesince
2010,withaminimumscoreof450points,andtohaveascoregreaterthanzerointhetestofwriting.
RegardingtheparticipationofpostsecondaryinstitutionsinFIES,institutionsmustsignaparticipationagreementthatcontainstheir
proposalofthenumberofvacanciesofferedandthefollowinginformationpershift(morning,evening)andcampuslocation:(i)tuition
grossamountfortheentirecourse,includingallsemesters(ii)totaltuitiongrossamountpercourseforthefirstsemester,whichmust
reflectatleastafivepercentdiscounttothecourselistpriceand(iii)thenumberofvacanciesthatwillbeofferedthroughtheFIES
selectionprocess.Also,onlycourseswithscoresof3,4or5intheNationalHigherEducationEvaluationSystem("SINAES")evaluation
areeligibletoreceiveFIESstudents.
OnJuly14,2016,ProvisionalPresidentialDecreeNo.741/2016(MedidaProvisriaNo.741/2016)revisingtheFIESpaymentsrules
waspublishedintheofficialgazette.Accordingtothenewdecree,highereducationinstitutionsbecameliablefortheadministrationfees
andexpenseschargedbythegovernmentbanksthatmanageFIESloans.Thedecreebecameeffectiveimmediatelyandthegovernment
willwithholdtwopercentofallFIESpaymentstocoversuchadministrationfeesandexpenses.Provisionalpresidentialdecreesare
instrumentswiththeforceoflawthatthePresidentofBrazilcanissueincasesofimportanceandurgency.Theyhaveimmediateeffectand
arevalidfor60days,extendableonlyonceforthesameperiod.EffectivenessbeyondthatperiodrequiredapprovaloftheNational
Congress,whichtookplaceonNovember9,2016,anditwasenactedintolawonDecember2,2016(LawNo.13.366/2016).
InAugust2016,theMECissuedadditionalFIESregulations("NormativeOrdinanceNo.17")expandingtheguidelinespreviously
definedinNormativeOrdinanceNo.13.Amongotherthings,NormativeOrdinanceNo.17describesingreaterdetailhowtocalculate
remainingvacancies,setsforth
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proceduresanddeadlinesforthecompletionofthefillingoftheremainingvacancies,andprovidesfordealingwithexceptionalsituations
whereproceduralerrorsorotherobstacleshavepreventedstudentsfromaccessingremainingvacanciesinatimelymanner.
Anotherchangeinthenewregulationwasthenumber(orpercentage)ofvacanciesthatcanbeofferedbythepostsecondary
institutionsinrelationtothescoreobtainedinSINAESevaluation,whichwasreduced:
toupto50%ofthenumberofvacanciesincourseswithascoreof5(fromupto100%)
toupto30%ofthenumberofvacanciesincourseswithascoreof3(fromupto50%)and
toupto25%ofthenumberofvacanciesincoursesthatareintheprocessofauthorizationbyMEC(fromupto50%).
ThecriteriafortheselectionofvacanciesbyMECtobeofferedtostudentswerealsomodifiedbyNormativeOrdinanceNo.13and
theregionalityprovisionsofthepriorNormativeOrdinances(i.e.,vacanciesofferedintheNortheast,NorthandCentralWestregions
wouldhavehadpriorityoverthoseofferedintheSouthandSoutheastregions)wereexcludedfromtheregulation.NormativeOrdinance
No.13replacestheregionalitycriterionwithanewcriterionof"socialrelevancedeterminedbymicroregions,"whichmeansthatforeach
microregiontheywilltakeintoconsiderationthedemandforhighereducationforeducationalfinancing(calculatedbyFIES)andthe
HumanDevelopmentIndexofeachmicroregion.Alloftheothercriteriaprovidedinthepreviousregulationweremaintainedinthenew
one(i.e.,(i)FIESbudgetandtheavailabilityofresources,(ii)coursescoreunderSINAES'sevaluationand(iii)prioritycourses,asdefined
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bythegovernment(pedagogy,engineeringandhealthsectorcourses)).NormativeOrdinanceNo.13alsocontainstwoannexes,which
addressingreatdetailtheselectionandtiebreakercriteriaforthevacancies,aswellastherulesforredistributionofremainingvacancies.
Brazil'seconomycontinuestopresentchallengestogrowthandcreatepricingpressuresintheeducationsector.Ournewstudent
enrollmentinBrazilwasnegativelyaffectedbytheseconditionsaswellasthechangestotheFIESprogram.Ifeconomicconditions
continuetoweakenandtheBraziliangovernmentimplementsadditionalausteritymeasures,ourabilitytogrowourstudentenrollmentin
Brazilmaybefurthernegativelyaffected.TheBraziliangovernment'schangestotheFIESprogramresultedinasubstantialincreaseinthe
totalnumberofnewFIEScontractsinthatcountryin2014,anelectionyear,andthenareductioninthetotalnumberofnewFIES
contracts,fromover700,000in2014toapproximately300,000in2015.Asaresult,Laureate'snewenrollmentsofstudentsintheFIES
programalsodecreasedsimilarlyin2015however,thisdidnothaveamaterialimpactonour2015resultsofoperationssincetotal
enrollmentsforallstudentsincreasedin2015.AnypotentialimpactontotalenrollmentwouldnotoccuruntiltheFIESstudentsfromthe
expansionoftheprogramhavegraduated,andwoulddependontheBraziliangovernment'scommitmenttotheFIESprogram.Inaddition,
theBraziliangovernmentreducedthefrequencyofpaymentstoparticipatinginstitutionsduring2015.
Theseprogramsaremorefullydescribedin"IndustryRegulationBrazilianRegulation"and"IndustryRegulationChilean
Regulation"andinNote11,CommitmentsandContingencies,toourconsolidatedfinancialstatementsincludedelsewhereinthis
prospectus.
Europe
OurEuropesegmentconsistsof14licensedhighereducationinstitutions,andhasoperationsinCyprus,Germany,Morocco,Italy,
Portugal,SpainandTurkeyatwhichweenrolledapproximately54,000studentsasofSeptember30,2016.Theinstitutionsprimarilyserve
18to24yearoldstudents
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andofferaneducationthatemphasizesprofessionalorientedfieldsofstudywithundergraduateandgraduatedegreesinawidevarietyof
disciplines,includingbusiness,hospitalitymanagement,healthsciences,architecture,engineeringandartanddesign.
ThefollowingtablepresentsinformationaboutourinstitutionsinourEuropesegment(unlessotherwisenoted,weowneachofthese
institutions):
Country
Cyprus
Germany
Italy
Morocco
Portugal
EuropeanUniversityCyprus(EUC)
BusinessandInformationTechnologySchool(BiTS)
BTKUniversityofAppliedScience(BTK)
HTKAcademyofDesign(HTK)
NuovaAccademiadiBelleArtiMilano(NABA)
UniversitInternationaledeCasablanca(UIC)
UniversidadeEuropeia(UE)
IADEUInstitutodeArte,DesigneEmpresaUniversitrio(IADEU)
InstitutoPortugusdeAdministraodeMarketingdePorto(IPAM
Porto)
InstitutoPortugusdeAdministraodeMarketingdeLisboa(IPAM
YearJoined
Laureate
Network
Year
Founded
2005
2007
2011
2011
2009
2010
2011
2015
1961
2000
2006
1987
1980
2010
1962
1969
2015
1984
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Spain
Turkey
*
InstitutoPortugusdeAdministraodeMarketingdeLisboa(IPAM
Lisboa)

UniversidadEuropeadeMadrid(UEM)
UniversidadEuropeadeCanarias(UEC)
UniversidadEuropeadeValencia(UEV)

IstanbulBilgiUniversity
2015
1999
2010
2012
2006 *
1987
1995
2010
2012
1996
OurEuropeinstitutionsconsistof:
Cyprus
EuropeanUniversityCyprus(EUC).EUCwasfoundedasCyprusCollegein1961andgranteduniversitystatusas
EuropeanUniversityCyprusin2007.EUCoffersundergraduate,graduateandpostgraduatedegreesinarts,education,
business,humanities,socialandbehavioralsciences,law,computerscience,engineering,healthsciencesandmedicine.
EUCislocatedinNicosia.
Germany
BusinessandInformationTechnologySchool(BiTS).Foundedin2000,BiTSoffersundergraduate,graduatedegreeand
workingadultprogramsinbusinessadministration,communication,businesspsychology,sportsandeventmanagement
andgreenbusinessmanagement.BiTSoffersitsprogramsinIserlohn,HamburgandBerlin,Germany.
BTKUniversityofAppliedScience(BTK).FoundedinBerlinin2006,BTKdeliversdegreeprogramsincommunication,
photography,designandillustrationandgamedesign.BTKislocatedinBerlin,HamburgandIserlohn,Germany.
HTKAcademyofDesign(HTK).Foundedin1987inHamburgandin2000inBerlin,HTKoffersvocationalprogramsin
design.HTKislocatedinHamburgandBerlin,Germany.
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Italy
NuovaAccademiadiBelleArtiMilano(NABA).Foundedin1980,NABAoffersaccreditedundergraduateandgraduate
degreeprogramsinfashiondesign,graphicdesign,productdesign,visualarts,stagedesign,interiordesign,photography
andmultimediacommunication.NABAislocatedinMilan,Italy.NABAalsoprovidesspecializedprogramsthrough
DomusAcademy.
DomusAcademy(DA).Foundedin1982,DAdeliversmastersdegreeprogramsinfashion,design,businessdesign,
experiencedesignandurbanarchitecture.AllprogramsaredeliveredinEnglishandarebasedinMilan,Italy.
Morocco
UniversitInternationaledeCasablanca(UIC).Foundedin2010,UICwascreatedthroughapartnershipbetweenSocit
MarocEmiratsArabesUnisdeDveloppement(SOMED)andLaureateEducation,Inc.UICoffersundergraduateand
graduatedegreesinbusiness,engineering,healthsciences,hospitalityandsportsmanagement.UICislocatedin
Casablanca,Morocco.
Portugal
UniversidadeEuropeia(UE).UE,formerlynamed"InstitutoSuperiordeLnguaseAdministraodeLisboa",wasfounded
in1962anditsoperationasahighereducationestablishmentwasauthorizedbyministerialdecisioninJune1986.UEwas
recognizedasauniversity("universidade")in2013.UEprovidesundergraduateandgraduatedegrees("licenciaturas"and
"mestrados")inbusiness,law,marketing,hospitalityandtourism,computersciences,humanresources,psychologyand
sports,andtwodoctorates("doutoramentos")inbusinessandtourismmanagement.UEislocatedinLisbon,Portugal.
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IADEUInstitutodeArte,DesigneEmpresaUniversitrio(IADEU).Foundedin1969,IADEUwasthefirsthigher
educationinstituteinPortugaltofocusondesign.IADEUobtainedofficialStaterecognitionasauniversityinstitution
("institutouniversitrio")in2012.IADEUoffersundergraduateandmastersdegrees("licenciaturas"and"mestrados")in
design,marketingandadvertisingandphotography,andonedoctorate("doutoramento")indesign.IADEUislocatedin
Lisbon.
InstitutoPortugusdeAdministraodeMarketingdePorto(IPAMPorto)waslaunchedinPortoin1984.IPAMPorto
obtainedofficialStaterecognitionasahighereducationestablishmentin1990.IPAMPortooffersundergraduateand
mastersdegrees("licenciaturas"and"mestrados")inmarketing.
InstitutoPortugusdeAdministraodeMarketingdeLisboa(IPAMLisboa).IPAMLisboaopenedin1987.IPAMLisboa
obtainedofficialStaterecognitionasahighereducationestablishmentin1991.IPAMLisboaoffersundergraduateand
mastersdegrees("licenciaturas"and"mestrados")inmarketing.
UniversidadEuropeadeMadrid(UEM).Foundedin1995,UEMoffersundergraduateandgraduatedegreeprogramsinarts
andarchitecture,business,communicationsandhumanities,economics,engineeringandcomputerscience,healthsciences
andmechanics,lawandphysical
Spain
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activityandsportsscience.UEMhascampuseslocatedinMadridandValencia,Spain.Additionally,UEMprovides
specializedprogramsthroughthefollowinginstitutions:
IEDEBusinessSchool(IEDE).Foundedin1991,IEDEoffersgraduatedegreeprogramstothoseseekingpositions
inhighermanagement.IEDEislocatedinMadrid,Spain.
IMPACTBusinessSchool(IMPACT).Foundedin2015,offersgraduatedegreeprograms.IMPACTislocatedin
Madrid,Spain.
RealMadridInternationalSchool.Foundedin2005,theRealMadridInternationalSchoolisapartnershipbetween
RealMadrid,oneofthemostrecognizedsportsclubsintheworld,andUEM.Together,thetwoinstitutionsoffer
graduatedegreeprogramsinsportsmanagement,health,communicationandleisureprograms.TheRealMadrid
InternationalSchoolislocatedinMadrid,Spain.
UniversidadEuropeadeCanarias(UEC).Foundedin2010,UECoffersundergraduateprogramsinmanagement,
marketing,tourismandleisuremanagement,communicationsandadvertising,andarchitecture,andgraduateprogramsin
business,renewableenergy,nursingandphysiotherapy.UECislocatedinLaOrotavaintheCanaryIslands.
UniversidadEuropeadeValencia(UEV).Foundedin2012,UEVoffersundergraduateandgraduateprogramsin
architecture,business,communication,healthsciencesandlaw.UEVislocatedinValencia,Spain.
Turkey
IstanbulBilgiUniversity.Foundedin1996,IstanbulBilgiUniversityoffersundergraduateandgraduatedegreesin
communication,business,socialsciences,law,architecture,engineeringandhealthsciences.IstanbulBilgiUniversityis
locatedinIstanbul,Turkey.
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TuitionandFees
TuitionvariesateachoftheinstitutionsinourEuropesegmentdependingonthecurriculumandtypeofprogram.Tuitionpayment
optionsvarybyinstitutionandprimarilyincludemonthlyinstallmentpaymentplansandlumpsumpaymentsatthebeginningofthe
academicyear.Historically,wehaveincreasedtuitionaseducationalcostsandinflationhaverisen.
Studentsandtheirfamiliesaregenerallyresponsibleforroomandboardfees,transportationexpensesandcostsrelatedtotextbook
andsupplypurchasesrequiredfortheireducationalprograms.SeveralofourinstitutionsinourEuropesegmentalsohaverevenue
generatingroomandboardfees.
Studentstypicallyselffinancetheireducationorseekthirdpartyfinancingprograms.
AMEA
OurAMEAsegmentconsistsof21licensedhighereducationinstitutions,andhasoperationsinAustralia,China,India,Malaysia,
NewZealand,SaudiArabia,SouthAfricaandThailandatwhichweenrolledapproximately86,000studentsasofSeptember30,2016as
adjustedfortherealignmentofMDSintoourAMEAsegment.Thesegmentincludes9licensedinstitutionsintheKingdomofSaudi
ArabiaandoneinstitutioninChinathatwemanagethroughjointventureorotherarrangements.Theinstitutionsprimarilyserve18to
24yearoldstudentsandofferaneducationthatemphasizesprofessionalorientedfieldsofstudywithundergraduateandgraduatedegrees
inawiderangeofdisciplines,includingbusiness,engineering,informationtechnology,law,arts,fashionanddesign,education,
hospitalitymanagementandhealthsciences,aswellasvocationaldiplomas.
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Wehavehistoricallyfocusedonenteringnewgeographicmarketsthroughacquiringinstitutionswithanestablishednameand
operationalhistoryhowever,wealsooccasionallyworkwithlocalpartnerstoentermarketsthroughjointventurestolaunchnewhigher
educationinstitutions.Throughthesepartnerships,wecanapplyourprogrammaticandmanagementexpertisetohelpdevelopthe
institutions,whilebenefitingfromourpartner'slocalmarketknowledgeandexperienceandlimitingourfinancialexposure.
ThefollowingtablepresentsinformationabouttheinstitutionsinourAMEAsegment(unlessotherwisenoted,weowneachofthese
institutions):
Country
BlueMountainsInternationalHotelManagementSchool
(BMIHMS)
THINKEducationGroup(THINK)
TorrensUniversityAustralia(TUA)
China
BlueMountainsInternationalHotelManagementSchoolSuzhou
(BlueMountainsSuzhou)
HunanInternationalEconomicsUniversity(HIEU)
India
PearlAcademy(Pearl)
UniversityofPetroleumandEnergyStudies(UPES)
UniversityofTechnologyandManagement(UTM)
Malaysia
INTIEducationGroup(INTIMalaysia)
NewZealand MediaDesignSchool(MDS)
SaudiArabia RiyadhPolytechnicInstitute(RPI)
InternationalTourismandHospitalityCollegeatRiyadh(ITHCR)
InternationalTechnicalCollegeatJeddah(ITCJ)
YearJoined
Laureate
Network
Year
Founded
Australia
2008
2013
2014
1991
2006
2014
2008
2009*
2011 *
2013*
2013*
2008
2011
2010
2013#
2013#
2004
1997
1993
2003
2011
1986
1998
2010
2013
2013
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InternationalTechnicalCollegeatJeddah(ITCJ)
InternationalTechnicalFemaleCollegeatMakkah(ITCM)
InternationalTechnicalFemaleCollegeatAlKharj(ITCAK)
InternationalTourismandHospitalityCollegeatAlMadinah
(ITHCAM)
InternationalTechnicalFemaleCollegeatAlNammas(ITCAN)
InternationalTechnicalFemaleCollegeatBuraydah(ITCB)
InternationalTechnicalFemaleCollegeatWadiAlDawaser
(ITCWAD)
SouthAfrica MonashSouthAfrica(MSA)
Thailand
StamfordInternationalUniversity(SIU)
*
2013#
2013#
2013#
2013
2013
2013
2014#
2015#
2015#
2014
2015
2015
2014#
2013
2011 *
2014
2001
1995
ManagedbyLaureateaspartofajointventurearrangement.
ManagedbyLaureateundercontractwiththeKingdomofSaudiArabia.
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OurAMEAinstitutionsconsistof:
Australia
BlueMountainsInternationalHotelManagementSchool(BMIHMS).Foundedin1991,BMIHMSoffersundergraduate
andgraduatedegreesinhospitalitymanagementthroughcampuseslocatedinLeuraandSydney.
THINKEducationGroup(THINK).THINKwasfoundedin2006andthroughitsmembercollegescantraceitsoriginsback
to1961.THINKprovidesspecializedprogramsthroughthefollowinginstitutions:
APMCollegeofBusinessandCommunication(APM).Foundedin1986,APMoffersvocationalprogramsin
businessandmanagement,marketing,eventmanagementandpublicrelations.APMhascampuslocationsin
SydneyandBrisbane.
AustralasianCollegeofNaturalTherapies(ACNT).Foundedin1981,ACNToffersundergraduateandvocational
programsinnutrition,naturopathy,westernherbalmedicine,massage,healthscienceandfitness.ACNThascampus
locationsinSydneyandBrisbane.
AustralianNationalCollegeofBeauty(ANCB).Foundedin2008,ANCBoffersadiplomainbeautytherapy.ANCB
hascampuslocationsinSydneyandBrisbane.
CATCDesignSchool(CATC).Foundedin1982,CATCoffersundergraduateandvocationalprogramsingraphic
design,interiordesignandphotography.CATChascampuslocationsinSydney,MelbourneandBrisbane.
JansenNewmanInstitute(JNI).Foundedin1978,JNIoffersundergraduate,vocationalandgraduateprogramsin
counselingandpsychotherapyandcommunityservices.JNIislocatedinSydneyandBrisbane.
SouthernSchoolofNaturalTherapies(SSNT).Foundedin1961,SSNToffersundergraduateprogramsinChinese
medicine,naturopathy,westernherbalmedicine,nutritionalmedicine,clinicalmyotherapy,massageandhealth
science.SSNTislocatedinMelbourne.
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WilliamBlueCollegeofHospitalityManagement(WBCHM).Foundedin1990,WBCHMoffersvocationaland
undergraduateprogramsinhotelandhospitalitymanagement,eventmanagement,tourismmanagement,commercial
cookeryandbusinessmanagement.WBCHMislocatedinSydneyandBrisbane.
Until2016,THINKalsoprovidedspecializedhighereducationprogramsthroughthefollowinginstitutions:
APMCollegeofBusinessandCommunication(APM).Foundedin1986,APMofferedundergraduateprogramsin
businessandmanagement,marketing,eventmanagementandpublicrelations.APMhascampuslocationsin
SydneyandBrisbane.
BillyBlueCollegeofDesign(BBCD).Foundedin1987,BBCDofferedundergraduateprogramsincommunication
design,digitalmediadesign,brandedfashiondesign,interiordesignandgraphicdesign.BBCDhascampus
locationsinMelbourne,Sydney,BrisbaneandPerth.
In2016,thesehighereducationprogramstransitionedtoandarenowofferedbyTorrensUniversityAustralia.
TorrensUniversityAustralia(TUA).Commencingoperationsin2014,TUAoffersundergraduateandgraduateprogramsin
businessandmanagement,marketing,eventmanagement,publicrelations,communicationdesign,digitalmediadesign,
brandedfashiondesign,interiordesign
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andgraphicdesign,businessadministration,design,education,globalprojectmanagementandpublichealth.In2015,
TUAacquiredChifleyBusinessSchooltoexpanditsofferingsinbusinessadministrationandprojectmanagement.
Commencingin2016,TUAalsooffersundergraduateandgraduatedegreesinhospitalitymanagementthathavebeen
offeredbyBMIHMSandoffersthehighereducationprogramspreviouslyofferedbyAPMandBBCD.TUAhascampusesin
Adelaide,Sydney,MelbourneandBrisbane,Australia.
China
BlueMountainsInternationalHotelManagementSchoolSuzhou(BlueMountainsSuzhou).Foundedin2004,Blue
MountainsSuzhouismanagedbyTUAincooperationwiththeSuzhouTourismandFinanceInstitute.BlueMountains
Suzhouoffersdiplomasandassociatedegreesinhotelmanagementandstudentshavetheopportunitytocontinuetheir
educationatTUAtowardanAustralianBachelorofBusinessdegree.BlueMountainsSuzhouislocatedinSuzhou,China.
HunanInternationalEconomicsUniversity(HIEU).Foundedin1997,HIEUoffersundergraduatedegreesincommerce,
businessmanagement,foreignlanguages,computerscience,electronicengineering,andartanddesign.HIEUislocatedin
Changsha,China.
PearlAcademy(Pearl).Foundedin1993,Pearloffersundergraduateandgraduateprogramsinfashiondesignandcreative
business.PearlhascampusesinDelhi,Jaipur,NoidaandMumbai.
UniversityofPetroleumandEnergyStudies(UPES).Foundedin2003,UPESofferssectorfocusedgraduate,postgraduate
anddoctoraldegreeprogramsinoilandgas,power,aviationandaerospace,port&shipping,automotive,infrastructure,
electronics,informationtechnology,logisticsandsupplychain,designandlegalstudies.UPESislocatedinDehradun,
India.
UniversityofTechnologyandManagement(UTM).Foundedin2011,UTMoffersgraduateprogramsincomputer
sciences&informationtechnology,travel&tourismandeconomicsandmanagement.UTMislocatedinShillong,India.
India
Malaysia
INTIEducationGroup(INTIMalaysia).Foundedin1986,INTIMalaysiaoffersundergraduateandgraduatedegreesin
businessandlaw,computingandinformationtechnology,engineeringandtechnology,languagesandliberalarts,and
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businessandlaw,computingandinformationtechnology,engineeringandtechnology,languagesandliberalarts,and
appliedsciencesandmathematics.INTIMalaysiahaslocationsinKualaLumpur,Selangor,Penang,SabahandNilai
(NegeriSembilan),Malaysia.
NewZealand
MediaDesignSchool(MDS).Foundedin1998,MDSprovidescertificateprogramsingraphicdesign,creativeadvertising,
visualeffectsandgamedevelopment.MDSislocatedinAuckland,NewZealand.
SaudiArabia
RiyadhPolytechnicInstitute(RPI).Foundedin2010,RPIisaprivatepublicinitiativelaunchedbytheKingdomofSaudi
ArabiatohelpmeettheincreasingdemandforSaudinationalswithindustrialtechnicalskills.RPIofferstwoyearprograms
inengineering,business,accountingandtechnology.RPIisoperatedbyLaureateVocationalSaudiArabia("LVSA")
throughajointventurewithObeikanEducation("Obeikan"),asubsidiaryoftheObeikanInvestmentGroup,oneofthe
largestindustrialgroupsintheKingdomofSaudiArabia.RPIislocatedinRiyadh,SaudiArabia.
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InternationalTourismandHospitalityCollegeatRiyadh(ITHCR).Foundedin2013,ITHCRispartofagovernmentled
initiativethatpartnerswithinternationalproviderstomanagecollegesdesignedtotrainanddevelopqualified,
employmentreadygraduatestomeettheneedsoftheSaudilabormarket.ThecollegeoffersDiplomasforhighschool
graduatesinBusinessAdministrationandTourism,HospitalityandLeisure.ITHCRisoperatedbyLVSA.
InternationalTechnicalCollegeatJeddah(ITCJ).Foundedin2013,ITCJispartofagovernmentledinitiativethat
partnerswithinternationalproviderstomanagecollegesdesignedtotrainanddevelopqualified,employmentready
graduatestomeettheneedsoftheSaudilabormarket.ITCJoffersDiplomasforhighschoolgraduatesinBusiness
Administration,InformationTechnologyTechnicalSupportandElectricalTechnology.ITCJisoperatedbyLVSA.
InternationalTechnicalFemaleCollegeatMakkah(ITCM).Foundedin2013,ITCMispartofagovernmentledinitiative
thatpartnerswithinternationalproviderstomanagecollegesdesignedtotrainanddevelopqualified,employmentready
graduatestomeettheneedsoftheSaudilabormarket.ITCMoffersDiplomasforhighschoolgraduatesinBusiness
Administration,Tourism,HospitalityandLeisure,andInformationTechnologyTechnicalSupport.ITCMisoperatedby
LVSA.
InternationalTechnicalFemaleCollegeatAlKharj(ITCAK).Foundedin2013,ITCAKispartofagovernmentled
employmentreadygraduatestomeettheneedsoftheSaudilabormarket.ITCAKoffersDiplomasforhighschoolgraduates
inBusinessAdministration,Tourism,HospitalityandLeisure,andInformationTechnologyTechnicalSupport.ITCAKis
operatedbyLVSA.
InternationalTourismandHospitalityCollegeatAlMadinah(ITHCAM).Foundedin2014,ITHCAMispartofa
governmentledinitiativethatpartnerswithinternationalproviderstomanagecollegesdesignedtotrainanddevelop
qualified,employmentreadygraduatestomeettheneedsoftheSaudilabormarket.ThecollegeoffersDiplomasforhigh
schoolgraduatesinBusinessAdministrationandTourism,HospitalityandLeisure.ITHCAMisoperatedbyLVSA.
InternationalTechnicalFemaleCollegeatAlNammas(ITCAN).Foundedin2015,ITCANispartofagovernmentled
employmentreadygraduatestomeettheneedsoftheSaudilabormarket.ITCANoffersDiplomasforhighschoolgraduates
inBusinessAdministration,Tourism,HospitalityandLeisure,andInformationTechnologyTechnicalSupport.ITCANis
operatedbyLVSA.
InternationalTechnicalFemaleCollegeatBuraydah(ITCB).Foundedin2015,ITCBispartofagovernmentledinitiative
thatpartnerswithinternationalproviderstomanagecollegesdesignedtotrainanddevelopqualified,employmentready
graduatestomeettheneedsoftheSaudilabormarket.ITCBoffersDiplomasforhighschoolgraduatesinBusiness
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graduatestomeettheneedsoftheSaudilabormarket.ITCBoffersDiplomasforhighschoolgraduatesinBusiness
Administration,Tourism,HospitalityandLeisure,andInformationTechnologyTechnicalSupport.ITCBisoperatedby
LVSA.
InternationalTechnicalFemaleCollegeatWadiAlDawaser(ITCWAD).Foundedin2014,ITCWADispartofa
governmentledinitiativethatpartnerswithinternationalproviderstomanagecollegesdesignedtotrainanddevelop
qualified,employmentreadygraduatestomeettheneedsoftheSaudilabormarket.ITCWADoffersDiplomasforhigh
schoolgraduatesinBusinessAdministration,Tourism,HospitalityandLeisure,andInformationTechnologyTechnical
Support.ITCWADisoperatedbyLVSA.
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SouthAfrica
MonashSouthAfrica(MSA).Foundedin2001byMonashUniversity,MSAoffersundergraduateandgraduatedegree
programsinbusinessandeconomics,informationtechnology,socialsciencesandhealthsciences.Laureateacquireda
controllinginterestinMSAin2014.MSAislocatedinJohannesburg,SouthAfrica.
Thailand
StamfordInternationalUniversity(SIU).Foundedin1995,SIUoffersinternationalandThaiundergraduateandgraduate
degreeprogramsinbusiness&management,communication,hospitalitymanagementandinformationtechnology.SIUis
locatedinHuaHinandBangkok,Thailand.
TuitionandFees
TuitionvariesateachoftheinstitutionsinourAMEAsegmentdependingonthecurriculumandtypeofprogram.Tuitionpayment
Studentsandtheirfamiliesaregenerallyresponsibleforroomandboardfees,transportationexpensesandcostsrelatedtotextbook
andsupplypurchasesrequiredfortheireducationalprograms.BlueMountainsInternationalHotelManagementSchool,ourChinese
institutions,MonashSouthAfrica,StamfordInternationalUniversity,theINTIGroupandourIndianinstitutionshaverevenuegenerating
roomandboardfees.
Studentstypicallyselffinancetheireducationorseekthirdpartyfinancingprograms.However,incertainmarketsintheAMEA
regiontherearevariousformsofgovernmentsupportedstudentfinancingprograms,asdiscussedbelow.
GovernmentSponsoredStudentFinancingPrograms
InAustralia,theCommonwealthgovernmenthasestablishedincomecontingentloanschemesthatassisteligiblefeepayingstudents
topayallorpartoftheirtuitionfees(separateschemesexistforhighereducationandvocationalcourses).Undertheschemestherelevant
feesarepaiddirectlytotheinstitutions.AcorrespondingobligationthenexistsfromtheparticipatingstudenttotheCommonwealth
government.TheAustralianinstitutionshavenoresponsibilityinconnectionwiththerepaymentoftheseloansbystudentsand,
generally,thisassistanceisnotavailabletointernationalstudents.InDecember2016,theAustraliangovernmentintroducedanewloan
schemeforvocationalcourses.Thiswillreplacethepreviousfundingmodelforloansforvocationalstudies(whichwillbephasedout
during2017).Underthenewarrangementsvocationaleducationalproviderswillberequiredtoreapplyforregistrationfortheirstudentsto
beeligibletoreceiveloansforvocationalcourses.Tobeeligibleforregistrationvocationaleducationalproviders,amongothermatters,
willberequiredtodemonstrateaminimumof50%completionrates.Relevantfeeswillbepaidmonthlyinarrearsandcapswillbeplaced
ontheamountofloansavailableforparticularcategoriesofcourses.THINKhasmadeaninitialapplicationtobeapprovedforthese
purposes.BMIHMSandTUAcurrentlyprovideonlyhighereducationprogramswhicharenotaffectedbythesechanges.TheAustralia
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purposes.BMIHMSandTUAcurrentlyprovideonlyhighereducationprogramswhicharenotaffectedbythesechanges.TheAustralia
institutionshavebeendeliberatelyplacingemphasisonhighereducationcoursesinTUAinanticipationofthesechanges.
InChina,ThailandandMalaysiatherearealsogovernmentprogramsavailabletoourstudents,however,theydonotrepresenta
materialportionoftherevenuesofourinstitutionsinthesecountries.IntheKingdomofSaudiArabia,ourstudents'tuitionisfullyfunded
bythegovernmentandthe
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governmentpaysthetuitionforeachstudenteitherdirectlytousor,inthecaseofRPI,totheinstitutionwhich,inturn,paysus.The
governmentalsoprovidesamonthlystipendtoeachstudentenrolledattheeightcollegesofexcellence,whileatRPI,theprivate
companiessponsoringthestudentspaythestipend.Thepaymentsarebasedonourenrollments,withminimumpaymentssetforeach
institution.
GPS
InstitutionsinourGPSsegmenthaveproductsandservicesthatspantheLaureateInternationalUniversitiesnetwork,withatotal
enrollmentofapproximately73,000studentsasofSeptember30,2016,asadjustedforthesegmentchange.InstitutionsinourGPS
segmentprovidefullyonlinedegreeprogramsthroughaU.S.basedaccreditedinstitution,WaldenUniversity,andinternationally,through
LaureateOnlineEducationB.V.,whichisbasedinAmsterdamandpartnerswiththeUniversityofLiverpoolandtheUniversityof
RoehamptonintheUnitedKingdom.Weprovideprofessionalorientedfullyonlineundergraduateandgraduatedegreeprogramslargely
toworkingprofessionalsthroughdistancelearningandofferonlinedegreeprogramsineducation,psychology,healthandhumanservices,
management,nursingandinformationtechnology.Thesefullyonlineinstitutionsprovideusexpertiseinonlineeducationthatwecan
leveragethroughoutthecampusbasedinstitutionsinourLatAm,EuropeandAMEAsegments.Ourfullyonlineinstitutionsenrolled
approximately70,000studentsasofSeptember30,2016.
Inaddition,withinthissegment,weownedthreesmaller,campusbasedinstitutionsintheUnitedStates.OurGPSsegmentalso
providessupportservicestoSFUAD.Thesecampusbasedinstitutionsprimarilyserve18to24yearoldstudentsandofferaneducation
thatemphasizesprofessionalorientedfieldsofstudy.ThecurriculumintheseinstitutionsisleveragedthroughouttheLaureate
InternationalUniversitiesnetworkthroughstudentexchangeprograms,dualdegreesandcertificateofferings.Thesecampusbased
institutionsenrolledapproximately3,000studentsasofSeptember30,2016.
ThefollowingtablepresentsinformationabouttheinstitutionsinourGPSsegment(unlessotherwisenoted,weowneachofthese
institutions):
Country
GlobalOnline
UnitedKingdom LaureateOnlineEducationB.V.(UniversityofLiverpool)
LaureateOnlineEducationB.V.(UniversityofRoehampton)
UnitedStates
WaldenUniversity
CampusBased
UnitedStates
NewSchoolofArchitectureandDesign
KendallCollege
SantaFeUniversityofArtandDesign(SFUAD)
UniversityofSt.AugustineforHealthSciences
YearJoined
Laureate
Network
2004
2012
2001
2008
2008
2009
Year
Founded
1881
2004
1970
1980
1934
1859
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UniversityofSt.AugustineforHealthSciences
(St.Augustine)
2013
1979
SFUADisseparatelyownedbyWengen.LaureateprovidessupportservicestoSFUADpursuanttocontractual
arrangements.See"CertainRelationshipsandRelatedPartyTransactionsAgreementswithWengenSFUAD
SharedServicesAgreement."OnMay17,2016,LEIHoldingsUSI,Inc.,awhollyownedsubsidiaryofWengen,
enteredintoanagreementtosellSFUADtoJoshuaEducation,Inc.,aU.S.subsidiaryofRafflesEducation
CorporationLimited,subjecttoallnecessaryregulatoryapprovals.Asusedherein,our"U.S.Institutions"refersto
NewSchoolofArchitectureandDesign,KendallCollege,St.AugustineandWaldenUniversity.
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OnlineInstitutions
LaureateOnlineEducationB.V.LaureateOnlineEducationB.V.istheexclusiveworldwideonlinecareerpartnerofthe
UniversityofLiverpoolandtheUniversityofRoehamptonandspecializesinthedeliveryofonlinegraduateprogramsto
workingadultstudents.LaureateOnlineEducationB.V.isbasedinAmsterdam.
UniversityofLiverpool.Foundedin1881,theUniversityofLiverpool,apublicuniversityintheUnitedKingdom,
throughLaureateOnlineEducationB.V.,offersonlinegraduatedegreeprogramsinbusinessadministration,health
sciences,lawandinformationtechnology.
UniversityofRoehampton.Foundedin2004,theUniversityofRoehampton,apublicuniversityintheUnited
Kingdom,throughLaureateOnlineEducationB.V.,offersonlinegraduatedegreeprogramsinbusinessand
internationalmanagement.
WaldenUniversity.Establishedin1970,WaldenUniversityisanonlineuniversitythatdeliversbachelor's,master's,
doctoralandpostdoctoralprogramsincounseling,education,healthsciences,humanservices,management,nursing,
psychology,publicadministration,publichealthandtechnology.WaldenUniversityisheadquarteredinMinneapolis,
Minnesota.
UnitedStates
NewSchoolofArchitectureandDesign.Foundedin1980,NewSchoolofArchitectureandDesignoffersundergraduateand
graduatedegreeprogramsinarchitecture,artanddesign,graphicdesign,historyandtheory,professionalpractice,
technologyandurbanstudies.NewSchoolofArchitectureandDesignislocatedinSanDiego,California.
KendallCollege.Foundedin1934,KendallCollegeoffersundergraduate,associateandcertificateprogramsinbusiness
administration,culinaryarts,educationandhospitalitymanagement.KendallCollegeislocatedinChicago.
SantaFeUniversityofArtandDesign(SFUAD).Foundedin1859,SFUAD(formerlytheCollegeofSantaFe)offers
undergraduatedegreesinartsmanagement,contemporarymusic,creativewritingandliterature,graphicdesignanddigital
arts,film,performingarts,photographyandstudioarts.SFUADalsoofferssemesterlongandintensiveEnglishlanguage
programstoforeignstudents.
UniversityofSt.AugustineforHealthSciences(St.Augustine).Foundedin1979,St.Augustineoffersgraduateand
doctoraldegreeandnondegreeprogramsinphysicaltherapy,occupationaltherapy,orthopedicassistants,educationand
healthsciences.St.AugustinehascampuslocationsinSt.AugustineandMiami,Florida,SanMarcos,CaliforniaandAustin,
Texas.
TuitionandFees
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TuitionvariesateachoftheinstitutionsinourGPSsegmentdependingonthecurriculumandtypeofprogram.Tuitionpayment
StudentsatU.S.campusbasedprogramsaregenerallyresponsibleforroomandboardfees,transportationexpensesandcostsrelated
totextbookandsupplypurchasesrequiredfortheireducationalprograms.
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CurrentlytherearenocompanysponsoredfinancingarrangementsinourGPSsegment.However,studentsinourU.S.Institutionsare
eligiblefortheDOE'sTitleIVprogramfederalfinancialaidundertheHEA.
Marketing
Webelievethateffectivemarketingisakeytothesuccessofourbusiness,enablingustoattractprospectivestudentstoour
institutionsandincreaseenrollment.Wefocusonmarketingasawaytoincreaseawarenessoftheinstitutionsineachoftheirrespective
marketsandtohighlightthebenefitsprovidedbytheLaureateInternationalUniversitiesnetwork.Weleveragebestpracticesacrossour
entirenetworktohelpourinstitutionsdevelopeffectivemarketingprograms.
Werecognizethatthevastmajorityofourstudentsresidewithinthecommunitieswhereourcampusesarelocated.Becauseourtarget
marketisincloseproximitytoourinstitutions,developingandmaintainingapowerfullocalpresenceisoneofthecornerstonesofour
brandbuildingstrategy.Webelieveastrongbrandisoneofthekeyvariablesforfuturesustainablegrowth.Wepromoteactivitiesthat
encouragedirectparticipationandinteractionbetweenthecommunityandourinstitutions.Forexample,manyofourinstitutionsprovide
valuableservicestotheresidentsinthelocalcommunitiesincludingaccesstoourveterinaryandmedicalfacilitiesatreducedcosts,legal
aidsupportanduseofourfacilities,includingremedialcourseofferingsandgymmemberships.Additionally,manyofourinstitutions'
sportsteamsserveasasourceofcivicprideforthelocalresidentsincludingourstudentsandtheirfamilies.Theseinformalinteractions
servetoenhancethetrustednatureofourlocalbrands,whichinturnfacilitatesawordofmouthreferralnetworkthathelpstoattract
qualitystudentsbeyondtheuseoftraditionalstudentrecruitmentpractices.
Duringenrollmentcampaigns,weaugmentourlongtermbrandbuildingactivitieswithprofessionaladvertisingcampaigns
employingavarietyofmedia,includingtelevision,radio,outdoorandprintadvertising.Wealsousedirectmail,webadvertisingandone
ononemeetingswithstudentsandtheirfamilies.Eachinstitutionisresponsibleforimplementingitsownmarketingcampaigns,although
weprovideaforumforthenetwork'smarketingdepartmentstosharebestpractices.Duringthelastseveralyears,wehaveincreasedthe
amountsspentonmarketingandadvertisingtomeetthelargedemandforourprograms,andweanticipatethatthistrendwillcontinue.
Additionally,westrivetodevelopstrongrelationshipswithlocalhighschoolsthatserveasfeederschoolsformanyofour
institutions.Webelievewehavedevelopedstrongrelationshipswithmanyofthesefeederschoolsandexpectthatwillcontinueto
provideavaluablesourceofreferralsformanyoftheinstitutionsinournetwork.
Competition
Wefacecompetitionineachofouroperatingsegments.Webelievecompetitionfocusesonprice,educationalquality,reputation,
locationandfacilities.
LatAm,EuropeandAMEA
ThemarketforhighereducationoutsidetheUnitedStatesishighlyfragmentedandmarkedbylargenumbersoflocalcompetitors.
Thetargetdemographicsareprimarily18to24yearoldsintheindividualcountriesinwhichwecompete.Wegenerallycompetewith
bothpublicandprivatehighereducationinstitutionsonthebasisofprice,educationalquality,reputationandlocation.Publicinstitutions
tendtobelessexpensive,ifnotfree,butmoreselectiveandlessfocusedonpracticalprogramsalignedaroundcareeropportunities.We
believewecomparefavorablywithcompetitorsbecauseofourfocusonquality,professionalorientedcurriculumandthecompetitive
advantagesprovidedbyourglobalnetwork.Atpresent,webelievenoothercompanyhasasimilarnetworkofinternationalinstitutions.
Thereareanumberofotherprivateandpublicinstitutionsineachofthe
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countriesinwhichweoperate.Becausetheconceptofprivatehighereducationinstitutionsisfairlynewinmanycountries,itisdifficultto
predicthowthemarketswillevolveandhowmanycompetitorstherewillbeinthefuture.Weexpectcompetitiontoincreaseasthe
marketsmature.
GPS
Themarketforfullyonlinehighereducationishighlyfragmentedandcompetitive,withnosingleinstitutionhavinganysignificant
marketshare.ThetargetdemographicsforourGlobalOnlineinstitutionsareadultworkingprofessionalswhoareover25yearsold.Our
GlobalOnlineinstitutionscompetewithtraditionalpublicandprivatenonprofitinstitutionsandforprofitschools.Typically,public
institutionschargelowertuitionsthanourGlobalOnlineinstitutionsbecausetheyreceivestatesubsidies,governmentandfoundation
grants,andtaxdeductiblecontributionsandhaveaccesstootherfinancialsourcesnotavailabletoourGlobalOnlineinstitutions.
However,tuitionatprivatenonprofitinstitutionsistypicallyhigherthantheaveragetuitionrateschargedbyourGlobalOnline
institutions.OurGlobalOnlineinstitutionscompetewithothereducationalinstitutionsprincipallybaseduponprice,educationalquality,
reputation,location,educationalprogramsandstudentservices.
See"RiskFactorsRisksRelatingtoOurBusinessThehighereducationmarketisverycompetitive,andwemaynotbeableto
competeeffectively."
IntellectualProperty
Wecurrentlyown,orhavefiledapplicationsfor,trademarkregistrationsfortheword"Laureate,"for"LaureateInternational
Universities"andfortheLaureateleaflogointhetrademarkofficesofalljurisdictionsaroundtheworldwhereweoperateinstitutionsof
higherlearning.Wehavealsoregisteredorfiledapplicationsintheapplicablejurisdictionswhereweoperateforthemarks"Laureate
OnlineInternational"and"LaureateOnlineEducation."Inaddition,wehavetherightstotradenames,logos,andotherintellectual
propertyspecifictomostofourhighereducationinstitutions,inthecountriesinwhichthoseinstitutionsoperate.
Employees
AsofDecember31,2015,wehadapproximately67,800employees,ofwhichapproximately19,900werefulltimeacademicteaching
staffand22,800wereparttimeacademicteachingstaff.Inaddition,wehaveapproximately11,800parttimeacademicteachingstaffwho
areclassifiedascontractors,principallyinChileandBrazil.OuremployeesatmanyofourinstitutionsoutsidetheUnitedStatesare
representedbylaborunionsundercollectivebargainingagreements,asiscustomaryorrequiredunderlocallawinthosejurisdictions.At
variouspointsthroughouttheyear,wenegotiatetorenewcollectivebargainingagreementsthathaveexpiredorthatwillexpireinthe
nearterm.Weconsiderourselvestobeingoodstandingwithallofthelaborunionsofwhichouremployeesaremembersandbelievewe
havegoodrelationswithallofouremployees.
EffectofEnvironmentalLaws
Webelieveweareincompliancewithallapplicableenvironmentallaws,inallmaterialrespects.Wedonotexpectfuturecompliance
withenvironmentallawstohaveamaterialadverseeffectonourbusiness.
CampusLocationsandOnlineFacilities
LaureateisheadquarteredinBaltimore,Maryland.AsofDecember31,2015,thereweremorethan200Laureatelocationsaroundthe
world.Theselocationsincludebuildingsandlandcomprisingatotalofapproximately127.5millionsquarefeet,ofwhich,approximately
62.8millionsquarefeetwereunderleaseandapproximately64.8millionsquarefeetwereowned.Thefollowingtablesummarizes
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thepropertiesleasedandownedbysegmentpriortothesegmentchange,astheeffectswerenotsignificant:
Segment
LatAm
Europe
AMEA
GPS
Corporate(includingheadquarters)
Total
Squarefeet
leasedspace
53,179,304
3,220,209
1,829,869
4,332,461
191,300
62,753,143
Squarefeet
ownedspace
Total
squarefeet
28,559,436
5,813,363
30,053,495
361,722
64,788,016
81,738,740
9,034,572
31,883,364
4,694,183
191,300
127,542,159
OurLatAm,EuropeandAMEAsegmentsleaseandownvarioussitesthatmayincludealocalheadquartersandallorsomeofthe
facilitiesofacampusorlocation.Inmanycountries,ourfacilitiesaresubjecttomortgages.
OurGPSsegmenthasofficesatourheadquarterslocationinBaltimoreandleaseseightadditionalfacilitiesinColumbia,Maryland
LosAngeles,CaliforniaMinneapolis,MinnesotaTempe,ArizonaSanAntonio,TexasGdansk,PolandLiverpool,Englandand
Amsterdam,Netherlands.OurheadquartersconsistsoftwoleasedfacilitiesinBaltimore,Maryland,whichareusedprimarilyforoffice
space.
Wemonitorthecapacityofourhighereducationinstitutionsonaregularbasisandmakedecisionstoexpandcapacitybasedon
expectedenrollmentandotherfactors.Ourleasedfacilitiesareoccupiedunderleaseswhoseremainingtermsrangefromonemonthto
22years.Amajorityoftheseleasescontainprovisionsgivingustherighttorenewtheleaseforadditionalperiodsatvariousrentalrates,
althoughgenerallyatrateshigherthanwearecurrentlypaying.
LegalProceedings
Wearepartytovariousclaimsandlegalproceedingsfromtimetotime.Exceptasdescribedbelow,wearenotawareofanylegal
proceedingsthatwebelievecouldhave,individuallyorintheaggregate,amaterialadverseeffectonourbusiness,resultsofoperationsor
financialcondition.
OnOctober5,2016,astudentfiledsuitagainstusandWaldenUniversityintheUnitedStatesDistrictCourtfortheSouthernDistrict
ofOhiointhematterofLatonyaThornhillv.WaldenUniversity,et.al.,claimingthatherprogressinherprogramwasdelayedbyWalden
Universityandseekingclassactionstatustorepresentanationwideclassofpurportedlysimilarlysituateddoctoralstudents.Theclaims
includefraudintheinducement,breachofcontract,consumerfraudunderthelawsofMarylandandOhio,andunjustenrichment.Weand
WaldenUniversitywereservedonOctober17,2016.OnDecember16,2016,weandWaldenUniversityfiledamotiontodismissthe
claimsandamotiontostriketheclassactioncertificationrequest.OnJanuary13,2017,theplaintifffiledanamendedcomplaint,making
modificationstosupplementsomeofthefactualallegationsandseekingtochangethegoverninglawofthecasetothelawofMinnesota.
WaldenUniversityandweintendtodefendagainstthiscasevigorously,includingtherequesttocertifyanationwideclass.
OnOctober18,2016,aformerstudentfiledsuitagainstusandWaldenUniversityproseintheUnitedStatesDistrictCourtforthe
DistrictofMarylandinthematterofEricD.Streeterv.WaldenUniversity,et.al.(CaseNo.1CCB6CV3460),claimingthathisprogressin
hisprogramwasdelayedbyWaldenUniversityandLaureate.Theclaimsincludeunjustenrichment,breachofcontract,violationofthe
MarylandConsumerProtectionAct,violationoftheDueProcessClauseintheFourteenthAmendment,libel,andviolationoftheFalse
ClaimsAct.WhileweandWaldenUniversityhavenotyetbeenservedinthismatter,WaldenUniversityandweintendtodefendagainst
thiscasevigorously.On
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December6,2016,thecourtorderedthattheplaintiffeffectserviceofthesummonsandcomplaintondefendantswithin90daysoffiling,
orthecourtmayenteranorderaskingthepartytoshowcausewhytheclaimsshouldnotbedismissed.Ifthepartyfailstoshowcause
withinthetimesetbythecourt,thecomplaintwillbedismissedwithoutprejudice.
OnDecember1,2016,fivestudentsfiledsuitagainstusandWaldenUniversityintheUnitedStatesDistrictCourtfortheDistrictof
MinnesotainthematterofJenniferWright,etalv.WaldenUniversity,et.al.,claimingthattheirprogressintheirprogramswasdelayedby
WaldenUniversityandseekingclassactionstatustorepresentanationwideclassofpurportedlysimilarlysituateddoctoralstudents.The
claimsincludefraudintheinducement,breachofcontract,consumerfraud,andbreachofimpliedcovenantoffairdealingunderthelaws
ofMinnesota,California,Georgia,WashingtonandMichigan,andunjustenrichment.WaldenUniversityandwewereservedinthismatter
onDecember8,2016,WaldenUniversityandweintendtodefendagainstthiscasevigorously,includingtherequesttocertifya
nationwideclass.OnJanuary13,2017,wefiledamotiontodismiss,orinthealternativetostayproceedings,pursuanttothefirstfiled
rule,baseduponthefactthattheThornhillcasewasfiledfirstinOhio.
OnDecember20,2016,aformerstudentfiledsuitagainstWaldenUniversity,intheBexarCountyDistrictCourtinTexasinthe
matterofDiannaMedellinv.WaldenUniversity,LLC(CauseNo.2016C121637),claimingthatWaldenUniversityintentionallydeceived
herbypraisingherandallowinghertosuccessfullycompletehercourseworkinherdoctoralprogram,onlytothenprolongthe
dissertationwritingprocessasmuchaspossible.ThecaseallegescausesofactionforviolationsoftheTexasDeceptiveTradePracticesAct
andfraudandincludescertainfactualallegationsthatareidenticaltotheotherpurportedclassactionlawsuits.Laureatehasnotbeensued
inthismatterandWaldenUniversityhasnotyetbeenserved.Onceserved,WaldenUniversitywilldefendagainstthiscasevigorously.
OnDecember29,2016,aformerstudentfiledsuitagainstusandWaldenUniversityintheUnitedStatesDistrictCourtfortheDistrict
ofMinnesotainthematterofAaronBleess,etalv.WaldenUniversity,et.al(CaseNo.16CV4402),claimingthathisprogressinhis
programwasdelayedbyWaldenUniversityandseekingclassactionstatustorepresentanationwideclassofpurportedlysimilarlysituated
doctoralstudents.Theclaimsinclude,underthelawsofMinnesota,breachofcontract,consumerfraud,breachofimpliedcovenantoffair
dealing,fraudulentinducement,unjustenrichment,andviolationoftheDeceptiveTradePracticesActandConsumerProtectionFraud
Act.ProcesswasservedinthismatteronDecember30,2016.WaldenUniversityandweintendtodefendagainstthiscasevigorously,
includingtherequesttocertifyanationwideclass.Thiscaseappearstobenearlyidenticalinallegations,includingthesameallegedclass,
asThornhillandWright.
OnDecember23,2016,counselfortheplaintiffsinThornhillandWrightfiledamotiontoconsolidatepretrialproceedingsinthese
matters,aswellastheStreeterandMedellinmatters,totheUnitedStatesJudicialPanelonMultiDistrictLitigation(MDL).Theyhave
alsoindicatedanintenttoincludetheBleessmatterinthisrequestedprocess,aswellasanyotherfuturefilingswiththesameorsimilar
allegations.AsubstantiveresponsetothisfilingfromWaldenUniversityandusisdueonJanuary17,2017.WeandWaldenUniversityare
assessingthisprocessandourresponse.
Inaddition,severalgroupsofcurrentandformerstudentsfiledfiveseparatelawsuitsintheSeventhJudicialCircuitinandfor
St.JohnsCounty,FloridaagainstSt.AugustinerelatingtomattersarisingbeforeweacquiredthatinstitutioninNovember2013.Thesuits
areHemingwayetal.v.UniversityofSt.AugustineforHealthSciences,Inc.filedonAugust12,2013Jenningsv.Universityof
St.AugustineforHealthSciences,LLCetal.filedonMarch26,2015,whichwasresolvedinMarch2016anddismissedAlbrittonetal.v.
UniversityofSt.AugustineforHealthSciences,LLCfiledonApril9,2015,whichwasresolvedinOctober2015anddismissed
Stephensv.UniversityofSt.AugustineforHealthSciences,LLCfiledonNovember11,2015whichwasresolvedinJune2016and
dismissedandJohnsonv.Universityof
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St.AugustineforHealthSciences,LLCfiledonJune16,2016.Theallegationsintheremainingcasesrelatetoaprogramthatwas
launchedinMay2011and,atthetime,offereda"MasterofOrthopaedicPhysician'sAssistantProgram"degree.Theplaintiffsinthese
mattersallegethattheuniversitymisrepresentedtheirabilitytopracticeaslicensedPhysicianAssistantswithaheightenedspecialtyin
orthopaedics.TheplaintiffsintheremainingcasesareseekingreliefincludingrefundoftuitionpaidtoSt.Augustine,aswellasloandebt
incurredbytheplaintiffswhileattendingSt.Augustine,lossoffutureearningsandlitigationcosts.TheHemingwaymatterisawaitinga
trialdate.TheJohnsonmatterisatapreliminarystageofdiscovery.Webelievetheclaimsinthesecasesarewithoutmeritandintendto
defendvigorouslyagainsttheallegations.WithrespecttothetwopendingSt.Augustinecases,underthetermsoftheacquisition
agreementforSt.Augustine,weexpecttobeindemnifiedbythesellerforsubstantiallyalloftheliabilitywithrespecttoanyclaimsin
thesecases.Wealsohavearightofsetoffagainstthesellerforsuchamounts.
OnNovember16,2016,MichaelS.Ryan,theformerchiefaccountingofficeroftheCompany,filedacomplaintwiththeOccupational
SafetyandHealthAdministrationoftheU.S.DepartmentofLaborallegingretaliatoryemploymentpracticesinviolationofthe
whistleblowerprovisionsoftheSarbanesOxleyAct(MichaelS.Ryanvs.LaureateEducation,Inc.,CaseNo.3005017011).The
complaintalsoallegesalackofcompliancewithU.S.GAAPandviolationsofcertainSECrulesandregulations.Thecomplaintdoesnot
seekanyspecifiedamountofdamages.TheCompanyhasinvestigatedtheallegationsmadeinthecomplaintwiththeassistanceofoutside
legalandaccountingadvisersandbelievesthatitsconsolidatedfinancialstatementsareincompliancewithU.S.GAAPandSECrulesand
regulationsinallmaterialrespectsandthattheallegationsarebaselessandwithoutmerit.TheCompanyintendstoassertallappropriate
defensestotheseallegationsandfiledaresponsewiththeU.S.DepartmentofLaboronDecember13,2016.TheCompanyintendsto
defenditselfvigorously.
During2010,wewerenotifiedbytheSTA(inthiscase,bytheRegionalInspectionOfficeoftheSpecialMadridTaxUnit)thatan
auditofsomeofourSpanishsubsidiarieswasbeinginitiatedfor2006and2007.OnJune29,2012,theSTAissuedafinalassessmentto
ICE,ourSpanishholdingcompany,forapproximatelyEUR11.1million($12.4millionatSeptember30,2016),includinginterest,for
thosetwoyearsbasedonitsrejectionofthetaxdeductibilityoffinancialexpensesrelatedtocertainintercompanyacquisitionsandthe
applicationoftheSpanishETVEregime.OnJuly25,2012wefiledaclaimwiththeRegionalEconomicAdministrativeCourt
challengingthisassessmentand,inthesamemonth,weissuedacashcollateralizedletterofcreditfortheassessmentamount,inorderto
suspendthepaymentofthetaxdue.Further,inJuly2013,wewerenotifiedbytheSTA(inthiscase,bytheCentralInspectionOfficefor
LargeTaxpayers)thatanauditofICEwasalsobeinginitiatedfor2008through2010.OnOctober19,2015,theSTAissuedafinal
assessmenttoICEforapproximatelyEUR17.2million($19.3millionatSeptember30,2016),includinginterest,forthosethreeyears.We
haveappealedthisassessmentand,inordertosuspendthepaymentofthetaxassessmentuntilthecourtdecision,weissuedacash
collateralizedletterofcreditfortheassessmentamountplusinterestandsurcharges.Webelievetheassessmentsinthiscasearewithout
meritandintendtodefendvigorouslyagainstthem.Duringthesecondquarterof2016,wewerenotifiedbytheSTAthattaxauditsofthe
Spanishsubsidiarieswerealsobeinginitiatedfor2011and2012noassessmentshaveyetbeenissuedfortheseyears.
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INDUSTRYREGULATION
BrazilianRegulation
TheBrazilianeducationalsystemisorganizedaccordingtoasystemofcooperationamongfederal,stateandlocalgovernments.
Highereducation(i.e.,undergraduateandgraduateleveleducationprovidedbypublicandprivatehighereducationinstitutions("HEI"))
isregulatedprimarilyatthefederallevel,particularlyintermsofpublicpolicygoals,accreditationandacademicoversighthowever,the
stateandmunicipalgovernmentsarealsoinvolved,principallyinrelationtotaxation,realestateandoperationalpermittingissues.
Withrespecttothefederalrole,TheNationalEducationalBasisandGuidelinesLaw("LDB"),providesthegeneralframeworkforthe
provisionofeducationalservicesinBrazilandestablishesthedutyofthefederalgovernmentto:
coordinatethenationaleducationalpolicy
definetheNationalEducationPlan,incoordinationwiththestates,theFederalDistrictofBrasiliaandmunicipalities
providetechnicalandfinancialassistancetothestates,theFederalDistrictofBrasiliaandmunicipalities
establish,incollaborationwiththestates,theFederalDistrictofBrasiliaandmunicipalities,skillsandguidelinesforearly
childhoodeducation,elementaryandsecondaryeducationthatwillguidethecurriculumandtheirminimumsyllabus,
ensuringtheregularbasiceducation
ensurenationalprocessofevaluationofhighereducationinstitutions,withthecooperationofevaluationagenciesthat
haveresponsibilityforthislevelofeducation
createanevaluationprocessfortheacademicperformanceofelementary,secondaryandhighereducationincollaboration
witheducationalinstitutionsinordertoimprovethequalityofeducationand
issuerulesandregulationsregardinghighereducation.
TheresponsibilityoftheFederalGovernmentinregulating,monitoringandevaluatinghighereducationinstitutionsand
undergraduateprogramsisexercisedbyMEC,alongwithanumberofotherfederalagenciesandofficesthatarerelatedtoMEC.
MEC
MECisthehighestauthorityofthehighereducationsysteminBrazilandhasthepowerto:
confirmthedecisionsoftheNationalBoardofEducation("CNE")regardingtheaccreditationandreaccreditationof
institutionsofhighereducation
confirmthesystemsandevaluationcriteriaadoptedbytheNationalInstituteofEducationalStudiesAnsioTeixeira
("INEP")
confirmopinionsandregulatoryproposalsissuedbytheCNE
issueimplementingrules,(regulations,notices,andtechnicaladvisoriesgoverningtheconductofhighereducation)and
regulateandmonitorthesystemofhighereducation.
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CNENationalBoardofEducation
CNEisaconsultativeadvisoryanddeliberativebodyofMEC.ItconsistsoftheBoardofBasicEducationandtheBoardofHigher
Education,eachcomposedof12membersappointedbythePresidentofBrazil.TheBoardofHigherEducationhasthepowerto:
supportthedevelopmentandmonitortheimplementationoftheNationalEducationPlan
analyzeandissueopinionsontheresultsoftheevaluationproceduresofhighereducation
offersuggestionsfordraftingtheNationalEducationPlanandtomonitortheirimplementation
decideonthecurriculumguidelinesproposedbytheMEC,forundergraduatecourses
deliberateonthereportssubmittedbyMEContherecognitionofcoursesandqualificationsofferedbyhighereducation
institutions,aswellasonpriorauthorizationfromthoseofferedbynonuniversityinstitutions
approvetheauthorization,accreditationandperiodicreaccreditationofhighereducationinstitutions,basedonreportsand
assessmentsprovidedbyMEC
approvethestatutesofuniversitiesandtheregimentoftheotherhighereducationinstitutionsthatarepartoftheFederal
educationalsystem
deliberateonthereportsforperiodicrecognitionofmaster'sanddoctoralprograms,preparedbytheMEC,basedonthe
evaluationoftheprograms
analyzemattersrelatingtotheimplementationoflegislationregardinghighereducationand
adviseMECinhighereducationrelatedmatters.
INEPNationalInstituteofEducationalStudiesAnsioTeixeira
INEPisafederalagencylinkedtoMECthatistheprimarystatisticalandinformationgatheringbodyfortheentireBrazilian
educationsystem.TheperformancedataitcollectsandpublishesisusedbyMEC,thelegislatureandtherestoftheexecutivebranch,as
wellasthepublic,todebateandmakepolicyandprogrammaticdecisionsabouteducation.INEPhasthepowerto:
carryoutvisitstoinstitutionsofhighereducationforonsiteevaluationsintheprocessofaccreditationandreaccreditation
ofinstitutionsandintheauthorization,recognition,accreditationandrenewalofrecognitionprocessesofundergraduate
andsequentialprograms
conductresearchandanalysisofdatarelatedtoeducationinBraziland
implementtheSINAES.
CONAESNationalCommissiononHigherEducationEvaluation
CONAESisacommitteeunderMECsupervisioncomposedof13members.CONAEShasthepowerto:
coordinateandmonitorSINAES
establishguidelinestobefollowedbyINEPinthedevelopmentofprogrammaticevaluationtools
approvetheevaluationtoolsandsubmitthemforapprovalbytheMinisterofEducationand
submitthelistofprogramstobeevaluatedbytheNationalExaminationofStudentPerformance("ENADE")examination,
totheMinisterofEducation.
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SERESHigherEducationRegulationandSupervisionSecretariat
In2011,SERES,whichoperatesasanarmofMEC,becamethespecificagencydirectlyresponsibleforregulationandsupervisionof
publicandprivateHEIs,aswellasundergraduatecoursesandlatosensupostgraduateprograms,bothinpersonanddistancelearning
modalities.Itsmissionistoelevatethequalitylevelofallhighereducationthroughtheestablishmentofguidelinesfortheexpansionof
HEIsandtheircourses,inaccordancewithnationalcurriculumguidelinesandproprietaryqualityparameters,andinclude:
toplanandcoordinatethepolicymakingprocessfortheregulationandsupervisionofhighereducation
toaccreditundergraduate(andsequential)courses,boththroughinpersonanddistancelearning
tooverseeHEIsandcourses,inordertofulfilltheeducationallegislationandtoinduceimprovementsinthequalityof
highereducationstandards,applyingthepenaltiesprovidedforinlegislation
toestablishguidelinesforthepreparationofassessmentinstrumentsforandhighereducationcourses
tomanagethepublicsystemofregistrationanddatabaseofHEIsandhighereducationcoursesand
toproposethedesignofactionsandupdatingofreferenceandcurriculumguidelinesforundergraduatecourses,aswellas
benchmarksforqualitydistanceeducation,consideringcurricularguidelinesandvariousformsoftechnology.
AccordingtotheLDB,highereducationcanbeofferedbypublicorprivatehighereducationinstitutions.Aprivateinstitutionof
highereducationshallbecontrolled,managedandmaintainedbyanindividualperson(s)orlegalentity,ineithercasereferredtoasthe
"mantenedora."ThemantenedoraisresponsibleforobtainingresourcestomeettheneedsofthedulyauthorizedHEI,whichinregulatory
termsisreferredtoasthe"mantida."Amantenedoramaybeauthorizedtooperatemorethanonemantida.Inanycase,themantenedorais
legallyandfinanciallyresponsibleforallofitsmantidas.EachofourHEIsinBrazilismaintainedbyaLaureatecontrolledmantenedora.
Privateinstitutionsofhighereducationmaybe:
privateinstitutionsofhighereducationwithprofitpurposescreatedandmaintainedbyoneormoreindividualsorprivate
legalentities
communityinstitutions,foundedbygroupsofindividualsoroneormorelegalentities,includingcooperatives,teachers
andstudentsthatincludecommunityrepresentativesinitssupportingentity
religiousinstitutions,institutedbyindividualsorgroupsforoneormorelegalentitiesthatmeetspecificreligiousand
ideologicalorientationandthatincludecommunityrepresentativesinitssupportingentityor
nonprofitprivateinstitutions,charitableornotcharitable,whicharealsosometimesreferredtoasphilanthropicor
nonphilanthropic.
Accordingtoorganizationalandacademicprerogatives,institutionsofundergraduatelearningcanbe:
Colleges(faculdades):Collegesareinstitutionsofpublicorprivateeducationofferingdegreeprogramsinmorethanone
areaofknowledgeandthataresupportedbyasinglesupporting
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entityandhavespecificadministrationandmanagement.Collegesmayofferprogramsatthefollowinglevels:traditional
undergraduateprograms,technologicalundergraduateprograms,specializationandgraduateprograms(master'sandPh.D.
degrees).Collegesdonothaveminimumrequirementsforthequalificationsofprofessorsandtheirlaborpractices,and
cannotestablishnewcampusesorcreateprogramsandnewlocationswithoutthepriorpermissionofMEC.
UniversityCenters(centrouniversitrios):Universitycentersarepublicorprivateeducationalinstitutionsthatoffera
varietyofprogramsinhighereducation,includingundergraduateprograms,extensioncoursesandlatosensugraduate
programsmaster'sandPh.D.degreestheymustalsoprovidelearningopportunitiesandcareerdevelopmentfortheir
professors.Atleastonethirdofthefacultyofauniversitycentermustbecomposedofpersonswithmastersordoctorate
degrees.Inaddition,atleastonefifthofitsprofessorsmustbecomposedofprofessorswhoworkfulltime.University
centershavetheautonomytocreate,organizeandextinguishindividualcoursesanddegreeprograms,aswellasrelocateor
expandlocationsintheirexistingprogramsinthemunicipalitywheretheuniversitycenter'sheadquartersislocated,
withoutpriorpermissionofMEC.Auniversitycentercannotopencampusesoutsidethemunicipalitywhereitsseatis
located.
Universities(universidades):Universitiesarepublicorprivateinstitutionsofhighereducationthatofferseveraldegree
programs,extensionactivitiesanddevelopmentofinstitutionalresearch.Liketheuniversitycenters,atleastonethirdof
thefacultyofauniversitymustbecomposedofpersonswithmastersordoctoratedegrees.Inaddition,atleastonethirdofa
university'sfacultymustbecomposedofprofessorswhoworkfulltime.Similartouniversitycenters,universitieshave
autonomytocreate,organizeandextinguishindividualcoursesanddegreeprograms,aswellastorelocateorexpand
locationsintheirexistingprogramsinthemunicipalitywheretheuniversity'sheadquartersislocated,withoutprior
permissionofMEC.Additionally,universitieshavetheability,uponpriorauthorizationbyMEC,toapplyforaccreditation
ofnewcampusesandcoursesoutsidethemunicipalitywheretheuniversity'sseatislocated,providedthattheyarewithin
thesamestateastheseat.
AmongtheHEIintheLaureateInternationalUniversitiesnetwork,therearethreefaculdades(FaculdadeInternacionaldaParaba,
locatedinJooPessoa,PBFaculdadesPortoAlegrense,locatedinPortoAlegre,RSandFaculdadedosGuararapesdeRecife,locatedin
Recife,PE),sixuniversitycenters(FaculdadedeDesenvolvimentodoRioGrandedoSul,locatedinPortoAlegre,RSFaculdadedos
Guararapes,locatedinJaboatodosGuararapes,PEFMUEducationGroup,locatedinSoPaulo,SPCentroUniversitrioRitterdosReis,
locatedinPortoAlegre,RSCentroUniversitriodoNorte,locatedinManaus,AMandInstitutoBrasileirodeMedicinadeReabilitao
IBMR,locatedinRiodeJaneiro,RJ),aswellasthreeuniversities(UniversidadePotiguar,locatedinNatal,RNUNIFACS
UniversidadeSalvador,locatedinSalvador,BAandUniversidadeAnhembiMorumbi,locatedinSoPaulo,SP).Inaddition,Business
SchoolSoPaulo,whichisaprofessionaldegreegrantinginstitution,isownedandoperatedbyUniversidadeAnhembiMorumbi,and
CEDEPEBusinessSchool,whichisaprofessionaldegreegrantinginstitution,isoperatedasadivisionofFaculdadedosGuararapesde
Recife.Asnotedbelow,eachformofHEIisentitledtoadifferentlevelofautonomywithintheregulatoryframework.Inturn,wefactorthe
respectivelevelsofautonomyintotheoperationalstrategyforeachHEI,astherequirementofpriororpostfactoMECapprovalcandelay
ornullifyspecificnewcampusexpansionprojects,newcourseofferings,andincreasesinthenumberofauthorizedseatspercourse.
Legislationprovidesforspecificlevelsofdidactic,scientificandadministrativeautonomytouniversities,universitycentersand
collegesindifferingdegreeswiththeaimoflimitingoutsideinfluencebyotherinstitutionsorpersonsoutsideoftheHEI'sinternal
governancestructure.
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LDBprovidesthatthefollowingpowersareguaranteedtouniversitiesanduniversitycentersintheexerciseoftheirautonomy:
creation,organization,andextinguishmentofdegreeprogramsintheirfacilities,subjecttoapplicableregulations
establishmentofthecurriculumoftheircoursesandprograms,subjecttoapplicablegeneralguidelines
establishmentofplans,programsandprojectsrelatedtoscientificresearch,artisticproductionandextracurricularactivities
establishmentofthenumberofavailableseatsexceptinrespectofprogramsinlaw,medicine,dentistryandpsychology,
wherethetotalnumberofavailableseatsintheentiresystemiscontrolledbyMECinconjunctionwiththeinputofthe
relevantprofessionalassociations
preparationandamendmentoftheirbylawsinaccordancewiththegeneralapplicablestandardsand
therighttograntdegrees,diplomasandotherqualifications.
LDBprovidesthatthefollowingpowersareguaranteedtocollegesintheexerciseoftheirautonomy:
establishmentofthecurriculumoftheircoursesandprograms,subjecttoapplicablegeneralguidelines
establishmentofplans,programsandprojectsrelatedtoscientificresearch,artisticproductionandextracurricularactivities
preparationandamendmentoftheirbylawsinaccordancewiththegeneralapplicablestandardsand
therighttograntdegrees,diplomasandotherqualifications.
Althoughcollegeshaveadministrativeautonomy,theydonotenjoyacademicautonomyand,therefore,aresubjecttoMEC'sprior
authorizationtocreatenewprogramsanddegreeprograms.
Accreditation.Thefirstaccreditationofaninstitutionofhighereducationisnecessarilyasacollege.Theaccreditationasa
universityoruniversitycenterisonlygrantedaftertheinstitutionhasoperatedasacollegeforatleastsixyearsandhasdemonstratedthat
ithasmetsatisfactoryqualitystandards,includingpositiveevaluationbytheSINAES,aswellasmetlegalrequirementsapplicabletoeach
typeofinstitutionofundergraduatelearning,includingminimumdegreeattainmentandtermsoffacultyemployment.
LDBestablishesthathighereducationshallincludethefollowingprograms:
continuingeducationprograms(cursossequnciais),opentoapplicantswhomeettherequirementsestablishedbythe
highereducationalinstitutions,providedtheyhavecompletedhighschoolorequivalent
undergraduateprograms,includingtraditionalandtechnologicalundergraduateprograms,thatareopentoapplicantswho
havecompletedsecondaryeducationortheequivalentandhavepassedtheselectionprocessoruniversityentrance
examination
graduateprograms,includingmaster'sdegreesandPh.D.s,specializationprograms,advancedtrainingcoursesandothers,
opentoapplicantswhohaveanundergraduatedegreeandmeettherequirementssetbytheeducationalinstitutionsand
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extensionprogramswithasocialcharacterthatgrantcertificatestostudents,opentoapplicantswhomeettherequirements
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extensionprogramswithasocialcharacterthatgrantcertificatestostudents,opentoapplicantswhomeettherequirements
established,ineachcase,bytheeducationalinstitutions.
Followingaccreditation,collegesmustobtainMECpermissiontooffernewundergraduatedegreeprograms.Asaconsequenceof
theirautonomy,universitiesanduniversitycentersdonotrequireMECauthorizationtocreateprogramsinthecitywheretheuniversity's
oruniversitycenter'sseatislocated.TheyneedonlyinformMECabouttheprogramstheyofferforregistration,evaluationandsubsequent
recognition.However,thecreationofgraduateprogramsinlaw,medicine,dentistryandpsychology,whetherbycolleges,universitiesor
universitycenters,aresubjecttotheopinionoftheproperprofessionalassociations.Theseassociationsarealsoconsultedinthe
reaccreditationprocess.
Additionally,andasaconsequenceoftheirautonomy,universitiesalsocanapplyforaccreditationofcampusesandtheauthorization
andrecognitionofprogramsoutsidethemunicipalitywheretheuniversity'sseatislocated.Thecampusesandprogramsnotlocatedinthe
cityoftheuniversity'sseatarenotentitledtotheautonomyofthemainuniversityandmustbecontrolledandsupervisedbythe
university.Effectively,thesecampusesaretreatedlikecollegesforeducationalregulatorypurposes.WithinthenetworkinBrazil,theUnP
MossorCampus,theUNIFACSFeiradeSantanaCampusandtheUniRitterCanoasCampusfallintothiscategory.
Onceauniversityhasobtainedtheauthorizationtoprovideaparticularprogram,theHEI,includinguniversitycentersand
universities,alsomustobtaintherecognitionofsuchcourse,asaconditionfornationalvalidationofthediploma.Theapplicationfor
recognitionmustbemadeatleastoneyearafterthestartoftheprogramandnolaterthanhalfofthetimerequiredforitscompletion.The
authorizationandtherecognitionofprogramsandaccreditationofinstitutionsofhighereducationmustberenewedperiodicallyin
accordancewiththeregularlyapplicableMECevaluationprocess.
Evaluation.SINAESwasestablishedtoevaluateHEIasinstitutionsofhighereducation,traditionaldegreeandtechnologydegree
programsandstudentacademicperformance.Themainobjectiveofthisevaluationsystemistoimprovethequalityofhighereducationin
Brazil.Inpractice,theCONAESconductsthemonitoringandcoordinationeffortsofSINAES.Theresultsoftheinstitutionalandcourse
evaluationsarerepresentedonascaleoffivelevelsandareconsideredintheprocessofaccreditation,recognitionandrenewalof
accreditationofprogramsandaccreditationandreaccreditationofinstitutions.
Inthecaseofunsatisfactoryresults,theHEIwillberequiredtoenterintoanagreementwithMECthatestablishesaremediation
programthatincludesamongotherrequirements:(i)diagnosisoftheunsatisfactoryconditions(ii)developmentandimplementationof
measurestobetakentoremedytheunsatisfactoryconditionsand(iii)establishmentofdeadlinesandgoalsforremediation.
Failuretocomply,inwholeorinpart,withtheconditionsprovidedinthetermofcommitmentmayresultinoneormorepenalties
imposedbyMEC,includingtemporarysuspensionoftheopeningoftheselectiveprocessforundergraduateprogramsandcancellationof
accreditationorreaccreditationoftheinstitutionandtheauthorizationforoperationofitsprograms.
ExternalevaluationsofinstitutionsofhighereducationarecarriedoutbytheINEPintwoinstances,first,whenaninstitutionapplies
foritsfirstaccreditationandsecond,bytheendofeachevaluationcycleofSINAES.Institutionsofhighereducationareevaluatedbased
onthefollowingcriteria,amongothers:(i)institutionaldevelopmentplan(ii)socialandinstitutionalresponsibility(iii)infrastructure
andfinancialconditionand(iv)pedagogicalmonitoringofstudentacademicperformance.
TheevaluationofundergraduateprogramsismadeatthetimeofthefirstaccreditationbyMEC,andconsistsoftheanalysisof
academicmethodology,faculty,studentandtechnicaladministrativebodiesandtheinfrastructureoftheinstitutionandisperiodically
updatedattheendofeachevaluationcycleofSINAES.
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TheevaluationofgraduateprogramsismadebytheCoordinatingAgencyfortheImprovementofHighlyEducatedPersons
("CAPES"),whichisresponsibleforestablishingthequalitystandardrequiredofmastersanddoctoralprogramsalongwiththe
identificationandevaluationofthecoursesthatmeetthisstandard.ItsrecommendationsaresubjecttotheapprovaloftheCNE.Programs
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identificationandevaluationofthecoursesthatmeetthisstandard.ItsrecommendationsaresubjecttotheapprovaloftheCNE.Programs
areevaluatedaccordingtotherequirementsestablishedforeachspecificprogram.CAPESupdatesitsevaluationofgraduateprograms
everythreeyears,whichisthevalidityperiodofanauthorization.
TheevaluationofstudentacademicperformanceisconductedbyINEP,whichrequireseachstudenttositfortheENADEinorderto
verifytheknowledgeandtechnicalskillofthestudentbody.EachENADEtestisdevelopedinaccordancewiththecontentandspecific
curriculumofeacheducationalprogram.StudentsenrolledinundergraduateprogramstaketheENADEeverythreeyears.Inthissystem,
studentsareevaluatedattheendofthelastyearofeachprogram.
Theoverallgradeforeachclassofstudentsiscalculatedbasedontheweightedarithmeticaverageofallstudentsinaspecificprogram
selectedfortheexam.INEPevaluatesthestandarddeviationofthestudent'sevolutionineachprograminordertocompareitwith
nationalstandards.
Transferofcontrolofmantenedoras.ThechangeofcontrolofmantenedorasdoesnotrequirepriorapprovalfromMEC.Achange
ofcontrolneedonlybereportedtoMECafterthefact.However,thetransferofanHEI(mantida)toanothermantenedoramustbe
previouslyapprovedbyMEC.Thenewmantenedoramustmeetthenecessaryrequirementsforaccreditationofaninstitutionofhigher
educationandprovideallappropriatedocumentationprovingeconomic,financialandacademiccapacitytodoso.Laureate'susual
methodfortheacquisitionofcontrolistoacquireaninterestinapreexistingmantenedora.Theremaybecircumstancesinthefuturethat
warrantadeparturefromthiscourseofconduct,inwhichcaseLaureatewillfollowtheprescribedMECrequirements.
AlthoughchangesofcontrolexercisedbyLaureatedonotordinarilyneedMECpriorapprovalorreview,duetothelevelofLaureate's
consolidatedgrossrevenuesthroughoutBrazil,currentBrazilianlawrequiresthateverycontroltransaction,withlimitedexceptions,that
LaureateentersintomustbesubmittedtotheBrazilianantitrustauthority,theConselhoAdministrativodeDefesaEconomico(the
"CADE"),forapproval.Suchrequestforapprovalmustbegrantedpriortothedefinitiveclosingofsuchtransaction.CADEhasthepower
torejectand/oralteranytransactionoranypartofatransactionthatitdeemstoundulyrestrictcompetition.
Incentiveprogram.PROUNIisafederalprogramoftaxbenefitsdesignedtoincreasehighereducationparticipationratesbymaking
collegemoreaffordable.PROUNIprovidesprivateHEIwithanexemptionfromcertainfederaltaxesinexchangeforgrantingpartialand
fullscholarshipstolowincomestudentsenrolledintraditionalandtechnologyundergraduateprograms.AllofourHEIadhereto
PROUNI.
HEImayjoinPROUNIbysigningatermofmembershipvalidfortenyearsandrenewableforthesameperiod.Thistermof
membershipshallincludethenumberofscholarshipstobeofferedineachprogram,unitandclass,andapercentageofscholarshipsfor
degreeprogramstobegiventoindigenousandAfroBrazilians.TojoinPROUNI,aneducationalinstitutionmustmaintainacertain
relationshipbetweenthenumberofscholarshipsgrantedtoregularpayingstudents.Therelationshipbetweenthenumberofscholarships
andregularpayingstudentsistestedannually.Ifthisrelationshipisnotobservedduringagivenacademicyearduetothedepartureof
students,theinstitutionmustadjustthenumberofscholarshipsinaproportionalmannerthefollowingacademicyear.
AnHEIthathasjoinedPROUNIandremainsingoodstandingisexempted,inwholeorinpart,fromthefollowingtaxesduringthe
periodinwhichthetermofmembershipisineffect:
IRPJ(incometax)andCSLL(socialcontribution),withrespecttotheportionofnetincomeinproportiontorevenuesfrom
traditionalandtechnologyundergraduateprogramsand
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Cofins(ContributionfortheFinancingofSocialSecurity)andPIS(ProgramofSocialIntegration),concerningrevenues
fromtraditionalandtechnologyundergraduateprograms.
AnumberofmunicipalandstategovernmentshavesoughttoreplicatePROUNIbycreatingtheirownprogramsthat,forexample,
offertaxincentivesthroughareductionin,orcreditsagainst,theISS(MunicipalServicesTax)inexchangeforscholarshipstotargeted
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offertaxincentivesthroughareductionin,orcreditsagainst,theISS(MunicipalServicesTax)inexchangeforscholarshipstotargeted
socialgroupsorprofessions.LaureateownsandoperatesHEIinseveraljurisdictionswheresuchlocalincentiveprogramsareinforce.
Studentfinancingprogram.FIESisafederalprogramestablishedtoprovidefinancingtostudentsenrolledincoursesinprivate
institutionsofhighereducationthathavemaintainedaminimumsatisfactoryevaluationaccordingtoSINAESandreceiveagradeof3or
higheroutof5ontheENADE.Theprimaryfactorindeterminingwhetherastudentiseligibletoreceivefullorpartialfinancingishowhe
orshescoresontheprogram'smeanstestingofhouseholdincomerelativetothecostoftuition.
Underthisbasicstructure,FIEStargetsbothofthegovernment'seducationpolicygoals:increasedaccessandimprovedacademic
qualityoutcomes.TheHEIreceivesthebenefitoftheFIESprogramthroughitsparticipationintheintermediationofCFTE(Certificado
FinanceirodoTesouro)bonds,whicharepublicbondsissuedtotheHEIbythefederalgovernmentthattheHEImayusetopaythe
nationalsocialsecuritytaximposedbytheINSS(NationalSocialSecurityInstitute)andcertainotherfederaltaxobligations.IftheHEIis
currentwithitstaxes(i.e.,itpossessesataxclearancecertificateandisnototherwiseinvolvedinanytaxrelateddisputeswiththefederal
governmentthatarenotbeingdefendedincompliancewithapplicablesecurity/bondrequirements)thentheHEIalsohastheoptionto
sellthebondsforcashinapublicauctionconductedbyoneofthegovernmentsponsoredbanks.
Althoughthefederalgovernmentisthedirectcreditortothestudents,federallawstipulatesthattheHEIbearaportionofthecredit
risk,whichlevelofriskhasbeensubjecttochangeinrecentyears.TherearetwodifferenttypesofguaranteesinFIEScontracts:
contractswithguarantor(s),whenthestudentnamessomeone(oragroupofpeople)astheunderwriter(s)ofhisorherloan.
Inthiscase,theHEIisresponsibleforupto15%(forinstitutionswithnotaxdisputes)andupto30%(iftheinstitutionhas
oneormoreopentaxdisputesthatarenotbeingdefendedincompliancewiththeapplicablesecurity/bondrequirements)of
allrelateddelinquencies.Inthepast,toeffectuatethiscontributionthefederalgovernmentwithheldbetween1%and3%of
thevalueoftheHEI'smonthlyCFTEreceiptsduringthecourseofthestudent'senrollment,butthishasbeenreplacedby
theFGEDUCguaranteedescribedbelow.Incasethereisnodefault,orthedefaultissmallerthantheamountblocked,the
federalgovernmentwillreleasethewithheldCFTEamounts.Thegovernmenthasyettoestablishguidelinesdetermining
howtheHEIshallremittheunpaidbalanceintheeventthatthedefaultamountishigherthantheblockedamountsand
contractswithaguaranteebyFGEDUC,apublicfundcreatedforthispurpose,astheunderwriterofhisorherloan.Since
February2014,FGEDUChasbecomemandatoryforallnewFIESstudents.Inthiscasethefederalgovernmentrequiresa
contributionof5.63%ofthetuitionvaluefromtheHEI.TheHEIcontributes5.63%oftheFIESstudent'sfulltuitiontothe
federalfund.FGEDUCguarantees90%oftheloanamount,leavingtheHEIresponsiblefor15%oftheother10%incaseof
default.
SinceFebruary2014,allnewstudentswhoparticipateinFIESmustalsoenrollinFGEDUC.FGEDUCallowsparticipating
educationalinstitutionstoinsurethemselvesfor90%(or13.5%of15%)oftheirlossesrelatedtostudentdefaultsundertheFIESprogram.
Thecostoftheprogramis6.25%oftheamountcovered,whichrepresents5.63%ofastudent'sfulltuition.SimilartoFIES,the
administratorwithholds5.63%ofastudent'stuitiontofundtheguaranteebyFGEDUC.
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AsofDecember31,2015,approximately21%ofourstudentsinBrazilparticipatedinFIES,representingapproximately26%ofour
Brazilrevenues.
InDecember2014,theMECalongwithFNDE,theagencythatdirectlyadministersFIES,announcedseveralsignificantrulechanges
totheFIESprogrambeginningin2015.Thesechangesraisetheeligibilityrequirements,reducetheannualbudgetoftheprogramand
delaypaymentstopostsecondaryinstitutionswithmorethan20,000FIESstudentsthatwouldotherwisehavebeenduein2015.Thefirst
changeimplementsaminimumscoreonthehighschoolachievementexaminordertoenrollintheprogram.Thesecondchangealtersthe
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changeimplementsaminimumscoreonthehighschoolachievementexaminordertoenrollintheprogram.Thesecondchangealtersthe
scheduleforthepaymentandrepurchaseofcreditsaswellaslimitstheopportunitiesforpostsecondaryinstitutionstosellanyunused
creditssuchthatthereisasignificantdelaybetweenthetimethepostsecondaryinstitutionprovidestheeducationalservicestothe
studentsandthetimeitreceivespaymentfromthegovernmentfor2015.Inadditiontotheserulechanges,FNDEimplementedapolicyfor
currentstudents'loanrenewalsfor2015,whichprovidesthatreturningstudentsmaynotfinanceanamountthatincreasesbymorethan
6.41%,whichwaslaterincreasedto8.5%,fromtheamountfinancedintheprevioussemester,regardlessofanyincreasesintuitionorin
thenumberofcoursesinwhichthestudentisenrolled,apolicythatwebelieveviolatestheapplicablelaw.For2016,MECannounced
thattherewillbenolimitationtothetuitionincrease.Moreover,inthefirstandsecondintakesof2015,theonlineenrollmentandre
enrollmentsystemthatallpostsecondaryinstitutionsandstudentsmustusetoaccesstheprogramhasexperiencednumeroustechnical
andprogrammingfaultsthathavealsointerferedwiththeenrollmentandreenrollmentprocess.Numerouschallengestothesechanges
andrequestsforjudicialrelieffromthesystem'sfaultshavebeenfiledintheBraziliancourts,mostofwhicharepending.The2016
enrollmentandreenrollmentschedulehasbeenreleasedand,sofar,thesystemhasnotpresentedanymaterialissues.
InOctober2015,FNDEinitiatednegotiationswithABRAESaimingatsettlingtheFIESpaymentsthatweredelayedin2015.The
proposalfromMEC,whichwasacceptedbyABRAES,wastodividethetotalamountdueintothreeannualinstallmentstobepaidone
fourthin2016,onefourthin2017andhalfin2018.ThepartiesalsoagreedthattheyearlyinstallmentswillbepaidinJuneofeachyear,
andtheamountswillbeadjustedtoreflectaninflationindexfromthedateoftherespectivematurityuntiltheeffectivepayment.FNDE
alsoagreednottotakeanydiscriminatorymeasuresinthefuturerelatedtothepaymentduetothepostsecondaryinstitutions,andnotto
imposeanylimitationontheissuanceofcertificatesandrepurchaseofcreditsduetothepostsecondaryinstitutions,whichbasically
meansthatallcertificateswillbeissuedandrepurchasedintheirrespectivefiscalyears,exceptforthoseintendedtobeissuedand
repurchasedinDecember,whichwillbepaidinJanuaryofthefollowingyear.Thepartiesexecutedthesettlementagreementon
January28,2016anditwasapprovedbytheofficeoftheAttorneyGeneralofBrazilonFebruary3,2016.TheFederalCourtofBrasilia
ratifiedthesettlementagreementonMarch17,2016.OurpostsecondaryinstitutionsinBrazilareassociatedwithABRAESandsigned
thesettlementagreementaswelltherefore,itwillapplytous.
OnDecember11,2015,MECissuednewFIESregulations("NormativeOrdinanceNo.13"),whichsupersedeinallsignificantaspects
therulespreviouslyinforce.NormativeOrdinanceNo.13definedandclarifiedsomerulesforstudenteligibilityandclassification,higher
educationinstitutionparticipationandselectionofthevacanciesthatwillbeofferedtothestudentsinthefirstintakeof2016.
wasraisedbytheMECto3.0timesonJune17,2016)andto
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havetakentheNationalHighSchoolProficiencyExamatleastoncesince2010,withaminimumscoreof450points,andtohaveascore
greaterthanzerointhetestofwriting.
RegardingtheparticipationofpostsecondaryinstitutionsinFIES,institutionsstillmustsignaparticipationagreementthatcontains
theirproposalofthenumberofvacanciesofferedandthefollowinginformationpershift(morning,evening)andcampuslocation:
(i)tuitiongrossamountfortheentirecourse,includingallsemesters(ii)totaltuitiongrossamountpercourseforthefirstsemester,which
mustreflectatleastafivepercentdiscounttothecourselistpriceand(iii)thenumberofvacanciesthatwillbeofferedthroughtheFIES
selectionprocess.Also,onlycourseswithscoresof3,4or5intheSINAESevaluationareeligibletoreceiveFIESstudents.
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InAugust2016,theMECissuedadditionalFIESregulations("NormativeOrdinanceNo.17")expandingtheguidelinespreviously
definedinNormativeOrdinanceNo.13.Amongotherthings,NormativeOrdinanceNo.17describesingreaterdetailhowtocalculate
remainingvacancies,setsforthproceduresanddeadlinesforthecompletionofthefillingoftheremainingvacancies,andprovidesfor
dealingwithexceptionalsituationswhereproceduralerrorsorotherobstacleshavepreventedstudentsfromaccessingremainingvacancies
inatimelymanner.
Anotherchangeinthenewregulationwasthenumber(orpercentage)ofvacanciesthatcanbeofferedbythepostsecondary
institutionsinrelationtothescoreobtainedinSINAESevaluation,whichwasreduced:
toupto30%ofthenumberofvacanciesincourseswithascoreof3(fromupto50%)and
toupto25%ofthenumberofvacanciesincoursesthatareintheprocessofauthorizationbyMEC(fromupto50%).
ThecriteriafortheselectionofvacanciesbyMECtobeofferedtostudentswerealsomodifiedbyNormativeOrdinanceNo.13and
theregionalityprovisionsofthepriorNormativeOrdinances(i.e.,vacanciesofferedintheNortheast,NorthandCentralWestregions
wouldhavehadpriorityoverthoseofferedintheSouthandSoutheastregions)wereexcludedfromtheregulation.NormativeOrdinance
No.13replacestheregionalitycriterionwithanewcriterionof"socialrelevancedeterminedbymicroregions,"whichmeansthatforeach
microregiontheywilltakeintoconsiderationthedemandforhighereducationforeducationalfinancing(calculatedbyFIES)andthe
HumanDevelopmentIndexofeachmicroregion.Alloftheothercriteriaprovidedinthepreviousregulationweremaintainedinthenew
one(i.e.,(i)FIESbudgetandtheavailabilityofresources,(ii)coursescoreunderSINAES'sevaluationand(iii)prioritycourses,asdefined
bythegovernment(pedagogy,engineeringandhealthsectorcourses)).NormativeOrdinanceNo.13alsocontainstwoannexes,which
addressingreatdetailtheselectionandtiebreakercriteriaforthevacancies,aswellastherulesforredistributionofremainingvacancies.
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Brazil'seconomycontinuestopresentchallengestogrowthandcreatepricingpressuresintheeducationsector.Ournewstudent
enrollmentinBrazilwasnegativelyaffectedbytheseconditionsaswellasthechangestotheFIESprogram.Ifeconomicconditions
continuetoweakenandtheBraziliangovernmentimplementsadditionalausteritymeasures,ourabilitytogrowourstudentenrollmentin
Brazilmaybefurthernegativelyaffected.TheBraziliangovernment'schangestotheFIESprogramresultedinasubstantialincreaseinthe
totalnumberofnewFIEScontractsinthatcountryin2014,anelectionyear,andthenareductioninthetotalnumberofnewFIES
contracts,fromover700,000in2014toapproximately300,000in2015.Asaresult,Laureate'snewenrollmentsofstudentsintheFIES
programalsodecreasedsimilarlyin2015however,thisdidnothaveamaterialimpactonour2015resultsofoperationssincetotal
enrollmentsforallstudentsincreasedin2015.AnypotentialimpactontotalenrollmentwouldnotoccuruntiltheFIESstudentsfromthe
expansionoftheprogramhavegraduated,andwoulddependontheBraziliangovernment'scommitmenttotheFIESprogram.Inaddition,
theBraziliangovernmentreducedthefrequencyofpaymentstoparticipatinginstitutionsduring2015.
Distanceeducation.DistanceEducation,orEducaoDistncia("EaD")inBrazil,isregulatedbytheLDB.ThelawdefinesEaDas 245/620
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Distanceeducation.DistanceEducation,orEducaoDistncia("EaD")inBrazil,isregulatedbytheLDB.ThelawdefinesEaDas
aneducationalmodalityinwhichthedidacticandpedagogicalmeasurementinteachingandlearningprocessesoccurwiththeuseof
media,informationandcommunicationtechnologies,withstudentsandteachersdevelopingeducationalactivitiesatdifferentplaces
and/ortimes.
EaDprogramscanbeofferedatdifferentlevelsandtypesofhighereducation,likeprofessionaleducation,includingtechnical,
mediumandtechnologicallevelofhighereducation,highereducation,coveringcontinuingeducationprograms,undergraduate,
specialization,mastersandPhD.EaDprogramsmayonlybeofferedbyHEIthatareregularlyaccreditedbytheMEC.Theaccreditation
requestandrespectiverenewalforEaDprogramsisseparatefromtheaccreditationprocessfortheinpersonprogramsdeliveredbytheHEI.
UniversitiesanduniversitycentersaccreditedtoofferEaDprogramsmaycreate,organizeandextinguishcoursesorhighereducation
programs,uponnoticetoMEC,andthecoursesorprogramscreatedcanonlybeofferedwithinthelimitsofthescopedefinedintheHEI's
accreditationact.Colleges(faculdades),mustrequestMECauthorizationtooffereachspecificEaDprogram.
Thelistofrequirementsforaccreditationinthefederaleducationsystemcomprehendsphysicalinfrastructure,academicfacilities,and
detailsthecharacteristicsandequipmentforthelibraryandlaboratoryoperations,alongwiththeaccessibilityplanandpriorityseating.
Onceissued,theEaDaccreditationlicenseissuedbyMECdefinesthescopeoftheHEI'sEaDoperationsinthecountry,andanyexpansion
beyondthelicensedareamayonlyoccurwithspecificMECpermission.TheHEIaccreditationfortheprovisionofEaDprogramsisvalid
fortheevaluationcycletermandisrenewable.
EaDprogramsmustbedesignedwiththesamedurationastheirrespectiveinpersoncourseprograms.Moreover,theEaDregulatory
schemerequiresthattheHEIperformsomeaspectsinpersonasfollows:(i)studentassessments(ii)compulsorytraineeprograms,when
providedforintherelevantlegislation(iii)dissertationdefenseforcoursecompletion,whenprovidedforintherelevantlegislationand
(iv)activitiesrelatedtoteachinglaboratories,whereapplicable.TheinpersoneventsmustbeperformedattheHEI'scampusorata
specific,brickandmortarlearningcenterdulyaccreditedforthispurpose,referredtoasa"polo."
ItisalsonoteworthythattheHEIofferingEaDprograms,particularlythepolos,aresubjecttoinspectionbytheMECatanytime.
ThoseinspectionsaimtodemonstratewhetherthoseHEIarecompliantwithlegalandregulatoryrequirements.Intheeventofany
irregularitynotcorrectedwithinthegivendeadlines,theHEImaybesubjecttocertainpenalties,includingdisqualification.
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EaDcertificatesordiplomasissuedbyaccreditedHEIhavenationalvaliditywiththesameforceandeffectasthosecertificatesor
diplomasissuedforthecompletionofinpersonprograms.
ChileanRegulation
ThePoliticalConstitutionoftheRepublicofChileguaranteeseveryindividual'srighttoeducationandsetsforththestate's
obligationtopromotethedevelopmentofeducationatalllevels.Italsoprovidesforlibertyinteaching,whichincludestherighttoopen,
organizeandmaintaineducationalinstitutions,providingthataConstitutionalOrganicLaw,whichrequiresasupermajorityvoteinthe
ChileanCongress,mustestablishtherequirementsfortheofficialrecognitionofeducationalinstitutions.
TheGeneralLawonEducationsetsforththerequirementsandtheprocedurefortheofficialrecognitionofeducationalinstitutions,
providingforaneducationalsystemthatismixedinnature,includingaformofeducationownedandmanagedbythestateanditsbodies
andanotheronethatisprivatelyprovided.TheprinciplesthatinspiretheChileaneducationalsystemincludethoseofuniversality,by
virtueofwhicheducationshouldbeaffordabletoallindividuals,qualityofeducation,andrespectforandpromotionoftheautonomyof
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virtueofwhicheducationshouldbeaffordabletoallindividuals,qualityofeducation,andrespectforandpromotionoftheautonomyof
theeducationalinstitutions,withintheframeworkofthelawsgoverningthem.
Inthecaseofhighereducation,thelawprovidesalicensingsystemfornewinstitutionsthat,oncecompleted,makesitpossiblefor
theseinstitutionstoachievefullautonomy.Thisautonomyconsistsofeveryhighereducationinstitution'srighttogovernitself,as
providedinitsbylaws,inallmattersregardingthefulfillmentofitspurpose,andencompassesacademic,economicandadministrative
autonomy.Academicautonomyincludesthehighereducationentities'powertodecidebythemselvesthemannerinwhichtheirteaching,
researchandextensionfunctionswillbefulfilledandtheestablishmentoftheircurriculaandprograms.Economicautonomymakesit
possibleforthoseestablishmentstomanagetheirresourcestofulfilltheirgoalspursuanttotheirbylawsandthelaws,whileadministrative
autonomyempowerseachhighereducationestablishmenttoorganizeitsoperationintheformdeemedmostappropriateinaccordance
withitsbylawsandtherelevantlaws.
TheMinistryofEducation("MINEDUC")isthedepartmentofstateinchargeofpromotingthedevelopmentofeducationatalllevels.
Itsfunctionsincludethoseofproposingandassessingthepoliciesandplansforeducationalandculturaldevelopment,assigningthe
necessaryresourcesfortheconductofeducationalandculturalextensionactivities,evaluatingthedevelopmentofeducation,discussing
andproposinggeneralnormsapplicabletothesectorandoverseeingtheirenforcement,grantingofficialrecognitiontoeducational
institutions,supervisingtheactivitiesofitsdependentunitsandfulfillingtheotherfunctionsassignedbythelaw.
TheMINEDUC'sHigherEducationDivisionistheunitinchargeofoverseeingcompliancewiththelegalandregulatorynormsthat
governhighereducation,ofprovidingadviceontheproposalofpoliciesatthislevelofeducationandofestablishinginstitutional
relationswiththeofficiallyrecognizedhighereducationinstitutions.
TheNationalEducationCouncil(ConsejoNacionaldeEducacin)isanautonomousentitycomposedoftenmemberswhomustbe
academicians,professorsorprofessionalswithanoutstandingcareerinteachingandeducationalmanagementandwhosefunctions,
regardinghighereducation,consistof:
managingthelicensegrantingsystemfornewinstitutions
decidingoninstitutionalprojectssubmittedbyinstitutionsforthepurposeoftheirofficialrecognition
verifyingthedevelopmentofinstitutionalprojectsoftheinstitutionsthathavebeenapproved
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establishingselectiveexaminationsystemsforthesubjectsorcoursesofstudydeliveredbythehighereducation
institutionssubjecttolicensegrantingprocessesinordertoevaluatecompliancewiththecurriculaandprogramsandthe
performanceofstudents
requestingfromtheMINEDUC,onasupportedbasis,therevocationofofficialrecognitionoftheuniversities,professional
institutesandtechnicaltrainingcentersunderthelicensegrantingprocess
managingtherevocationprocessofhighereducationinstitutions
assistingtheMINEDUCinthemanagementoftheshutdownprocessesofautonomoushighereducationinstitutions,
especiallyastotheprocessofawardingdiplomasanddegreestostudentswhoareinthecourseoftheireducationatthe
timeofshutdownand
servingasanappealsbodyfordecisionsoftheNationalAccreditationCommission.
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TheNationalAccreditationCommission(ComisinNacionaldeAcreditacin)isanautonomousentity,thefunctionofwhichisto
verifyandpromotethequalityoftheautonomousuniversities,professionalinstitutesandtechnicaltrainingcentersandofthecoursesof
studyandprogramsofferedbythem.Inparticular,theNationalAccreditationCommissionisrequiredtodeliveranopiniononthe
institutionalaccreditationofhighereducationinstitutions,authorizetheprivateagenciesinchargeofaccreditationofcoursesofstudy
andundergraduateprogramsandbachelorprogramsandspecialtyprogramsintheareaofhealth,andsupervisetheiroperation.
TheManagingCommissionoftheCreditSystemforHigherEducationStudies(ComisinAdministradoradelSistemadeCrditos
paraEstudiosSuperiores)isanentitywhosefunctionsincludedefiningandassessingpoliciesforthedevelopmentandimplementationof
financingarrangementsforhighereducationstudies,enteringintoandproposingmodificationstoanynecessaryagreementswithboth
domesticandforeignpublicandprivatefinancingentitiesandimplementingthosearrangements,anddefiningandevaluatingthepolicies
forhighereducationloansguaranteedbythestate.
Organizationandrecognitionofhighereducationinstitutions.Thelawrecognizesstateownedhighereducationinstitutions,
whichmayonlybecreatedbyalaw,andprivateinstitutionsthatmustbeorganizedinaccordancewithprovisionscontainedinthelaw.
TheChileanlegislationprovidesthatthestatewillofficiallyrecognizethefollowinghighereducationinstitutions:
Universities:Universitiesmaygrantprofessionalcertificatesandallkindsofacademicdegrees,includinggraduate
certificates,bachelor'sdegreesandPh.Ds.Universitiesaretheonlyinstitutionsentitledtograntprofessionalcertificates
withrespecttowhichthelawrequireshavingpreviouslyobtainedabachelor'sdegree.
ProfessionalInstitutes:Professionalinstitutesmayonlyconferprofessionalcertificatesofthetypethatdonotrequirea
bachelor'sdegree,andtechnicalcertificatesofasuperiorleveltothosestudentswhohavecompletedprogramsofatleast
1,600classhourswithoutreceivingabachelor'sdegree.
TechnicalTrainingCenters:Technicaltrainingcentersmayonlyconferatechnicalcertificateofasuperiorleveltothose
studentswhohavecompletedprogramsofatleast1,600classhours.
Educationalinstitutionsofthearmedforcesandpolice.
Privateuniversitiesmustbecreatedinaccordancewiththeproceduressetforthbylaw,andmustalwaysbenotforprofitentitiesin
ordertobeofficiallyrecognized.
Privateprofessionalinstitutesandtechnicaltrainingcentersmaybecreatedbyanyindividualorlegalentity,theymaybeorganized
asforprofitornotforprofitentities,andtheirsolepurposemustbethecreation,organizationandmaintenanceofaprofessionalinstitute
ortechnicaltrainingcenter.
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Inordertobeofficiallyrecognized,universities,professionalinstitutesandtechnicaltrainingcentersmusthavethenecessary
teaching,didactic,economic,financialandphysicalresourcestooffertheacademicdegrees,professionalcertificatesortechnical
certificates,asappropriate,whichmustbecertifiedbytheNationalEducationCouncil.Additionally,theseinstitutionsmusthavea
certificationgrantedbytheNationalEducationCouncilevidencingthattheentityhashadbothitsinstitutionalprojectanditsacademic
programsapprovedandthatitwillhavetheprogressiveverificationofitsinstitutionaldevelopmentperformed.Highereducation
institutionsmayonlystarttheirteachingactivitiesoncetheofficialrecognitionhasbeengranted.
Theofficialrecognitionofahighereducationinstitutionmayberevokedand,inthecaseofuniversities,theirlegalexistencemaybe
revokedthroughasupportedStatutoryDecreeoftheMINEDUC,afteradecisionoftheNationalEducationCounciladoptedbythe
majorityofitsmembersinameetingcalledforthatsolepurposeandafterhearingtheaffectedparty,ifthatparty(i)failstocomplywith
theobjectivessetforthinitsbylaws,(ii)conductsactivitiescontrarytomorals,publicorder,goodcustomsornationalsecurity,
(iii)commitsgrossviolationsofitsbylaws,or(iv)ceasestoconferprofessionalcertificatestoitsgraduates.
Thelawprovidesforasystemoflicensegrantstohighereducationinstitutions,whichincludestheapprovalofinstitutionalproject
andtheevaluation,progressandmaterializationofitseducationalprojectforaperiodofnolessthansixyears,attheendofwhichthey
maybecomefullyautonomous.
Nationalsystemofqualityassuranceinhighereducation.Thelawprovidesforasystemofqualityassuranceinhighereducation
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Nationalsystemofqualityassuranceinhighereducation.Thelawprovidesforasystemofqualityassuranceinhighereducation
thatincludesasystemofinstitutionalaccreditationthatconsistsofaprocessofanalysisofexistingmechanismswithintheautonomous
highereducationinstitutionstoguaranteetheirquality,bearinginmindboththeexistenceofthosemechanismsandtheirapplicationand
results,andaprocessofaccreditationofcoursesofstudyorprograms,consistingofaprocessofverificationofthequalityofthecoursesof
studyorprogramsofferedbytheautonomoushighereducationinstitutions,onthebasisoftheirdeclaredpurposesandthecriteriasetforth
bytherespectiveacademicandprofessionalcommunities.
Boththeinstitutionalaccreditationandtheaccreditationofcoursesofstudyandundergraduateprogramsarevoluntary,exceptthat
thecoursesofstudyandacademicprogramsleadingtotheprofessionaldegreesofSurgeon,ElementaryEducationTeacher,Secondary
EducationTeacher,DifferentialEducationTeacherandNurserySchoolTeacheraresubjecttomandatoryaccreditation.
TheinstitutionalaccreditationisfiledwiththeNationalAccreditationCommission,whereastheaccreditationofcoursesofstudyand
undergraduateprogramscanbeperformedbydomestic,foreignorinternationalaccreditationentitiesauthorizedbytheNational
AccreditationCommission.
Taxbenefits.Chileanuniversitiesrecognizedbythestate,andtheassociations,corporations,partnershipsandfoundationsthatare
created,organizedormaintainedbythoseuniversities,areexemptedfrompayingtaxontheincomearisingexclusivelyfromtheir
educationalactivities.Likewise,educationalinstitutionsareexemptedfrompayingvalueaddedtax,anexemptionthatislimitedtothe
revenuesarisingfromtheirteachingactivities.Additionally,universitiesareexemptedfrompayingwithholdingtaxesforpaymentsmade
abroad.Therearealsospecifictaxbenefitsfordonationsmadetouniversities.
Financing.TheChileanstatecontributestothedirectfinancingofuniversitiesexistingasofDecember31,1980bymeansof
contributionsfromthestate.Inaddition,alluniversities,professionalinstitutesandtechnicaltrainingcentersrecognizedashigher
educationinstitutionsreceiveanindirectcontributionfromthestate,whichisdistributedonthebasisofthescoresobtainedinthe
universityadmissiontestbythestudentsenrolledineachhighereducationinstitution.
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UndertheCAEProgram,thestateguaranteesupto90%oftheprincipalplusinterestonloansgrantedbyfinancialinstitutionsto
studentsofhighereducationatautonomous,accreditedinstitutionsofficiallyrecognizedbythestatethatselecttheirfirstyearstudentson
thebasisofthescoreobtainedintheuniversityadmissiontestandthatusetheaforesaidindirectcontributionbythestateexclusivelyfor
institutionaldevelopmentpurposes.
TheNMSprogramsupportsaccesstovocationalandtechnicaleducationforstudentsinthelowest70%whometorexceededcertain
academicstandardsbyprovidingannualscholarships(i)underNMSIinamountsuptoCLP600,000(ii)underNMSIIinamountsupto
CLP850,000peryearforstudentswhocomefromthefirstfiveincomedecilesifthetech/vocinstitutioninwhichtheyareenrolledis
organizedasanotforprofitlegalentityor,ifthetech/vocinstitutionisnotsoorganized,theinstitutionhasstatedinwritingitsintention
tobecomeanotforprofitentityandtobeaccreditedand(iii)underNMSIIIinamountsuptoCLP900,000peryear,providedthatsuch
studentsandtheinstitutioninwhichtheyenrollmeettherequirementsforNMSIIandthetech/vocinstitutionwas,onDecember31,2015,
accreditedforfouryearsormore.
Recentdevelopments.BecauseofanongoingcontroversyinChilewithrespecttothequalityofhighereducationandcompliance
withtheregulationsapplicabletohighereducationinstitutions,sinceJuly2011severalreformshavebeenpromotedbytheChilean
government.Someofthesereformswereapprovedduringthepreviousadministration,suchasamendmentstotheCAEProgramreducing
from6%to2%perannumtheinterestratethatCAEdebtorsmustpay,limitingprincipalandinterestpaymentsunderthatprogramto10%
ofadebtor'smonthlyincome,andprovidingfortheterminationofthedebtaftera180monthperiod.
OtherlegislativereformswerepromotedbymembersofthepreviousChileanCongressbutwerenotsupportedbytheprevious
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OtherlegislativereformswerepromotedbymembersofthepreviousChileanCongressbutwerenotsupportedbytheprevious
Chileangovernment,includingproposalstorestrictrelatedpartytransactionsbetweenhighereducationinstitutionsandentitiesthat
controlthem.InNovemberandDecember2013,Chileheldnationalelections.Thepresidentialelectionwaswonbyformerpresident
MichelleBachelet,whoassumedofficeonMarch11,2014,andapoliticalcoalitionledbyMs.Bacheletwontheelectionsforbothhouses
oftheChileanCongress,ineachcaseforfouryearsbeginningonMarch11,2014.Althoughtheelectionplatformofthenewgovernment
mentionedthatstrongerregulationofhighereducationwasrequired,itdidnotcontainspecificcommitmentswithrespecttothe
abovementionedreforms,otherthanthecreationofaspecialagencytooverseehighereducationinstitutions'compliancewithlawand
regulations.Inthesecondquarterof2014,thenewgovernmentannouncedthewithdrawalofalloftheprioradministration'shigher
educationproposalsanditsintenttosubmitnewbillstotheChileanCongress.
InDecember2014,theChileanCongressadoptedtheProvisionalAdministratorLaw,whichprovidesfortheappointmentofa
provisionaladministratororclosingadministratortohandletheaffairsoffailinguniversitiesoruniversitiesfoundtohavebreachedtheir
bylaws.Inaddition,theChileanCongresshasapprovedlegislationthatwouldpermit,butnotrequire,universitiesand
technical/vocationalinstitutestoincludeintheirbylawsprovisionscontemplatingtheparticipationofstudents,professorsandemployees
inthegovernanceoftheinstitution.
OnNovember27,2015,theChileanCongresspassedthe2016BudgetLaw.Bymeansofthe2016BudgetLaw,theadministration
soughttoimplementapolicytograntfreeaccesstohighereducationtostudentsfromthefirstfiveincomedecileswhoattendcertain
universitiesortech/vocinstitutions.Foruniversitystudents,theBudgetLawwouldhaverequiredthemtobeenrolledinuniversitiesthat
eitheraremembersoftheCRUChorareprivateuniversitiesthatarenotmembersoftheCRUChthat,onSeptember30,2015,metthe
followingrequirements:(a)beingaccreditedforfouryearsormore(b)notbeingrelatedtoforprofitlegalentitiesand(c)havinga
representativeofthestudentsornonacademicpersonnelasamemberoftheirgoverningbody.Fortech/vocstudents,the2016Budget
Lawwouldhaverequiredthemtobeenrolledininstitutionsorganizedasnotforprofitlegalentitiesthatwereaccreditedforfourormore
years.
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OnDecember21,2015,theCTdeclaredportionsofthe2016BudgetLawdealingwithhighereducationinstitutionstobe
unconstitutional,inparticularthoseportionsthatwouldrequirestudentstoattendinstitutionswithspecificcharacteristicsinorderto
obtainfreetuitionas,undertheChileanConstitution,thatwouldconstitutearbitrarydiscriminationaffectingstudentswhoareinthesame
economiccondition.
BeforetheCTpublishedthetextofitsdecision,theadministrationsubmittedtheShortLawtotheChileanCongress.TheShortLaw
wasapprovedbyCongresstwodaysafteritssubmission,onDecember23,2015,andpublishedonDecember26,2015.TheShortLawis
UndertheShortLaw,foruniversitystudentstobeeligibleforfreetuition,theyhadtocomefromthefirstfiveincomedecilesand
enrolleitherinaStateowneduniversityorinaprivateuniversitythatonDecember27,2015wasaccreditedforatleastfouryearsand
controlledbyindividualsornotforprofitlegalentities.TheShortLawexcludedtech/vocstudentsfromeligibilityforfreetuitionin
2016.However,theShortLawprovidedthatfreetuitionfortech/vocstudentswouldbeimplementedwithinthreeyearsprovidedthatthey
attendtech/vocinstitutionsthatareaccreditedforatleastfouryearsandareorganizedasnotforprofitlegalentities.TheShortLaw
providedthattech/vocinstitutionsthatwereorganizedasforprofitentitiesshould,notlaterthanDecember27,2015,statetheirintention
toreorganizeasnotforprofitentitiesinordertobeeligibletoparticipateinNMSIIandNMSIII.
participateinthefreetuitionprogram,theShortLawmodifiedtheallocationsoftheNMS.TheShortLawdividedthisscholarship
programintothreeparts:(i)NMSI,whichgrantsstudentswhomeetcertainpersonalconditionsscholarshipsofuptoCLP600,000per
year(ii)NMSII,whichgrantsstudentsscholarshipsofuptoCLP850,000peryear,providedthestudentscomefromthefirstfiveincome
decilesandthetech/vocinstitutioninwhichtheyareenrolledisorganizedasanotforprofitlegalentityor,ifthetech/vocinstitutionis
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decilesandthetech/vocinstitutioninwhichtheyareenrolledisorganizedasanotforprofitlegalentityor,ifthetech/vocinstitutionis
notsoorganized,theinstitutionhasstatedinwritingitsintentiontobecomeanotforprofitentityandtobeaccreditedand(iii)NMSIII,
whichgrantsstudentsscholarshipsofuptoCLP900,000peryear,providedthatsuchstudentsandtheinstitutioninwhichtheyenroll
meettherequirementsforNMSIIandthetech/vocinstitutionwas,onDecember31,2015,accreditedforfouryearsormore.
TheChileanuniversitiesandtech/vocinstitutionsintheLaureateInternationalUniversitiesnetworkdidnotmeeteachofthesetests,
sostudentsattheseinstitutionsarenoteligibleforfreetuitionorNMSIIorNMSIIIscholarshipsundertheShortLaw.
OnNovember11,2016,theChileanCongresspassedthe2017BudgetLaw.The2017BudgetLawincludedchangestothepolicies
forgrantingfreeaccesstohighereducationandscholarshipstostudentsfromthefirstfiveandsevenincomedecileswhoattendcertain
universitiesortech/vocinstitutions.
Foruniversitystudents,the2017BudgetLawprovidesforfreeaccesstohighereducationwiththesamerequirementsaswereinthe
2016BudgetLawbutaddstherequirementthateligibleuniversitieshaveaminimumof80%oftheirnewlyenrolledstudentswithan
averageresultfromthenationaluniversityadmissionsexamination,highschoolgradesandhighschoolrankingsaboveaspecifiedlevel,
andhaveatransparentadmissionsystemthatmusthavebeenpublishedontheinstitution'swebsitebyDecember1,2016.Fortech/voc
institutions,the2017BudgetLawprovidesforeligibilityforfreeaccessforstudentsiftheyareenrolledininstitutions(i)organizedas
notforprofitlegalentitiesorasforprofitlegalentitiesthathavefiledfortransformationtonotforprofitlegalentitiesunderthe
"TransformationLaw"passedbytheChileanCongressonNovember16,2016,beforeDecember15,2016,(ii)accreditedforfouryearsor
moreasofDecember23,2016,(iii)havingascontrollersnotforprofitlegalentitiesornaturalpersons,(iv)havingstatedtheirintentionto
participateinthe
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freeaccesssystembeforeDecember15,2016,and(v)havingatransparentadmissionsystemthatmusthavebeenpublishedonthe
institution'swebsitebyDecember1,2016.
The2017BudgetLawalsomodifiedtheallocationsoftheBSProgram.TheBSProgramsupportsaccesstohighereducationfor
universitystudentscomingfromoneofthefirstsevenincomedecilesandcoversthefullamountoftuitionuptoanamountauthorizedby
thegovernment.Historically,theBSProgramsolelybenefitedstudentsofCRUChuniversities.The2017BudgetLawterminatedthe
differentiationbetweenCRUChandnonCRUChuniversitiesforeligibilityfortheBSProgram.Thus,for2017,3,500BSProgram
scholarshipswillbegrantedtostudentsatnonCRUChuniversitiesand3,500additionalBSProgramscholarshipswillbegrantedto
studentsatnonCRUChuniversitiesin2018.By2019,thegovernmentpromisestohaveanequalBSProgramscholarshippolicyforall
universities,whetherCRUChornonCRUCh.StudentsmayapplyforaBSProgramscholarshipiftheiruniversityisaccreditedforatleast
fouryearsandif80%oftheuniversity'snewlyenrolledstudentshaveanaverageresultfromthenationaluniversityadmissions
examination,highschoolgradesandhighschoolrankingsaboveaspecifiedlevel.
Underthe2017BudgetLaw,theNMSIIandNMSIIIareavailabletoallstudentsenrolledinatech/vocinstitution,whetherforprofit
ornotforprofit:(i)NMSIIinanamountofCLP860,000peryear,oruptotheeffectivegovernmentapprovedtuitionfeeifitislessthan
thatamount,forstudentswhocomefromthefirstfiveincomedecileswithanaveragehighschoolgradeof5.0andthetech/vocinstitution
inwhichtheyareenrolledbeingaccreditedforatleastthreeyearsand(ii)NMSIII,inanamountuptoCLP900,000peryear,oruptothe
effectivegovernmentapprovedtuitionfeeifitislessthanthatamount,providedthatsuchstudentsandtheinstitutioninwhichthey
enrollmeettherequirementsforNMSIIandthetech/vocinstitutionwas,onDecember31,2016,accreditedforfouryearsormore.The
NMSIIIscholarshipwilllastuntilthetaxbenefitestablishedintheTransformationLawfortech/vocinstitutionsends.
Finally,underthe2017BudgetLaw,theComptrollerGeneralwillbeinchargeofoverseeingtheuseofthepublicresourcesinhigher
education.
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InApril2016,theChileanCongressmadereformstospecificcareerdisciplines,includingpedagogy.Law20,903createdtheteaching
professionaldevelopmentsystem(SistemadeDesarrolloProfesionalDocente),whichaimstoimprovethequalityoftrainingforthose
whochoosetostudypedagogybysettingnewprogramadmissionrequirementsandmandatoryinstitutionalaccreditationstandardsfor
pedagogycareerprograms.Asthesechangeshaveonlytakeneffectin2017,theirimpactcannotyetbedeterminedhowever,theChilean
universitiesintheLaureateInternationalUniversitiesnetworkarepreparingtoadjusttothenewregimeandwillbemonitoringtheeffects
ontheirpedagogyprograms.
OnJuly4,2016,theChileanPresidentsubmittedtotheChileanCongressabill(the"HigherEducationBill")that,ifapproved,would
legislation,includingrepealingthecurrentlawsgoverninguniversities,professionalinstitutesandtechnicaltrainingcenters.Thechanges
contemplatedintheHigherEducationBillthataremostrelevanttousare:
(1)
ThecreationofanUndersecretaryofHigherEducation,whichwouldreplaceandbethelegalsuccessortothecurrent
HigherEducationDivisionoftheMINEDUCandwhosefunctionswouldbe:(i)toproposetotheMINEDUCpolicieson
highereducation,includingpoliciesonaccess,inclusion,retentionandgraduationofhighereducationstudents,onthe
promotion,development,supportandcontinuousimprovementofthequalityofhighereducationinstitutionsandtheir
relationshipwiththeneedsofthecountry,andontheallocationofpublicfunds(ii)tomanagetheproceduresrelatingto
thegrantingandrevocationoftheofficialrecognitionofhighereducationinstitutions(iii)totakecustodyoftheacademic
recordsofhighereducationinstitutionsthathavelosttheirofficialrecognition(iv)tomanage
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theCommonAccessSystemforHigherEducationInstitutions(v)tomanagetheNationalHigherEducationInformation
System(vi)tocoordinatethevariouspublicinstitutionsandservicesthathaveauthorityonhighereducationmatters
(vii)toestablishcoordinationmechanismsforthemembersoftheboardsofdirectorsofstateowneduniversitieswhoare
appointedbythePresident(viii)togenerateandcoordinatewithregionalandlocalgovernmentsinstancesofparticipation
anddialoguewithandamonghighereducationinstitutionsaswellasthecollaborationandtransferofbestpracticesamong
them,andbetweensuchinstitutionsandsecondaryschools(ix)todevelopstudiesonthehighereducationsystem(x)to
maintainaregistryofhighereducationinstitutionswithaccesstopublicfundingand(xi)tohaveanyotherfunctionthat
thelawmayassigntoit.
(2)
ThecreationofanewCommonAccessSystemforHigherEducationInstitutions,tobemanagedbytheUndersecretaryof
HigherEducation,whichwouldestablishtheprocessandmechanismsfortheapplication,admissionandselectionof
undergraduatestudents,andwhichwouldbemandatoryatallhighereducationinstitutionsthatreceivepublicfunding
throughtheMINEDUC.
(3)
ThecreationofaNationalHigherEducationInformationSystem,tobemanagedbytheUndersecretaryofHigher
Education,whichwouldinclude,amongotherthings,informationaboutstudents,enrollment,faculty,resources,
infrastructureandresultsoftheacademicprocessathighereducationinstitutionsaboutthenatureofthehighereducation
institutions,theirmembersandindividualsthatarepartoftheiradministrativebodiesaboutthefinancialconditionand
solvencyofhighereducationinstitutions,includingtheirannualauditedfinancialstatementsandinformationabout
relatedpartytransactions.BoththeSuperintendenceofHigherEducationandtheHigherEducationQualityCouncilwould
provideallinformationtheyreceivefromhighereducationinstitutionstotheUndersecretaryofHigherEducationtobe
includedintheNationalHigherEducationInformationSystem.
(4)
ThecreationofanewNationalSystemofQualityAssuranceofHigherEducation,tobeestablishedbytheMINEDUC
throughtheUndersecretaryofHigherEducation,theNationalEducationCouncil,theHigherEducationQualityCouncil
andtheSuperintendenceofHigherEducation,thefunctionsofwhich,amongothers,wouldbeto:(i)developpoliciesto
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andtheSuperintendenceofHigherEducation,thefunctionsofwhich,amongothers,wouldbeto:(i)developpoliciesto
promotequality,suitability,articulation,inclusionandequalityintheexecutionofthedutiesofhighereducation
institutions(ii)licensenewhighereducationinstitutions(iii)providetheinstitutionalaccreditationofautonomoushigher
educationinstitutionsand(iv)enforcethecomplianceofhighereducationinstitutionswiththerulesapplicabletohigher
educationandthelegalityoftheuseoftheirresources,supervisetheiradministrativeandfinancialfeasibility,andtheir
academiccommitmentstostudents.
TheHigherEducationQualityCouncil,whosepurposewouldbetoevaluate,accreditandpromotethequalityof
autonomoushighereducationinstitutionsandofthecareersandstudyprogramstheyoffer,andwhichwouldberesponsible
forexecutingtheinstitutionalaccreditationprocessesandundergraduateandgraduatecareerandstudyprograms
accreditationprocesses,wouldbecomposedof11directors,nineofwhichwouldbeappointedbythePresidentofthe
Republic.ThefunctionsoftheHigherEducationQualityCouncilwouldinclude:(i)managingandresolvingthe
accreditationprocesses(ii)proposingthequalitycriteriaandstandardsforinstitutionalaccreditationandaccreditationof
undergraduateandgraduatecareersandstudyprogramstotheMINEDUC(iii)maintainingpublicinformationsystemsthat
containrelevantdecisionsregardingthedifferentaccreditationprocesses(iv)executingandpromotingactionsfor
continuousimprovementofthequalityofhighereducationinstitutions(v)keepingaregistryofpeerreviewerswhoare
partoftheaccreditationprocess(vi)trainingpeerreviewersand(vii)submittingdatatotheNationalHigherEducation
InformationSystem.
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UndertheNationalSystemofQualityAssuranceofHigherEducation,institutionalaccreditationwouldbemandatoryfor
allautonomoushighereducationinstitutionsandwouldconsistoftheevaluationandverificationofcompliancewith
qualitystandards,aswellastheanalysisofinternalmechanismsforqualityassurance,consideringboththeirexistenceand
theirapplicationandresults,andtheiralignmentwiththemissionandpurposeofhighereducationinstitutions.All
institutionalaccreditationswouldlastforeightyears.Theaccreditationprocesswouldincludetheevaluation,forall
campusesandfortheundergraduatecareersandprogramsselectedbytheboardoftheHigherEducationQualityCouncil,of
themanagementandinstitutionalresources,internalqualityassurance,teachingandresultsoftheeducationprocess,
generationofknowledge,creationandinnovation,andassociationwiththeenvironment,oftherespectivehigher
educationalinstitutions.Accreditedinstitutionswouldbeclassifiedunderoneofthreedifferentcategories.CategoryC
institutionswouldneedtoobtainpriorapprovaloftheHigherEducationQualityCounciltoopennewcampusesor
programs,whileCategoryBinstitutionswouldneedtoobtainsuchapprovalonlytoopencareersorprogramsinafieldof
knowledgenotregularlyofferedbytheinstitutionorwhichhasnotbeenofferedinthelasttwoyears,andCategoryA
institutionswouldnotneedtoobtainanyapprovaltoopennewcampuses,careersorprograms.
Thebillalsoprovidesthatcertaincareersandstudyprograms,i.e.,medicalandeducationprograms,aswellasdoctorate
levelprogramsbemandatorilyaccredited.
AccreditationdecisionswouldnotbeappealablealthoughreconsiderationcouldbesoughtbeforetheHigherEducation
QualityCouncilnotlaterthan15daysafterthenotificationofdecision.
(5)
ThecreationofaSuperintendenceofHigherEducation,whosepurposeistoenforceandmonitorcompliancewiththelegal
andregulatoryprovisionsthatgovernhighereducation,aswellasthelegalityoftheuseofresourcesbyhighereducation
institutionsandtosupervisetheirfinancialfeasibility.Itsfunctionsandpowerswouldbe,amongothers,to:(i)enforce
compliancewiththelawbyhighereducationinstitutions,theirorganizers,controllers,members,associates,partners,
owners,founders,legalrepresentativesandboardmembers(ii)ensurethattherequirementsorconditionsthatresultedin
officialrecognitionofthehighereducationinstitutionsaremaintained(iii)supervisethefinancialfeasibilityofhigher
educationinstitutions(iv)ensurethelegalityoftheuseofresourcesofhighereducationinstitutions(v)ensurethathigher
educationinstitutionscomplywiththeterms,conditions,andmodalitiesoftheacademiccommitmentsundertakenwith
students(vi)arrangeandconductauditsofhighereducationinstitutions(vii)visittheacademicandadministrative
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establishmentsandofficesofhighereducationinstitutionsandoftheinstitutions'organizersthatarerelatedtothe
managementoftherespectiveinstitutioninordertocarryoutthefunctionsassignedtotheSuperintendence,accessingany
documents,booksorinformationrequiredforthepurposesofenforcement,andreviewingallthetransactions,assets,books,
accounts,filesand,ingeneral,anydocumentsorinformationitdeemsnecessaryforthesupervisionoftheindividualsor
institutionsinspectedandofthethirdpartieswithwhichtheyinteract(viii)requirepertinentinformationneededforitto
fulfillitsdutiestobeprovidedtoitbyinspectorsandinspectinginstitutionsandrelatedthirdparties,andbyanyrelevant
governmententities(ix)summonorganizers,controllers,members,associates,partners,owners,founders,legal
representatives,boardmembersoremployeesoftheinspectedinstitutions,orofthosewhoexercisethosepositionsat
relatedinstitutions,andanyotherpersonwhohasenteredintoanagreementsofanykindwiththeabove,totestifybeforeit,
andsummonwitnessestoprovideanyinformationitdeemsnecessarytofulfillitsduties(x)respondtoinquiriessubmitted
toitwithinthescopeofitspowers,receiveandresolveclaims,andmediateclaims,whenapplicable(xi)investigateand
resolvecomplaintsthatarise(xii)bringcharges,processthem,adoptprovisionalmeasures,andresolvetheproceedings
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underwayregardinganyinfractionthatcomestoitsattention(xiii)applypenaltiesinaccordancewiththelaw(xiv)apply
andprovideadministrativeinterpretationsoftheapplicablelaw,andissuegeneralinstructionstothesectorsubjecttoits
enforcement(xv)sendinformationbroughttoitsattentionintheexerciseofitsdutiesandpowerstotheHigherEducation
QualityCouncilwhensuchinformationindicatesviolationswithinthescopeofthemattersitregulates(xvi)remit
informationbroughttoitsattentionintheexerciseofitsdutiestothePublicProsecutorwhensuchinformationindicates
thatacrimehasbeencommitted(xvii)managetheinformationitcompilesintheexerciseofitsduties,inacoordinated
effortwiththeUndersecretaryofHigherEducation,foradequatedevelopmentoftheNationalHigherEducation
InformationSystem(xviii)reachagreementswithotherpublicservicesregardingelectronictransfersofinformationto
facilitateexecutionoftheirfunctions(xix)generateindexes,statisticsandstudieswiththeinformationdeliveredbythe
institutionsitinspects,andproducepublicationswithinthescopeofitspowersand(xx)providetechnicaladvisory
servicestotheMINEDUCandotherentitieswithinthescopeofitspowers.
SanctionsimposedbytheSuperintendenceofHigherEducationwouldbeappealabletothecourts.
HighereducationinstitutionswouldberequiredtoprovidetotheSuperintendenceofHigherEducationthefollowing
information:(i)theirauditedconsolidatedannualfinancialstatementsandanyinformationaboutanyfactthatmay
significantlyaffectitsfinancialcondition(ii)alistoftheirpartnersormembers,andofanyindividualsexercising
executivefunctions(iii)informationaboutrelatedpartytransactions(iv)informationabouttaxexemptdonationsand
(v)alistofentitiesinwhichtheinstitutionholdsaninterestofmorethan10%andofnotforprofitentitiesinwhichitis
entitledtoappointatleastoneboardmember.
(6)
(7)
Newregulationsapplicabletonotforprofiteducationalinstitutions(includinguniversities)thatwould:(i)providethat
theircontrollersandmemberscanonlybeindividuals,othernotforprofitsorstateownedentities(ii)createtheobligation
tousetheirresourcesandreinvesttheirsurplusorprofitsinthepursuitoftheirobjectivesandinenhancingthequalityof
theeducationtheyprovide(iii)createtheobligationtohaveaboardofdirectors,whichcannotdelegateitsfunctions,and
whosememberscannotberemovedunlessapprovedbythemajorityoftheboardandforseriousreasonsand(iv)prohibit
relatedpartytransactionswiththeirfounders,controllers,membersoftheboard,rectorandtheirrelativesorrelatedentities,
unlessthecounterpartytothetransactionisanothernotforprofitentity,andestablishregulationsforotherrelatedparty
transactionswhichincludetheneedforthemtobeundermarketconditionsandapprovedbytheboard.
Anewsystemtoprovidepublicfundingtohighereducationinstitutionsandfreehighereducationtocertainstudents.
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(7)
Underthenewsystem,alllicensedhighereducationinstitutionswouldbeeligibletoreceivepublic"institutionalfunding
forgratuity"aslongastheycompliedwiththefollowingrequirements:(i)accreditation(ii)notforprofitorstateowned
(iii)bepartoftheCommonAccessSystemforHigherEducationInstitutionsand(iv)applypoliciesapprovedbythe
UndersecretaryofHigherEducationthatpermitfairstudentaccessandimplementvulnerablestudentsupportprogramsthat
promotetheirretention,providingthatatleast20%ofthetotaladmissionsoftheuniversityaregrantedtostudentsfrom
homeswithinthecountry'sfourlowestincomedeciles.Theinstitutionsthatwouldbepartofthepublicfundingsystem
wouldbesubjecttoregulationoffeeschargedwhichwouldbesetbytheUndersecretaryofHigherEducation.
proposedHigherEducationBillwillbeadoptedinthisform,orifanyhighereducationlegislationwillbeadoptedthatwouldaffect
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theinstitutionsintheLaureateInternationalUniversitiesnetwork.However,ifanysuchlegislationisadopted,itcouldhaveamaterial
economicgroups.TheinvestigativecommitteereferreditsreporttotheMINEDUCandtothePublicProsecutorofChiletodetermine
whethertherehasbeenanyviolationofthelaw.ThePublicProsecutorappointedaregionalprosecutortoinvestigatewhetheranycriminal
chargesshouldbebroughtforallegedviolationsofthelawsonhighereducationand,morethanthreeyearslater,nochargeshavebeen
broughtbytheregionalprosecutoragainstanyinstitutionsintheLaureateInternationalUniversitiesnetwork.OnJuly19,2012,the
ChileanChamberofDeputiesrejectedthereportoftheinvestigativecommittee.InDecember2012,inlightofthecriminalprosecutionof
theformerpresidentoftheNationalAccreditationCommissionforallegedbribery,theChileanChamberofDeputiesmandatedits
EducationCommissiontobeaninvestigativecommitteeregardingthefunctioningoftheNationalAccreditationCommission,especially
withrespecttocompliancewiththeNationalAccreditationCommission'sdutytooverseehighereducationentities.TheEducation
Commissiondeliveredareport,whichwasapprovedbytheChamberofDeputiesonOctober1,2013,containingseveralrecommendations
toimproveregulationofthehighereducationaccreditationsystem.Additionally,theChileanChamberofDeputiesapprovedthecreation
ofaspecialinvestigativecommitteetoresumetheinvestigationofhighereducationperformedbytheinvestigativecommitteethatissued
theJune2012reportthatwaspreviouslyrejectedbytheChamberofDeputies.OnJanuary15,2014,thatinvestigativecommittee
approvedanewreportrecommending,amongotherthings,improvementstotheChileanhighereducationsystemregulations,
amendmentstothehighereducationfinancingsystem,particularlytheCAEProgram,impositionofcriminalpenaltiesforviolationofthe
requirementthatuniversitiesbenotforprofit,andsupportoflegislationthatwouldprohibitrelatedpartytransactions,prohibitthe
transferofcontrolofuniversities,andrequireuniversitiestohaveindependentboardmembers.Thereportwasapprovedbythefull
ChamberofDeputiesonApril1,2014.
OnFebruary18,2014,theMINEDUCdisclosedthatonNovember15,2013andFebruary11,2014,ithadinitiatedinternal
investigationsintoUDLAChileandUNAB,respectively.TheinvestigationswereinitiateduponreferralsfromtheNationalEducation
CouncilandtheNationalAccreditationCommission,whichhadconveyedtotheMINEDUCtheirconcernsregardingcertainagreements
enteredintobyUDLAChileandUNABwiththeircontrollingentities,includingconcernsabouttheamountandrealusemadebythe
universitiesoftheservicesprovidedunderthoseagreements.TheinvestigationsareaninitialstepbytheMINEDUCtodeterminewhether
theMinistryshouldbeginformalsanctionproceedingsagainsttheuniversities.TheMINEDUCalsodisclosedthatithaddelivered
relevantdocumentationonthemattertothePublicProsecutor.InJanuary2016,theMINEDUCannouncedthatithadclosedthe
investigationintoUNAB.
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investigationintoUNAB.
InMay2014,SIIinstitutedanauditofUVMChile,UNABandUDLAChilequestioningwhethertheyhadregularlypaidtheirtaxesas
nonprofitentitiesfortheperiod2011to2014,specificallyinrelationtotheirfinancialdealingswithLaureate,forprofitentities.Any
noncompliancewiththenonprofitlawswouldsubjectthemtothepaymentofadditionaltaxesandpenalties.AsofAugust2015,SIIhad
notifiedallthreeinstitutionsthatitsauditdetected"nodifferences"inthetaxespaidandthetaxesowed,andprovidedawrittenclosure
lettertoeachoftheinstitutions.InDecember2016,SIInotifiedseparatelyUDLAChileandUNABthataspartofthegeneralaudit
programcalled"AuditoriaIntegralaUniversidades,"itwasrequestingsupportingdocumentationfromthemforthetaxperiodsbetween
November2013andOctober2016.Eachinstitutionwillsubmitresponsivedocumentsthat
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supporttaxespaidrelatedtoitsrevenuesandexpenses,includingtotheextentsuchrevenuesandexpensesinvolvefinancialdealings
withLaureateforprofitentities.
InJune2016,theMINEDUCnotifiedUNABthatitwasopeninganinvestigationintopossibleviolationsofthenotforprofitnature
ofUNAB.InSeptember2016,theMINEDUCnotifiedUVMChilethatitwasopeningasimilarinvestigationofUVMChile.Eachofthe
institutionscontinuestoberesponsivetotheMINEDUC'srequestsaspartoftheseinvestigations.Eachinvestigationwillbeconductedby
aninvestigatorappointedbytheMINEDUCundertheProvisionalAdministratorLaw,andbothUNABandUVMChilehavebeenadvised
thattheinvestigationswilllastatleastsixmonths.Proceduralsafeguardsintheinvestigationprocessincludenotice,therighttopresent
writtenstatementsandevidence,andtherequirementthatthedecisionbebasedontheformalrecord.UndertheProvisionalAdministrator
Law,attheendoftheinvestigationtheMINEDUCcaneitherclosetheinvestigationorissueareportimposingoneofthefollowing
measures:(i)orderingarecoveryplanfortheinvestigatedinstitution,shouldtheMINEDUCverifyseverebreachesoftheinstitution's
financial,administrative,labororacademiccommitments(ii)withthepriorconsentoftheNationalEducationCouncil,naminga
provisionaladministratorfortheinstitutioniftheMINEDUCdeterminesthat(a)thereareseriousriskstotheadministrativeorfinancial
viabilityoftheinstitutionthatmayaffectthecontinuityofitseducationalprograms,(b)thereareseriousandrecurringbreachesofthe
academiccommitmentsoftheinstitutiontoitsstudentsduetoalackofeducationalorteachingresourcesavailabletograntprofessional
ortechnicaldegrees,(c)itisimpossiblefortheinstitutiontomaintainitsacademicfunctionsduetosanctions,injunctionsorforeclosures
affectingtheinstitution,itscampusesoritsassets,(d)theinstitutionisdeclaredbankruptor(e)arecoveryplanpursuantto(i)abovehas
notbeenpresented,hasbeenrejectedorhasbeenbreachedbytheinstitutionor(iii)initiatingaprocesstorevoketheinstitution'slicense,
inwhichcaseitwouldnameaclosingadministrator.IftheMINEDUCweretoimposeanysanctions,UNABorUVMChile,asthecasemay
be,wouldhaveseveralroutestoappealorchallengethatdecision,bothwithintheMINEDUCandinthecourtsorothergovernmental
bodies.UNABandUVMChilearecooperatingwiththeinvestigation.
MexicanRegulation
Mexicanlawprovidesthatprivateentitiesareentitledtorendereducationservicesinaccordancewithapplicablelegalprovisions.
Theseprovisionsregulatetheeducationservicesrenderedbythefederalgovernment,thestatesandprivateentitiesandcontainguidelines
fortheallocationofthehighereducationroleamongthefederalgovernment,thestatesandthemunicipalities,includingtheirrespective
economiccontributionsinordertojointlyparticipateinthedevelopmentandcoordinationofhighereducation.
TherearethreelevelsofregulationinMexico:federalstateandmunicipal.ThefederalauthorityistheFederalMinistryofPublic
Education(SecretaradeEducacinPblica).Eachofthe31statesandtheFederalDistricthastherighttoestablishalocalMinistryof
Education,andeachmunicipalityofeachstatemayestablishamunicipaleducationauthoritythatonlyhasauthoritytoadvertiseand
promoteeducationalservicesand/oractivities.Additionally,sinceFebruary26,2013,theNationalInstitutefortheEvaluationof
EducationalServices(InstitutoNacionalparalaEvaluacindelaEducacin)isinchargeof,amongotherthings,evaluatingthequality
ofthestudyplansandprogramsforBasicandMidSuperioreducationservices(asfurtherdescribedbelow).
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ofthestudyplansandprogramsforBasicandMidSuperioreducationservices(asfurtherdescribedbelow).
SomefunctionsareexclusivetotheFederalMinistryofEducationsuchastheestablishmentofstudyplansandprogramsforBasic
andMidSuperioreducationservicesOtherfunctionsareexclusivetothestateMinistriesofEducationsuchasthecoordinationand
administrationofthelocalregistryofstudents,teachers,educationinstitutionsandschools.Therearealsoconcurrentfunctionssuchasthe
grantingandwithdrawalofgovernmentalrecognitionofvalidityofstudies(ReconocimientodeValidezOficialdeEstudios)("REVOEs,"
foritsacronyminSpanish).
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TheGeneralLawonEducation(LeyGeneraldeEducacin)inMexicoclassifiesstudiesinthefollowingthreecategories:(i)Basic
Education,whichincludespreschool(kindergarten),elementaryschoolandjuniorhighschool(secundaria)(ii)MidSuperiorEducation,
whichincludeshighschool(prepataroria)andequivalentstudies,aswellasprofessionaleducationthatdoesnotconsiderpreparatoriaas
aprerequisiteand(iii)SuperiorEducation,whichincludesthestudiestaughtafterprepataroria,includingundergraduateschool
(licenciatura),specialties(especialidades),mastersstudies,doctoratestudiesandstudiesforteachers(educacinnormal).
TheGeneralLawonEducationprovidesthatinorderforprivateentitiestobeabletoprovideBasicEducationServicesandstudies
forteachers(educacinnormal),apriorgovernmentalauthorizationisrequired(the"Authorization").Forotherstudies,includingMid
SuperiorandSuperiorEducationServices,nopriorgovernmentalauthorizationisrequired.However,iftheprivateentitiesdesireto
provideMidSuperiorandSuperiorEducationServices,andwantthosestudiestobeintegratedintothefederaland/orlocalpublic
educationalsystem,theymustobtainaREVOEbythefederaland/orlocalMinistryofEducation,respectively.
TheREVOEsareissuedbytheFederalMinistryofEducationundertheGeneralLawonEducation,orbyanyofthestateMinistriesof
Educationundertheapplicablestatelaw.REVOEsaregrantedforeachprogramtaughtineachcampus.Ifthereisachangeintheprogram
orinthecampusinwhichitistaught,theentitywillneedtogetanewREVOE.
TheFederalMinistryofEducationhasissuedasetofgeneralresolutions(Acuerdos)thatregulatethegeneralrequirementsfor
obtainingREVOEs.ThemainAcuerdosare(i)Acuerdo243issuedonMay27,1998tosetthegeneralguidelinesforobtainingan
AuthorizationorREVOE,and(ii)Acuerdo279issuedonJuly10,2000tosettheproceduresrelatedtoREVOEsforSuperiorEducation
studies.TheFederalMinistryofEducationrecommendstothelocalMinistriesofEducationtheadoptionandinclusionoftheprovisions
containedinAcuerdo243andAcuerdo279inthelocalLawonEducationandotherapplicablelocallawsandregulations.
Ingeneralterms,federalandstatelawsinMexicoprovideforthreerequirementsforgrantingREVOEs:
personnelthathaveadequatequalificationstorendereducationservicesandthatcomplywiththeappropriate
administrativerequirements
facilitiesthatmeetthehygiene,securityandpedagogicconditionsdeterminedbytheauthorityand
studies,plansandprogramsthattheauthorityconsidersappropriate.
Dependingoneachstate,otherrequirementsmayapply,forexample,thatprivateinstitutionsthatprovideeducationalserviceswith
REVOEsneedtoberegisteredwiththecorrespondinglocalauthorities.
Acuerdo279regulatesindetailtheprovisionscontainedundertheGeneralLawonEducationtograntREVOEsforSuperior
Educationstudies,regardingfaculty,plansandprogramsofstudies,inspectionvisits,procedures,etc.Acuerdo279providesthatthe
facultythatparticipateinprogramstaughtbyprivateinstitutionsmustbefulltimefacultyorfacultyretainedbysubject.Acuerdo279
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facultythatparticipateinprogramstaughtbyprivateinstitutionsmustbefulltimefacultyorfacultyretainedbysubject.Acuerdo279
regulatesthequalificationsthatthefacultymembershavetomeetdependingonwhethertheyarefulltimeorparttime,andprovidesthat
aminimumpercentageofcoursesneedtobetaughtbyfulltimefaculty,whichpercentagedependsonthetypeofprogramtaught.
Acuerdo279alsoprovidesthatprivateinstitutionsthatprovideSuperiorEducationservicesinaccordancewithpresidentialdecrees
orsecretarialresolutions(acuerdossecretariales)issuedspecificallytothemmaymaintaintheobligationsprovidedtothemthereunder
andmayfunctionundertheprovisionsofAcuerdo279totheextenttheprovisionsofthislatterAcuerdobenefitthem.Currently,
UniversidadTecnolgicadeMxico,S.C.andUniversidaddelValledeMxico,S.C.havesecretarialresolutionsthatwereissuedintheir
favorbeforetheissuanceofAcuerdo279.Theobligations
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containedinthesesecretarialresolutionsgenerallyconformtotheobligationsprovidedunderAcuerdo279.
Theregulatoryauthoritiesareentitledtoconductinspectionvisitstothefacilitiesofeducationalinstitutionstoverifycompliance
withapplicablelegalprovisions.Failuretocomplywithapplicablelegalprovisionsmayresultintheimpositionoffines,inthe
cancellationoftheapplicableREVOEandintheclosureoftheeducationfacilities.
PrivateinstitutionswithREVOEsarerequiredtograntaminimumpercentageofscholarshipstostudents.Acuerdo279providesthat
privateinstitutionsgrantscholarshipstoatleastfivepercentofthetotalstudentsregisteredduringeachacademicterm.Scholarships
consist,inwholeorinpart,ofpaymentoftheregistrationandtuitionfeesestablishedbytheeducationalinstitution.Thegrantingof
scholarshipshastobeprovidedforintheinternalregulationsoftheeducationalinstitution,whichregulationsmustprovide:
authorityoftheinstitutionthatwillcoordinatetheapplicationandsupervisionofthecompliancewiththeapplicable
provisions
termsandproceduresfortheexpeditionanddisseminationofthescholarshipsgrant
requirementswithwhichtheapplicantsofscholarshipswillhavetocomply
typesofscholarshipsoffered
proceduresforthedeliveryofresultsand
conditionstomaintainandtocancelscholarships.
Acuerdo279providesfortheminimumpercentageofcoursesthatmustbetaughtbyfulltimefaculty.Privateeducationinstitutions
thatdonotmeettheminimumrequirementsmustsubmittotheeducationauthority,forapproval,adetailedjustificationinthatregard
makingreferencetotheareaofknowledgeoftheplanofstudies,levelthereof,educationmode,generalpurposeoftheplanand
educationalmodelproposedforthereferencedstudies.Inaddition,formastersstudiesfocusedinresearch,theuniversitymusthaveatleast
onefulltimeactiveinvestigatorforevery25studentsandfordoctoratestudies,musthaveatleastonefulltimeactiveinvestigatorfor
everytenstudents.
PrivateentitiesmayalsoobtaintherecognitionofvalidityoftheirprogramsfromtheNationalAutonomousUniversityofMexico
(UniversidadNacionalAutnomadeMxicoor"UNAM").TheGeneralRegulationsofIncorporationandValidationofStudiesissuedby
UNAMprovidethatprogramsfollowedinprivateentitiesmaybe"incorporated"toUNAMinorderforUNAMtorecognizetheirvalidity.
Fortheprogramstobeincorporatedthefollowinggeneralrequirementsmustbemet:
theyhavetobecompletecyclesandnotisolatedsubjects
theprivateentitymusthaveappropriateinfrastructure(workshops,laboratories,libraries,etc.)
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theprivateentitymusthaveappropriateinfrastructure(workshops,laboratories,libraries,etc.)
theprivateentitymusthaveprofessors,studyplans,programsandotheracademicelementsapprovedbyUNAMand
theprivateentitymustbesubjecttotheinspectionandsurveillanceofUNAMandpaythecorrespondingfees.
TheUNAMregulationsalsoprovidethatprivateentitiesincorporatedtoUNAMmustgrantscholarshipstoatleastfivepercentofthe
totalstudentsregisteredinsuchentity.Thesescholarshipsshallconsistoftheexemptioninwholeofpaymentoftheregistrationand
tuitionfeesestablishedbytheeducationalentity.ThestudentsentitledtohavethisbenefitwillbeselectedbyUNAM.Someofourhigh
schoolprogramsandoneofourmedicalprogramsareincorporatedtoUVMMexico.
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PeruvianRegulation
WeoperatefourpostsecondaryeducationinstitutionsinPeru,twoofwhichareuniversitiesandtwoofwhicharetechnicalvocational
institutes.Peruvianlawprovidesthatuniversitiesandtechnicalvocationalinstitutescanbeoperatedaspublicorprivateentities,andthat
theprivateentitiesmaybeorganizedforprofit.TheMinistryofEducationhasoverallresponsibilityforthenationaleducationsystem.
In2014,thePeruvianCongressenactedanewUniversityLawtoregulatetheestablishment,operation,monitoringandclosureof
universities.ThelawalsopromotescontinuousimprovementofqualityatPeruvianuniversities.Thelawcreatedanewagency,the
SuperintendenciadeEducacinSuperiorUniversitaria("SUNEDU"),whichisresponsibleforcarryingoutthegovernmentalrolein
universityregulation,includingensuringquality.Whileinstitutionalautonomyisstillrecognized,anduniversitiesarepermittedtocreate
theirowninternalgovernancerulesanddeterminetheirownacademic,managementandeconomicsystems,includingcurriculumdesign
andentranceandgraduationrequirements,allofthesemattersarenowsubjecttoreviewandevaluationbySUNEDUthroughitsperiodic
reviewofuniversitiesaspartofalicenserenewalprocess.
Underthenewlaw,universitylicensesaretemporarybutrenewable,andwillbegrantedbySUNEDUforamaximumofsixyears.On
November24,2015theBoardofSUNEDUpromulgatedregulationsfortheuniversitylicensingprocess.Forlicensestoberenewed,
universitieswillhavetodemonstratetoSUNEDUthatitcomplywith,ataminimum,certainBasicQualityConditions("BQCs")(i.e.,that
theyhavespecifiedacademicgoalsandthatthedegreesgrantedandplansofstudyarealignedwiththosegoals,thattheiracademic
offeringsarecompatiblewiththeirplanninggoals,(e.g.,thereissufficientlabordemandforcareersoffered)thatthereareonlytworegular
semestersofstudiesperyear,thattheyhaveappropriateinfrastructureandequipment,thattheyengageinresearch,thattheyhavea
sufficientsupplyofqualifiedteachers,atleast25%ofwhomwillneedtobefulltime,thattheysupplyadequatebasiccomplementary
educationalservices(e.g.,medicalandpsychologicalservicesandsportsactivities),thattheyprovideappropriateplacementoffice
services,andthattheyhavetransparencyofinstitutionalinformation).TherelicensingprocessstartedonDecember15,2015andwillend
onDecember31,2017andisdividedbygroups.UPCandUPNhavebeenincludedinGroup5,thereviewprocessforwhichwillstartin
early2017,althoughuniversitiesarepermittedtoapplyearlierthantheirscheduledtime.UPNappliedearlyinJuly2016,whileUPChas
untilFebruary2017tofile.ThereviewcommitteeofSUNEDUwillissuealicenseattheendoftherelicensingprocessor,alternatively,not
issuealicenseandprovideforaremediationperiodifoneormoreoftheBQCsarenot,initsopinion,satisfied.Followingaoneyear
period,SUNEDUwillmakeanewverificationvisitaftertheuniversityhaspresentedandimplementeditsremediationplan.
TechnicalvocationalinstitutesareregulatedbytheMinistryofEducation,whichgrantsoperatinglicensesfornotlessthanthreenor
morethansixyears,afterwhichtheMinistryconductsarevalidationprocess.Theapprovalofnewinstitutelicensesisbasedonthe
evaluationbytheMinistryoftheinstitute'sinstitutionalgoals,thecurriculaofitseducationprogramsandtheirlinkwithcareersneededin
thePeruvianeconomy,theavailabilityofadequatequalifiedteachers,theinstitute'sinfrastructure,theinstitute'sfinancialresources,and
thefavorableopinionoftheNationalSystemofAssessment,AccreditationandCertificationofEducationQuality("SINEACES")
regardingtheappropriatenessoftheprogramstheinstituteisoffering.SINEACESisalsoresponsiblefortheaccreditationofprogramsand
careersatallhighereducationinstitutions.OnNovember2,2016anewlawregardingtechnicalvocationalinstitutes(the"InstitutesLaw")
wasenacted.Regulationsareexpectedtobeissuedwithin120daysfromthedateofpassage.UndertheInstitutesLaw,technical
vocationalinstitutesareregulatedbytheMinistryofEducation,whichgrantsoperatinglicenses.TheInstitutesLawhascreatedtwotypes
ofinstitutes,HigherEducationInstitutes("Institutes")andHigherEducationColleges("Colleges").Institutesarededicatedtotechnical
careersandCollegesaredevotedtotechnicalcareersrelatedtoeducationaswellasscienceandinformationTechnology.Collegesgrant
TechnicalBachelorDegreesandProfessionalTechnicalDegrees.Thescopeofsuchdegreeswillbe
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definedmorecompletelybytheimplementingregulations.InstitutesandCollegesaresubjecttoamandatorylicensegrantedbythe
MinistryofEducation,basedonanevaluationtodeterminecompliancewithBQCs.BQCsinclude:anappropriateinstitutional
managementguaranteeingaproperrelationwiththeeducationalmodeloftheinstitutionappropriateacademicmanagementandproper
programstudiesalignedwiththeMinistryofEducationnormsappropriateinfrastructureandequipmenttodevelopeducationalactivities
adequateteachersandstaffwhich,ataminimum,shouldconsistof20%fulltimestaffandappropriatefinancialandeconomicprovisions.
Thelicensingprocessofinstitutesisstilltobedeterminedbytheregulations.However,theLawprovidesthattheprocesswilllastnomore
than90daysandwillgrantalicenseforafiveyearperiodtoberenewedonceexpired.Unlikelicenses,qualityaccreditationisvoluntary
exceptforcertaincareersforwhichitmightbemandatoryasdeterminedbylaw.Suchaccreditationwillbetakenintoconsiderationfor
accesstopublicgrantsforscholarshipsandresearchamongotherthings.PrivateInstitutesandCollegesmaybeorganizedasforprofitor
notforprofitentitiesunderPeruvianlaw.NotforprofitColleges'andInstitutes'incomeisexemptfromtaxesontheireducational
activities.ForprofitCollegesandInstitutesaresubjecttoincometaxes,butmayqualifyforataxcrediton30%oftheirreinvestedincome,
subjecttoareinvestmentprogramtobefiledwiththeMinistryofEducationforamaximumtermoffiveyears.Thespecificrequirements
ofsuchprogramsarestilltobedeterminedbytheregulations.
TherewasaPresidentialelectioninPeruduringthesecondquarterof2016,andthenewPresidententeredintoofficeattheendof
July2016.ThenewPresidentreappointedthesameMinisterofEducation,andtherehavebeennochangesinpolicyattheSUNEDUnor
areanyexpected.
TurkishRegulationandInternalInvestigation
ThroughourEuropeansegment,weoperateIstanbulBilgiUniversity,anetworkinstitutionlocatedinTurkeythatconsolidatesunder
thevariableinterestentitymodel.IstanbulBilgiUniversityisestablishedasaFoundationUniversityundertheTurkishhighereducation
law,sponsoredbytheBilgiFoundation.Assuch,itissubjecttoregulation,supervisionandinspectionbytheTurkishHigherEducation
Council(the"YK").In2014,theTurkishparliamentamendedthehighereducationlawtoprovideexpandedauthoritytotheYKwith
respecttoFoundationUniversities,includingauthorizingadditionalremediesforviolationsofthehighereducationlawandofregulations
adoptedbytheYK.OnNovember19,2015,theYKpromulgatedan"OrdinanceConcernedwithAmendmenttoFoundationHigh
EducationInstitutions"(the"Ordinance")theprincipaleffectsofwhichrelatetothesupervisionandinspectionofFoundationUniversities
bytheYK.UndertheOrdinance,theYKhasexpandedauthoritytoinspectaccounts,transactions,activitiesandassetsofFoundation
Universities,aswellastheiracademicunits,programs,projectsandsubjects.TheOrdinanceestablishesaprogressiveseriesoffive
remediesthattheYKcantakeintheeventitfindsaviolationoftheOrdinance,rangingfrom(1)awarningandrequestforcorrectionto
(2)thesuspensionoftheFoundationUniversity'sabilitytoestablishnewacademicunitsorprogramsto(3)limitingthenumberof
studentstheFoundationUniversitycanadmit,includingceasingnewadmissions,to(4)provisionalsuspensionoftheFoundation
University'slicenseto(5)cancellationoftheFoundationUniversity'slicense.SincethepromulgationoftheOrdinance,theYKhas
cancelledthelicensesof15FoundationUniversities.
andstudentservicesandcertainintellectualpropertyatfairmarketrates.TheYKconductsannualauditsoftheoperationsofIstanbul
BilgiUniversityandcurrentlyisintheprocessofcompletingitsmostrecentaudit.IftheYKweretodeterminethatanyofthese
contractsorthepaymentsmadebyIstanbul
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BilgiUniversitytothisLaureatesubsidiary,oranyotheractivitiesofIstanbulBilgiUniversity,including,asfurtherdescribedbelow,the
donationof40.0millionTurkishLirasmadebytheuniversitytoacharitablefoundationthatwassubsequentlyreimbursedtothe
universitybycertainLaureateownedentities,violatetheOrdinanceorotherapplicablelaw,theYKcouldtakeactionsagainstIstanbul
BilgiUniversityuptoandincludingcancellationofitslicense.Further,iftheYKweretodeterminethatanyadministratorsofIstanbul
BilgiUniversityhavedirectlytakenanyactionsorsupportedanyactivitiesthatareintendedtoharmtheintegrityofthestate,thelicense
oftheuniversitycouldbecancelled.InJuly2016,acoupattemptincreasedpoliticalinstabilityinTurkey,andtheuncertaintiesarising
fromthefailedcoupinTurkeycouldleadtochangesinlawsaffectingIstanbulBilgiUniversityorresultinmodificationstothecurrent
interpretationsandenforcementoftheOrdinanceorotherlawsandregulationsbytheYK.
misappropriatethefundsandwhetheranyportionofthefundswaspaidtogovernmentofficials.Wehavenotidentifiedthatanyother
officersoremployeesoutsideofTurkeywereinvolvedinthediversionoftheintendeddonation.Althoughwearepursuingeffortsto
recoverthedivertedfunds,thereisnoassurancethatwewillbesuccessful.
donation.
InSeptember2016,wevoluntarilydisclosedtheinvestigationtotheDOJandtheSEC.TheCompanyintendstofullycooperatewith
theseagenciesandanyotherapplicableauthoritiesinanyinvestigationthatmaybeconductedinthismatterbythem.TheCompanyhas
internalcontrolsandcompliancepoliciesandproceduresthataredesignedtopreventmisconductofthisnatureandsupportcompliance
withlawsandbestpracticesthroughoutitsglobaloperations.TheCompanyistakingstepstoenhancetheseinternalcontrolsand
compliancepoliciesandprocedures.Theinvestigationisongoing,andwecannotpredicttheoutcomeatthistime,ortheimpact,ifany,to
theCompany'sconsolidatedfinancialstatementsorpredicthowtheresultingconsequences,ifany,mayimpactour
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internalcontrolsandcompliancepoliciesandprocedures,business,abilityorrighttooperateinTurkey,resultsofoperationsorfinancial
position.IfwearefoundtohaveviolatedtheFCPAorotherlawsgoverningtheconductofouroperations,wemaybesubjecttocriminal
andcivilpenaltiesandotherremedialmeasures,whichcouldmateriallyadverselyaffectourbusiness,financialcondition,resultsof
operationsandliquidity.
See"Wecurrentlyhavefourmaterialweaknessesinourinternalcontroloverfinancialreportingthat,ifnotcorrected,couldresultin
materialmisstatementsofourfinancialstatements"and"Ourinstitutionsaresubjecttouncertainandvaryinglawsandregulations,and
anychangestotheselawsorregulationsortheirapplicationtousmaymateriallyadverselyaffectourbusiness,financialconditionand
resultofoperations."
U.S.Regulation
OurinstitutionsintheUnitedStatesaresubjecttoextensiveregulationbytheDOE,accreditingagenciesandstateeducational
agencies.Theregulations,standardsandpoliciesoftheseagenciescoversubstantiallyallofourU.S.Institutions'operations,including
theireducationalprograms,facilities,instructionalandadministrativestaff,administrativeprocedures,marketing,recruiting,finances,
resultsofoperationsandfinancialcondition.
Asinstitutionsofhighereducationthatgrantsdegreesanddiplomas,ourU.S.Institutionsarerequiredtobeauthorizedbyappropriate
stateeducationalagencies.Inaddition,theDOEregulatesourU.S.Institutionsduetotheirparticipationinfederalstudentfinancialaid
programsunderTitleIVoftheHEA,orTitleIVprograms.TitleIVprogramscurrentlyincludegrantsandeducationalloansprovided
directlybythefederalgovernment,includingloanstostudentsandparentsthroughtheWilliamD.FordFederalDirectLoanProgram(the
"DirectLoanProgram").TheDirectLoanProgramoffersFederalStaffordLoans,FederalParentPLUSLoans,FederalGradPLUSLoansand
FederalConsolidationLoans.PriortoJuly1,2010,TitleIVprogramsalsoincludededucationalloansissuedbyprivatebankswithbelow
marketinterestratesthatareguaranteedbythefederalgovernmentintheeventofastudent'sdefaultonrepayingtheloan.Asignificant
percentageofstudentsatourU.S.InstitutionsrelyontheavailabilityofTitleIVprogramstofinancetheircostofattendance.
ToparticipateinTitleIVprograms,ourU.S.Institutionsarerequiredtobothmaintainauthorizationbytheappropriatestate
educationalagencyoragenciesandbeaccreditedbyanaccreditingagencyrecognizedbytheDOE.TheHEArequiresaccrediting
agenciesrecognizedbytheDOEtoreviewandmonitormanyaspectsofaninstitution'soperationsandtotakeappropriateactionifthe
institutionfailstomeettheaccreditingagency'sstandards.
Weplanandimplementourbusinessactivitiestocomplywiththestandardsoftheseregulatoryagencies.Tomonitorcompliancewith
thisregulatoryenvironment,institutionsparticipatinginTitleIVprogramsundergoperiodicreviewstodemonstrate,amongotherthings,
thattheymaintainproperaccreditation,stateauthorization,andadequatefinancialresources.Historically,ourU.S.Institutionshave
maintainedeligibilitytoaccessTitleIVfunding.
StateEducationLicensureandRegulation
OurU.S.InstitutionsarerequiredbytheHEAtobeauthorizedbyapplicablestateeducationalagenciesinthestateswhereweare
locatedtoparticipateinTitleIVprograms.Tomaintainrequisitestateauthorizations,ourU.S.Institutionsarerequiredtocontinuously
meetstandardsrelatingto,amongotherthings,educationalprograms,facilities,instructionalandadministrativestaff,marketingand
recruitment,financialoperations,additionofnewlocationsandeducationalprogramsandvariousoperationalandadministrative
procedures.ThesestandardscanbedifferentthanandconflictwiththerequirementsoftheDOEandotherapplicableregulatorybodies.
Statelawsandregulationsmaylimitourabilitytooffereducationalprogramsandoffercertaindegrees.Somestatesmayalsoprescribe
financialregulationsthataredifferentfromthoseoftheDOEandmanyrequirethepostingofsurety
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bonds.Failuretocomplywiththerequirementsofapplicablestateeducationalagenciescouldresultinuslosingourauthorizationtooffer
educationalprogramsinthosestates.Ifthatweretooccur,theapplicablestateeducationalagencycouldforceustoceaseoperationsin
theirstate.Eveniftheapplicablestateeducationalagencydoesnotrequireaninstitutiontoceaseoperationsonanimmediatebasis,the
lossofauthorizationbythatstateeducationalagencywouldthencauseourinstitutioninsuchstatetoloseeligibilitytoparticipatein
TitleIVprograms,andsuchlossofTitleIVprogrameligibilitycouldforcethatinstitutiontoceaseoperationsinsuchstate.Alternatively,
thestateeducationallicensingagenciescouldrestricttheinstitution'sabilitytooffercertaindegreeordiplomaprograms.Wemayalsobe
subjecttoreviewbyapplicablestateeducationalagenciesorassociations.
EachofourU.S.Institutionsmaintainsanauthorizationfromthepertinentstateregulatoryauthorityinwhichsuchinstitutionsare
physicallylocated,orisexemptundercurrentstatelawfromarequirementtobespecificallyauthorized.Ifanyoftheauthorizations
providedtooneormoreofourU.S.InstitutionsaredeterminednottocomplywiththeDOEregulations,oroneormoreofourU.S.
InstitutionsisunabletoobtainormaintainanauthorizationthatsatisfiestheDOErequirements,studentsatthepertinentinstitutionmay
beunabletoaccessTitleIVfunds,whichcouldhaveamaterialadverseeffectonourbusiness,financialconditionandresultsofoperations
intheUnitedStates.
DOEregulationseffectiveJuly1,2011imposednewrequirementsregardingwhetherastate'sauthorizationofaneducational
institutionissufficientforpurposesofparticipationintheTitleIVprograms.Theseregulationsalsoincludedarequirementthatan
institutionmeetanystateauthorizationrequirementsinastateinwhichithasdistanceeducationstudents,butinwhichitisnot
physicallylocatedorotherwisesubjecttostatejurisdiction,asaconditionofawardingTitleIVfundstostudentsinthatstate.InJuly
2011,aFederalDistrictCourtissuedanordervacatingtheregulationasrelatedtodistanceeducation,whichwassustainedbytheUnited
StatesCourtofAppealsfortheDistrictofColumbiaCircuit.In2014,theDOEbegananewprogramintegritynegotiatedrulemakingthat
included,amongotherissues,stateauthorizationofdistanceeducation.InJune2014,theDOEannouncedthattherulemakingonstate
authorizationofdistanceeducationwouldbeputonholdatthattime.OnDecember19,2016,theDOEpublishedfinalregulations
regardingstateauthorizationforprogramsofferedthroughdistanceeducationandstateauthorizationforforeignlocationsofinstitutions.
Amongotherprovisions,thesefinalregulationsrequirethataninstitutionparticipatingintheTitleIVfederalstudentaidprogramsand
offeringpostsecondaryeducationthroughdistanceeducationbeauthorizedbyeachstateinwhichtheinstitutionenrollsstudents,ifsuch
authorizationisrequiredbythestate.TheDOEwouldrecognizeauthorizationthroughparticipationinastateauthorizationreciprocity
agreement,iftheagreementdoesnotpreventastatefromenforcingitsownlaws.Thefinalregulationsalsorequirethatforeignadditional
locationsandbranchcampusesbeauthorizedbytheappropriateforeigngovernmentagencyand,ifatleast50%ofaprogramcanbe
completedatthelocation/branch,beapprovedbytheinstitution'saccreditingagencyandbereportedtothestatewherethemaincampus
islocated.Thefinalregulationswouldalsorequireinstitutionsto:documentthestateprocessforresolvingcomplaintsfromstudents
enrolledinprogramsofferedthroughdistanceeducationorcorrespondencecoursesandmakecertainpublicandindividualized
disclosurestoenrolledandprospectivestudentsabouttheirdistanceeducationprograms.ThesefinalregulationsareeffectiveJuly1,
2018.
Independentofthismatteroffederalregulation,severalstateshaveassertedjurisdictionovereducationalinstitutionsofferingonline
degreeprogramsthathavenophysicallocationorotherpresenceinthestate,butthathavesomeactivityinthestate,suchasenrollingor
offeringeducationalservicestostudentswhoresideinthestate,conductingpracticaorsponsoringinternshipsinthestate,employing
facultywhoresideinthestateoradvertisingtoorrecruitingprospectivestudentsinthestate.Thus,ouractivitiesincertainstates
constituteapresencerequiringlicensureorauthorizationunderrequirementsofstatelaw,regulationorpolicyofthestateeducational
agency,eventhoughwedonothaveaphysicalfacilityinsuchstates.Therefore,inadditiontothestateswherewemaintain
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physicalfacilities,wehaveobtained,orareintheprocessofobtaining,approvalsorexemptionsthatwebelievearenecessaryin
connectionwithouractivitiesthatmayconstituteapresenceinsuchstatesrequiringlicensureorauthorizationbythestateeducational
agencybasedonthelaws,rulesorregulationsofthatstate.Someofourapprovalsarependingorareintherenewalprocess.St.Augustine
doesnothavecurrentapprovalsorexemptionsfromthestateeducationalagenciesoftwelvestatesinwhichSt.Augustinedoesnot
maintainphysicallocationsbuthasenrolledasmallnumberofstudents.Foreachsuchstate,St.Augustineiseitherintheprocessof
applyingforsuchapproval/exemptionorhasplanstosubmitsuchapplicationsin2017.Inrecentyears,severalstateshavevoluntarily
enteredintoSARAthatestablishstandardsforinterstateofferingofpostsecondarydistanceeducationcoursesandprograms.Ifan
institution'shomestateparticipatesinSARAandauthorizestheinstitutiontoprovidedistanceeducationinaccordancewithSARA
standards,thentheinstitutionneednotobtainadditionalauthorizationsfordistanceeducationfromanyotherSARAmemberstate.The
SARAparticipationrequirementsandprocessareadministeredbythefourregionalhighereducationcompactsintheUnitedStates(the
MHEC,theNewEnglandBoardofHigherEducation,theSouthernRegionalEducationBoardandtheWesternInterstateCommissionfor
HigherEducation)andisoverseenbytheNationalCouncilforStateAuthorizationReciprocityAgreements.
WaldenUniversitywasapprovedtoparticipateinSARA,effectivethroughJune2,2016.OnApril8,2016,theMOHEnotified
WaldenUniversitythatitsrenewalapplicationtoparticipateinSARAhasbeendeniedbecauseWaldenUniversitydoesnothavean
institutionalfederalfinancialcompositescorecomputedbytheDOEinconnectionwithWaldenUniversity'sparticipationinfederalTitle
IVfinancingprogramsof1.5orhigher,althoughtheinstitutionalfinancialcompositescorecalculationmadebyWaldenUniversityin
accordancewiththeDOE'spublishedformulaandbasedonWaldenUniversity's2014auditedfinancialstatementsis3.0.Intheabsenceof
aninstitutionlevelfinancialcompositescorecalculatedbyDOE,MOHEviewedLaureate'sfinancialcompositescorecalculatedbasedon
itsglobaloperations,whichdoesnotexceed1.5for2014,asattributabletoWaldenUniversity.
participatesinordertoseektoenrollnewstudentswhoresideinthosestates.Asofthedateofissuanceofthesefinancialstatements,
WaldenUniversityhasregainedauthorization,exemptionorotherrequiredstatusinallofthe31SARAstatesinwhichithasbeenaSARA
participant.LaureatebelievesthatthedecisionbytheMOHEandMHECshouldnothaveamaterialadverseeffectonLaureate'sbusiness,
financialcondition,resultsofoperationandcashflows.
Notwithstandingoureffortstoobtainapprovalsorexemptions,stateregulatoryrequirementsforonlineeducationvaryamongthe
states,arenotwelldevelopedinmanystates,areimpreciseorunclearinsomestatesandcanchangefrequently.BecauseourU.S.
Institutionsenrollstudentsinonlinedegreeprograms,weexpectthatregulatoryauthoritiesinotherstateswherewearenotcurrently
licensedorauthorizedmayrequestthatweseekadditionallicensesorauthorizationsfortheseinstitutionsintheirstatesinthefuture.If
anyofourU.S.Institutionsfailstocomplywithstatelicensingorauthorizationrequirementsforastate,orfailstoobtainlicensesor
authorizationswhenrequired,thatinstitutioncouldloseitsstatelicensureorauthorizationbythatstate,whichcouldprohibititfrom
recruitingprospectivestudentsorofferingservicestocurrentstudentsinthatstate.Wecouldalsobesubjecttoothersanctions,including
restrictionsonactivitiesinthatstate,finesandpenalties.Wereviewthelicensurerequirementsofotherstateswhenwebelievethatitis
appropriatetodeterminewhetherouractivitiesinthosestatesmayconstituteapresenceorotherwisemayrequirelicensureor
authorizationbytherespectivestateeducationagencies.Inaddition,statelawsandregulationsmaylimitourabilitytooffereducational
programsandtoawarddegreesandmaylimittheabilityofourstudentstositforcertificationexamsintheirchosenfieldsofstudy.New
laws,regulations
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orinterpretationsrelatedtoofferingeducationalprogramsonlinecouldincreaseourcostofdoingbusinessandaffectourabilitytorecruit
studentsinparticularstates,whichcould,inturn,adverselyaffectourU.S.Institutions'enrollmentsandrevenuesandhaveamaterial
adverseeffectonourbusiness.
Wealsoaresubjecttoextensivestatelawsandregulations,includingstandardsforinstruction,qualificationsoffaculty,
administrativeprocedures,marketing,recruiting,financialoperationsandotheroperationalmatters.Theproprietaryeducationindustryis
experiencingbroadbased,intensifyingscrutinyintheformofincreasedinvestigationsandenforcementactions.InOctober2014,the
DOEannouncedaninteragencytaskforcecomposedoftheDOE,theFTC,theU.S.DepartmentsofJustice,TreasuryandVeteransAffairs,
theCFPB,theSEC,andnumerousstateattorneysgeneral.Attorneysgeneralinseveralstateshavebecomemoreactiveinenforcing
consumerprotectionlaws,especiallyrelatedtorecruitingpracticesandthefinancingofeducationatproprietaryeducationalinstitutions.
Inaddition,severalstateattorneysgeneralhaverecentlypartneredwiththeCFPBtoreviewindustrypractices.TheFTChasalsorecently
issuedcivilinvestigativedemandstoseveralotherU.S.proprietaryeducationalinstitutions,whichrequiretheinstitutionstoprovide
documentsandinformationrelatedtotheadvertising,marketing,orsaleofsecondaryorpostsecondaryeducationalproductsorservices,
oreducationalaccreditationproductsorservices.Ifourpastorcurrentbusinesspracticesarefoundtoviolateapplicableconsumer
protectionlaws,orifwearefoundtohavemademisrepresentationstoourcurrentorprospectivestudentsaboutoureducationalprograms,
wecouldbesubjecttomonetaryfinesorpenaltiesandpossiblelimitationsonthemannerinwhichweconductourbusiness,whichcould
materiallyandadverselyaffectourbusiness,financialcondition,resultsofoperationsandcashflows.Totheextentthatmorestatesor
governmentagenciescommenceinvestigations,actinconcert,ordirecttheirfocusonourU.S.Institutions,thecostofrespondingtothese
inquiriesandinvestigationscouldincreasesignificantly,andthepotentialimpactonourbusinesswouldbesubstantiallygreater.
InJanuary2015,twostudentsfiledsuitagainstusandWaldenUniversity,seekingclassactionstatusandallegingclaimsforbreachof
contractandunjustenrichmentandviolationsoftheMarylandandIllinoisconsumerprotectionlawsandCaliforniaunfaircompetition
lawrelatedtothestudents'doctoraldissertationandmaster'sthesisprocesses.Athirdstudentjoinedasaplaintiffwhenthecomplaintwas
subsequentlyamended.TheclaimsfromallthreestudentswereresolvedinDecember2015anddismissedwithprejudiceasofJanuary5,
2016.ThethreeplaintiffshavereenrolledatWaldenUniversitytocompletetheirPh.D.programs.Inaddition,severalgroupsofcurrent
andformerstudentshavefiledfiveseparatelawsuitsagainstSt.Augustinerelatingtomattersarisingbeforeweacquiredtheschoolin
November2013.TheallegationspertaintoaprogramthatwaslaunchedinMay2011and,atthetime,offereda"MasterofOrthopaedic
Physician'sAssistantProgram"degree.Theplaintiffsinthesemattersallegethattheuniversitymisrepresentedtheirabilitytopracticeas
licensedPhysicianAssistantswithaheightenedspecialtyinorthopaedics.OneofthelawsuitswasresolvedinOctober2015,anotherwas
resolvedinMarch2016,andanotherwasresolvedinJune2016andallthreehavebeendismissed.See"BusinessLegalProceedings"for
moreinformation.Webelievetheclaimsintheremainingtwocasesarewithoutmeritandintendtodefendvigorouslyagainstthe
allegations.Anyadverseoutcomeinsuchlitigationcouldresultinmonetaryorinjunctiverelief,whichcouldadverselyaffectourU.S.
Institutionsandtheiroperations.OnSeptember8,2016,MOHEsenttoWaldenUniversityaninformationrequestregardingitsdoctoral
programsandcomplaintsfiledbydoctoralstudents,aspartofaprogramreviewthatMOHEisconducting.Wehavebeeninformedby
MOHEthatinanefforttobetterunderstandthecontext,backgroundandissuesrelatedtodoctoralstudentcomplaintsinMinnesota,
MOHEisinitiatingafullreviewofdoctoralprogramsforinstitutionsregisteredinMinnesota.
StateProfessionalLicensure
Manystateshavespecificlicensurerequirementsthatanindividualmustsatisfytobelicensedasaprofessionalinspecifiedfields,
includingfieldssuchaseducationandhealthcare.Theserequirements
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varybystateandbyfield.Astudent'ssuccessinobtaininglicensurefollowinggraduationtypicallydependsonseveralfactors,including
butnotlimitedto:thebackgroundandqualificationsoftheindividualgraduatewhethertheinstitutionandtheprogramwereapproved
bythestateinwhichthegraduateseekslicensurewhethertheprogramfromwhichthestudentgraduatedmeetsallrequirementsfor
professionallicensureinthatstatewhethertheinstitutionandtheprogramareaccreditedand,ifso,bywhataccreditingagenciesand
whethertheinstitution'sdegreesarerecognizedbyotherstatesinwhichastudentmayseektowork.Severalstatesalsorequirethat
graduatespassastatetestorexaminationasaprerequisitetobecomingcertifiedincertainfields,suchasteachingandnursing.Inseveral
states,aneducationalprogrammustbeapprovedbyaprofessionalassociationinorderforgraduatestobelicensedinthatprofessional
field.Inthefieldofpsychology,anincreasingnumberofstatesrequireapprovalbyeithertheAmericanPsychologicalAssociation("APA")
ortheAssociationofStateandProvincialPsychologyBoards("ASPPB").Todate,WaldenUniversityhasbeenunabletoobtainapproval
ofitsPh.D.programinCounselingPsychologyfromtheASPPBorAPA.Additionally,statesoftenrequireacriminalbackgroundclearance
beforegrantingcertainprofessionallicensuresorcertifications.ThecatalogsforourU.S.Institutionsinformstudentsthatitisincumbent
uponthestudenttoverifywhetheraspecificcriminalbackgroundclearanceisrequiredintheirfieldofstudypriortobeginningcourse
work.
Additionally,undertheHEA,proprietaryschoolsgenerallyareeligibletoparticipateinTitleIVprogramsinrespectofeducational
programsthatleadto"gainfulemploymentinarecognizedoccupation."AspartofregulationspromulgatedbytheDOEtomore
specificallydefine"gainfulemployment,"whichbecameeffectiveonJuly1,2015andaredescribedinmoredetailbelow,theDOEwill
requireeachofourU.S.Institutionstocertifythatitseducationalprogramsmeettheapplicablerequirementsforgraduatestobe
professionallyoroccupationallycertifiedinthestateinwhichtheinstitutionislocated.Failuretoprovidesuchcertificationmayresultin
suchprogramsbeingineligibleforTitleIVprogramfunds.Itispossiblethatseveralprogramsofferedbyourschoolsmaybeadversely
impactedbythisrequirementduetolackofspecializedprogramaccreditationorcertificationinthestatesinwhichsuchinstitutionsare
based.
Accreditation
Accreditationisaprivate,nongovernmentalprocessforevaluatingthequalityofeducationalinstitutionsandtheirprogramsinareas,
includingstudentperformance,governance,integrity,educationalquality,faculty,physicalresources,administrativecapabilityand
resourcesandfinancialstability.ToberecognizedbytheDOE,accreditingagenciesmustcomplywithDOEregulations,whichrequire,
amongotherthings,thataccreditingagenciesadoptspecificstandardsfortheirreviewofeducationalinstitutions,conductpeerreview
evaluationsofinstitutionsandpubliclydesignatethoseinstitutionsthatmeettheircriteria.Anaccreditedinstitutionissubjecttoperiodic
revieworreviewwhennecessarybyitsaccreditingagenciestodeterminewhetheritcontinuestomeettheperformance,integrityand
qualityrequiredforaccreditation.KendallCollegeandWaldenUniversityareinstitutionallyaccreditedbytheHigherLearning
Commission,aregionalaccreditingagencyrecognizedbytheDOE.NewSchoolofArchitectureandDesignandSt.Augustineare
institutionallyaccreditedbytheAccreditingCommissionforSeniorCollegesandUniversitiesoftheWesternAssociationofCollegesand
Schools("WASC").Accreditationbytheseaccreditingagenciesisimportanttousforseveralreasons,onebeingthatitenableseligible
studentsatourU.S.InstitutionstoreceiveTitleIVfinancialaid.Inaddition,othercollegesanduniversitiesdepend,inpart,onan
institution'saccreditationinevaluatingtransfersofcreditandapplicationstograduateschools.Employersalsorelyontheaccredited
statusofinstitutionswhenevaluatingcandidates'credentials,andstudentsandcorporateandgovernmentsponsorsundertuition
reimbursementprogramsconsideraccreditationasassurancethataninstitutionmaintainsqualityeducationalstandards.IfanyofourU.S.
Institutionsfailstosatisfythestandardsofitsrespectiveaccreditingagency,thatinstitutioncouldloseitsaccreditation
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bythataccreditingagency,whichwouldcauseittoloseitseligibilitytoparticipateinTitleIVprograms.
TheHEAandregulationsissuedbytheDOErequireaccreditingagenciestomonitorthegrowthofinstitutionsthattheyaccredit.Our
U.S.Institutions'respectiveaccreditingagenciesrequireallaffiliatedinstitutions,includingus,tocompleteanannualdatareport.Ifthe
nonfinancialdata,particularlyenrollmentinformation,andanyotherinformationsubmittedbytheinstitutionindicateproblems,rapid
changeorsignificantgrowth,thestaffoftherespectiveaccreditingagencymayrequirethattheinstitutionaddressanyconcernsarising
fromthedatareportinthenextselfstudyandvisitprocessormayrecommendadditionalmonitoring.Inaddition,DOEregulationsrequire
theHigherLearningCommissiontonotifytheDOEifaninstitutionitaccreditsthatoffersdistancelearningprograms,suchasKendall
CollegeandWaldenUniversity,experiencesanincreaseinitsheadcountenrollmentof50%ormoreinanyfiscalyear.TheDOEmay
considerthatinformationinconnectionwithitsownregulatoryoversightactivities.
Inadditiontoinstitutionwideaccreditation,therearenumerousspecializedaccreditingagenciesthataccreditspecificprogramsor
schoolswithintheirjurisdiction,manyofwhichareinhealthcareandprofessionalfields.Accreditationofspecificprogramsbyoneof
thesespecializedaccreditingagenciessignifiesthatthoseprogramshavemettheadditionalstandardsofthoseagencies.Inadditionto
beingaccreditedbyregionaland/ornationalaccreditingagencies,ourU.S.Institutionsalsohavethefollowingspecializedaccreditations:
theAmericanCulinaryFederationEducationFoundationAccreditingCommissionaccreditstheA.A.S.inCulinaryArtsand
theA.A.S.inBaking&PastryprogramsintheSchoolofCulinaryArtsatKendallCollege
theCouncilforAccreditationofCounselingandRelatedEducationalProgramsaccreditstheM.S.inClinicalMental
HealthCounseling,M.S.inMarriage,CoupleandFamilyCounselingandPh.D.inCounselorEducationandSupervision
programsatWaldenUniversity
theCommissiononCollegiateNursingEducationaccreditstheB.S.inNursing,M.S.inNursingandDoctorofNursing
PracticeprogramsatWaldenUniversity,andtheM.S.inNursingprogramatSt.Augustineholdsnewapplicantstatus
theAccreditationCouncilforBusinessSchoolsandProgramsaccreditstheB.S.inBusinessAdministration,Masterof
BusinessAdministration,DoctorofBusinessAdministrationandPh.D.inManagementprogramsatWaldenUniversity
theNationalArchitectureAccreditingBoardaccreditsNewSchoolofArchitectureandDesign'sarchitectureprograms
theNationalCouncilforAccreditationofTeacherEducationaccreditstheRichardW.RileyCollegeofEducationand
LeadershipatWaldenUniversity
theProjectManagementInstituteGlobalAccreditationCenterforProjectManagementEducationProgramaccreditsthe
M.S.inProjectManagementprogramatWaldenUniversity
theABETaccreditstheB.S.inInformationTechnologyonlineprogramatWaldenUniversity
theCommissionforAccreditationofPhysicalTherapyEducationaccreditsthefirstprofessionalPhysicalTherapyprograms
atSt.Augustine
theAccreditationCouncilforOccupationalTherapyEducationaccreditsthefirstprofessionalOccupationalTherapy
programsatSt.Augustine
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theInternationalAssociationforContinuingEducationandTrainingrecognizestheSt.AugustineasanAuthorized
Providerofcontinuingeducationprogramsand
theCouncilonSocialWorkEducationaccreditsthemaster'ssocialworkprogramatWaldenUniversity.
Ifwefailtosatisfythestandardsofanyofthesespecializedaccreditingagencies,wecouldlosethespecializedaccreditationforthe
affectedprograms,whichcouldresultinmateriallyreducedstudentenrollmentsinthoseprograms.
CongressionalHearingsandRelatedActions
TheU.S.CongressmustauthorizeandappropriatefundingforTitleIVprogramsundertheHEAandcanchangethelawsgoverning
TitleIVprogramsatanytime.TheHEAwasmostrecentlyreauthorizedinAugust2008throughfederalfiscalyear2014,althoughtheU.S.
CongresshastakenactionsrequiredtoextendTitleIVprogramswhileaHEAreauthorizationremainspendingandtheTitleIVprograms
remainauthorizedandfunctioning.CongresscontinuestoengageinHEAreauthorizationhearings,withsuchhearingsexaminingvarious
subjectstobepotentiallyaddressedthroughreauthorization,including,butnotlimitedto,collegeaffordability,theroleofconsumer
informationincollegechoicesbystudentsandfamilies,whetherTitleIVprogramsshouldincludeinstitutionalrisksharing,andtherole
ofaccreditingagenciesinensuringinstitutionalquality,amongotheritems.WecannotpredictthetimingandtermsofanyeventualHEA
reauthorization,includinganypotentialchangestoinstitutionalparticipationorstudenteligibilityrequirementsorfundinglevelsfor
particularTitleIVprograms.
InadditiontocomprehensivereauthorizationsoftheHEA,Congressmayperiodicallyrevisethelawandotherstatutoryrequirements
governingTitleIVprograms.InadditiontoTitleIVprograms,eligibleveteransandmilitarypersonnelmayreceiveeducationalbenefits
underotherfederalprograms.CongressmustdeterminethefundinglevelsforTitleIVprograms,andprogramsbenefitingeligibleveterans
andmilitarypersonnel,onanannualbasisthroughthebudgetandappropriationsprocess.AreductioninfederalfundinglevelsforTitle
IVprograms,orforprogramsprovidingeducationalbenefitstoveteransandmilitarypersonnel,couldreducetheabilityofsomestudents
tofinancetheireducation.Thelossof,orasignificantreductionin,TitleIVprogramfundsorotherfederaleducationbenefitsavailableto
studentsatourU.S.Institutionscouldreduceourenrollmentsandrevenuesandhaveamaterialadverseeffectonourbusiness.
Inrecentyears,theHouseEducationandWorkforceCommitteeandtheSenateHELPCommitteeintheU.S.Congresshaveincreased
thefocusontheroleoftheforprofitpostsecondaryeducationindustry.Inthepast,hearingsbythesecommitteeshavefocused,among
otherthings,onthemannerinwhichaccreditingagenciesreviewhighereducationinstitutions,studentrecruitingandadmissionsand
outcomesofstudents.InJuly2012,formerSenatorTomHarkin,thethenChairmanoftheSenateHELPCommittee,andthethenmajority
staffoftheSenateHELPCommitteereleasedareportanalyzinginformationfromthirtycompaniesoperatingproprietaryinstitutions,
includingWaldenUniversity.Whilestatingthatproprietaryeducationalinstitutionsplayanimportantroleinhighereducationand
shouldbewellequippedtomeettheneedsofnontraditionalstudentswhonowconstitutethemajorityofthepostsecondaryeducation
population,thereportwascriticaloftheproprietarysector.
TheU.S.CongressandtheDoDhaveincreasedtheirfocusonDoDtuitionassistancethatisusedfordistanceeducationandprograms
atproprietaryinstitutions.InSeptember2011,asubcommitteeoftheU.S.SenateHomelandSecurityandGovernmentAffairsCommittee
conductedhearingscoveringthequalityofeducationprovidedbyproprietaryinstitutionsandtreatmentofeducationalbenefitsfor
militarypersonnelforpurposesofthe90/10RuleoninstitutionaleligibilityforTitleIVprograms.InApril2012,PresidentObamasigned
anexecutiveorderaimedatprovidingmilitarypersonnel,veteransandtheirfamilymembers
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withtheresourcestheyneedtomakeaninformeddecisionabouttheireducationalprospectsandotherprotections.InAugust2013,the
DoDbeganincorporatingtheprinciplesofexcellenceoutlinedinthe2012ExecutiveOrderintotheircurrentMOU,whichincreases
oversightofeducationalprogramsofferedtoactivedutyservicemembersandconveysthecommitmentsandagreementsbetween
educationalinstitutionsandtheDoDpriortoacceptingfundsunderthetuitionassistanceprogram.Institutionswererequiredtosignthe
MOUbyMarch30,2012.AfterMarch1,2013,institutionswithoutasignedDoDMOUcannotenrollservicemembersunderthetuition
assistanceprogram.InMay2014,theDoDreleasedafinalversionofitsrevisedMOU,whichincludednewprovisionsapplicabletoall
highereducationalinstitutionsprovidingeducationalprogramsthroughtheDoDtuitionassistanceprogram.Amongotherthings,the
MOUrequestedthatparticipatinginstitutionsprovidemeaningfulinformationtostudentsaboutthefinancialcostandattendanceatan
institutionsomilitarystudentscanmakeinformeddecisionsonwheretoattendschool,willnotuseunfair,deceptive,andabusive
recruitingpracticesandwillprovideacademicandstudentsupportservicestoservicemembersandtheirfamilies.TherevisedMOUalso
implementedrulestostrengthenexistingproceduresforaccesstoDoDinstallationsbyeducationalinstitutions,aDoDPostsecondary
EducationComplaintSystemforservicemembers,spouses,andadultfamilymemberstoregisterstudentcomplaintsandestablished
authorizationforthemilitarydepartmentstoestablishservicespecifictuitionassistanceeligibilitycriteriaandmanagementcontrols.Our
U.S.InstitutionsutilizingtuitionassistancehavesignedDoD'sstandardMOU.TheDoDhasbeguntoincreaseitsenforcementactivityin
connectionwiththe2012ExecutiveOrder.
RegulationofFederalStudentFinancialAidPrograms
TobeeligibletoparticipateinTitleIVprograms,aninstitutionmustcomplywithspecificrequirementscontainedintheHEAandthe
regulationsissuedthereunderbytheDOE.Aninstitutionmust,amongotherthings,belicensedorauthorizedtoofferitseducational
programsbythestateorstatesinwhichitislocatedandmaintaininstitutionalaccreditationbyanaccreditingagencyrecognizedbythe
DOE.ThesubstantialamountoffederalfundsdisbursedtoschoolsthroughTitleIVprograms,thelargenumberofstudentsand
institutionsparticipatingintheseprogramsandallegationsoffraudandabusebycertainforprofiteducationalinstitutionshavecaused
CongresstorequiretheDOEtoexerciseconsiderableregulatoryoversightoverforprofiteducationalinstitutions.Asaresult,forprofit
educationalinstitutions,includingours,aresubjecttoextensiveoversightandreview.BecausetheDOEperiodicallyrevisesits
regulationsandchangesitsinterpretationsofexistinglawsandregulations,wecannotpredictwithcertaintyhowtheTitleIVprogram
requirementswillbeappliedinallcircumstances.
SignificantaspectsofTitleIVprogramsincludethefollowing:
Eligibilityandcertificationprocedures.EachofourU.S.InstitutionsmustapplyperiodicallytotheDOEforcontinuedcertification
toparticipateinTitleIVprograms.Suchrecertificationgenerallyisrequiredeverysixyears,butmayberequiredearlier,includingwhen
aninstitutionundergoesachangeincontrol.AninstitutionmayalsocomeundertheDOE'sreviewwhenitexpandsitsactivitiesincertain
ways,suchasopeninganadditionallocation,addinganeweducationalprogramormodifyingtheacademiccredentialsitoffers.TheDOE
mayplaceaninstitutiononprovisionalcertificationstatusifitfindsthattheinstitutiondoesnotfullysatisfyalloftheeligibilityand
certificationstandardsandincertainothercircumstances,suchaswhenaninstitutioniscertifiedforthefirsttimeorundergoesachangein
control.Duringtheperiodofprovisionalcertification,theinstitutionmustcomplywithanyadditionalconditionsincludedinthe
institution'sprogramparticipationagreementwiththeDOE.Inaddition,theDOEmaymorecloselyreviewaninstitutionthatis
provisionallycertifiedifitappliesforrecertificationorapprovaltoopenanewlocation,addaneducationalprogram,acquireanother
institutionormakeanyothersignificantchange.IftheDOEdeterminesthataprovisionallycertifiedinstitutionisunabletomeetits
responsibilitiesunderitsprogramparticipationagreement,itmayseektorevoketheinstitution'scertificationtoparticipateinTitleIV
programswithoutadvancenoticeor
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opportunityfortheinstitutiontochallengetheaction.Studentsattendingprovisionallycertifiedinstitutionsremaineligibletoreceive
TitleIVprogramfunds.EachofourU.S.InstitutionscurrentlyisprovisionallycertifiedtoparticipateinTitleIVprograms.Theyarealso
subjecttoaletterofcreditfornotsatisfyingtheDOE'sstandardsoffinancialresponsibility,asdescribedbelow.Inaddition,theyare
subjecttoadditionalcashmanagementrequirementswithrespecttotheirdisbursementsofTitleIVfunds,aswellascertainadditional
reportinganddisclosurerequirements.
Gainfulemployment.UndertheHEA,proprietaryschoolsgenerallyareeligibletoparticipateinTitleIVprogramsinrespectof
educationalprogramsthatleadto"gainfulemploymentinarecognizedoccupation."Asmentionedabove,in2013,theDOEestablisheda
negotiatedrulemakingcommitteetoaddressgainfulemploymentinarecognizedemployment.OnOctober30,2014,theDOEpublished
finalregulationstodefine"gainfulemployment,"whichbecomeeffectiveonJuly1,2015.Historically,theconceptof"gainful
employment"hasnotbeendefinedindetail.Thefinalregulationsrequireeacheducationalprogramofferedbyaproprietaryinstitutionto
achievethresholdratesintwodebtmeasurecategories:anannualdebttoannualearnings("DTE")ratioandanannualdebtto
discretionaryincome("DTI")ratio.
Theratiosarecalculatedundercomplexmethodologiesanddefinitionsoutlinedinthefinalregulationsand,insomecases,arebased
ondatathatmaynotbereadilyaccessibletous.TheDTEratioiscalculatedbycomparing(i)theannualloanpaymentrequiredonthe
medianstudentloandebtincurredbystudentsreceivingTitleIVprogramfundswhocompletedaparticularprogramand(ii)thehigherof
themeanormedianofthosestudents'annualearningsapproximatelytwotofouryearsaftertheygraduate.TheDTIratioiscalculatedby
comparing(x)theannualloanpaymentrequiredonthemedianstudentloandebtincurredbystudentsreceivingTitleIVprogramfunds
whocompletedaparticularprogramand(y)thehigherofthemeanormedianofthosestudents'discretionaryincomeapproximatelytwoto
fouryearsaftertheygraduate.
AneducationalprogrammustachieveaDTEratioatorbelow8%oraDTIratioatorbelow20%tobeconsidered"passing."An
educationalprogramwithaDTEratiogreaterthan8%butlessthanorequalto12%oraDTIratiogreaterthan20%butlessthanorequal
to30%isconsideredtobe"inthezone."AneducationalprogramwithaDTEratiogreaterthan12%andaDTIratiogreaterthan30%is
considered"failing."AneducationalprogramwillceasetobeeligibleforstudentstoreceiveTitleIVprogramfundsifitsDTEandDTI
ratiosarefailingintwooutofanythreeconsecutiveawardyearsorifbothofthoseratesarefailingorinthezoneforfourconsecutive
awardyears.
Thefinalregulationsalsorequireaninstitutiontoprovidewarningstocurrentandprospectivestudentsinprogramswhichmaylose
TitleIVeligibilityattheendofanawardorfiscalyear.Ifaneducationalprogramcouldbecomeineligiblebasedonitsratiosforthenext
awardyear,theinstitutionmust(1)deliverawarningtocurrentandprospectivestudentsintheprogramand(2)notenroll,registerorenter
intoafinancialcommitmentwithaprospectivestudentuntilthreebusinessdaysafterthewarningisprovidedorasubsequentwarningis
provided,ifmorethanthirtydayshavepassedsincethefirstwarning.IfaprogrambecomesineligibleforstudentstoreceiveTitleIV
programfunds,theinstitutioncannotseektoreestablisheligibilityofthatprogram,orestablishtheeligibilityofasimilarprogramhaving
thesameclassificationofinstructionalprogram("CIP")codewiththesamefirstfourdigitsoftheCIPcodeoftheineligibleprogramfor
threeyears.
Additionally,thefinalregulationsrequireaninstitutiontocertifytotheDOEthatitseducationalprogramssubjecttothegainful
employmentrequirements,whichincludeallprogramsofferedbyourU.S.Institutions,meettheapplicablerequirementsforgraduatesto
beprofessionallyoroccupationallylicensedorcertifiedinthestateinwhichtheinstitutionislocated.Ifweareunabletocertifythatour
programsmeettheapplicablestaterequirementsforgraduatestobeprofessionallyoroccupationally
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certifiedinthatstate,thenwemayneedtoceaseofferingcertainprogramsincertainstatesortostudentswhoareresidentsincertainstates.
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InNovember2014,twoorganizationsrepresentingforprofitinstitutionsfiledseparatelawsuitsinfederaldistrictcourtsagainstthe
DOEseekingtohavethefinalregulationsinvalidated.Inbothcases,thecourtsupheldtheregulationsanddismissedthelawsuits.
InJanuary2017,theDOEissuedtoinstitutionsfinalDTErates.AmongtheClassificationofInstructionalProgramsreportedwithin
NewSchoolofArchitectureandDesign,KendallCollegeandWaldenUniversity,theDOEhasindicatedthatwehadonethatfailedand
fiveinthezone.Thisrepresentsatotalofoneeducationalprogramthatfailedand10inthezone.St.Augustinehadnoprogramsthat
failedorwereinthezone.Thepercentageofstudentsenrolledintheeducationalprogramthatfailedrepresentsapproximately1%ofthe
studentscurrentlyenrolledinourU.S.Institutions.Thepercentageofstudentsenrolledintheeducationalprogramsthatwereinthezone
representsapproximately5.3%.Wearecurrentlyexaminingandimplementingoptionsforeachoftheseprogramsandtheirstudents.The
failureofanyprogramorprogramsofferedbyanyofourU.S.Institutionstosatisfyanygainfulemploymentregulationscouldrenderthat
programorprogramsineligibleforTitleIVprogramfunds.IfaparticulareducationalprogramceasedtobecomeeligibleforTitleIV
programfunds,eitherbecauseitfailstopreparestudentsforgainfulemploymentinarecognizedoccupationorduetootherfactors,we
maychoosetoceaseofferingthatprogram.Itispossiblethatseveralprogramsofferedbyourschoolsmaybeadverselyimpactedbythe
regulationsduetolackofspecializedprogramaccreditationorcertificationinthestatesinwhichsuchinstitutionsarebased.Wealso
couldberequiredtomakechangestocertainprogramsatourU.S.Institutionsortoincreasestudentloanrepaymenteffortsinorderto
complywiththeruleortoavoidtheuncertaintyassociatedwithsuchcompliance.
Administrativecapability.DOEregulationsspecifyextensivecriteriabywhichaninstitutionmustestablishthatithastherequisite
"administrativecapability"toparticipateinTitleIVprograms.Tomeettheadministrativecapabilitystandards,aninstitutionmust,among
otherthings:complywithallapplicableTitleIVprogramrequirementshaveanadequatenumberofqualifiedpersonneltoadminister
TitleIVprogramshaveacceptablestandardsformeasuringthesatisfactoryacademicprogressofitsstudentsnothavestudentloancohort
defaultratesabovespecifiedlevelshavevariousproceduresinplaceforawarding,disbursingandsafeguardingTitleIVprogramfunds
andformaintainingrequiredrecordsadministerTitleIVprogramswithadequatechecksandbalancesinitssystemofinternalcontrols
notbe,andnothaveanyprincipaloraffiliatewhois,debarredorsuspendedfromfederalcontractingorengaginginactivitythatiscause
fordebarmentorsuspensionprovidefinancialaidcounselingtoitsstudentsrefertotheDOE'sOfficeofInspectorGeneralanycredible
informationindicatingthatanystudent,parent,employee,thirdpartyservicerorotheragentoftheinstitutionhasengagedinanyfraudor
otherillegalconductinvolvingTitleIVprogramssubmitallrequiredreportsandfinancialstatementsinatimelymannerandnot
otherwiseappeartolackadministrativecapability.Ifaninstitutionfailstosatisfyanyofthesecriteria,theDOEmayrequiretheinstitution
torepayTitleIVfundsitsstudentspreviouslyreceived,changetheinstitution'smethodofreceivingTitleIVprogramfunds,whichin
somecasesmayresultinasignificantdelayintheinstitution'sreceiptofthosefunds,placetheinstitutiononprovisionalcertification
statusorcommenceaproceedingtoimposeafineortolimit,suspendorterminatetheinstitution'sparticipationinTitleIVprograms.Ifthe
DOEdeterminesthatanyofourU.S.Institutionsfailedtosatisfyitsadministrativecapabilityrequirements,thentheinstitution'sstudents
couldlose,orbelimitedintheiraccessto,TitleIVprogramfunding.
Financialresponsibility.TheHEAandDOEregulationsestablishextensivestandardsoffinancialresponsibilitythatinstitutions
suchasoursmustsatisfytoparticipateinTitleIVprograms.TheDOEevaluatesinstitutionsforcompliancewiththesestandardsonan
annualbasisbasedontheinstitution'sannualauditedfinancialstatementsaswellaswhentheinstitutionappliestotheDOEtohaveits
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eligibilitytoparticipateinTitleIVprogramsrecertified.Themostsignificantfinancialresponsibilitystandardistheinstitution's
compositescore,whichisderivedfromaformulaestablishedbytheDOEbasedonthreefinancialratios:(1)equityratio,whichmeasures
theinstitution'scapitalresources,financialviabilityandabilitytoborrow(2)primaryreserveratio,whichmeasurestheinstitution's
abilitytosupportcurrentoperationsfromexpendableresourcesand(3)netincomeratio,whichmeasurestheinstitution'sabilityto
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abilitytosupportcurrentoperationsfromexpendableresourcesand(3)netincomeratio,whichmeasurestheinstitution'sabilityto
operateataprofitorwithinitsmeans.TheDOEassignsastrengthfactortotheresultsofeachoftheseratiosonascalefromnegative1.0to
positive3.0,withnegative1.0reflectingfinancialweaknessandpositive3.0reflectingfinancialstrength.TheDOEthenassignsa
weightingpercentagetoeachratioandaddstheweightedscoresforthethreeratiostogethertoproduceacompositescoreforthe
institution.Thecompositescoremustbeatleast1.5fortheinstitutiontobedeemedfinanciallyresponsiblewithouttheneedforfurther
DOEoversight.Inadditiontohavinganacceptablecompositescore,aninstitutionmust,amongotherthings,providetheadministrative
resourcesnecessarytocomplywithTitleIVprogramrequirements,meetallofitsfinancialobligationsincludingrequiredrefundsto
studentsandanyTitleIVliabilitiesanddebts,becurrentinitsdebtpaymentsandnotreceiveanadverse,qualifiedordisclaimedopinion
byitsaccountantsinitsauditedfinancialstatements.
IftheDOEdeterminesthataninstitutiondoesnotmeetthefinancialresponsibilitystandardsduetoafailuretomeetthecomposite
scoreorotherfactors,theinstitutionisabletoestablishfinancialresponsibilityonanalternativebasispermittedbytheDOE.This
alternativebasiscouldinclude,intheDepartment'sdiscretion,postingaletterofcredit,acceptingprovisionalcertification,complying
withadditionalDOEmonitoringrequirements,agreeingtoreceiveTitleIVprogramfundsunderanarrangementotherthantheDOE's
standardadvancefundingarrangement,suchasthereimbursementmethodofpaymentorheightenedcashmonitoring,orcomplyingwith
oracceptingotherlimitationsontheinstitution'sabilitytoincreasethenumberofprogramsitoffersorthenumberofstudentsitenrolls.
TheDOEmeasuresthefinancialresponsibilityofseveralofourU.S.InstitutionsonthebasisoftheLaureateconsolidatedaudited
financialstatementsandnotattheindividualinstitutionlevel.InOctober2014,uponreviewofthosefinancialstatements,theDOE
determined,basedonLaureate'scompositescoreforitsfiscalyearendedDecember31,2013,thatitand,consequently,WaldenUniversity,
NewSchoolofArchitectureandDesignandKendallCollegefailedtomeetthestandardsoffinancialresponsibility.Asaresult,theDOE
requiredustoincreaseourrequiredletterofcreditamounttoapproximately$85.6millionforWaldenUniversity,NewSchoolof
ArchitectureandDesignandKendallCollege,whichisequaltoapproximately10%ofTitleIVprogramfundsthattheseinstitutions
receivedduringthefiscalyearendedDecember31,2013.InSeptember2015,theDOErequiredustoincreaseourrequiredletterofcredit
amountto$85.8millionforWaldenUniversity,NewSchoolofArchitectureandDesignandKendallCollege,whichisapproximately10%
ofTitleIVprogramfundsthattheseinstitutionsreceivedduringthefiscalyearendedDecember31,2014.Werenewedourletterofcredit
forthisrequiredamount.InMarch2016,inconnectionwithitsreviewofourfinancialstatementsfollowingourconversiontoaDelaware
publicbenefitcorporation,theDOEsentusaletterrequiringustoincreaseourexistingletterofcreditby$4,682,990totheamountof
$90,508,766forKendallCollege,St.Augustine,WaldenUniversityandNewSchoolofArchitectureandDesign,whichisequalto
approximately10%oftheTitleIVprogramfundsthattheseschoolsreceivedduringthemostrecentlycompletedfiscalyear.Intheletter,
DOEalsohasrequiredustocontinuetocomplywithadditionalnotificationandreportingrequirements.Wehaveprovidedtheincreased
letterofcreditandarecomplyingwiththeadditionalnotificationandreportingrequirements.
Laureate'sfailuretomeetstandardsoffinancialresponsibilityforthefiscalyearendedDecember31,2015,wearerequiredtoeither:
1)increaseourletterofcredittoanamountequalto50%(calculatedbytheDOEtobe$351,995,250)oftheTitleIV,HEAfundsreceived
by
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LaureateinthefiscalyearendedDecember31,2015andqualifyasafinancialresponsibleinstitutionor2)increaseourletterofcreditto
anamountequalto15%(calculatedbytheDOEtobe$105,598,575),oftheTitleIV,HEAfundsreceivedbyLaureateinthefiscalyear
endedDecember31,2015andremainprovisionallycertifiedforaperiodofuptothreecompleteawardyears.Intheletter,theDOEalso
hasrequiredustocontinuetocomplywithadditionalnotificationandreportingrequirements.Wehavechosentoincreaseourletterof
creditto$105,598,575andtoremainprovisionallycertifiedforaperiodofuptothreecompleteawardyearsandhaveobtaineda
replacementletterofcredit.St.Augustine,WaldenUniversity,NewSchoolofArchitectureandDesignandKendallCollegealsocurrently
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replacementletterofcredit.St.Augustine,WaldenUniversity,NewSchoolofArchitectureandDesignandKendallCollegealsocurrently
receiveTitleIVprogramfundsundertheleastrestrictiveformofheightenedcashmonitoring.WehaveprovidedtheDOEwiththe
increasedletterofcredit.
Further,theDOE,asaconditiontotheprovisionalprogramparticipationagreementoftheNationalHispanicUniversity,requested
thatwepostanadditionalletterofcreditinanamountequalto$1,473,990,representing25%oftheTitleIVprogramfundsreceivedby
theNationalHispanicUniversityduringthefiscalyearendedDecember31,2013.InOctober2015,theDOEsentusaletterrequiringusto
renewourletterofcreditintheamountof$772,931fortheNationalHispanicUniversity(25%ofthetotalTitleIVprogramfundsthe
institutionreceivedduringthefiscalyearendedDecember31,2014).Werenewedourletterofcreditforthisrequiredamount.This
requirementwasinitiallyduetothefactthatthesubsidiarycorporationusedtoacquiretheinstitution'sassetsdidnotpossesstwoyearsof
auditedfinancialstatementsatthetimeoftheacquisitioninApril2010,andtherequirementhasbeencontinuedbasedontheDOE's
reviewoftheinstitution'sauditedfinancialstatements.WereceivedaletterdatedSeptember21,2016fromtheDOEconfirmingthatthis
letterofcreditforNationalHispanicUniversitywasnolongerrequiredandmaybecancelledbyourbank.Wehavecancelledthisletterof
creditandthefundshavebeenreleasedbacktous.
InDecember2015,theDOEsentusaletterrequiringustopostaletterofcreditintheamountof$14,967forSt.Augustine(25%of
thetotalTitleIVprogramrefundstheinstitutionmadeorshouldhavemadeduringthefiscalyearendedDecember31,2014).This
requirementwasduetothefactthatSt.Augustinewasfoundtohaveissuedlaterefundstomorethan5%ofthestudentsinitsauditor's
sampleforthe2014fiscalyear.Wehaveobtainedthisletterofcredit.Anyrequirementtopost,maintainorincreasealetterofcreditor
othersanctionsthatmaybeimposedbytheDOEcouldincreaseourcostofregulatorycomplianceandcouldaffectourcashflows.The
DOEhasthediscretiontoincreaseourletterofcreditrequirementsatanytime.IfourU.S.Institutionsareunabletomeettheminimum
compositescorerequirementorcomplywiththeotherstandardsoffinancialresponsibility,andcouldnotpostarequiredletterofcreditor
complywiththealternativebasesforestablishingfinancialresponsibility,thenstudentsatourU.S.Institutionscouldlosetheiraccessto
TitleIVprogramfunding.
OnNovember1,2016,theDOEissuedafinalruletoreviseitsgeneralstandardsoffinancialresponsibilitytoincludevariousactions
andeventsthatwouldrequireinstitutionstoprovidetheDOEwithirrevocablelettersofcredit.Foradditionalinformationregardingthis
finalrule,see"AdditionalDOErulemakingactivities."IfwearerequiredtorepaytheDOEforanysuccessfulDTRclaimsbystudents
whoattendedourU.S.Institutions,orwearerequiredtoobtainadditionallettersofcreditorincreaseourcurrentletterofcredit,itcould
materiallyaffectourbusiness,financialconditionsandresultsofoperations.Wearecurrentlyassessingtheimpactofthesefinal
regulationsonourU.S.Institutions.
ReturnofTitleIVfundsforstudentswhowithdraw.WhenastudentwhohasreceivedTitleIVfundswithdrawsfromschool,the
institutionmustdeterminetheamountofTitleIVprogramfundsthestudenthas"earned."TheinstitutionmustreturnanyunearnedTitle
IVprogramfundstotheappropriatelenderortheDOEinatimelymanner,whichisgenerallynolaterthan45daysafterthedatethe
institutiondeterminedthatthestudentwithdrew.Ifsuchpaymentsarenottimelymade,theinstitutionwillberequiredtosubmitaletterof
credittotheDOEequalto25%oftheTitleIVfunds
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thattheinstitutionshouldhavereturnedforwithdrawnstudentsinitsmostrecentlycompletedfiscalyear.UnderDOEregulations,late
returnsofTitleIVprogramfundsfor5%ormoreofthewithdrawnstudentsintheauditsampleintheinstitution'sannualTitleIV
complianceauditforeitheroftheinstitution'stwomostrecentfiscalyearsorinaDOEprogramreviewtriggersthisletterofcredit
requirement.
AfinalprogramreviewdeterminationissuedbytheDOEonMarch3,2015foundthatWaldenUniversityfailedtotimelyreturnTitle
IVprogramfundsformorethan5%ofthewithdrawnstudentsduringitsfiscalyearendedDecember31,2012.TheDOEnotedthatsucha
findingwouldusuallyrequireWaldentopostaletterofcredittotheDOEequalto25%oftheTitleIVfundsthattheinstitutionshould
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findingwouldusuallyrequireWaldentopostaletterofcredittotheDOEequalto25%oftheTitleIVfundsthattheinstitutionshould
havereturnedforwithdrawnstudentsinitsmostrecentlycompletedfiscalyearhowever,suchanadditionalletterofcreditwasnot
requiredinthisinstancebecauseoftheletterofcreditthatwaspreviouslypostedtotheDOEbasedonourconsolidatedauditedfinancial
statementsfailingtomeettheDOE'sstandardsoffinancialresponsibility.
The"90/10Rule."ArequirementoftheHEAcommonlyreferredtoasthe"90/10Rule"providesthataninstitutionlosesits
eligibilitytoparticipateinTitleIVprograms,if,underacomplexregulatoryformulathatrequirescashbasisaccountingandother
adjustmentstothecalculationofrevenue,theinstitutionderivesmorethan90%ofitsrevenuesforanyfiscalyearfromTitleIVprogram
funds.Thisruleappliesonlytoforprofitpostsecondaryeducationalinstitutions,includingourU.S.Institutions.Aninstitutionissubject
tolossofeligibilitytoparticipateinTitleIVprogramsifitexceedsthe90%thresholdfortwoconsecutivefiscalyears,andaninstitution
whoserateexceeds90%foranysinglefiscalyearwillbeplacedonprovisionalcertificationandmaybesubjecttoadditionconditionsor
sanctionsimposedbytheDOE.
UsingtheDOE'sformulaunderthe"90/10Rule,"KendallCollegederivedapproximately36%,35%and43%ofitsrevenues
(calculatedonacashbasis)fromTitleIVprogramfundsinfiscalyears2015,2014and2013,respectively.NewSchoolofArchitectureand
Designderivedapproximately43%,47%and56%ofitsrevenues(calculatedonacashbasis)fromTitleIVprogramfundsinfiscalyears
2015,2014and2013,respectively.St.Augustinederivedapproximately49%,46%and47%ofitsrevenues(calculatedonacashbasis)
fromTitleIVprogramfundsinfiscalyears2015,2014and2013,respectively.WaldenUniversityderivedapproximately73%,74%and
74%ofitsrevenues(calculatedonacashbasis)fromTitleIVprogramfundsinfiscalyears2015,2014and2013,respectively.
TheabilityofourU.S.Institutionstomaintain90/10ratesbelow90%willdependonourenrollments,anyincreasesinstudentsTitle
IVfundingeligibilityinthefuture,andotherfactorsoutsideofourcontrol,includinganyreductioningovernmentassistanceformilitary
personnel,includingveterans,orchangesinthetreatmentofsuchfundingforthepurposesofthe90/10calculation.Inrecentyears,
severalmembersofCongresshaveintroducedproposalsandlegislationthatwouldmodifythe90/10Rule.Onesuchproposalwould
revisethe90/10Ruletoan85/15ruleandwouldcountDoDtuitionassistanceandGIBilleducationbenefitstowardthatlimit.Wecannot
predictwhether,ortheextenttowhich,theseactionscouldresultinlegislationorfurtherrulemakingaffectingthe90/10Rule.Tothe
extentthatanysuchlawsorregulationsareenacted,ourU.S.Institutions'financialconditioncouldbeadverselyaffected.
Studentloandefaults.UndertheHEA,aneducationalinstitutionmayloseitseligibilitytoparticipateinsomeorallTitleIV
programsifdefaultsbyitsstudentsontherepaymentoffederalstudentloansreceivedunderTitleIVprogramsexceedcertainlevels.For
eachfederalfiscalyear,theDOEcalculatesarateofstudentdefaultsonsuchloansforeachinstitution,knownasa"cohortdefaultrate."
Undercurrentregulations,aninstitutionwillloseitseligibilitytoparticipateinTitleIVprogramsifitsthreeyearcohortdefaultrate
equalsorexceeds30%forthreeconsecutivecohortyearsor40%foranygivenyear.
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KendallCollege'sofficialthreeyearcohortdefaultratesforthe2013,2012and2011federalfiscalyearswere10.0%,7.9%and11.3%,
respectively.NewSchoolofArchitectureandDesign'sofficialthreeyearcohortdefaultratesforthe2013,2012and2011federalfiscal
yearswere5.1%,10.2%and11.2%,respectively.St.Augustine'sofficialthreeyearcohortdefaultratesforthe2013,2012and2011federal
fiscalyearswere0.2%,0.5%,and0.0%,respectively.WaldenUniversity'sofficialthreeyearcohortdefaultratesforthe2013,2012and
2011federalfiscalyearswere6.7%,6.8%and7.8%,respectively.TheaveragenationalstudentloandefaultratespublishedbytheDOEfor
allinstitutionsthatparticipatedinthefederalstudentaidprogramsfor2013,2012and2011were11.3%,11.8%and13.7%,respectively,
andforallproprietaryinstitutionsthatparticipatedinthefederalstudentaidprogramsfor2013,2012and2011were15.0%,15.8%and
19.1%,respectively.
The2008reauthorizationoftheHEAmodifiedthecohortdefaultratecalculationtoincreasebyoneyearthemeasuringperiodfor
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The2008reauthorizationoftheHEAmodifiedthecohortdefaultratecalculationtoincreasebyoneyearthemeasuringperiodfor
eachcohort.StartinginSeptember2012,theDOEbeganpublishingthreeyearcohortdefaultratesinadditiontothetwoyearrates.Two
yearcohortdefaultrateswerenolongercalculatedfollowingthereleaseofthe2011twoyearrates.
Incentivecompensationrule.UndertheHEA,aneducationalinstitutionthatparticipatesinTitleIVprogramsmaynotmakeany
commission,bonusorotherincentivepaymentstoanypersonsorentitiesinvolvedinrecruitmentoradmissionsactivitiesorinthe
awardingoffinancialaidpertainingtoU.S.citizens,permanentresidentsandotherstemporarilyresidingintheUnitedStateswiththe
intentionofbecomingacitizenorpermanentresident.TheDOEhastakenthepositionthatanycommission,bonusorotherincentive
compensationbasedinanypart,directlyorindirectly,orsecuringenrollmentorawardingfinancialaidisinconsistentwiththestatutory
prohibitionagainstincentivecompensation.TheDOEhasmaintainedthatinstitutionsmaymakemeritbasedadjustmentstoemployee
compensation,providedthatthoseadjustmentsarenotbased,inanypart,directlyorindirectly,uponsecuringenrollmentsorawarding
financialaid.Insubregulatorycorrespondencetoinstitutionsregardingitsregulatorychanges,theDOEprovidedadditionalguidance
regardingthescopeoftheprohibitiononincentivecompensationandtowhatemployeesandtypesofactivitiestheprohibitionapplies.
Inaddition,inrecentyears,otherpostsecondaryeducationalinstitutionshavebeennamedasdefendantstowhistleblowerlawsuits,
knownas"quitam"cases,broughtbycurrentorformeremployeespursuanttotheFederalFalseClaimsAct,allegingthattheirinstitutions'
compensationpracticesdidnotcomplywiththeincentivecompensationrule.Aquitamcaseisacivillawsuitbroughtbyoneormore
individuals(a"relator")onbehalfofthefederalgovernmentforanallegedsubmissiontothegovernmentofafalseclaimforpayment.The
relator,oftenacurrentorformeremployee,isentitledtoashareofthegovernment'srecoveryinthecase,includingthepossibilityoftreble
damages.Aquitamactionisalwaysfiledundersealandremainsundersealuntilthegovernmentdecideswhethertointerveneinthecase.
Ifthegovernmentintervenes,ittakesoverprimarycontrolofthelitigation.Ifthegovernmentdeclinestointerveneinthecase,therelator
maynonethelesselecttocontinuetopursuethelitigationathisorherownexpenseonbehalfofthegovernment.Anysuchlitigation
couldbecostlyandcoulddivertmanagement'stimeandattentionawayfromthebusiness,regardlessofwhetheraclaimhasmerit.
Substantialmisrepresentation.AninstitutionparticipatinginTitleIVprogramsisprohibitedfrommakingmisrepresentations
regardingthenatureofitseducationalprograms,thenatureoffinancialchargesandavailabilityoffinancialassistance,orthe
employabilityofgraduates.Amisrepresentationisdefinedintheregulationsasanyfalse,erroneousormisleadingstatementtoany
studentorprospectivestudent,anymemberofthepublic,anaccreditingagency,astateagencyortheDOE,and,significantly,the
regulationsaspromulgatedbytheDOEdefinemisleadingstatementstobroadlyincludeanystatementsthathavealikelihoodortendency
todeceive.IfanyofourU.S.Institutionsoranyentity,organization,orpersonwithwhomtheinstitutionhasanagreementtoprovide
educationalprogramsortoprovidemarketing,advertising,recruiting,oradmissionsservicescommittedamisrepresentationfor
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whichapersoncouldreasonablybeexpectedtorely,orhasreasonablyrelied,tothatperson'sdetriment,theDOEcouldinitiate
proceedingstorevoketheinstitution'sTitleIVeligibility,denyapplicationsmadebytheinstitution,imposefines,orinitiatealimitation,
suspensionorterminationproceedingagainsttheinstitution.
Compliancereviews.OurU.S.Institutionsaresubjecttoannouncedandunannouncedcompliancereviewsandauditsbyvarious
externalagencies,includingtheDOE,itsOfficeofInspectorGeneral,statelicensingagencies,variousstateapprovingagenciesfor
financialassistancetoveteransandaccreditingagencies.Ingeneral,aftertheDOEconductsasitevisitandreviewsdatasuppliedbyan
institution,theDOEsendstheinstitutionaprogramreviewreportandaffordstheinstitutionwithanopportunitytorespondtoany
findings.TheDOEthenissuesafinalprogramreviewdeterminationletter,whichidentifiesanyliabilities.
OnMarch3,2015,theDOEissuedafinalprogramreviewdeterminationlettertoWaldenUniversityforaSeptember2012reviewof
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foundthatWaldenUniversityfailedtotimelyreturnTitleIVprogramfundsformorethan5%ofthewithdrawnstudentsduringitsfiscal
yearendedDecember31,2012.TheDOEnotedthatsuchafindingwouldusuallyrequireWaldentopostaletterofcredittotheDOE
equalto25%oftheTitleIVfundsthattheinstitutionshouldhavereturnedforwithdrawnstudentsinitsmostrecentlycompletedfiscal
yearhowever,suchanadditionalletterofcreditwasnotrequiredinthisinstancebecauseoftheletterofcreditthatwaspreviouslyposted
totheDOEbasedonourconsolidatedauditedfinancialstatementsfailingtomeettheDOE'sstandardsoffinancialresponsibility.On
February3,2015,theDOEissuedafinalprogramreviewdeterminationlettertoNationalHispanicUniversityregardingaDecember2013
reviewcoveringthe20122013and20132014TitleIVawardyears.TheletterdeterminedthatNationalHispanicUniversityhastaken
correctiveactionsnecessarytoresolveallfindingsnotedinthepreliminaryreport,exceptforcertainfindingsrelatedtodrugandalcohol
abusepreventionprogramrequirements.Withrespecttothosefindings,theDOEdidnotrequireanyfurtheractionduetothefactthatthe
NationalHispanicUniversityclosedonAugust23,2015.OnSeptember11,2015,theDOEissuedanexpeditedfinalprogramreview
determinationlettertoKendallCollegeregardingaMarchApril2015programreview.TheletterdeterminedthatKendallCollegehas
takencorrectiveactionsnecessarytoresolveallfindings.Inaddition,onSeptember21,2015,theHigherLearningCommissionnotified
KendallCollegethattheHigherLearningCommissionplacedtheschoolonongoingfinancialmonitoringoverthenext24months.Such
actionwasprimarilyduetoconcernsovertheschool'scontinuedrelianceuponLaureatetoprovidefinancialsupporttosustainits
operations.InMay2017,KendallCollegeandWaldenUniversityarescheduledtohostinterimsitevisitsfromtheirinstitutional
accreditor,HigherLearningCommission,asaconditionoftheirongoingaccreditation.OnSeptember8,2016,MOHEsenttoWalden
Universityaninformationrequestregardingitsdoctoralprogramsandcomplaintsfiledbydoctoralstudents,aspartofaprogramreview
thatMOHEisconducting.WehavebeeninformedbyMOHEthatinanefforttobetterunderstandthecontext,backgroundandissues
relatedtodoctoralstudentcomplaintsinMinnesota,MOHEisinitiatingafullreviewofdoctoralprogramsforinstitutionsregisteredin
Minnesota.
AspartoftheDOE'songoingmonitoringofinstitutions'administrationofTitleIVprograms,theHEAalsorequiresinstitutionsto
annuallysubmittotheDOEaTitleIVcomplianceauditconductedbyanindependentcertifiedpublicaccountantinaccordancewith
applicablefederalandDOEauditstandards.Inaddition,toenabletheDOEtomakeadeterminationofaninstitution'sfinancial
responsibility,eachinstitutionmustannuallysubmitauditedfinancialstatementspreparedinaccordancewithDOEregulations.
Programintegrityandimprovement.AnegotiatedrulemakingcommitteeestablishedbytheDOEin2014toaddressprogram
integrityandimprovementissuesforthefederalstudentaidprogramsmetfourtimesbetweenFebruaryandMay2014.Topicsfor
discussionincludedclocktocredithour
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conversion,stateauthorizationofdistanceeducationandforeignlocations,cashmanagementandtheuseofdebitcardsforstudent
refunds,retakingcourseworkandthedefinitionofadversecreditforDirectPLUSloaneligibility.OnOctober23,2014,theDOEpublished
finalregulationsupdatingthestandardfordeterminingifapotentialparentorstudentborrowerundertheFederalDirectPLUSLoan
ProgramhasanadversecredithistoryforpurposesofDirectPLUSLoaneligibility.Theseregulationsalsorequireparentsandstudents
whohaveanadversecredithistory,butwhoareapprovedforaDirectPLUSloanonthebasisthatextenuatingcircumstancesexistorby
obtaininganendorserfortheloan,toreceiveloancounselingbeforereceivingtheloan.AlthoughtheseruleswentintoeffectonJuly1,
2015,theDOEpermittedearlyimplementationofthenewcriteriabyinstitutionscommencingMarch29,2015.Theincreasein
administrativeburdenunderthesenewregulationsisnotexpectedtohaveamaterialeffectonourbusiness.Inaddition,onOctober30,
2015,theDOEpublishedfinalregulationsoncashmanagementanddebitcardpractices,retakingcoursework,andclocktocredithour
conversion.AmajorityoftheprovisionsoftheregulationstookeffectonJuly1,2016,andotherstookeffectonlaterdatesin2016.The
finalregulationsconcerningcashmanagementrequire,amongotherthings,thatinstitutionssubjecttoheightenedcashmonitoring
proceduresfordisbursementsofTitleIVfundsmust,effectiveJuly1,2016,paytostudentsanyapplicableTitleIVcreditbalancesbefore
requestingsuchfundsfromtheDOE.St.Augustine,WaldenUniversity,NewSchoolofArchitectureandDesignandKendallCollegeare
currentlysubjecttoheightenedcashmonitoringprocedures.Wehavereviewedtheregulationsandmadeappropriateadjustmentsinour
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currentlysubjecttoheightenedcashmonitoringprocedures.Wehavereviewedtheregulationsandmadeappropriateadjustmentsinour
businessoperationstomeetthoserequirementseffectiveJuly1,2016.OnDecember19,2016,theDOEpublishedfinalregulations
regardingstateauthorizationforprogramsofferedthroughdistanceeducationandstateauthorizationforforeignlocationsofinstitutions.
Amongotherprovisions,thesefinalregulationsrequirethataninstitutionparticipatingintheTitleIVfederalstudentaidprogramsand
offeringpostsecondaryeducationthroughdistanceeducationbeauthorizedbyeachstateinwhichtheinstitutionenrollsstudents,ifsuch
authorizationisrequiredbythestate.TheDOEwouldrecognizeauthorizationthroughparticipationinastateauthorizationreciprocity
agreement,iftheagreementdoesnotpreventastatefromenforcingitsownlaws.Thefinalregulationsalsorequirethatforeignadditional
locationsandbranchcampusesbeauthorizedbytheappropriateforeigngovernmentagencyand,ifatleast50%ofaprogramcanbe
completedatthelocation/branch,beapprovedbytheinstitution'saccreditingagencyandbereportedtothestatewherethemaincampus
islocated.Thefinalregulationswouldalsorequireinstitutionsto:documentthestateprocessforresolvingcomplaintsfromstudents
enrolledinprogramsofferedthroughdistanceeducationorcorrespondencecoursesandmakecertainpublicandindividualized
disclosurestoenrolledandprospectivestudentsabouttheirdistanceeducationprograms.ThesefinalregulationsareeffectiveJuly1,
2018.
ViolenceAgainstWomenActandCleryAct.TheDOEestablishedanegotiatedrulemakingcommitteein2014toaddresschanges
incampussafetyandsecurityreportingrequirementsenactedbyCongressinthe2013reauthorizationoftheViolenceAgainstWomenAct
("VAWA").VAWAincludedvariousamendmentstotheCleryAct,afederallawrequiringcollegesanduniversitiestodiscloseinformation
aboutcrimesthatoccuraroundandoncampusproperty.OnJune24,2014,theDOEpublishedproposedregulationstoimplementthe
changesmadetotheCleryActbyVAWA,andthefinalruleswerepublishedonOctober20,2014.Thesenewrulescontainadditional
disclosureandcampuscrimepreventionandawarenessrequirementswhichweanticipatewillincreaseouradministrativecosts.
AdditionalDOErulemakingactivities.OnDecember3,2014,theDOEpublishedproposedregulationsontheteacherpreparation
programaccountabilitysystemundertheHEA,andadditionallyproposedamendmentsonteacherpreparationprogrameligibilityfor
TEACHGrantparticipation.InOctober2016,theDOEpublisheditsfinalregulationsregardingteacherpreparationprogramsandTEACH
Granteligibility.WearecurrentlyassessingtheeligibilityofWaldenUniversitytocontinuetoaccessTEACHGrantfundsunderthenew
regulations.
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OnOctober30,2015,theDOEpublishedfinalregulationstoestablishaPayasYouEarnRepaymentPlanandimplementchanges
regardingcohortdefaultrateappealsandtheFederalFamilyEducationLoanandDirectLoanPrograms.ThePayasYouEarnRepayment
PlanprovisionstookeffectinDecember2015andamajorityoftheremainingprovisionsregulationstookeffectonJuly1,2016.
OnNovember1,2016,theDOEpublishedafinalrulethat,amongotherprovisions,establishesnewstandardsandprocessesfor
determiningwhetheraDirectLoanProgramborrowerhasadefensetorepayment("DTR")onaloanduetoactsoromissionsbythe
institutionatwhichtheloanwasusedbytheborrowerforeducationalexpenses.ThefinalregulationstakeeffectonJuly1,2017.Among
othertopics,thisfinalruleestablishespermissibleborrowerdefenseclaimsfordischarge,proceduralrulesunderwhichclaimswillbe
adjudicated,timelimitsforborrowers'claims,andguidelinesforrecoupmentbytheDOEofdischargedloanamountsfrominstitutionsof
highereducation.Italsoprohibitsschoolsfromusinganypredisputearbitrationagreements,prohibitsschoolsfromprohibitingreliefin
theformofclassactionsbystudentborrowers,andinvalidatesclausesimposingrequirementsthatstudentspursueaninternaldispute
resolutionprocessbeforecontactingauthoritiesregardingconcernsaboutaninstitution.Forproprietaryinstitutions,thefinalrule
describesthethresholdforloanrepaymentratesthatwillrequirespecificdisclosurestocurrentandprospectivestudentsandtheapplicable
loanrepaymentratemethodology.Thefinalrulealsoestablishesimportantnewfinancialresponsibilityandadministrativecapacity
requirementsforbothnotforprofitandforprofitinstitutionsparticipatingintheTitleIVprograms.Forexample,certaineventswould
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schoolthatitmaysuspendtradingontheschool'sstock,theschoolfailedtotimelyfilearequiredannualorquarterlyreportwiththeSEC,
ortheexchangeonwhichthestockistradednotifiestheschoolthatitisnotincompliancewithexchangerequirementsorthestockis
delisted.Othereventswouldwillrequirearecalculationofaschool'scompositescoreoffinancialresponsibility,including,fora
proprietaryinstitutionwhosescoreislessthan1.5,anywithdrawalofanowner'sequitybyanymeans,includingbydeclaringadividend,
unlesstheequityistransferredwithintheaffiliatedentitygrouponwhosebasisthecompositescorewascalculated.Thefinalrulealsosets
fortheventsthatarediscretionarytriggersforlettersofcredit,meaningthatifanyofthemoccur,theDOEmaychoosetorequirealetterof
credit,increaseanexistingletterofcreditrequirementordemandsomeotherformofsuretyfromtheinstitution.Thefinalruleprovides
thatifaninstitutionfailstomeetthecompositescorerequirementforlongerthanthreeyearsunderprovisionalcertification,theDOEmay
mandateadditionalfinancialprotectionfromtheinstitutionoranypartywith"substantialcontrol"overtheinstitution.Suchpartieswith
"substantialcontrol"mustagreetojointlyandseverallyguaranteetheTitleIVliabilitiesoftheinstitutionattheendofthethreeyear
provisionalcertificationperiod.Undercurrentregulations,apartymaybedeemedtohave"substantialcontrol"overaninstitutionif,
amongotherfactors,thepartydirectlyorindirectlyholdsanownershipinterestof25%ormoreofaninstitution,orisamemberofthe
boardofdirectors,ageneralpartner,thechiefexecutiveofficerorotherexecutiveofficeroftheinstitution.Ifwearerequiredtorepaythe
DOEforanysuccessfulDTRclaimsbystudentswhoattendedourU.S.Institutions,orwearerequiredtoobtainadditionallettersofcredit
orincreaseourcurrentletterofcredit,itcouldmateriallyaffectourbusiness,financialconditionsandresultsofoperations.Weareinthe
processofevaluatingthefinalregulationsandcannotpredictwithcertaintywhatimpactthefinalregulationswillhaveonourbusiness
andtheeducationalprogramsofferedbyourU.S.Institutions.
Privacyofstudentrecords.TheFamilyEducationalRightsandPrivacyActof1974("FERPA"),andtheDOE'sFERPAregulations
requireeducationalinstitutionstoprotecttheprivacyofstudents'educationalrecordsbylimitinganinstitution'sdisclosureofastudent's
personallyidentifiableinformationwithoutthestudent'spriorwrittenconsent.FERPAalsorequiresinstitutionstoallowstudentstoreview
andrequestchangestotheireducationalrecordsmaintainedbytheinstitution,tonotifystudentsatleastannuallyofthisinspectionright
andtomaintainrecordsineachstudent'sfile
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listingrequestsforaccesstoanddisclosuresofpersonallyidentifiableinformationandtheinterestofsuchpartyinthatinformation.Ifan
institutionfailstocomplywithFERPA,theDOEmayrequirecorrectiveactionsbytheinstitutionormayterminateaninstitution'sreceipt
offurtherfederalfunds.Inaddition,ourU.S.InstitutionsareobligatedtosafeguardstudentinformationpursuanttotheGrammLeach
BlileyAct(the"GLBA"),afederallawdesignedtoprotectconsumers'personalfinancialinformationheldbyfinancialinstitutionsand
otherentitiesthatprovidefinancialservicestoconsumers.TheGLBAandtheapplicableGLBAregulationsrequireaninstitutionto,
amongotherthings,developandmaintainacomprehensive,writteninformationsecurityprogramdesignedtoprotectagainstthe
unauthorizeddisclosureofpersonallyidentifiablefinancialinformationofstudents,parentsorotherindividualswithwhomsuch
institutionhasacustomerrelationship.IfaninstitutionfailstocomplywiththeapplicableGLBArequirements,itmayberequiredtotake
correctiveactions,besubjecttomonitoringandoversightbytheFTC,andbesubjecttofinesorpenaltiesimposedbytheFTC.Forprofit
educationalinstitutionsarealsosubjecttothegeneraldeceptivepracticesjurisdictionoftheFTCwithrespecttotheircollection,useand
disclosureofstudentinformation.TheinstitutionmustalsocomplywiththeFTCRedFlagsRule,asectionofthefederalFairCredit
ReportingAct,thatrequirestheestablishmentofguidelinesandpoliciesregardingidentitytheftrelatedtostudentcreditaccounts.
Potentialeffectofregulatoryviolations.IfanyofourU.S.InstitutionsfailstocomplywiththeregulatorystandardsgoverningTitle
IVprograms,theDOEcouldimposeoneormoresanctions,includingrequiringustorepayTitleIVprogramfunds,requiringustoposta
letterofcreditinfavoroftheDOEasaconditionforcontinuedTitleIVcertification,takingemergencyactionagainstus,initiating
proceedingstoimposeafineortolimit,suspendorterminateourparticipationinTitleIVprogramsorreferringthematterforcivilor
criminalprosecution.BecauseourU.S.InstitutionsareprovisionallycertifiedtoparticipateinTitleIVprograms,theDOEmayrevokethe
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certificationoftheseinstitutionswithoutadvancenoticeoradvanceopportunityforustochallengethataction.Ifsuchsanctionsor
proceedingswereimposedagainstusandresultedinasubstantialcurtailmentorterminationofourparticipationinTitleIVprograms,our
enrollments,revenuesandresultsofoperationscouldbemateriallyandadverselyaffected.
InadditiontotheactionsthatmaybebroughtagainstusasaresultofourparticipationinTitleIVprograms,wearealsosubjectto
complaintsandlawsuitsrelatingtoregulatorycompliancebroughtnotonlybyregulatoryagencies,butalsobyothergovernment
agenciesandthirdparties,suchascurrentorformerstudentsoremployeesandothermembersofthepublic.
RegulatoryStandardsthatMayRestrictInstitutionalExpansionorOtherChangesintheUnitedStates
ManyactionsthatwemaywishtotakeinconnectionwithexpandingouroperationsorotherchangesintheUnitedStatesaresubject
torevieworapprovalbytheapplicableregulatoryagencies.
Addingteachinglocations,implementingneweducationalprogramsandincreasingenrollment.Therequirementsandstandards
ofstateeducationagencies,accreditingagenciesandtheDOElimitourabilityincertaininstancestoestablishadditionalteaching
locations,implementneweducationalprogramsorincreaseenrollmentincertainprograms.Manystatesrequirereviewandapproval
beforeinstitutionscanaddnewlocationsorprograms.OurU.S.Institutions'stateeducationalagenciesandinstitutionalandspecialized
accreditingagenciesthatauthorizeoraccreditourU.S.Institutionsandtheirprogramsgenerallyrequireinstitutionstonotifythemin
advanceofaddingnewlocationsorimplementingnewprograms,anduponnotificationmayundertakeareviewofthequalityofthe
facilityortheprogramandthefinancial,academicandotherqualificationsoftheinstitution.
WithrespecttotheDOE,ifaninstitutionparticipatinginTitleIVprogramsplanstoaddanewlocationoreducationalprogram,the
institutionmustgenerallyapplytotheDOEtohavethe
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additionallocationoreducationalprogramdesignatedaswithinthescopeoftheinstitution'sTitleIVeligibility.Asaconditionforan
institutiontoparticipateinTitleIVprogramsonaprovisionalbasis,asinourcase,theDOEcanrequirepriorapprovalofsuchprogramsor
otherwiserestrictthenumberofprogramsaninstitutionmayaddortheextenttowhichaninstitutioncanmodifyexistingeducational
programs.IfaninstitutionthatisrequiredtoobtaintheDOE'sadvanceapprovalfortheadditionofanewprogramornewlocationfailsto
doso,theinstitutionmaybeliableforrepaymentoftheTitleIVprogramfundsreceivedbytheinstitutionorstudentsinconnectionwith
thatprogramorenrolledatthatlocation.
Provisionalcertification.EachinstitutionmustapplytotheDOEforcontinuedcertificationtoparticipateinTitleIVprogramsat
leasteverysixyearsandwhenitundergoesachangeincontrol.AninstitutionmayalsocomeundertheDOE'sreviewwhenitexpandsits
activitiesincertainways,suchasopeninganadditionallocation,addinganeducationalprogramormodifyingtheacademiccredentials
thatitoffers.
TheDOEmayplaceaninstitutiononprovisionalcertificationstatusifitfindsthattheinstitutiondoesnotfullysatisfyallofthe
eligibilityandcertificationstandards.Inaddition,ifacompanyacquiresaninstitutionfromanotherentity,theacquiredinstitutionwill
automaticallybeplacedonprovisionalcertificationwhentheDOEapprovesthetransaction.Duringtheperiodofprovisional
certification,theinstitutionmustcomplywithanyadditionalconditionsorrestrictionsincludedinitsprogramparticipationagreement
withtheDOE.StudentsattendingprovisionallycertifiedinstitutionsremaineligibletoreceiveTitleIVprogramfunds,butiftheDOE
findsthataprovisionallycertifiedinstitutionisunabletomeetitsresponsibilitiesunderitsprogramparticipationagreement,itmayseek
torevoketheinstitution'scertificationtoparticipateinTitleIVprogramswithoutadvancenoticeoradvanceopportunityforthe
institutiontochallengethataction.Inaddition,theDOEmaymorecloselyreviewaninstitutionthatisprovisionallycertifiedifitapplies
forrecertificationorapprovaltoopenanewlocation,addaneducationalprogram,acquireanotherinstitutionormakeanyother
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forrecertificationorapprovaltoopenanewlocation,addaneducationalprogram,acquireanotherinstitutionormakeanyother
significantchange.AllofourU.S.InstitutionscurrentlyparticipateinTitleIVprogramspursuanttoprovisionalparticipationagreements
duetoourconversiontoapublicbenefitcorporationandthisoffering,aswellasbecausewedonotmeettheDOE'sstandardsoffinancial
responsibility.
Acquiringotherinstitutions.Wehaveacquiredotherinstitutionsinthepast,andwemayseektodosointhefuture.TheDOEand
virtuallyallstateeducationagenciesandaccreditingagenciesrequireacompanytoobtaintheirapprovalifitwishestoacquireanother
institution.Thelevelofreviewvariesbyindividualstateandaccreditingagency,withsomerequiringapprovalofsuchanacquisition
beforeitoccurswhileothersonlyconsiderapprovalaftertheacquisitionhasoccurred.Theapprovaloftheapplicablestateeducation
agenciesandaccreditingagenciesisanecessaryprerequisitetotheDOEcertifyingtheacquiredinstitutiontoparticipateinTitleIV
programs.Therestrictionsimposedbyanyoftheapplicableregulatoryagenciescoulddelayorpreventouracquisitionofother
institutionsinsomecircumstancesorcoulddelaytheabilityofanacquiredinstitutiontoparticipateinTitleIVprograms.
Changeinownershipresultinginachangeincontrol.TheDOEandmanystatesandaccreditingagenciesrequireinstitutionsof
highereducationtoreportorobtainapprovalofcertainchangesincontrolandchangesinotheraspectsofinstitutionalorganizationor
control.UnderDOE'sregulations,aninstitutionthatundergoesachangeincontrollosesitseligibilitytoparticipateinTitleIVprograms
andmustapplytotheDOEtoreestablishsucheligibility.Ifaninstitutionfilestherequiredapplicationandfollowsotherprocedures,the
DOEmaytemporarilycertifytheinstitutiononaprovisionalbasisfollowingthechangeincontrol,sothattheinstitution'sstudentsretain
continuedaccesstoTitleIVprogramfunds.Inaddition,theDOEmayextendsuchtemporaryprovisionalcertificationiftheinstitution
timelyfilescertainrequiredmaterials,includingtheapprovalofthechangeincontrolbyits
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stateauthorizingagencyandaccreditingagencyandcertainfinancialinformationpertainingtothefinancialconditionoftheinstitution
oritsparentcorporation.
TheDOEpreviouslynotifiedusthatitconsidersthisofferingandourrecentconversiontoaDelawarepublicbenefitcorporationtobe
achangeofownershipresultinginchangesincontrolundertheDOE'sregulations.Accordingly,weappliedtotheDOEonbehalfof
KendallCollege,NewSchoolofArchitectureandDesign,St.AugustineandWaldenUniversityforapprovaloftheseinstitutions'
continuedparticipationinTitleIVprogramsinconnectionwithboththisofferingandtherecentconversiontoaDelawarepublicbenefit
corporation.TheDOEcompleteditsreviewoftheconversionandissuedprovisionalprogramparticipationagreementstotheinstitutions
withrespecttotheconversion.WehavealsofiledpreacquisitionreviewapplicationstotheDOEonbehalfofKendallCollege,
NewSchoolofArchitectureandDesign,St.AugustineandWaldenUniversityinconnectionwiththisoffering.Afterthisofferingis
completed,iftheapplicationsaredeemedmateriallycomplete,theDOEwillissuetemporaryprogramparticipationagreementstothe
institutions,whichwillexpireonthelastdayofthemonthfollowingthemonthinwhichtheofferingoccurred.Ifcertaindocumentsare
submittedtoDOEbeforetheexpirationofthetemporaryprogramparticipationagreements,theeligibilityoftheinstitutionstoparticipate
intheTitleIVprogramswillbecontinued.However,theDOEwillonlyformallyreviewandapprovethisofferingafterithasoccurred.
TherecanbenoassurancethattheDOEwillformallyapprovethisofferingandrecertifyourU.S.InstitutionsforcontinuedTitleIV
programeligibilityfollowingthisoffering.IftheDOEfailedtorecertifytheinstitutionsfollowingthisoffering,studentsattheaffected
institutionswouldnolongerbeabletoreceiveTitleIVprogramfunds.TheDOEcouldalsorecertifyourU.S.Institutionsfollowingthis
offering,butrestrictordelaystudents'receiptofTitleIVprogramfunds,limitthenumberofstudentstowhomaninstitutioncould
disbursesuchfunds,orimposeotherrestrictions.
Thetypesofandthresholdsforsuchreportingandapprovalvaryamongthestatesandaccreditingagencies.Certainaccrediting
agenciesmayrequirethataninstitutionmustobtainitsapprovalinadvanceofachangeincontrol,structureororganizationforthe
institutiontoretainitsaccreditedstatus.Inaddition,intheeventofachangeincontrol,structureororganization,certainaccrediting
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institutiontoretainitsaccreditedstatus.Inaddition,intheeventofachangeincontrol,structureororganization,certainaccrediting
agenciesmayrequireaposttransactionfocusedvisitorotherevaluationtoreviewtheappropriatenessofitsapprovalofthechangeand
whethertheinstitutionhasmetthecommitmentitmadetotheaccreditingagencypriortotheapproval.Otherspecializedaccrediting
agenciesalsorequireaninstitutiontoobtainsimilarapprovalbeforeoraftertheeventthatconstitutesachangeincontrolundertheir
standards.Manystatesincludethetransferofacontrollinginterestofcommonstockinthedefinitionofachangeincontrolrequiring
approval.Somestateeducationalagenciesthatregulateusmayrequireustoobtainapprovalofthechangeincontroltomaintain
authorizationtooperateinthatstate,andinsomecasessuchstatescouldrequireustoobtainadvanceapprovalofachangeincontrol.We
areseekingguidancefromtheapplicablestateeducationalagenciesastowhethertheinitialpublicofferingconstitutesachangeof
controlrequiringapproval.
WearealsoseekingconfirmationfromtheinstitutionalandprogrammaticaccreditingagenciesforKendallCollege,NewSchoolof
ArchitectureandDesign,St.AugustineandWaldenUniversity,aswellasfromtheU.S.institutionalaccreditingagencyforUniversidad
AndrsBello,whetherthisofferingwillconstituteachangeofcontrolundertheirrespectivestandards.Withrespecttotheinstitutional
accreditingagencies,theHigherLearningCommission,theMiddleStatesCommissiononHigherEducationandtheCommissionon
SeniorCollegesoftheWesternAssociationofSchoolsandCollegeshaveinformedusthattheydonotconsiderthisofferingtoconstitutea
changeofcontrol,buthaverequiredcertainfollowupinformationregardingtheoffering.WithrespecttotheconversiontoaDelaware
publicbenefitcorporation,amongourinstitutionalaccreditors,theMiddleStatesCommissiononHigherEducationhasstatedthatit
considerstheconversiontoaDelawarepublicbenefitcorporationtoconstituteasubstantivechangeunderitsstandards,andhasapproved
theconversion.TheCommissiononSeniorCollegesoftheWesternAssociationofSchoolsandColleges
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requiredtheNewSchoolofArchitectureandDesignandSt.Augustinetosubmit"SubstantiveChange:ChangeinMission,Ownership,or
FormofControl"proposalstotheStructuralChangecommittee.Thiscommitteereviewedtheseproposalsanddeterminedthatneitherthis
offeringnortheconversiontoaDelawarepublicbenefitcorporationconstitutedstructuralchangesrequiringapproval.Followingthe
conversion,theFloridaCommissionforIndependentEducationissuedprovisionallicensestoWaldenUniversityandSt.Augustineand
requiredadditionalongoingfinancialreporting.InSeptember2016,itissuedafull,nonprovisionallicensetoSt.Augustinebut
continuedtheschoolonfinancialreporting.
Manystatesandprogrammaticaccreditorshaveinformedusthatthisofferingwillnotconstituteachangeofcontrol,butsome
agencieshavedeterminedthattheofferingwillneedtobereviewedundertheirrespectivechangeofownershipstandards.Wehave
notifiedeachagencyregardingtheofferingandsomehaverequestedadditionalinformationinconnectionwiththeoffering.Totheextent
anyagencyrequiresapprovalofthisoffering,theinstitutionalaccreditingagenciesandsomestateeducationalagenciesthatauthorizeour
U.S.Institutionsalsomaynotacttorevieworapprovethisofferingonanadvancebasis.Ourfailuretoobtainanyrequiredapprovalofthis
offeringfromtheDOE,theinstitutionalaccreditingagencies,orthepertinentstateeducationalagenciescouldresultinoneormoreofour
U.S.InstitutionslosingcontinuedeligibilitytoparticipateintheTitleIVprograms,accreditationorstatelicensure,whichcouldhavea
materialadverseeffectonourU.S.business,financialconditionandresultsofoperations.
Inaddition,weincreasedourownershipofSt.Augustinefrom80%to100%onJune7,2016.The20%noncontrollinginterestwas
previouslyheldbyPatrisofSt.Augustine,Inc.andsubjecttoaputright,whichPatrisofSt.Augustine,Inc.electedtoexercise.Wehave
notifiedSt.Augustine'sapplicableregulatorsregardingtheincreaseinthepercentageofourownershipinSt.Augustine.
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MANAGEMENT
DirectorsandExecutiveOfficers
Thefollowingtablesetsforthinformationregardingourcurrentdirectors,directordesigneesandexecutiveofficers,includingtheir
ages.OurdirectorsareelectedinaccordancewiththeprovisionsoftheWengenSecurityholders'Agreement.See"InformationRegarding
theLaureateBoard."Executiveofficersserveattherequestoftheboardofdirectors.Therearenofamilyrelationshipsamonganyofour
currentdirectors,directordesigneesandexecutiveofficers.
Name
DouglasL.Becker
EndersonGuimares
EilifSerckHanssen
RicardoBerckemeyer
MiguelCarmelo
TimothyF.Daniels
JonathanA.Kaplan
AlfonsoMartinez
RichardJ.Patro
KarlD.Salnoske
PaulaSinger
RobertW.Zentz
BrianF.Carroll
AndrewB.Cohen
WilliamL.Cornog
DarrenM.Friedman
Age
50
57
50
47
60
54
52
58
56
63
62
63
45
45
52
48
Position
Director,ChairmanoftheBoard,ChiefExecutiveOfficer
PresidentandChiefOperatingOfficer
ExecutiveVicePresident,ChiefFinancialOfficer
ChiefExecutiveOfficer,LatAm
ChiefExecutiveOfficer,Europe
ChiefExecutiveOfficer,Asia,MiddleEastandAfrica
President/CEOofWaldenUniversityandCEOofLaureateOnline
ChiefHumanResourcesOfficer
ChiefExecutiveOfficer,GlobalProductsandServices
ChiefInformationOfficer
ChiefNetworkOfficer
SeniorVicePresident,Secretary,GeneralCounsel
Director
Director
Director*
Director**
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DarrenM.Friedman
JohnA.Miller
GeorgeMuoz
Dr.JudithRodin
JonathanD.Smidt
IanK.Snow
StevenM.Taslitz
QuentinVanDoosselaere
RobertB.Zoellick
*
**
48
63
65
72
44
47
57
55
63
Director**
Director**
Director
Director
Director**
Director
Director
Director
Director
Thisindividualhasagreedtojointheboardofdirectorsuponcompletionofthisoffering.
Theseindividualswillresignfromtheboardofdirectorsuponcompletionofthisoffering.
EffectiveMarch31,2017,Mr.CarmelowillretireasChiefExecutiveOfficer,Europe,uponthecombinationofourEuropeoperations
withourAMEAoperations,andwillnolongerbeanexecutiveofficer.Atthattime,Mr.DanielswillbecometheChiefExecutiveOfficerof
thecombinedEuropeandAMEAoperations.See"PresentationofFinancialInformation."Mr.PatroplanstoretirefromtheCompanynot
laterthanDecember31,2017.
DouglasL.BeckerhasservedasourChairmanandChiefExecutiveOfficersinceFebruary2000.Mr.BeckerservedasPresidentfrom
June2011untilSeptember2015.FromApril1993untilFebruary2000,Mr.BeckerservedastheCompany'sPresidentandCoChief
ExecutiveOfficer.Mr.BeckerhasbeenadirectoroftheCompanysinceDecember1989.Mr.BeckerwasadirectorofConstellationEnergy
CorporationfromApril1999throughMay2009.From2004toJune2015,Mr.BeckerservedasadirectorofMeritasLLC,aprivately
ownedfamilyofcollegepreparatoryschools.Mr.Beckeralsoservesontheboardsoftwononprofitcompanies:InternationalYouth
Foundation,anonprofitGlobal
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NGOfocusingonyouthemployment,educationandcivicengagement,forwhichMr.BeckerservesasChairmanandasamemberofits
auditcommitteeandPortDiscoveryChildren'sMuseum,locatedinBaltimore,Maryland.
EndersonGuimareswasappointedasourPresidentandChiefOperatingOfficereffectiveSeptember2015.FromJanuarytoAugust
2015,Mr.Guimaresservedasexecutivevicepresident,GlobalCategoriesandOperationsatPepsiCo,Inc.Mr.Guimaresservedaschief
executiveofficer,PepsiCoEuropefromSeptember2012toJanuary2015andasPresidentofPepsiCoGlobalOperationsfromOctober
2011toSeptember2012.BeforejoiningPepsiCo,Mr.GuimaresservedasexecutivevicepresidentofElectroluxandchiefexecutive
officerofitsmajorappliancesbusinessinEurope,AfricaandtheMiddleEastfrom2008to2011.Healsospent10yearsatPhilips
Electronics,from1998to2007,firstasaregionalmarketingexecutiveinBrazilandultimatelyasseniorvicepresident,headofGlobal
MarketingManagementandgeneralmanageroftheWidiWallLEDdisplaybusiness.HealsoservedaschiefexecutiveofficerofPhilips's
LifestyleIncubatorgroup,aninnovationenginewhichcreatednewbusinessesanddevelopedthemoverseveralyears.Earlier,
Mr.GuimaresworkedinvariousmarketingpositionsatDanoneandJohnson&Johnson.Mr.Guimarescurrentlyservesasadirectorof
AutoZoneInc.,aretaileranddistributorofautomotivereplacementpartsandaccessories.Mr.GuimaresreceivedaB.S.fromthe
AeronauticalInstituteofTechnologyinSoJosdosCampos,BrazilandanM.B.A.fromMcGillUniversity(Canada).
EilifSerckHanssenjoinedLaureateinJuly2008asourExecutiveVicePresidentandChiefFinancialOfficer.FromFebruary2008
untilJuly2008,Mr.SerckHanssenservedaschieffinancialofficerandpresidentofinternationaloperationsatXOJET,Inc.InJanuary
2005,Mr.SerckHanssenwaspartoftheteamthatfoundedEosAirlines,Inc.,apremiumairline,anduntilFebruary2008,Mr.Serck
Hanssenservedasitsexecutivevicepresidentandchieffinancialofficer.PriortostartingEosAirlines,Mr.SerckHanssenservedinseveral
financialexecutivepositionsatUSAirways,Inc.(nowAmericanAirlines,Inc.)andNorthwestAirlines,Inc.(nowDeltaAirlines,Inc.),
includingservingasaseniorvicepresidentandTreasurerofUSAirways,Inc.Priortojoiningtheairlineindustry,Mr.SerckHanssenspent
overfiveyearswithPepsiCo,Inc.,invariousinternationallocationsandthreeyearswithPricewaterhouseCoopersLLP(formerly
Coopers&LybrandDeloitte)inLondon.Mr.SerckHanssenearnedhisM.B.A.infinanceattheUniversityofChicagoBoothSchoolof
Business,aB.A.inmanagementsciencefromtheUniversityofKentatCanterbury(UnitedKingdom),andaB.S.incivilengineeringfrom
theBergenUniversityCollege(Norway).HeisanAssociateCharteredAccountant(ACA)andamemberoftheInstituteofChartered
AccountantsinEnglandandWales.
RicardoBerckemeyerservesasChiefExecutiveOfficer,LatinAmerica,apositionhehasheldsinceMay2012.FromJanuary2011
throughApril2012,Mr.BerckemeyerservedasChiefExecutiveOfficerofLaureate'sAndeanRegion.From2002,whenMr.Berckemeyer
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throughApril2012,Mr.BerckemeyerservedasChiefExecutiveOfficerofLaureate'sAndeanRegion.From2002,whenMr.Berckemeyer
joinedtheCompany,throughDecember2010,heservedasSeniorVicePresidentSouthAmericawithinLaureate'sLatinAmerican
operations,wherehehadresponsibilityforbusinessdevelopmentinSouthAmerica.Mr.Berckemeyerreceivedabachelor'sdegreein
economicsfromUniversidaddelPacifico(Peru)andanM.B.A.fromtheUniversityofNorthCarolinaatChapelHill.
MiguelCarmelohasservedasChiefExecutiveOfficer,EuropesinceMay2012,andasPresidentofUniversidadEuropeadeMadrid
since1999.From1999untilMay2012,Mr.CarmeloservedasPresidentoftheMediterraneanRegionofLaureateInternational
Universities.Mr.CarmeloreceivedaPh.D.ineconomicsfromUniversidadAutnoma,Madrid.
TimothyF.DanielsservesasChiefExecutiveOfficer,Asia,theMiddleEastandAfrica,apositionhehasheldsinceAugust2013.From
2011through2013,Mr.DanielswasthepresidentofApolloGlobal,wherehefocusedondevelopinganinternationalnetworkof
postsecondaryoperationsforajointventurebetweenApolloGroupandTheCarlyleGroup.From2003through2010,Mr.Danielswasthe
chairmanandchiefexecutiveofficerofWallStreetInstituteInternational,whereheledthe
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turnaroundoftheleadingglobalproviderofEnglishlanguageinstruction.From2000through2003,Mr.Danielsservedasthemanaging
directorforSylvanVentures,wherehewasresponsibleforallaspectsofK12sectorinvestments.Mr.DanielsreceivedaB.A.inbusiness
administrationfromtheUniversityofWisconsinandanM.B.A.fromtheUniversityofChicago.
JonathanA.KaplanhasservedasPresident/CEOofWaldenUniversityandCEOofLaureateOnlinesinceJanuary2017.Mr.Kaplan
hasservedasPresidentand/orCEOofWaldenUniversitysince2007andduringthatperiodhehasalsoservedastheCEOofvarious
businessunitswithinourGPSsegment.Mr.KaplanreceivedanA.B.fromHarvardCollegeandaJ.D.fromBostonUniversity.
AlfonsoMartinezservesasourChiefHumanResourcesOfficer.Mr.MartinezjoinedtheCompanyin2013astheheadofHuman
ResourcesforourGPSsegment.From2008to2013,Mr.MartinezwastheexecutivevicepresidentofhumanresourcesforNII
Holdings,Inc.,aproviderofwirelesscommunicationservices.From2005to2008,Mr.Martinezheldvariousmanagementpositionswith
Sodexho,Inc.,anintegratedfoodandfacilitiesmanagementserviceprovider,andwasmostrecentlythegroupvicepresidentofglobal
talent.From2003to2005,Mr.MartinezwasthechiefexecutiveofficeroftheHispanicAssociationonCorporateResponsibility.Priorto
2003,Mr.MartinezheldvariouspositionswithMarriottInternational,Inc.Mr.MartinezearnedaB.S.fromtheUniversityofDenveranda
M.S.inorganizationalpsychologyfromJohnsHopkinsUniversity.
RichardJ.PatroservesasChiefExecutiveOfficer,GlobalProductsandServices,apositionhehasheldsinceJanuary2016.From
January2015toDecember2015,heservedasPresident,GlobalProductsandServices,andfromJanuary2008toDecember2015,he
servedasChiefOperatingOfficer,GlobalProductsandServices,anditspredecessorbusinesses.Mr.PatrojoinedtheCompanyasafinance
directorin1995andservedinfinancepositionsofincreasingimportancepriortohisappointmentasChiefOperatingOfficer,Global
ProductsandServices.Mr.PatroearnedaB.S.inaccountingfromLoyolaUniversityMaryland.
KarlD.SalnoskehasservedasourChiefInformationOfficersinceMarch2014.From2010to2014,Mr.Salnoskewastheexecutive
vicepresidentandCIOofGXS,aleading,multinationalbusinesstobusinesssoftwarecompanywhereheoversawallaspectsofthe
company'sinternalandexternalITsystems,datacenteroperations,customersupportandqualityassurance.From2004to2009,
Mr.SalnoskewasthevicepresidentandCIOatScheringPlough,wherehedirectedtheplanning,acquisition,developmentandoperation
ofcomputerandITsystemsforallfacilitiesglobally.Mr.SalnoskealsopreviouslyservedasageneralmanagerforSoftwareSolutionsat
IBMaswellasaseniorITspecialistatMcKinsey&Company.Mr.SalnoskeearnedaB.S.inelectricalengineeringfromVirginia
PolytechnicInstitute.
PaulaSingerjoinedLaureatein1993.Ms.SingerhasservedasChiefNetworkOfficersinceJanuary2015.From2011toDecember
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PaulaSingerjoinedLaureatein1993.Ms.SingerhasservedasChiefNetworkOfficersinceJanuary2015.From2011toDecember
2015,sheservedasChiefExecutiveOfficerofGlobalProductsandServices.FromJuly2001toJanuary2011,Ms.Singerservedas
PresidentoftheLaureateHigherEducationGroup.Ms.SingerearnedaB.S.ineducationfromtheUniversityofConnecticut.
RobertW.ZentzhasservedasSeniorVicePresident,GeneralCounsel,ChiefLegalOfficerandSecretaryofLaureatesincejoiningthe
Companyin1998.Mr.ZentzoverseesallofLaureate'slegalaffairsworldwideandhasbeenthearchitectofLaureate'sinternational
structureanditsexpansioninto28countries.PriortojoiningLaureate,Mr.ZentzservedasNorthAmericangeneralcounselforA.C.
Nielsen,Inc.,theglobalmarketingandmediaresearchcompanyanddirectedthelegalworkforthesaleofDun&Bradstreet'sDonnelley
Marketingyellowpagesbusiness.PriortoACNielsen,Mr.ZentzwasgeneralcounselofA.S.Hansen,Inc.,aglobalcompensationand
benefitsfirmheadquarteredinChicagoandnegotiatedthesaleofthatbusinesstoMercer,Inc.Mr.ZentzearnedaB.S.inaccountingfrom
IndianaUniversityandaJ.D.fromValparaisoUniversityLawSchool.
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BrianF.CarrollistheManagingPartnerofCarrollCapitalLLC.Hewas,through2016,aMemberofKKR,aglobalalternativeasset
manager.HejoinedKKRin1995andwasheadoftheConsumerandRetailteamsinEurope.HewasalsoamemberoftheEuropean
InvestmentCommittee.InadditiontoservingasadirectorofLaureate,inthepastfiveyearshehasservedasamemberoftheboardof
directorsofPetsatHomeGroupPlc,Cognita,NorthgateInformationSolutions,SMCPandAfriflora.PriortojoiningKKR,Mr.Carrollwas
withDonaldson,Lufkin&Jenrettewhereheworkedonabroadrangeofhighyieldfinancing,corporatefinanceandmerchantbanking
transactions.HehasaB.S.andB.A.S.fromtheUniversityofPennsylvania,andanM.B.A.fromStanfordUniversityGraduateSchoolof
Business.Mr.CarrollhasbeenadirectorandchairmanofthecompensationcommitteeofourboardofdirectorssinceJuly2007.
AndrewB.CohenisaManagingDirectoratCohenPrivateVentures,LLC,whichinvestslongtermcapital,primarilyindirectprivate
investmentsandotheropportunistictransactions,onbehalfofStevenA.Cohen.PriortohispositionwithCohenPrivateVentures,LLC,
Mr.Cohenwasamanagingdirector,directorandanalystatS.A.C.CapitalAdvisors,L.P.,aninvestmentmanagementfirm,andits
predecessorfrom2002to2005and2010to2014.From2005to2010,Mr.CohenwasamanagingdirectorandpartnerofDuneCapital
ManagementLP,aninvestmentmanagementfirm.Mr.CohenbeganhiscareeratMorganStanleywherehewasananalystintherealestate
departmentandprincipalinvestinggroup(MSREF)andthenanassociateinthemergersandacquisitionsgroupafterbusinessschool.
Mr.CohenreceivedhisB.A.fromtheUniversityofPennsylvaniaandhisM.B.A.fromtheWhartonSchooloftheUniversityof
Pennsylvania.Mr.CohenisadirectorofKadmonHoldings,Inc.Healsoservesontheboardsofseveralprivatecompanies.Healsoserves
ontheNationalAdvisoryBoardoftheJohnsHopkinsBermanInstituteofBioethics,andthePaintingandSculptureCommitteeofThe
WhitneyMuseumofAmericanArt.Mr.CohenhasbeenadirectorsinceJune2013.
WilliamL.Cornoghasagreedtoserveasamemberofourboardofdirectorsuponcompletionofthisoffering.Mr.CornogjoinedKKR
Capstone,aconsultingfirmthatprovidesservicestoKKRportfoliocompanies,in2002andcurrentlyservesasGlobalHeadofKKR
Capstone.Mr.CornogservesasamemberofKKR'sAmericas,EMEAandAPACPortfolioManagementCommittees.PriortojoiningKKR
Capstone,Mr.CornogwaswithWilliamsCommunicationsGroupastheseniorvicepresidentandgeneralmanagerofNetworkServices.
PriortoWilliamsCommunicationsGroup,Mr.CornogwasapartneratTheBostonConsultingGroup.Mr.Cornoghasalsoworkedin
directmarketingwithAgeWaveCommunicationsandinmarketingandsalespositionswithSmithKlineBeckman.Mr.Cornogholdsa
B.A.fromStanfordUniversityandanM.B.A.fromHarvardBusinessSchool.
DarrenM.Friedmanwillresignasamemberofourboardofdirectorsuponcompletionofthisoffering.Mr.FriedmanisaPartnerof
StepStoneGroupLLC,apositionhehasheldsinceOctober1,2010.PriortohisemploymentwithStepStone,from2001through2010,
Mr.FriedmanwasManagingPartnerofCitiPrivateEquity("CPE"),abusinessunitofCitigroupmanagingprivateequitycoinvestment
fundsandmezzanineproducts.AtCPE,Mr.Friedmanmanagedover$10billionofcapital,acrossthreeprivateequityinvestingactivities:
directcoinvestments,mezzaninedebtinvestmentsandfundinvestments.Mr.FriedmanreceivedhisM.B.A.fromtheWhartonSchoolof
theUniversityofPennsylvaniaandhisB.S.infinancefromtheUniversityofIllinois.Mr.FriedmanhasbeenadirectorsinceDecember
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theUniversityofPennsylvaniaandhisB.S.infinancefromtheUniversityofIllinois.Mr.FriedmanhasbeenadirectorsinceDecember
2010.
JohnA.Millerwillresignasamemberofourboardofdirectorsuponcompletionofthisoffering.Mr.MillerhasservedasPresident
since1987andChiefExecutiveOfficersince2006ofNorthAmericanCorporation,amultidivisionalproviderofspecializedbusiness
distributionandmarketingservices.Mr.Millerservesasadirector(andamemberoftheauditcommitteeandtheexecutivecommittee)of
SallyBeautyHoldings,abeautyproductsdistributioncompany.Mr.MillerisalsoadirectorofAtlanticPremiumBrands,Ltd.(anda
memberofthecompensationcommittee),WirtzCorporation(andamemberofthecompensationcommittee),NetworkServicesCompany
and
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BreakthruBeverageGroup(andamemberofthecompensationandauditcommittees).Mr.Millerservesontheboardoftrusteesforthe
UniversityofDenver.Mr.MillerreceivedhisB.S.B.A.inFinancefromtheUniversityofDenverandholdsanM.B.A.fromtheUniversity
ofDenverwherehegraduatedwithhonors.Mr.MillerhasbeenadirectorsinceJanuary2009andwasadirectorofLaureatefrom2001to
July2007.
GeorgeMuozhasbeenaprincipalintheWashington,D.C.basedinvestmentbankingfirmMuozInvestmentBankingGroup,LLC
since2001.Mr.MuozhasalsobeenapartnerintheChicagobasedlawfirmTobin&Muoz,LLCsince2002.Mr.Muozservedas
PresidentandChiefExecutiveOfficeroftheOverseasPrivateInvestmentCorporationfrom1997toJanuary2001.Mr.MuozwasChief
FinancialOfficerandAssistantSecretaryoftheU.S.TreasuryDepartmentfrom1993until1997.Mr.Muozisacertifiedpublicaccountant
andanattorney.Mr.MuozisadirectorofMarriottInternational,Inc.(andamemberofitsauditcommittee),AltriaGroup,Inc.and
AnixterInternational,Inc.,andatrusteeoftheNationalGeographicSociety.Mr.MuozhasbeenadirectorsinceMarch2013and
chairmanoftheauditcommitteeoftheboardofdirectorssinceAugust2013.Mr.MuozservedthreetermsaspresidentoftheChicago
BoardofEducationinthemid1980s.Mr.MuozhastaughtcoursesinglobalizationatGeorgetownUniversityinWashingtonD.C.andis
coauthorofthebook"RenewingtheAmericanDream:ACitizen'sGuideforRestoringofCompetitiveAdvantage."Mr.Muozhasa
B.B.A.inAccountingfromtheUniversityofTexas,aJ.D.andaMasterofPublicPolicyfromHarvardUniversity,andaLL.M.inTaxation
fromDePaulUniversity.
Dr.JudithRodinhasservedasPresidentofTheRockefellerFoundationsinceMarch2005.Thefoundationsupportseffortstocombat
globalsocial,economic,healthandenvironmentalchallenges.From1994to2004,Dr.RodinservedasPresidentoftheUniversityof
Pennsylvania.Beforethat,Dr.RodinchairedtheDepartmentofPsychologyatYaleUniversity,andalsoservedasDeanoftheGraduate
SchoolofArtsandSciencesandProvost,andservedasafacultymemberattheuniversityfor22years.Dr.Rodinisalsoadirectorof
CitigroupInc.andComcastCorporation.Dr.RodinservedasadirectorofAMRCorporationfrom1997to2013.Dr.RodinholdsaB.A.
fromtheUniversityofPennsylvaniaandaPh.D.fromColumbiaUniversity.Dr.RodinhasbeenadirectorsinceDecember2013.
JonathanD.Smidtwillresignasamemberofourboardofdirectorsuponcompletionofthisoffering.Mr.SmidtjoinedKKRinJuly
2000andisaPartnerinKKR'sprivateequitybusinessinEuropewhereheisresponsibleforleadingKKR'seffortsintheIndustrialindustry
sectorintheregion.Mr.SmidtalsoservesasamemberofKKR'sprivateequityInvestmentCommitteeinEurope.Priortohiscurrentrole,
Mr.SmidtwasbasedinNewYorkwithKKRandfocusedonprivateequityinvestingintheenergyandconsumerproductssectorsbetween
2000and2015.InadditiontoservingasadirectorofLaureate,Mr.SmidtservesontheboardofdirectorsofEFHandSamsonResources
Corporation.PriortojoiningKKR,Mr.SmidtwaswithGoldman,Sachs&Co.intheirinvestmentbankingdivisionwherehewasfocused
ontheenergyandpowersectorandmergersandacquisitions.Mr.SmidtstartedhiscareeratErnst&YounginCapeTown,SouthAfrica.He
holdsaB.B.S.andaPostgraduateDiplomainAccountingfromtheUniversityofCapeTown(SouthAfrica).Mr.Smidtisamemberofthe
BoardofOverseersoftheColumbiaUniversity,MailmanSchoolofPublicHealthandisamemberoftheboardofTeamRubiconUSA.
Mr.SmidtisalsoamemberoftheCouncilonForeignRelations.Mr.SmidthasbeenadirectorofLaureatesinceJuly2007.
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IanK.SnowischiefexecutiveofficerandacofoundingPartnerofSnowPhippsGroup,LLC,aprivateequityfirm.Priortothe
formationofSnowPhippsinApril2005,Mr.SnowwasaManagingDirectoratRipplewoodHoldingsL.L.C.,aprivateequityfirm,where
heworkedfromitsinceptionin1995untilMarch2005.Mr.SnowreceivedaB.A.,withhonors,inhistoryfromGeorgetownUniversity.He
currentlyservesasadirectorofthefollowingprivatecompaniesinwhichSnowPhippsholdsanequityinterest:EnviroFinance
Group,LLC,acompanyspecializinginfinancingtheacquisition,cleanup
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andredevelopmentofcontaminatedpropertiesVelocityCommercialCapital,Inc.,asmallbalancecommercialrealestatelender
ZeroChaos,LLC,aproviderofcontingentworkforcemanagementsolutionsVelvet,Inc.,adesigner,manufacturerandwholesalerof
upscaleapparelbrandsandServiceChamp,Inc.,avehicleproductsdistributor.Inaddition,from1996until2007,Mr.Snowwasadirector
(and,from2006until2007,amemberoftheauditcommitteeoftheboardofdirectors)ofAsburyAutomotiveGroup,Inc.Mr.Snowhas
beenadirectorsinceJuly2007.
StevenM.Taslitzhasservedsince1983asaSeniorManagingDirectorofSterlingPartners,aprivateequityfirmhecofoundedwith
Mr.Beckerandothers.Mr.TaslitzreceivedhisB.A.,withhonors,inaccountingfromtheUniversityofIllinois.Mr.Taslitzcurrentlyserves
asadirectorofthefollowingprivatelyheldcompaniesinwhichSterlingPartnersholdsanequityinterest:ConversantIntellectual
Property,Inc.,anintellectualpropertymanagementcompanyInnovationHoldings,LLC,parenttoI/ODataCenters,LLCand
Baselayer,LLC,datacenteranddatacenteroperatingsystemscompaniesProspectMortgage,LLC,aretailmortgageorigination
companyWengenInvestmentsLimitedSterlingFundManagement,LLCSecondaryOpportunityBook,LLCSterlingVenture
Partners,LLCSterlingCapitalPartners,LLCSterlingCapitalPartnersII,LLCSterlingCapitalPartnersIII,LLCSCPartnersIIIAIV
OneGPCorporationSterlingPartners2009,LLCandSterlingCapitalPartnersIV,LLC.Inaddition,fromApril2005toOctober2012,
Mr.TaslitzwasadirectorofAmeritoxLtd.,aprescriptionmonitoringsolutionproviderandAmeritoxTestingManagement,Inc.,a
laboratoryservicescompanyMr.Taslitzalsoservesonthecompensationcommitteesoftheboardsofdirectorsofeachofthesecompanies
otherthanConversantIntellectualProperty,Inc.andservesasamemberoftheauditcommitteeoftheboardofdirectorsofAmeritox,Ltd.
Mr.TaslitzhasbeenadirectorsinceJuly2007.
QuentinVanDoosselaereisCoChiefExecutiveOfficerofBregalInvestments,Inc.,aprivateequityinvestmentbusiness.Mr.Van
DoosselaerejoinedBregalinJanuary2009.Followinghisbusinessschoolgraduationin1984,hemovedtoNewYorkandbeganhis
careeratDrexelBurnhamLambert.HethenjoinedBankersTrustCo.asaManagingDirectorandranvariousglobalcapitalmarkets
businesses.Inthemidnineties,heheldexecutivepositionsinanumberofnonprofitorganizationsbeforegoingintoacademia.Hewas
affiliatedwithColumbiaUniversityandOxfordUniversitywhenhejoinedBregal.Mr.VanDoosselaereservesasamemberonthe
investmentcommitteesofBregalCapital,BregalSagemount,BregalPartners,BregalFreshstream,BregalEnergy,BregalPrivateEquity
Partners,RanchCapitalInvestmentandBirchillExploration.Mr.VanDoosselaereholdsadegreefromtheSolvayBrusselsSchoolof
EconomicsoftheUniversitLibredeBruxelles(Belgium)andaPh.D.fromColumbiaUniversity.Mr.VanDoosselaerehasbeenadirector
sinceJanuary2015.
RobertB.ZoellickisaSeniorFellowattheBelferCenterforScienceandInternationalAffairsatHarvardUniversity.Heisadirectorof
TemasekHoldings(Private)Ltd.("Temasek"),aSingaporecorporation,whichisprincipallyengagedinthebusinessofinvestment
holding.Mr.ZoellickhasbeenadirectorofTemaseksinceAugust2013.HeisalsoamemberoftheinternationaladvisoryboardforRolls
Royce.From2007to2012,Mr.ZoellickwaspresidentoftheWorldBankGroup.From2006to2007,Mr.Zoellickwasvicechairman,
International,ofGoldmanSachsandfrom2013to2016,hechairedGoldmanSachs'sInternationalAdvisors.Healsoservedasastrategic
advisortotheChairmanandCEOofAXA,theglobalinsurancefirmheadquarteredinParis,from2013to2016.Mr.Zoellickwasthe
deputysecretaryoftheU.S.DepartmentofStatefrom2005to2006andtheU.S.TradeRepresentativefrom2001to2005.From1993to
2001,Mr.ZoellickservedinvariousacademicandexecutivepostsattheU.S.NavalAcademy,HarvardUniversity,GoldmanSachs,Fannie
MaeandtheCenterforStrategicandInternationalStudies.From1985to1993,Mr.ZoellickservedinseniorpostsattheTreasuryand
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MaeandtheCenterforStrategicandInternationalStudies.From1985to1993,Mr.ZoellickservedinseniorpostsattheTreasuryand
Statedepartments,aswellasWhiteHousedeputychiefofstaff.Mr.ZoellickreceivedhisB.A.(PhiBetaKappa)fromSwarthmoreCollege
andaJ.D.(magnacumlaude)andMasterofPublicPolicyfromHarvardUniversity.Mr.ZoellickhasbeenadirectorsinceDecember2013.
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Duringthepasttenyears,noneofLaureate,itsexecutiveofficers,itscurrentdirectorsoritsdirectordesigneeshas(i)beenconvicted
inacriminalproceeding(excludingtrafficviolationsandsimilarmisdemeanors)or(ii)beenapartytoanyjudicialoradministrative
proceeding(exceptformattersthatweredismissedwithoutsanctionorsettlement)thatresultedinajudgment,decreeorfinalorder
enjoiningsuchpersonfromfutureviolationsof,orprohibitingactivitiessubjectto,federalorstatesecuritieslaws,orafindingofany
violationoffederalorstatesecuritieslaws.
Exceptasdescribedbelow,duringthepasttenyears(i)nopetitionhasbeenfiledunderfederalbankruptcylawsoranystate
insolvencylawsbyoragainstanyofourexecutiveofficers,currentdirectorsordirectordesignees,(ii)noreceiver,fiscalagentorsimilar
officerwasappointedbyacourtforthebusinessorpropertyofanyofourexecutiveofficers,currentdirectorsordirectordesigneesand
(iii)noneofourexecutiveofficers,currentdirectorsordirectordesigneeswasanexecutiveofficerofanybusinessentityorageneral
partnerofanypartnershipatorwithintwoyearsbeforethefilingofapetitionunderthefederalbankruptcylawsoranystateinsolvency
lawsbyoragainstsuchentity.
InJanuary2005,Mr.SerckHanssenjoinedtheteamthatfoundedEosAirlines,Inc.EosAirlineswasanallfirstclassshuttlebetween
NewYorkandLondon.Mr.SerckHanssenleftEosinFebruary2008,andEosfiledforprotectionunderChapter11oftheU.S.Bankruptcy
CodeinlateApril2008,afterthecollapseofBearStearns&Co.,itslargestsingleclient,andthestartoftheU.S.economicdownturn,
whichcausedfundingcommitmentsfromitsfinancialsponsorstobewithdrawn.InDecember2008,Mr.MartinezjoinedNIIHoldings,Inc.
("NIIHoldings")asvicepresidentofhumanresources.Mr.MartinezleftNIIHoldingsin2013andNIIHoldingsfiledforprotectionunder
Chapter11oftheU.S.BankruptcyCodeinSeptember2014.
WiththeexceptionofMr.VanDoosselaere,whoholdsBelgiancitizenship,Mr.Guimares,whoholdsdualcitizenshipinBraziland
Canada,Mr.SerckHanssen,whoisaNorwegiancitizenandapermanentresidentoftheUnitedStates,Mr.Berckemeyer,whoholdsdual
citizenshipinPeruandtheUnitedStates,andMr.Carmelo,whoholdsSpanishcitizenship,allofthecurrentdirectors,directordesignees
andexecutiveofficerslistedaboveareU.S.citizens.
Eachcurrentdirectoranddirectordesigneebringsastronganduniquebackgroundandsetofskillstotheboardofdirectors,giving
theboardofdirectorsasawholecompetenceandexperienceinawidevarietyofareas,includingcorporategovernanceandboardservice,
executivemanagement,highereducationindustryexperience,accountingandfinance,andriskassessment.Setforthbelowisabrief
descriptionofcertainexperience,qualifications,attributesorskillsofeachdirectoranddirectordesigneethatledtheboardofdirectorsto
concludethatsuchpersonshouldserveasoneofourdirectors:
Mr.BeckerhasledourCompanysince1989andhasbeeninstrumentalinourtransformationintothelargestprivate
internationalnetworkofdegreegrantinghighereducationinstitutions.HiscurrentresponsibilitiesasChairmanandChief
ExecutiveOfficermakehimwellqualifiedtoserveontheboardofdirectors.
Messrs.Carroll,Cohen,Cornog,Friedman,Smidt,Snow,TaslitzandVanDoosselaereareaffiliatedwithprivateequityand
othersimilartypesofinvestmentfundsandhavesignificantexperiencemakingandmanagingprivateequityinvestments
onbehalfoftheirrespectivefunds.Eachoftheinvestmentfundstheyrepresenthavebeenintimatelyinvolvedinthe
managementofLaureatesince2007,makingthemwellqualifiedtoserveontheboardofdirectors.
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Mr.Millerhasservedasthepresidentandchiefexecutiveofficerofalargeprivatecompanyspecializinginindustrialpaper
products,packaging,printingandothercommercialconsumablessince1987.Mr.Miller'slongbusinesscareer,including
serviceaspresidentandchiefexecutiveofficerofalargedistributioncompanyandhispreviousserviceontheboardofour
predecessormakehimwellqualifiedtoserveontheboardofdirectors.
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Mr.Muozhasextensiveknowledgeinthefieldsoffinanceandaccountingandhisknowledgeofinvestmentbanking,
legalexperience,corporategovernanceexperienceandauditoversightexperiencegainedfromhismembershiponthe
boardsandauditcommitteesofotherpubliccompaniessupporthisqualificationstoserveontheboardofdirectors.
Dr.Rodinisanexperiencedleaderinthenotforprofitsectorandhasextensiveexperienceintheareasofcorporateaffairs,
financialreporting,riskmanagement,compensationandlegalmatters,whichsupportsherqualificationstoserveonthe
boardofdirectors.
Mr.Zoellickhasextensiveknowledge,insightandexperienceoninternationaltrade,development,andfinanceissuesand
hiseducationalandgovernmentexperienceprovideimportantinsightsforourglobalbusinessmodel.Inaddition,his
currentpositionswithinternationalfinancialandinvestmentfirmsasadirectorofaninternationalinvestmentcompany
makehimwellqualifiedtoserveontheboardofdirectors.
InformationRegardingtheLaureateBoard
Ourboardofdirectorswillconsistof11persons,sevenofwhomaredesignatedbyWengen.UntilWengenceasestoownatleast40%
ofthecommonequityofLaureate,itisentitledtodesignateaproportionoftheLaureatedirectorscommensuratewithitsrelative
economicownershipbutWengenhaschosentolimititsdesigneesontheinitialboard.Weintendoverthecourseofthenext12monthsto
addatleasttwoadditionalindependentdirectorsinordertocomplywiththecorporategovernancestandardsofNasdaq.Pursuanttothe
WengenSecurityholders'Agreementthatweexpectwillbeinplaceatthetimeofconsummationofthisoffering,fourofWengen'sseven
directorsshallbeselectedbyKKR,SterlingCapitalPartnersII,L.P.,BregalandPoint72.KKRwillbeentitledtoelectoneofLaureate's
directorssolongasKKRownsatleastanumberofsharesinanamountequalto$75milliondividedbytheinitialpublicofferingpriceof
theWengeninterestsitheldonthedateWengenacquiredLaureate("InitialWengenInterest").Mr.CornogwillbeelectedtotheLaureate
boardofdirectorsastheKKRdesignateddirectoreffectiveuponconsummationofthisoffering,replacingMr.Smidt,whoseresignationas
adirectorwillbecomeeffectiveatthattime.SterlingCapitalPartnersII,L.P.willbeentitledtoelectoneofLaureate'sdirectorssolongas
SterlingCapitalPartnersII,L.P.,SterlingCapitalPartnersIII,L.P.,SPLAffiliate,LLC,Messrs.BeckerandTaslitzandeachoftheir
respectiveaffiliates(togetherthe"SterlingParties")collectivelyownatleastanumberofsharesinanamountequalto$75milliondivided
bytheinitialpublicofferingpriceoftheirInitialWengenInterest.Mr.TaslitzwillcontinuetoserveastheSterlingdesignateddirectorand
Mr.Miller,whohasbeenservingasanadditionalSterlingdesignateddirector,willresignasadirector,effectiveuponconsummationof
thisoffering.BregalwillbeentitledtoelectoneofLaureate'sdirectorssolongasBregalownsatleastanumberofsharesinanamount
equalto$75milliondividedbytheinitialpublicofferingpriceofitsInitialWengenInterest.Mr.VanDoosselaerewillcontinuetoserveas
theBregaldesignateddirector.Point72willbeentitledtoelectoneofLaureate'sdirectorssolongasPoint72ownsatleastanumberof
sharesinanamountequalto$75milliondividedbytheinitialpublicofferingpriceofitsInitialWengenInterest.Mr.Cohenwillcontinue
toserveasthePoint72designateddirector.TheremainingthreeWengendesigneestotheLaureateboardofdirectorswillbeselectedby
thevoteofholdersofamajorityofinterestsinWengen.See"CertainRelationshipandRelatedPartyTransactionsAgreementswith
Wengen."WengenhasagreedthatsolongasMr.BeckerisourChiefExecutiveOfficeritwillvoteforMr.Beckerasadirector.After
completionofthisofferingWengenmaydecidetochangetheindividualsitisentitledtohaveelectedtoourboardofdirectors.The
WengenSecurityholders'AgreementdoesnotterminateuponthedissolutionofWengen.
ControlledCompanyException
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theNasdaqcorporategovernancestandards.UndertheNasdaqrules,acompanyofwhichmorethan50%ofthevotingpowerisheldbyan
individual,grouporanothercompanyisa"controlledcompany"andmayelectnottocomplywithcertainNasdaqcorporategovernance
standards,including:
therequirementthatamajorityoftheboardofdirectorsconsistofindependentdirectors
therequirementthatwehaveanominating/corporategovernancecommitteethatiscomposedentirelyofindependent
directorswithawrittencharteraddressingthecommittee'spurposeandresponsibilities
therequirementthatwehaveacompensationcommitteethatiscomposedentirelyofindependentdirectorswithawritten
charteraddressingthecommittee'spurposeandresponsibilitiesand
therequirementforanannualperformanceevaluationofthenominating/corporategovernanceandcompensation
committees.
Followingthisoffering,weintendtoutilizetheseexemptions.Asaresult,wewillnothaveamajorityofindependentdirectors,our
nominating/corporategovernancecommitteeandcompensationcommitteewillnotconsistentirelyofindependentdirectorsandsuch
committeeswillnotbesubjecttoannualperformanceevaluations.Accordingly,forsolongaswearea"controlledcompany"youwillnot
havethesameprotectionsaffordedtostockholdersofcompaniesthataresubjecttoalloftheNasdaqcorporategovernancerequirements.
LaureateBoardCommittees
Ourboardofdirectorshasthreestandingcommittees:anAuditCommittee,aCompensationCommitteeandaNominatingand
CorporateGovernanceCommittee.
TheAuditCommitteemeetswithourindependentauditorsto:(i)reviewwhethersatisfactoryaccountingproceduresarebeing
followedbyusandwhetherourinternalaccountingcontrolsareadequate(ii)monitorauditandnonauditservicesperformedbythe
independentauditors(iii)approvefeeschargedbytheindependentauditorsand(iv)performallotheroversightandreviewofthe
Company'sfinancialreportingprocess.TheAuditCommitteealsoreviewstheperformanceoftheindependentauditorsandannually
selectsthefirmofindependentauditorstoaudittheCompany'sfinancialstatements.TheAuditCommitteecurrentlyconsistsof
Messrs.Muoz,SmidtandSnowandtheboardofdirectorshasdeterminedthatMr.Muozisan"auditcommitteefinancialexpert"for
purposesofRegulationSK,Item407(d)(5).Uponcompletionofthisoffering,Mr.Smidtwillresign,andweintendtoappointMr.Taslitz
totheAuditCommittee.Mr.MuozwillbeindependentforpurposesofRule10A3undertheExchangeActandcorporategovernance
standards.WeexpectasecondindependentmembertobeappointedtotheAuditCommitteewithin90daysofthecompletionofthis
offeringtoreplaceeitherMr.SnoworMr.TaslitzandathirdnewindependentmembertobeappointedtotheAuditCommitteetoreplace
eitherMr.SnoworMr.Taslitz,whoeverremains,withinoneyearofthecompletionofthisofferingsothatallofourAuditCommittee
memberswillbeindependentassuchtermisdefinedinRule10A3(b)(i)undertheExchangeActandundertherulesofNasdaq.Theboard
ofdirectorshasaffirmativelydeterminedthatMr.Muozmeetsthedefinitionof"independentdirector"forpurposesoftheNasdaqrules
andtheindependencerequirementsofRule10A3oftheExchangeAct.ThereweretenmeetingsoftheAuditCommitteeduring2016.
TheCompensationCommitteeestablishesthecompensationfortheChiefExecutiveOfficerandtheotherexecutiveofficersof
Laureateandgenerallyreviewsbenefitsandcompensationforallofficersandemployees.TheCompensationCommitteealsoadministers
our2007Planandour2013Plan.TheCompensationCommitteecurrentlyconsistsofMessrs.Carroll,FriedmanandTaslitz.Upon
completionofthisoffering,Mr.FriedmanwillresignandtheCompensationCommitteewillconsistof
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completionofthisoffering,Mr.FriedmanwillresignandtheCompensationCommitteewillconsistof
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Messrs.CarrollandTaslitz.ThereweresixmeetingsoftheCompensationCommitteeduring2016andoneactionbywrittenconsent.
TheNominatingandCorporateGovernanceCommitteereviewsandmonitorscorporategovernancematters.TheNominatingand
CorporateGovernanceCommitteecurrentlyconsistsofMr.Carroll.Uponcompletionofthisoffering,weintendtoappointatleastone
additionalmembertotheNominatingandCorporateGovernanceCommittee.TheNominatingandCorporateGovernanceCommitteedid
notmeetduring2016.
Priortothecompletionofthisoffering,eachoftheabovecommitteeswilladoptawrittencharter,whichwillbeapprovedbyour
boardofdirectors.Followingthecompletionofthisoffering,copiesofeachcharterwillbepostedonourwebsite.
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EXECUTIVECOMPENSATION
CompensationDiscussionandAnalysis
ThisCompensationDiscussionandAnalysisprovidesanoverviewofourexecutivecompensationphilosophy,theoverallobjectives
ofourexecutivecompensationprogram,andeachmaterialelementofcompensationforthefiscalyearendedDecember31,2016thatwe
providedtoeachpersonwhoservedasourprincipalexecutiveofficerorprincipalfinancialofficerduring2016andourthreemosthighly
compensatedexecutiveofficersemployedattheendof2016otherthanthosepersons,allofwhomwerefertocollectivelyasourNamed
ExecutiveOfficers.
OurNamedExecutiveOfficersforthefiscalyearendedDecember31,2016wereasfollows:
DouglasL.Becker,ChairmanandChiefExecutiveOfficer
EilifSerckHanssen,ExecutiveVicePresidentandChiefFinancialOfficer
RicardoM.Berckemeyer,ChiefExecutiveOfficer,LatinAmericaRegion
EndersonGuimares,PresidentandChiefOperatingOfficerand
PaulaSinger,ChiefNetworkOfficer.
TheCompensationCommitteeisresponsibleforestablishing,implementing,andevaluatingouremployeecompensationandbenefit
programs.TheCompensationCommitteeperiodicallyreviewsandmakesrecommendationstotheboardofdirectorswithrespecttothe
adoptionof,oramendmentsto,allequitybasedincentivecompensationplansforemployees,andcashbasedincentiveplansfor
executiveofficers,andevaluateswhethertherelationshipbetweentheincentivesassociatedwiththeseplansandthelevelofrisktaking
byexecutiveofficersinresponsetosuchincentivesisreasonablylikelytohaveamaterialadverseeffectontheCompany.The
CompensationCommitteeannuallyevaluatestheperformanceofourChiefExecutiveOfficerandourotherexecutiveofficers,establishes
theannualsalariesandannualcashincentiveawardsforourChiefExecutiveOfficerandourotherexecutiveofficers,andapprovesall
equityawards.TheCompensationCommittee'sobjectiveistoensurethatthetotalcompensationpaidtotheNamedExecutiveOfficersas
wellasourotherseniorofficersisfair,reasonable,andcompetitive.Generally,thetypesofcompensationandbenefitsprovidedtoour
NamedExecutiveOfficersarelikethoseprovidedtootherseniormembersofourmanagementteam.
ExecutiveCompensationPhilosophy
Thegoalofourexecutivecompensationprogramistocreatelongtermvalueforourinvestorswhileatthesametimerewardingour
executivesforsuperiorfinancialandoperatingperformanceandencouragingthemtoremainwithusforlong,productivecareers.We
believethemosteffectivewaytoachievethisobjectiveistodesignanexecutivecompensationprogramrewardingtheachievementof
specificannual,longtermandstrategicgoalsandaligningexecutives'interestswiththoseofourinvestorsbyfurtherrewarding
performanceaboveestablishedgoals.Weusethisphilosophyasthefoundationforevaluatingandimprovingtheeffectivenessofour
executivepayprogram.Thefollowingarethecoreelementsofourexecutivecompensationphilosophy:
MarketCompetitive:Compensationlevelsandprogramsforexecutives,includingtheNamedExecutiveOfficers,shouldbe
competitiverelativetotheappropriatemarketsinwhichweoperate.Weareauniquenetworkoforganizations,andwe
believethatcompetitivepayprogramsmustbelocallydriven.Itisimportantforourlocalorganizationstoleveragean
understandingofwhatconstitutescompetitivepayintheirmarketsandbuilduniquestrategiestoattractthehighcaliber
talentwerequiretomanageandgrowourfastpacedorganization
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PerformanceBased:Mostexecutivecompensationshouldbeperformancebasedpaythatis"atrisk,"basedonshortterm
andlongtermgoals,whichrewardbothorganizationalandindividualperformance
InvestorAligned:Incentivesshouldbestructuredtocreateastrongalignmentbetweenexecutivesandinvestorsonbotha
shorttermandalongtermbasisand
FinanciallyEfficient:Payprogramsandfeaturesshouldattempttominimizetheimpactonourearningsandmaximizeour
taxbenefits,allotherthingsbeingequal.
Byincorporatingtheseelements,webelieveourexecutivecompensationprogramisresponsivetoourinvestors'objectivesand
effectiveinattracting,motivating,andretainingtheleveloftalentnecessarytogrowandmanageourbusinesssuccessfully.
ProcessforDeterminingCompensation
OurcompensationprocessforeachfiscalyearbeginsintheprecedingSeptember,whenseniormanagementmeetstosetthenextyear's
budgets.UsingthebudgetsdevelopedduringOctoberandNovember,eachyearinDecember,theboardofdirectorsapprovesourrevenue,
earnings,andstudentenrollmentgoalsforthefollowingyear.ThesegoalsserveasthetargetmetricsinourAnnualIncentivePlan("AIP"),
anonequityshorttermincentiveplandesignedtocreatealinkbetweenexecutivecompensationandcompanyperformance,andourcash
LongTermIncentivePlans("LTIP")withcertainNamedExecutiveOfficers,whicharedesignedtorewardsuperiorperformanceovera
longerperiodandtherebyprovideanincentivefortheseexecutivestoremainwithus.See"ElementsofLaureate's2016Compensation
ProgramIncentiveOpportunity."InMarch,theCompensationCommitteemeetstoreviewtheNamedExecutiveOfficers'prioryear's
performance,settheirbasesalarylevelsforthecurrentfiscalyear,approvetheAIPforthecurrentyear,andapproveormodifyindividual
goalsfortheNamedExecutiveOfficersthatwererecommendedbymanagementforthediscretionaryportionofourAIP.InMarch,the
CompensationCommitteeassessesperformanceandcertifiestheextenttowhichtheprioryear'sperformancegoalshavebeenachieved
andauthorizesthepaymentofanyearnedincentivecompensation.
TheCompensationCommitteehasnotyetassessed2016performanceunderanyofourperformancebasedcompensationprograms.
Accordingly,2016payoutsunderourperformancebasedincentiveawardshavenotbeendeterminedatthistime.TheCompanyintendsto
fileaCurrentReportonForm8Korotherwisedisclosethe2016performancebasedcompensationaftertheCompensationCommitteehas
assessed2016performanceunderourperformancebasedcompensationprogramsandindividualincentiveawardsaredetermined.
PriortotheMarchCompensationCommitteemeeting,theCEOandtheChiefHumanResourcesOfficer("CHRO")reviewtheprior
year'sperformanceofeachNamedExecutiveOfficer(otherthantheCEO,whoseperformanceisreviewedonlybytheCompensation
Committee).Theconclusionsreachedandrecommendationsbasedonthesereviews,includingwithrespecttosalaryadjustmentsandAIP
cashawardamounts,arepresentedtotheCompensationCommitteeatitsMarchmeeting.TheCompensationCommitteedeterminessalary
adjustmentsandAIPcashawardsforourNamedExecutiveOfficers,consideringtheCEO'srecommendations.TheCEOandCHROarenot
membersoftheCompensationCommitteeanddonotparticipateindeliberationsregardingtheirowncompensation.
RelationshipofCompensationPracticestoRiskManagement
Wehavereviewedandconsideredourcompensationplansandpracticesforallouremployeesanddonotbelievethatour
compensationpoliciesandpracticescreaterisksthatarereasonablylikelyto
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haveamaterialadverseeffectontheCompany.Weutilizemanydesignfeaturesthatmitigatethepossibilityofencouragingexcessiverisk
takingbehavior.Amongthesedesignfeaturesare:
reasonablegoalsandobjectivesthatarewelldefinedandcommunicated
astrongrecoupment("clawback")policy
balanceofshortandlongtermvariablecompensationtiedtoamixoffinancialandoperationalobjectives
doubletriggerseveranceandequityarrangements
anindependentcompensationconsultantfortheCompensationCommitteeand
theCompensationCommittee'sabilitytoexercisedownwarddiscretionindeterminingpayouts.
RoleofIndependentCompensationConsultant
During2016,theCHROandmembersofhisstaffmetseveraltimeswithFredericW.Cook&Co.,Inc.("FWCook"),anindependent
executivecompensationconsultingfirmretainedbytheCompensationCommittee,foradviceandperspectiveregardingmarkettrends
thatcouldaffectourdecisionsaboutourexecutivecompensationprogramandpractices.Duringthistime,FWCookassessedour
compensationphilosophyandthestructureofourprogramsandreviewedourexistingequityandvariablepaycompensationdocuments.
FWCookthenadvisedmanagementaboutalternativesitcouldconsiderbeforerecommendingexecutivecompensationdesignand
amountstotheCompensationCommittee.TheCompensationCommitteeassessedtheindependenceofFWCookpursuanttoSECrules
andconcludedthattheworkperformedbyFWCookdoesnotraiseanyconflictsofinterest.
CompensationPeerGroup
InitscapacityastheCompensationCommittee'sindependentcompensationconsultant,FWCookhasprovidedinsighttothe
CompensationCommitteeoncertainregulatoryrequirementsandconcernsofourinvestors,assistingwiththedevelopmentofconceptual
designsforfutureequityandcashincentivecompensationprogramsandprovidingtheCompensationCommitteewithrelevantmarket
dataandalternativestoconsiderwhenmakingcompensationdecisionsfortheCEOandotherNamedExecutiveOfficers.Additionally,the
CompensationCommitteerequestedFWCooktoidentifyaframeworkofcomparatorsthatadequatelyreflectstheuniquenatureofour
operations.TheCompensationCommitteeusedthisCompensationPeerGroup,whichwasupdatedin2014,aspartofthe2016
compensationprocesstoevaluatethecompetitivenessofthecompensationtargetsforourexecutiveteam.TheCompensationPeerGroup
includesthreedistinctelements,eachrepresentingakeyLaureatecharacteristic.Thesebusinesscharacteristicsinclude:(1)industry,
(2)sizeandcomplexityand(3)growthandprofitability.TheCompensationCommitteehasdefinedthesecharacteristicsandselectedpeer
companiesforeachgroupasfollows:
Industry:CompaniesintheS&P1500andtheeducationalservicesindustrywithtotalrevenueofatleast$1billion,
includingApolloEducationGroup,CareerEducation,DeVryEducationGroup,EducationManagementCorporationand
ITTEducationalServices.
Size/Complexity:CompaniesintheS&P1500withtotalrevenuerangingfrom$2.5billionto$5.5billion,withatleast
70%oftotalrevenuederivedfromforeignsources,includingAnalogDevices,Inc.TheBrinksCompany,Cabot
Corporation,FMCTechnologies,Inc.,FirstSolar,Inc.,HarmanInternationalIndustries,Incorporated,International
Flavors&FragrancesInc.,MolsonCoorsBrewingCompany,NaborsIndustriesLtd.,NvidiaCorporation,SandiskCorp.,
TerexCorporation,andUniversalCorporation.
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HighGrowth/Profitability:CompaniesintheS&P1500withtotalrevenuerangingfrom$1billionto$10billion,threeyear
totalrevenueCAGRofatleast15%,threeyearaverageEBITDAmarginsofatleast20%,atleast30%oftotalrevenue
generatedfromforeignsources,includingAlteraCorporation,BlackRock,Inc.,CelgeneCorporation,CliffsNatural
ResourcesInc.,DiscoveryCommunications,Inc.,Equinix,Inc.,FLIRSystems,Inc.,GileadSciences,Inc.,Global
PaymentsInc.,IntercontinentalExchange,Inc.,MylanN.V.,NewmontMiningCorporation,ThePricelineGroupInc.,
ResMedInc.andVisaInc.
Sincethepeergroupwasupdatedin2014,threecompanies(onefromeachsubcategory),CorinthianColleges,LSICorporationand
LifeTechnologies,Inc.,havebeenremovedbecausetheyhaveceasedtobeindependentlyoperatedentities.
TheCompensationCommitteeuseddataderivedfromourCompensationPeerGrouptoinformitsdecisionsaboutoverall
compensation,compensationelements,optimumpaymixandtherelativecompetitivelandscapeofourexecutivecompensationprogram.
Thecommitteeusedmultiplereferencepointswhenestablishingtargetcompensationlevels.Becausecomparativecompensation
informationisjustoneofseveralanalytictoolstheCompensationCommitteeusesinsettingexecutivecompensation,ithasdiscretionin
determiningthenatureandextentofitsuse.Moreover,giventhelimitationsassociatedwithcomparativepayinformationforsetting
individualexecutivecompensation,theCompensationCommitteemayelectnottousethecomparativecompensationinformationatall
whilemakingindividualcompensationdecisions.
ConsiderationsinSetting2016Compensation
Inapproving2016compensationfortheNamedExecutiveOfficers,theCompensationCommitteetookunderadvisementthe
recommendationoftheCEOandCHROrelatingtothetotalcompensationpackagefortheNamedExecutiveOfficersand,basedon
companywideoperatingresultsandtheextenttowhichindividualperformanceobjectivesweremet,theCompensationCommittee
determined2016compensationforeachoftheNamedExecutiveOfficers.Indeterminingwhethertoapproveormodifymanagement
recommendedcompensationfortheNamedExecutiveOfficersin2016,theCompensationCommitteereviewednonfinancialfactorsas
partoftheoverallevaluationofperformance.SuchnonfinancialfactorsincludedjudgingtheextenttowhicheachNamedExecutive
Officeridentifiedbusinessopportunities,maximizednetworksynergiesforLaureate,sharedbestpracticesandmaximizedthemixofour
geographicrevenues,programs,modalitiesandlevelsofstudy.TheCompensationCommitteebelievesnonfinancialmeasuresareoften
"leadingindicators"offinancialperformanceandareespeciallyimportanttoarapidlygrowingandgeographicallydispersedcompany
likeLaureate.TheCompensationCommitteebelievesthatthetotal2016compensationopportunityforourNamedExecutiveOfficerswas
competitivewhileatthesametimebeingresponsibletoourinvestorsbecauseasignificantpercentageoftotalcompensationin2016was
allocatedtovariablecompensation,paidonlyuponachievementofbothindividualandCompanyperformanceobjectives.
Thefollowingisasummaryofkeyconsiderationsthataffectedthedevelopmentof2016compensationtargetsand2016
compensationdecisionsforourNamedExecutiveOfficers(andwhichtheCompensationCommitteebelieveswillcontinuetoaffectits
compensationdecisionsinfutureyears):
MarketTargets.WetargetbasesalaryforourNamedExecutiveOfficersgenerallynearthe50 thpercentileoftheCompensationPeer
Group.Totalcashandtotaldirectcompensation(basesalary,AIPawardattargetandthevalueofequitygrants)aregenerallynearthe
75 thpercentileoftheCompensationPeerGroup.AlthoughhistoricallyaspecificpaymixforourNamedExecutiveOfficershasnotbeen
set,ithasbeenandwillcontinuetobeourpolicytoallocateasignificantlylargerportionoftheNamedExecutiveOfficers'compensation
intheformofvariableor"atrisk"compensationthan
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isallocatedtojuniormembersofmanagement.BytargetingourNamedExecutiveOfficers'basesalariesandtotalcashandtotaldirect
compensationnearthe50 thandthe75 thpercentiles,respectively,mostofourNamedExecutiveOfficers'payisatrisk,consistentwith
strategiesfollowedbyotherhighgrowthcompaniesandtheCompensationCommittee'spayforperformancephilosophy.Markettargets
areperiodicallyreviewedtoensurecompetitivenesswithothercompanies'executiveswithlikeresponsibilitiestoourNamedExecutive
Officers.
EmphasisonPerformance.Laureate'scompensationprogramprovidesincreasedpayopportunitycorrelatedwithsuperior
performanceoverthelongterm.Whenevaluatingbasesalary,individualperformanceistheprimarydriverthatdeterminestheNamed
ExecutiveOfficer'sannualincrease,ifany.InourAIP,bothorganizationalandindividualperformancearekeydriversindeterminingthe
NamedExecutiveOfficer'snonequityincentiveaward.Oftheoutstandingunvestedoptions,performanceshareunits,andrestrictedstock
unitscurrentlyheldbyourNamedExecutiveOfficers,approximately50%areperformancebased.
TheImportanceofOrganizationalResults.Laureate'sAIPusestheachievementofspecificorganizationalmetricsindetermining
approximately80%oftheNamedExecutiveOfficers'targetannualcashincentiveaward.ThisisbecausetheCompensationCommittee
believesitisimportanttoholdtheNamedExecutiveOfficersaccountableforboththeresultsoftheirorganizationandoverallcompany
results.Our2016AIPwasdesignedtoemphasizeandrewardtheNamedExecutiveOfficersforcorporateperformance.TheCompensation
CommitteebelievesthatindividualcontributionsbytheNamedExecutiveOfficerssignificantlyaffectbothregionalandoverallcorporate
results.ThepaymentofLTIPawardsandthevestingofperformanceoptionsandperformanceshareunitsgrantedunderour2013Planare
dependentontheCompanyachievingoverallcorporatefinancialgoals.
2016StockOptionRepricing/RetentionEquityGrant
EffectiveJune17,2016,upontherecommendationoftheCompensationCommittee,theboardofdirectorsapprovedamodification
intheexercisepriceofalloutstandingstockoptionsgrantedunderthe2013Plan,otherthanoptionsgrantedin2016,toreducethe
exercisepricepershareto$23.20pershare,whichwastheestimatedfairmarketvalueofthecommonstockontheeffectivedateofthe
repricing.Stockoptionsgrantedunderthe2013Planduring2016,aswellasstockoptionsgrantedunderthe2007Planwereexcluded
fromthisrepricing,andwillmaintaintheiroriginalexerciseprices.Thestockoptionsthatwererepricedhadbeengrantedwithanexercise
pricegreaterthantheestimatedfairmarketvalueonJune17,2016(i.e.,exercisepricesrangingfrom$34.52to$25.76pershare).Because
theexercisepricesofthesestockoptionsexceededtheestimatedfairmarketvalueoftheCompany'scommonstockonthemodification
date,theCompensationCommitteedeterminedthattheretentivevalueoftheseawardshadsubstantiallydiminishedfromthetimethey
hadbeengranted.TheCompensationCommitteedeterminedthatthisrepricingwasinthebestinterestsoftheCompanyandits
stockholderstoprovideacontinuedincentiveforhighlyqualifiedemployeeswithsubstantialexperienceintheCompany'sbusinessto
remainemployedduringacriticalperiodfortheCompany.
EffectiveOctober25,2016,theCompensationCommitteeapprovedincrementalequitygrantsunderthe2013Planto45senior
employees,includingtheNamedExecutiveOfficersotherthanMr.Guimares,eachofwhomhadpreviouslyreceivedequityawardsunder
the2007Planand2013Planin2013andprioryears.TheseretentionawardsweretheonlyequityawardsmadetoanyoftheNamed
ExecutiveOfficersduring2016andweredesignedtoprovideanadditionalincentivefortheseemployeestoremainwiththeCompany.
Mr.Beckerreceived114,790timebasedvestingstockoptionsand47,477performancebasedvestingstockoptionsbecausethe
CompensationCommitteewantedtoprovideanincentivetoMr.Beckerthatwastiedanincreaseintheoverallequityvalueofthe
Company,andtheother44senioremployeesreceivedrestrictedstockunits("RSUs")and/orperformanceshareunits("PSUs").Thetime
basedvestingstockoptionsandRSUsgrantedonOctober25,2016willbecomevestedonJune17,2018,iftherecipientcontinuously
remainsemployed
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bytheCompanythroughthatdate.50%oftheperformancebasedvestingstockoptionsandPSUsgrantedonOctober25,2016will
becomevestediftheCompanyachievesapplicableequityvaluetargets("EquityValueTargets")in2016and50%willbecomevestedif
theCompanyachievestheapplicableEquityValueTargetsin2017,ineachcase,subjecttotherecipientremainingcontinuously
employedbytheCompanythroughJune17,2018.See"GrantsofPlanBasedAwardsin2016"formoreinformationonthesegrants.
ElementsofLaureate's2016CompensationProgram
TherearethreekeycomponentsofourexecutivecompensationprogramforourNamedExecutiveOfficers:basesalary,AIPawards,
andlongtermequityincentiveawards.FourofourNamedExecutiveOfficers,Messrs.SerckHanssen,BerckemeyerandGuimaresand
Ms.SingerhavealsoparticipatedinourLongtermcashincentiveopportunity("LTIP").Thecomponentsofincentivecompensation(the
AIPawards,equityawardsandLTIPs)aresignificantly"atrisk,"asthedegreetowhichtheAIPawardsandLTIPsarepaidandthe
performancevestingandtheintrinsicvalueoftheequityawardsalldependontheextenttowhichcertainofouroperatingandfinancial
goalsareachieved.Inadditiontothesekeycompensationelements,theNamedExecutiveOfficersareprovidedcertainother
compensation.See"OtherCompensation."Whenreviewingcompensationlevels,eachcomponentofcompensationisreviewed
independently,andthetotalpaypackageisreviewedintheaggregate.However,theCompensationCommitteebelievesthatanimportant
componentofaligningtheinterestsofinvestorsandexecutivesistoplaceastrongemphasison"atrisk"compensationlinkedtooverall
Companyperformance.
In2016,approximately67%ofthecompensationfortheCEOwas"atrisk."See"ArrangementswithCertainNamedExecutive
OfficersChairmanandChiefExecutiveOfficerCompensation"belowforadiscussionrelatingtoMr.Becker'slongtermincentive
compensation.
BaseSalary.WepayourNamedExecutiveOfficersbasesalariestocompensatethemforservicesrenderedeachyear.Basesalaryisa
regular,fixedcashpayment,theamountofwhichisbasedonposition,experience,andperformanceafterconsideringthefollowing
primaryfactorsinternalreviewoftheexecutive'scompensation,relativetobothU.S.nationalmarkettargetsandotherexecutives'
salaries,andtheCompensationCommittee'sassessmentoftheexecutive'sindividualpriorperformance.Salarylevelsaretypically
consideredannuallyaspartofourperformancereviewprocessbutcanbeadjustedinconnectionwithapromotionorotherchangeinjob
responsibility.MeritbasedincreasestosalariesoftheNamedExecutiveOfficersaredeterminedeachMarchbytheCompensation
CommitteeaftertheCompensationCommitteeassessesperformancebyeachexecutiveduringtheprecedingfiscalyear.Eachofthe
NamedExecutiveOfficersreceiveda2.0%salaryincreasefrom2015to2016,exceptforMr.Guimares,whoreceivedanincreaseof0.7%
from2015to2016becausehisemploymentwiththeCompanybeganonSeptember1,2015.
ThesalaryincreasesfortheNamedExecutiveOfficersfrom2015to2016were:
Executive
DouglasL.Becker
EilifSerckHanssen
RicardoM.Berckemeyer
EndersonGuimares
PaulaSinger
(1)
Salaryasof
December31,
2015
$
$
$
$
$
998,278
582,329
682,906
900,000
682,906
SalaryIncrease
from2015
to2016(1)
2016Salary
2.0%$ 1,018,244
2.0%$ 593,975
2.0%$ 696,564
0.7%$ 906,017
2.0%$ 696,564
SalaryincreaseseffectiveMarch1,2016.
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IncentiveOpportunity.Inadditiontoreceivingbasesalaries,theNamedExecutiveOfficersparticipateintheAIPeachyear.
Messrs.SerckHanssen,BerckemeyerandGuimaresalsoparticipateinLTIPsin2016.TheCompensationCommitteehasidentified
severalfactorsthatitbelievesarecriticaltothesuccessofourbusinessandthesefactors,invariouscombinations,areincorporatedinto
the2013Plan,theAIPandtheLTIPs:
AdjustedFinancingEBITDA:EBITDAequalsrevenuesminusexpenses(excludinginterest,taxes,depreciationand
amortization).FinancingEBITDAexcludesnoncashcompensationexpenses,includingexpensesrelatingtolongterm
incentiveplans,acquisitioncosts,supportcharges,androyalty/networkfees.For2016,theCompensationCommitteeused
anAdjustedFinancingEBITDAtargetforpurposesoftheAIP,whichislikeAdjustedEBITDAdescribedelsewhereinthis
prospectusbutexcludestheimpactofforeigncurrencyexchangeratesandcertainextraordinaryornonrecurringitems,
whichtheCompensationCommitteebelievesarenotindicativeofongoingresults("AdjustedFinancingEBITDA").The
CompensationCommitteebelievesthatAdjustedFinancingEBITDAisanimportantmeasureinevaluatingmanagement's
successinpositioningtheCompanyforsustainableprofitability,whichisaprimarygoaloftheCompany.
Revenue:Revenuesarethefeesgeneratedfromourprovisionofeducationalservicesandproductsbeforeanycostsor
expensesarededucted.Yeartoyeargrowthinrevenuesindicatesastrongbaseforfuturegrowth.
OperatingEBITDAMargin:EBITDAMarginisEBITDAasapercentageoftotalrevenues.In2016,wecalculatedthe
EBITDAMarginusingOperatingEBITDA.OperatingEBITDAisAdjustedFinancingEBITDAexcludingthevalueadded
taxfromroyalty/networkfees.OperatingEBITDAMarginisameansbywhichtheCompensationCommitteecanmonitor
theextenttowhichtheCompany'sgrowthinrevenuesresultsinincreasedprofitability.Thetargetfor2016wasbasedon
2015resultsplus40basispoints.
NewEnrollment:Newenrollmentisdefinedasstudentswhoenrollinanacademicprogramforthefirsttimeorstudents
whoreturntotheiracademicprogramafteranabsenceofatleasttwoyears.Newenrollmentindicatesthatthereiscontinued
interestintheLaureateInternationalUniversitiesnetworkandcanbealeadingindicatoroffuturerevenuelevels.Total
enrollmentistiedtototalrevenuesandcanbealeadingindicatorofcontinuedgoodstudentoutcomes.
Certainadjustmentsinmeasuringperformance.Inmeasuringfinancialperformanceforpurposesofourincentivecompensation
programs,theCompensationCommitteefocusesonthefundamentalsoftheunderlyingbusinessperformanceandadjustsforitemsthatare
notindicativeofongoingresults.Forexample,revenueandAdjustedFinancingEBITDAmeasuresareexpressedinconstantcurrencies
(i.e.,excludingtheeffectsofforeigncurrencytranslation)becausewebelievethatperiodtoperiodchangesinforeignexchangeratescan
causeourreportedresultstoappearmoreorlessfavorablethanbusinessfundamentalsindicate.TheCompensationCommittee'sapproach
toothertypesofadjustmentsissubjecttopreestablishedguidelines,includingmateriality,toprovideclarityandconsistencyonhowit
viewsthebusinesswhenevaluatingperformance.Charges/creditsthatmaybeexcludedfromAdjustedFinancingEBITDAinclude:
strategicitems(suchasrestructurings,acquisitionsanddivestitures)regulatoryitems(changesinlaw,ortaxoraccountingrules)and
externalitems(extraordinary,nonrecurringeventssuchasnaturaldisasters).Forexample,amongotherthings,theCompensation
Committeeexpectstoadjust2016performancetogiveeffecttothedivestituresofourFrenchandSwisshospitalitybusinessesduring
2016.
AnnualCashIncentiveOpportunity.OurAIPisanannualcashincentiveprogramdesignedtocreatealinkbetweenexecutive
compensationandperformanceoftheparticipantsandtheCompany.TheAIPprovidesmetricsforthecalculationofannualincentive
basedcashcompensationafterassessingtheexecutive'sperformanceagainstpredeterminedquantitativeandqualitativemeasures
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withinthecontextofouroverallperformance.ForpurposesofcompliancewiththeInternalRevenueCode("Code"),awardsundertheAIP
willnotbepaidtoindividualssubjecttoSection162(m)oftheCodeunlessattainmentofperformancegoalsiscertifiedbythe
CompensationCommittee.IntheeventofattainmentofminimumperformancegoalsundertheAIP,theCompensationCommitteewill
exercisenegativediscretiontoadjustawardsdownwardsfromapotentialmaximumamounttosatisfyrequirementsunderSection162(m)
oftheCode,whilestillprovidingforawardsbasedonCompanyandindividualperformanceinaccordancewithourAIPprogram.In
addition,asignificantportionofeachNamedExecutiveOfficer's2016AIPawardswillbedeterminedbasedonindividualperformance.In
evaluatingindividualperformance,theCompensationCommitteereviewstheannualobjectivessetforeachoftheNamedExecutive
Officersatthestartoftheyear(bytheCompensationCommitteefortheCEOandbytheCEOforallotherNamedExecutiveOfficers)and
usesitsjudgmenttodeterminewhethertheobjectiveswereachieved.Individualperformanceisweightedat20%oftheoverallAIP
opportunityattarget.IndividualresultsfortheyearareratedbytheCompensationCommitteeonascalefrom0%to200%basedonthe
recommendationoftheCEO,exceptwithrespecttohisownperformance,whichisdeterminedbytheCompensationCommittee.
Considerationsaffectingevaluationofindividualperformancemayincludeextraordinaryeconomicorbusinessconditions,thestateofthe
business,deviationsfromforecastedbusinesstargetsthatareunrelatedtotheexecutive'sperformanceandotherexternalfactorsthat,inthe
CEO'sjudgment(ortheCompensationCommittee'sjudgmentinthecaseoftheCEO'sindividualperformance),mayhaveaffectedour
financialandoperatingresults.TheCompensationCommitteealsoconsidersconstructivestrategicissuesthathavelongterm
consequencessuchas:positivestudentoutcomeslikejobplacementandontimegraduation,achievingthehighestacademicand
operationalstandardsandregulatorycompliance.TheNamedExecutiveOfficersarealsorewardedforimportantstrategiccontributions
likebuildingsuccessionplanpipelinesandhighperformancecultures.InreviewingthecompensationoftheNamedExecutiveOfficers,
theCompensationCommitteeconsiderstheexecutive'sperformance,theimportanceofhisorherpositiontousandtheexecutive'sfuture
leadershippotential.ForallNamedExecutiveOfficers,otherthantheCEO,theCEOgivesguidancetotheCompensationCommitteeasto
whetherhebelieveseachoftheNamedExecutiveOfficershasachievedtheindividualperformancegoalssetatthebeginningoftheyear.
Afterhisreview,theCEOpresentsAIPawardandsalaryadjustmentrecommendationsfortheNamedExecutiveOfficerstothe
CompensationCommitteeforapproval.TheCompensationCommitteedeterminesthecompensationoftheNamedExecutiveOfficers,
consideringtheCEO'sassessmentofeachexecutive'sperformance.TheCompensationCommitteedetermineswhethertheCEOhas
achievedtheindividualperformancegoalstheCompensationCommitteesetfortheCEO,takingintoaccounttheCEO'sassessmentofhis
ownperformance.
AIPawardlevelsfortheNamedExecutiveOfficersaredependentontheextenttowhichspecifiedlevelsoftheabovemetricsand
certainindividualgoalshavebeenachieved.ThegoalsspecifiedintheAIPforeachoftheabovemetricsderivefrommanagement'sannual
businessplan(the"annualplan")andmanagement'splanforthenextfivefiscalyears(the"longrangeplan"),bothofwhicharereviewed
bytheboardofdirectorseachDecember.TheCEOandCHROworkwiththeCompensationCommitteetosettargetmetricsfortheAIP
basedonourboardapprovedannualplanandthefinancialgoalscontainedtherein,whichthedirectorsbelieveshouldbeattainablebut
onlywithconsiderableeffort.
InFebruary2016,theCompensationCommitteeadoptedthe2016AIP.Weightingunderthe2016AIPconsistedof:Adjusted
FinancingEBITDA,40%Revenue,15%OperatingEBITDAMargin,10%NewEnrollments,15%andIndividualPerformance,20%.If
atleast95%ofthecorporateand/orregionalAdjustedFinancingEBITDAtargetwasnotachievedfortheyear,themaximumAIPpayment
forNamedExecutiveOfficerswouldbecappedat100%oftarget.Ifatleast80%ofthecorporateAdjustedFinancingEBITDAwasnot
achievedfortheyear,theAIPplanpoolfortheCompany'sexecutiveofficers,whichincludestheNamedExecutiveOfficers,wouldnotbe
funded.Ifatleast85%ofthecorporateand/orregionalAdjustedFinancingEBITDAtargetwasnotachievedfor
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theyear,theCompensationCommitteecouldelectnottopayanyawardstoanyparticipantunderthe2016AIP.Asofthedateofthis
prospectus,theCompensationCommitteehasnotyetassessed2016performanceunderanyofourperformancebasedcompensation
programs.Accordingly,2016performancebasedincentiveawards,includingtheAIP,hasnotbeendeterminedatthistime.TheCompany
intendstofileaCurrentReportonForm8Korotherwisedisclosethe2016performancebasedcompensationaftertheCompensation
Committeehasassessed2016performanceunderourperformancebasedcompensationprogramsandindividualincentiveawardsare
determined.
In2016,AIPtargetawardopportunitiesrangedfrom85%to130%ofthebasesalaryofeachNamedExecutiveOfficer,dependingon
theexecutive'slevelofresponsibilityandtheeffecttheCompensationCommitteeperceivedtheNamedExecutiveOfficertohaveon
Companyoperations.TheCompensationCommitteetookintoconsiderationCompensationPeerGroupcompetitivenessand
compensationequityacrossvariousCompanyexecutivepositionswhensettingtherangeoftarget2016AIPawardopportunitiesforour
NamedExecutiveOfficers.TheCompensationCommitteealsogaveeachNamedExecutiveOfficertheopportunitytoearna2016AIP
awardabovethetargetopportunityuptoamaximumof200%ofhisorherAIPtargetopportunity,iftheCompanyachievedcertainlevels
ofperformanceandtheCompensationCommitteedeterminedthattheindividualhadachievedcertaingoals,aswell.
AIPawardsgrantedtoourNamedExecutiveOfficersfor2016performancewillreflecttheCompensationCommittee'sassessmentof
eachNamedExecutiveOfficer'sindividualperformanceandouroverallperformancewhenmeasuredagainsttheCompensation
Committeeestablishedgoalsfor2016ofAdjustedFinancingEBITDA,revenue,OperatingEBITDAmargin,newenrollments,and
individualobjectives.The2016AIPwasdesignedsothatamultiplierwillbeappliedtotherespectiveweightofeachmetric,which
proportionallyreducesorincreasestheNamedExecutiveOfficer'sawarddependingontheextenttowhichthegoalforeachmetricis
missedorexceeded,asapplicableandassetforthinthetablebelowforeachNamedExecutiveOfficer.Exceptasdescribedbelow,for
performancepercentagesbetweenthelevelssetforthinthetable,theresultingpayoutpercentagewouldbeadjustedonalinearbasis.
BecausetheCompensationCommittee'sintentindesigningthe2016AIPwasfortheNamedExecutiveOfficerstostressimproved
profitability,the2016AIPprovidedthat:(i)hadweachieved80%orlessofthe2016corporateand/orregionalAdjustedFinancing
EBITDAgoal,asapplicable,noneoftheNamedExecutiveOfficerswouldhavereceivedany2016AIPAward,and(ii)hadtheCompany
achievedlessthan95%ofthe2016corporateand/orregionalAdjustedFinancingEBITDAgoal,asapplicable,noneoftheNamed
ExecutiveOfficerswouldhavereceivedmorethanhisorhertargetawardopportunity,regardlessofwhetherthegoalforanyoftheother
metricshadbeenexceeded.Additionally,the2016AIPprovidedthatiftheCompanyachieved85%orlessoftheestablishedgoalfornew
enrollments,90%orlessoftheestablishedgoalforrevenuesorifOperatingEBITDAMarginwaslessthanorequaltotheapplicable2015
result,thentheportionoftheNamedExecutiveOfficer'sAIPawarddependentonthatmetricwouldbeentirelydeductedfromhisorher
total2016AIPawardopportunity.
Percent
Payout
Weight
200%
100%
0%
Performance
AgainstPlan
Adjusted
Financing
EBITDA
PercentofTarget
Valuefor100%payout
PercentofTarget
Revenue
40%
110%
Target
90%
15%
110%
Target
90%
Operating
EBITDA
Margin
New
Enrollments
10%
2015result+80bps
2015result+40bps
2015Result
15%
115%
Target
85%
AlthoughtheCompensationCommitteehasnotyetassessedperformanceunderthe2016AIP,thetablesbelowcontainthegoalfor
eachmetricusedinthe2016AIP.2016AIPawardsforallNamedExecutiveOfficers,apartfromMr.Berckemeyer,willbebasedon
corporateresults,whichgoalsandresultsareshowninthefirsttablebelow.Mr.Berckemeyer's2016AIPgoalswerebasedonLatAm
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regionalresults,whichgoalsareshowninthesecondtablebelow.Ofthefourfinancialmetricsusedtodetermine2016AIPawards,
AdjustedFinancingEBITDAwasweightedtheheaviestbecauseoftheCompensationCommittee'sfocusonprofitability.Whileeachof
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AdjustedFinancingEBITDAwasweightedtheheaviestbecauseoftheCompensationCommittee'sfocusonprofitability.Whileeachof
OperatingEBITDAmargin,revenue,andnewenrollmentarecriticaltoourabilitytogrowoverthelongterm,theCompensation
CommitteebelievesAdjustedFinancingEBITDAisthemostimportantmeasureofsustainableprofitability.
Corporate2016AIP
PerformanceMetric
(1)
Target
AdjustedFinancingEBITDA(1)
Revenue(1)
OpEBITDAMargin
NewEnrollments
IndividualPerformance
Weighted
Targetas%
ofAward
$ 781.4
$ 4,365.5
18.7%
536,353
40%
15%
10%
15%
20%
100%
Inthousands
LatAm2016AIP
PerformanceMetric
(1)
Target
AdjustedFinancingEBITDA(1)
Revenue(1)
OpEBITDAMargin
NewEnrollments
IndividualPerformance
Weighted
Targetas%
ofAward
$ 495.0
$ 2,396.1
21.9%
416,348
40%
15%
10%
15%
20%
100%
Inthousands
Thetablebelowprovidesinformationrelatingtothe2016AIPtargetforeachoftheNamedExecutiveOfficers,bothindollaramounts
andasapercentageofyearendbasesalary.
Executive
DouglasL.Becker
EilifSerckHanssen
EndersonGuimares
PaulaSinger
YearEnd2016
BaseSalary
Amount($)
1,018,243
593,975
696,564
906,017
696,564
AIPTarget
Awardas%of
2016YearEnd
Salary
Target2016
AIPAward
($)
120% 1,221,891
85% 504,879
120% 835,877
130% 1,177,821
100% 696,564
LongTermCashIncentiveOpportunity.Messrs.SerckHanssen,BerckemeyerandGuimareseachparticipatedinaLTIPin2016,
andMs.SingeralsoparticipatedinaLTIPin2015.TheLTIPsaremultiyearcashincentiveplansdesignedtomotivateandreward
participantsfortheachievementofperformancegoalsoveramultiyearperiodbyofferingthemtheopportunitytoreceivecashpayments
basedontheachievementofsuchgoals.ThemultiyearperformanceperiodisdesignedtoprovideanadditionalincentivefortheNamed
ExecutiveOfficerstoremainwithLaureatethroughthe
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performanceperiodandbeyond.TheLTIPawardsareconditionedontheachievementofCompanyfinancialperformancegoalsandare
earnedoverseparateoneyearperiodssubjecttocontinuedemployment.LTIPpayoutsfor2015appearintheSummaryCompensation
Table.Asofthedateofthisprospectus,theCompensationCommitteehasnotyetassessed2016performanceunderanyofour
performancebasedcompensationprograms.Accordingly,2016performancebasedincentiveawards,includingtheLTIPs,havenotbeen
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performancebasedcompensationprograms.Accordingly,2016performancebasedincentiveawards,includingtheLTIPs,havenotbeen
determinedatthistime.TheCompanyintendstofileaForm8Korotherwisedisclosethe2016performancebasedcompensationafterthe
CompensationCommitteehasassessed2016performanceunderourperformancebasedcompensationprogramsandindividualincentive
awardsaredetermined.
TheLTIPsinitiallyhadtwoseparateoneyearperformanceperiodscommencingJanuary1,2014andcontinuingthrough
December31,2015,withthepayoutsforeachyearundertheplanpayableassoonaspracticableaftertheCompensationCommittee
assessedwhethertheapplicabletargethadbeenachievedbasedontheauditedfinancialstatementsforthatyear.PayoutsundertheLTIPs
arebasedontheachievementofCorporateAdjustedFinancingEBITDAtargets,andinthecaseofMr.Berckemeyeronly,LatAmAdjusted
FinancingEBITDAtargets.
InSeptember2014,theCompensationCommitteeapprovedachangetoMr.Berckemeyer'sLTIParrangementtoaddanadditional
$1,000,000awardopportunityfor2016.PaymentsofawardstoMr.Berckemeyerin2016aresubject(a)50%tocontinuedemploymenton
theapplicableannualpaymentdate,and(b)50%toachievementoftheannualperformancetargetssetbytheCompensationCommittee.
Paymentoftheperformancebasedcomponentwillbebasedonachievementofatleast98%oftheAdjustedFinancingEBITDAtargetfor
2016.ForMr.Berckemeyer,theperformancetargetsfor2016arebasedonthegoalscontainedintheCompany's2014longrangeplanona
foreigncurrencyexchangeneutralbasisat2015budgetexchangerates,based75%onLatAmAdjustedFinancingEBITDA,whichis
$723,859,021,and25%onCorporateAdjustedFinancingEBITDA,whichis$1,033,673,322.Payment,ifearned,willbemadeassoonas
administrativelypracticableaftertheendoftheperformanceperiod.
InMay2015,theCompensationCommitteeapprovedanadditionalyearforMr.SerckHanssen'sLTIP.Ifatleast98%ofthe
applicable2016CorporateAdjustedFinancingEBITDAtargetisachieved,Mr.SerckHanssenwillbeeligibletoreceivea$500,000
payment.ForMr.SerckHanssen,the2016performancetargetisbasedonthegoalscontainedintheCompany's2015longrangeplan,on
aforeigncurrencyexchangeneutralbasisat2015budgetexchangerates,whichis$942,449,981.Payment,ifearned,willbemadeassoon
asadministrativelypracticableaftertheendoftheperformanceperiod.
Pursuanttohisofferletter,Mr.GuimaresiseligibletoparticipateinacashLTIPplanvaluedat$1,000,000in2016and$1,500,000
in2017,subjecttothetermsoftheplanasamendedfromtimetotime.LTIPgoalsaretiedtoachievementofAdjustedFinancingEBITDA
goalsintheCompany's2016budgetand2017longrangeplan.Paymentwillbebasedonachievementofatleast98%oftheAdjusted
FinancingEBITDAtargetforeachyear.ForMr.Guimares,the2016performancetargetisbasedonthegoalscontainedintheCompany's
2016budgetonaforeigncurrencyneutralbasisat2016budgetexchangerates,whichwas$781,355,195.Payment,ifearned,willbemade
assoonasadministrativelypracticableaftertheendoftheperformanceperiod.
Executive
EilifSerckHanssen
EndersonGuimares
2016
PaymentTarget
$
$
$
500,000
1,000,000
1,000,000
LongTermEquityIncentiveOpportunity.Theuseoflongtermequityincentivescreatesalinkbetweenexecutivecompensationand
Laureate'slongtermperformance,therebycreatingalignment
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betweenexecutiveandinvestorinterests.In2013,ourboardofdirectorsandthestockholdersoftheCompanyapprovedthe2013Plan,
whichisanomnibusplanprovidingtheflexibilitytograntavarietyoflongtermequityincentiveawards,includingstockoptions,
restrictedstock,restrictedstockunitsandstockappreciationrights.InSeptember2015andDecember2016,ourboardofdirectorsandthe
stockholdersoftheCompanyapprovedamendmentstothe2013Plantoincreasetheaggregatenumberofsharesofcommonstock
issuablepursuanttoawardsthatmaybegrantedunderthe2013Plan.AsofDecember31,2016,onlystockoptions,RSUsandPSUshad
beengrantedtoanyoftheNamedExecutiveOfficersunderthe2013Plan.Inconnectionwiththeadoptionofthe2013Plan,the
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beengrantedtoanyoftheNamedExecutiveOfficersunderthe2013Plan.Inconnectionwiththeadoptionofthe2013Plan,the
CompensationCommitteemadelongtermequityincentiveawardstotheNamedExecutiveOfficersthatwereintendedtoprovidefive
yearsoflongtermincentiveonanupfrontbasis.TheCompensationCommitteedidnotmakeanyequitygrantstoanyNamedExecutive
Officerduring2016otherthantheOctober,2016retentionawardsdescribedabovein"2016StockOptionRepricing/RetentionEquity
Grant"andincludedin"GrantsofPlanBasedAwardsin2016".
EquityawardsgrantedtotheNamedExecutiveOfficersunderthe2013Planweredeterminedbasedonmarketcompetitiveness,
criticalityofpositionandindividualperformance(bothhistoricalandexpectedfutureperformance)and,inthecaseofMr.Guimares,
recruitment.Thereisnosetweightgiventothesefactors.PerformanceawardsgrantedtoourNamedExecutiveOfficersunderthe2013
PlancanvestsubjecttoanannualcorporateEquityValueTarget.TheEquityValueTargetwasbasedon15%cumulativeannualgrowth
over2012results.EquityValueisgenerallydefinedasAdjustedEBITDA,minusnoncontrollinginterestsequityvalue,multipliedby10,
minusnetdebtallcalculatedonaforeigncurrencyneutralbasis.Thetargetsalsocontainacatchupprovision.Iftheperformancevesting
targetismissedforayear,thatperformancetranchecanvestinanysubsequentyearafterwhichthetargetedresultisachievedforthe
currentyear.TheCompensationCommitteeusesitsdiscretionindeterminingappropriateequityawardlevelsfortheNamedExecutive
Officers.
Commencingwiththeannualequitygrantsmadein2016,theCompensationCommitteerefinedtheCompany'slongtermincentive
awardprogramtomakeitmoreconsistentwithmarketpractice,appropriatelyaligningpaywithperformance,andmaximizingshareusage
underour2013Plan.BecausetheNamedExecutiveOfficerseachreceivedfrontloadedawardsin2013,orinthecaseofMr.Guimaresin
2015uponhisrecruitment,noneoftheNamedExecutiveOfficersreceivedanannualequityawardin2016withthesenewfeatures.
CertainoftheNamedExecutiveOfficersdid,however,receivetheOctober2016retentiongrantdescribedabovein"2016StockOption
Repricing/RetentionEquityGrant",whichdidnotincorporatethenewannualrefinements.ItisanticipatedNamedExecutiveOfficersmay
receivegrantswiththenewfeaturesinfutureperiods.
Theprincipallongtermequityincentivedesignfeaturesadoptedin2016included:
Movefromplandesignedtodelivermarketcompetitivelongtermincentivesinupfrontfashiontoseniorexecutivesand
onanannualbasistootheremployeestoonedesignedtodelivermarketcompetitivelongtermincentivesonanannual
basistoalleligibleemployees
Movefromawardsvestingover5yearstoawardsvestingover3years,generallyasfollows:
Stockoptions33.3%ofthetotalnumberofoptionsineachannualgrantvestingeachyear,
RSUs33.3%ofthetotalnumberofunitsineachannualgrantvestingeachyear,and
PSUs:apercentageoftargetdeterminedbasedoncorporateperformanceonthethirdanniversaryofthegrantdate
againstanAdjustedEBITDAperformancegoalsetannuallybytheCompensationCommittee
Reduceoreliminateuseofperformancestockoptionsand
ChangefromEquityValueTargetperformancegoaltoAdjustedEBITDAperformancegoal.
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ThefollowingisadescriptionofequityawardsgrantedtoourNamedExecutiveOfficerssince2013:
StockOptions:Historically,stockoptionshavebeen,andweexpecttheywillcontinuetobe,acoreelementoflongtermincentive
opportunityforourNamedExecutiveOfficers.TheCompensationCommitteebelievesthatthebestwaytoaligncompensationofour
NamedExecutiveOfficerswithlongtermgrowthandprofitabilityistodesignlongtermincentivecompensationthatis,toagreatdegree,
dependentonCompanyperformance.TimebasedstockoptionsgrantedtoourNamedExecutiveOfficers(otherthanthosegrantedto
Mr.BeckerinOctober2016)vestinequalannualinstallmentsoverafiveyearperiod,subjecttocontinuedemploymentoneach
applicablevestingdate.PerformancebasedstockoptionsgrantedtoourNamedExecutiveOfficers(otherthanthosegrantedtoMr.Becker
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applicablevestingdate.PerformancebasedstockoptionsgrantedtoourNamedExecutiveOfficers(otherthanthosegrantedtoMr.Becker
inOctober2016)underour2013PlanvestinequalannualinstallmentsoverafiveyearperiodbasedonsatisfactionoftheannualEquity
ValueTargetdescribedabove,subjecttocontinuedemploymentoneachapplicablevestingdate.See"2016StockOption
Repricing/RetentionEquityGrant"and"2016GrantsofPlanBasedAwards"formoreinformationonthestockoptionsgrantedto
Mr.BeckerinOctober2016.See"OutstandingEquityAwards"forinformationaboutthevestingtermsofouroutstandingstockoptions.
See"ArrangementswithCertainNamedExecutiveOfficersChairmanandChiefExecutiveOfficerCompensation"formore
informationconcerning(x)(1)optionstheCompanywillgranttoMr.Beckerand(2)sharesofourClassBcommonstockWengenwill
transfertoMr.BeckerinexchangefortheliquidationofcertainofMr.Becker'sExecutiveProfitsInterestsand(y)sharesWengenwill
transfertoanentityaffiliatedwithMr.BeckerandStevenTaslitzandtwootherfoundingpartnersofSterlingPartners(collectively,the
"SterlingFounders")inexchangefortheliquidationofcertainequityintereststheSterlingFoundersholdinWengen,alleffectiveupon
theconsummationofthisoffering.
PerformanceShareUnits:EachoftheNamedExecutiveOfficers(otherthanMr.Guimares)receivedagrantofPSUsin2013.The
PSUsvestinequalannualinstallmentsoverafiveyearperiodsubjecttosatisfactionoftheEquityValueTargetdescribedabove.The
portionoftheinitialgrantofPSUssubjecttoachievementofeachofthe2013and2014EquityValueTargetswasfirsteligibletovestafter
thepublicationofauditedfinancialstatementsfor2014.TheremainingportionofthePSUsis,orwas,asapplicable,eligibletovestbased
onachievementoftheapplicable2015,2016,and2017EquityValueTargets.Thegrantagreementscontainthecatchupprovision
discussedabove.Mr.Guimaresreceivedgrantsof174,392PSUsinSeptember2015and30,518PSUsinDecember2015,whichwillbe,or
was,asapplicable,eligibletovestbasedonachievementoftheapplicable2015,2016,2017,2018and2019EquityValueTargets.The
NamedExecutiveOfficers(otherthanMessrs.BeckerandGuimares)alsoreceivedPSUsinOctober2016.See"2016StockOption
Repricing/RetentionEquityGrant"and"2016GrantsofPlanBasedAwards"formoreinformationonthesegrants.See"Outstanding
EquityAwards"forinformationaboutthevestingtermsofouroutstandingPSUs.
InMarch2015,theCompensationCommitteedetermined,basedontheCompany'sauditedconsolidatedfinancialstatementsfor
2013and2014,thattheEquityValueTargetsfor2013and2014hadbeenachieved,andthePSUssubjecttothoseEquityValueTargets
vestedandweresettledinsharesofcommonstockinApril2015.InMarch2016,theCompensationCommitteedetermined,basedonthe
Company'sauditedconsolidatedfinancialstatementsfor2015,thattheEquityValueTargetfor2015hadbeenachievedandthePSUs
subjecttothatEquityValueTargetvestedandweresettledinsharesofcommonstockinApril2016.PSUsareimpactedbyallchangesin
thefairmarketvalueofourcommonstockand,therefore,thevaluetotheNamedExecutiveOfficersisaffectedbybothincreasesand
decreasesinthefairmarketvalue.Exceptasprovidedinanindividualagreement,allunvestedPSUsareforfeitableuponterminationof
employmentpriortovesting.PSUsdonotprovidevotingordividendrightsuntiltheunitsarevestedandsettledinsharesofcommon
stock.
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RestrictedStockUnits:OnMay14,2015,Mr.SerckHanssenreceivedagrant20,380RSUsunderthe2013Plan,allofwhichwill
vestonMay14,2018,subjecttocontinuedemploymentthroughsuchdate.OnSeptember17,2015,Mr.Guimaresreceivedagrantof
62,500RSUsandonDecember16,2015,Mr.Guimaresreceivedanadditionalgrantof10,937RSUs,allofwhichwillveston
December31,2017,subjecttocontinuedemployment.IfMr.Guimares'semploymentisterminatedwithoutcause(otherthandueto
deathordisability)priortoDecember31,2017,the73,437RSUsgrantedtoMr.Guimaresin2015willvestimmediately,provided
Mr.Guimaressignsarequiredseparationandreleaseagreementwithinthetimeperiodspecifiedintheagreements.TheNamedExecutive
Officers(otherthanMessrs.BeckerandGuimares)alsoreceivedRSUsinOctober2016.See"2016StockOptionRepricing/Retention
EquityGrant"and"2016GrantsofPlanBasedAwards"formoreinformationonthesegrants.See"OutstandingEquityAwards"for
informationaboutthevestingtermsofouroutstandingRSUs.
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Exceptasprovidedinanindividualagreement,allunvestedRSUsareforfeitableuponterminationofemploymentpriortovesting.
RSUsdonotprovidevotingordividendrightsuntiltheunitsarevestedandsettledinsharesofcommonstock.
OtherCompensation
DeferredCompensation.ThePost2004DCPisintendedtopromoteexecutiveretentionbyprovidingalongtermsavings
opportunityonataxefficientbasistoapproximately82eligibleCompanyemployeesforthe2016Planyear,includingcertainofthe
NamedExecutiveOfficers.ThePost2004DCPallowsparticipantstodeferupto85%oftheirbasesalariesand100%ofanyAIPawards,
withinterestearnedatmarketratesondeferredamountsandpayoutfollowingterminationofemploymentoranotherselectedpayout
schedule.PayoutsofPost2004DCPbalancesaremadeinalumpsumorininstallments,attheelectionoftheparticipants.Eachyear,we
havetheability,butnottheobligation,tomakematchingemployercontributionstoeachparticipant'sPost2004DCPaccountifthe
participantmadesalaryreductioncontributionstothe401(k)RetirementSavingsPlan,receivedlessthanthefullmatchunderthe401(k)
RetirementSavingsPlanonthesalaryreductioncontributionbecauseofthelimitinSection401(a)(17)oftheCodeoncompensationand
madeatleasta$5,000minimumcontributiontohisorher401(k)RetirementSavingsPlanaccount.Todate,wehavenotmadeany
matchingcontributionstoanyparticipantPost2004DCPaccount,norhavewechosentomakeanyotherdiscretionaryemployer
contributionspermittedtobemadetoparticipantspursuanttothePost2004DCP.See"2016NonqualifiedDeferredCompensation"
belowforinformationrelatingtothe2014Post2004DCPaccountsofcertainofourNamedExecutiveOfficers.Allamountsdeferred
underthePost2004DCPareunfundedandunsecuredobligationsofLaureate,receivenopreferentialcreditors'standingandaresubjectto
thesamerisksasanyofourothergeneralobligations.
Benefits.WeprovidevariousemployeebenefitprogramstoourNamedExecutiveOfficers,includingmedical,dental,life/accidental
deathanddismembermentdisabilityinsurancebenefitsandour401(k)RetirementSavingsPlan.Thesebenefitprogramsaregenerally
availabletoallofourU.S.basedemployees.ExecutiveOfficers,includingtheNamedExecutiveOfficersotherthanMr.Guimares,also
wereprovidedaccesstoaMedicalExpenseReimbursementProgramuntilDecember31,2014.Throughthisprogramtheycouldreceive
reimbursementforhealthcarechargesnotcoveredbyourhealthcareplan.Thisprogramonlycoveredeligiblehealthexpensesasdefined
bySection213oftheCode.Somerunoutexpensereimbursementclaimswerepaidin2015.ExecutiveOfficersarealsoprovidedwith
individualsupplementalexecutivelongtermdisabilitycoverageandmayparticipateinthePinnacleCareHealthConsultingService,a
medicalconciergeservicethatprovidesadviceandotherassistancewithhealthcaredecisionsandgivesthemaccesstomedicalservices
aroundtheworld.InconnectionwithhisrecruitmentweagreedtoprovideMr.Guimareswithrelocationbenefits.Thesebenefitsare
providedtotheNamedExecutiveOfficerstoeliminatepotentialdistractionsfrom
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performingtheirregularjobduties.Webelievethecostoftheseprogramsiscounterbalancedbyanincreaseinproductivitybythe
executivesreceivingaccesstothem.
ClawbackPolicy
InOctober2013,theCompensationCommitteeadoptedanExecutiveIncentiveCompensationRecoupmentPolicy,alsoknownasa
"clawback."Undertheseclawbackprovisions,executivesthatviolateconfidentiality,noncompetition,andnonsolicitationagreements
forfeitanyoutstandingawardsunderthe2013Planandreturnanygainsrealizedfromawardspriortotheviolation.Theseprovisionsserve
toprotectourintellectualpropertyandhumancapital,andhelpensurethatexecutivesactinthebestinterestsofLaureateandits
stockholders.WeplantorevisetheExecutiveIncentiveCompensationRecoupmentPolicytobeconsistentwiththefinalrules
implementingtherequirementsoftheDoddFrankAct.
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TaxandAccountingImplications
Aspartofitsrole,theCompensationCommitteeconsidersthetaxandaccountingimpactsreflectedinourfinancialstatementswhen
establishingourcompensationplans.Theformsofcompensationitselectsareintendedtobecostefficient.UnderGAAP,thecashAIP
awards,LTIPawards,andperformancebasedequityawardsresultin"accrual"accounting,whichmeansthattheestimatedpayoutofthe
award,alongwithanychangesinthatestimate,arerecognizedovertheperformanceperiod.Ourultimateexpensewillequalthevalue
earnedbyandpaidtotheexecutives.Therefore,theultimateexpenseisnotdeterminableuntiltheendoftheperformanceperiod.
Section162(m)oftheCodegenerallyprovidesthatpubliclyheldcorporationsmaynotdeductinanytaxableyearspecified
compensationofmorethan$1,000,000paidtotheCEOandthenextthreemosthighlycompensatedexecutiveofficers,excludingthe
chieffinancialofficer.However,performancebasedcompensationmorethan$1,000,000isdeductibleifspecifiedcriteriaaremet,
includingshareholderapprovalofthematerialtermsofapplicableplans.
AswehavenotbeensubjecttoSection162(m)oftheCodesincetheleveragedbuyout,theCompensationCommitteedidnot
considertheimpactofthisrulewhendevelopingandimplementingourexecutivecompensationprogramsthrough2015.Section162(m)
oftheCodeprovidesforatransitionperiodforIPOcompanies.However,beginningin2016,theCompensationCommittee'sintentionis
tocomplywiththerequirementsfordeductibilityunderSection162(m)oftheCode,unlesstheCommitteeconcludesthatadherenceto
thelimitationsimposedbytheseprovisionswouldnotbeinthebestinterestoftheCompanyoritsshareholders.Whilebasesalariesof
morethan$1,000,000arenotdeductible,paymentsmadeunderourAIPandLTIPprograms,andthegrantsofPSUsandstockoptionsare
intendedtoqualifyfordeductibilityunderSection162(m)oftheCodeasqualifiedperformancebasedcompensation.
ForpurposesofcompliancewiththeCode,awardsunderapplicableprogramswillnotbemadetoindividualssubjectto
Section162(m)oftheCodeunlessattainmentofperformancegoalsiscertifiedbytheCompensationCommittee.Intheeventof
attainmentofminimumperformancegoalsundertheseprograms,theCompensationCommitteewillexercisenegativediscretiontoadjust
awardsdownwardfromapotentialmaximumamountinordertosatisfyrequirementsunderSection162(m)oftheCode,whilestill
providingforawardsbasedonCompanyandindividualperformanceinaccordancewithourAIP,LTIPandequitycompensationprograms.
SummaryCompensationTable
Thefollowingtablesummarizesthetotalcompensationearnedin2014(exceptforMr.Guimares,whowasnotaNamedExecutive
Officerinthatyear),in2015andin2016bytheCEOandChiefFinancialOfficerduringthefiscalyearandthethreeotherpersonsserving
asexecutiveofficersattheendoffiscal2016whowerethemosthighlycompensatedexecutiveofficersoftheCompanyinfiscal2016.
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TheCompensationCommitteehasnotyetassessed2016performanceunderanyofourperformancebasedcompensationprograms.
Accordingly,2016awardshavenotbeendeterminedatthistime.TheCompanyintendstofileaCurrentReportonForm8Korotherwise
disclosethe2016performancebasedcompensationaftertheCompensationCommitteehasassessed2016performanceunderour
performancebasedcompensationprogramsandindividualincentiveawardsaredetermined.
WehaveomittedfromthistablethecolumnsforChangeinPensionValueandNonqualifiedDeferredCompensationEarnings,
becausenoNamedExecutiveOfficerreceivedsuchtypesofcompensationduring2016.
SUMMARYCOMPENSATIONTABLE
NonEquity
IncentivePlan
AllOther
Salary
Bonus
Stock
Option
Compensation Compensation
Total
NameandPrincipalPosition Year
($)
($)
($)(1)
($)(2)
($)(3)
Awards Awards
DouglasL.Becker
2016 1,014,916

4,071,544(4)

43,815(5) 5,130,275
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DouglasL.Becker
Founder,Chairman&CEO
EilifSerckHanssen
ExecutiveVicePresident&
CFO
CEOofLatAm
EndersonGuimares
President&ChiefOperating
Officer
2016 1,014,916
2015 994,220
4,071,544(4)

2014 969,970
2016 592,034
706,640(6)
672,613(7)
2015 579,962
524,989(9)
2014 565,816
2016 694,288
2015 680,130
2014 663,542
2016 905,014
PaulaSinger
ChiefNetworkOfficer
(1)
(2)
(3)
(4)
(5)
(6)
43,815(5) 5,130,275
45,477(5) 2,460,158
1,756,813

41,105(5) 2,767,888
11,559(8) 1,982,846
1,161,174
12,272(8) 2,278,397
676,500(7)

1,140,505
706,640(6)
11,806(8) 1,718,127
40,903(10) 2,118,331
50,012(10) 2,848,120
2,201,808
746,890(7)
35,682(10) 2,901,032
12,093(11) 1,663,997
2015 300,000 1,800,000(12) 5,054,170(9) 11,284,109(13)
963,718
98,427(11) 19,500,424

1,309,763
15,252(14) 1,736,440
16,322(14) 2,006,215
1,368,257
31,649(14) 2,063,448
2016 694,288
2015 680,130
350,400(6)
2014 663,542

1,420,461
676,500(7)

2,117,978
Asofthedateofthisprospectus,theCompensationCommitteehasnotyetassessed2016performanceunderanyofourperformancebasedcompensation
programs.Accordingly,2016AIPand2016LTIPawardshavenotbeendeterminedatthistime.TheCompanyintendstofileaCurrentReportonForm8K
orotherwisedisclosethe2016performancebasedcompensationaftertheCompensationCommitteehasassessed2016performanceunderourperformance
basedcompensationprogramsandindividualincentiveawardsaredetermined.See"2016GrantsofPlanBasedAwards"foradescriptionofamounts
potentiallypayableundertheAIP.For2014and2015forMr.BeckertheamountsshowninthiscolumnrepresentawardsunderourAIPonly.For
Mr.SerckHanssenthe2015amountrepresents$661,174undertheAIPand$500,000underhisLTIPandthe2014amountrepresents$640,505underthe
AIPand$500,000underhisLTIP.ForMr.Berckemeyerthe2015theamountrepresents$1,117,978undertheAIPand$1,000,000underhisLTIPandthe
2014amountrepresents$1,201,808undertheAIPand$1,000,000underhisLTIP.ForMr.Guimaresthe2015amountrepresents$463,718undertheAIP
and$500,000underhisLTIP.ForMs.Singerthe2015amountrepresents$809,763undertheAIPand$500,000underherLTIPandthe2014amount
represents$868,257undertheAIPand$500,000underherLTIP.
"AllOtherCompensation"foreachNamedExecutiveOfficerincludes$7,950for2016and2015,and$7,800for2014,contributedbyuspursuanttoour
401(k)matchingprogram.ForMr.Guimaresonly,the2015401(k)matchwas$0.
Totalamountsreportedfor2016donotincludeamountspayableinconnectionwiththe2016AIPand2016LTIPawards,whichamountsareexpectedtobe
determinedinMarch2017.
ForMr.Becker,$2,117,841representstheincrementalfairvalueonthemodificationdateinaccordancewithFinancialAccountingStandardsBoard
AccountingStandardsCodificationTopic718("ASC718")withrespecttothereductionto$23.20oftheexercisepricepershareofcertainoptionsgranted
underthe2013Plan.See"2016StockOptionRepricing/RetentionEquityGrant"and"2016GrantsofPlanBasedAwards"formoreinformation.
$1,953,704representsthegrantdatefairvalue,whichisanestimatedvaluecomputedinaccordancewithASC718,ofoptionawardsgrantedtoMr.Becker
in2016.See"2016GrantsofPlanBasedAwards"formoreinformation.PleaserefertoNote13,SharebasedCompensation,inourconsolidatedfinancial
statementsincludedelsewhereinthisprospectusforadiscussionoftheassumptionsrelatedtothecalculationofsuchvalue.
For2016,includes$24,987forexecutivesupplementaldisabilityplanpremiumpaidbyus,$10,750formedicalconciergeservices,aswellasotherpersonal
expensereimbursement.For2015,includes$24,987forexecutivesupplementaldisabilityplanpremiumspaidbyusand$10,000formedicalconcierge
services,aswellastransportationandpersonalexpensereimbursement.For2014,includes$20,934forexecutivesupplementaldisabilityplanpremiums
paidbyus,$2,371formedicalexpensereimbursementand$10,000formedicalconciergeservices.
Theamountsreportedrepresentthegrantdatefairvalue,whichisanestimatedvaluecomputedinaccordancewithASC718,ofRSUsandPSUsgrantedto
theNEOsin2016.ForMr.SerckHanssenthisamountrepresents$504,740forRSUs,whichvestovertime,subjecttocontinuedemploymentand
$201,900forPSUswhichvestbasedonachievementofcertainCorporateperformancetargetsandcontinued
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employmentthroughJune17,2018.ForMr.Berckemeyer,thisamountrepresents$504,740forRSUs,whichvestovertime,subjecttocontinued
employmentand$201,900forPSUswhichvestbasedonachievementofcertaincorporateperformancetargetsandcontinuedemploymentthroughJune17,
2018.ForMs.Singerthisamountrepresents$250,285forRSUs,whichvestovertime,subjecttocontinuedemploymentand$100,115forPSUswhich
vestbasedonachievementofcertaincorporateperformancetargetsandcontinuedemploymentthroughJune17,2018.PleaserefertoNote13,Sharebased
Compensation,inourconsolidatedfinancialstatementsincludedelsewhereinthisprospectusforadiscussionoftheassumptionsrelatedtothecalculationof
suchvalue.
(7)
(8)
(9)
(10)
RepresentstheincrementalfairvalueonthemodificationdateinaccordancewithASC718withrespecttothereductionto$23.20oftheexercisepriceper
shareofcertainoptionsgrantedunderthe2013Plan.See"2016StockOptionRepricing/RetentionEquityGrant"and"2016GrantsofPlanBased
Awards"formoreinformation.PleaserefertoNote13,SharebasedCompensation,inourconsolidatedfinancialstatementsincludedelsewhereinthis
prospectusforadiscussionoftheassumptionsrelatedtothecalculationofsuchvalue.
For2016,includes$3,609forexecutivesupplementaldisabilityplanpremiumspaidbyus.For2015,includes$3,609forexecutivesupplementaldisability
planpremiumspaidbyusand$713indistributionsonunvestedrestrictedshares.For2014,includes$3,609forexecutivesupplementaldisabilityplan
premiumspaidbyusand$397indistributionsonunvestedrestrictedshares.
Theamountsreportedrepresentthegrantdatefairvalue,whichisanestimatedvaluecomputedinaccordancewithASC718,ofRSUsandPSUs,as
applicable,grantedtotheNEOsin2015.ForMr.SerckHanssenthisamountrepresentsRSUs,whichvestovertime,subjecttocontinuedemployment.For
Mr.GuimaresthisamountincludesRSUsandPSUs.PSUsvestbasedonachievementofcertaincorporateperformancetargets.InaccordancewithASC
718weaccountforPSUsbasedontheamountprobabletovestateachperiodenddate.Ifweweretoassumethehighestlevelofperformanceonthese
PSUs,Mr.Guimares'stotalStockAwardgrantdatefairvaluewouldbe$7,163,617.PleaserefertoNote13,SharebasedCompensation,inour
consolidatedfinancialstatementsincludedelsewhereinthisprospectusforadiscussionoftheassumptionsrelatedtothecalculationofsuchvalue.
For2016,includes$4,639forexecutivesupplementaldisabilityplanpremiumspaidbyusand$28,314forfamilytransportation.For2015includes$4,639
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(10)
(11)
(12)
(13)
(14)
For2016,includes$4,639forexecutivesupplementaldisabilityplanpremiumspaidbyusand$28,314forfamilytransportation.For2015includes$4,639
forexecutivesupplementaldisabilityplanpremiumspaidbyus,personalexpensereimbursementand$35,306forfamilytransportation.For2014,includes
$4,639forexecutivesupplementaldisabilityplanpremiumspaidbyus,$298indistributionsonunvestedrestrictedshares,andformedicalexpense
reimbursement,personalexpensereimbursementand$21,356forfamilytransportation.
For2016,includes$4,143forexecutivesupplementaldisabilityplanpremiumspaidbyus.The2015amountrepresents$98,427forrelocationexpenses.
RepresentsanamountequivalenttotheforfeitedlongtermbonusattargetMr.Guimareswouldhavereceivedfromhisprioremployerandeightmonths'
cashlongtermincentive,asspecifiedinhisofferletter.
ForMr.Guimares,theamountshownintheOptionAwardscolumnrepresentsthegrantdatefairvalue,whichisanestimatedvaluecomputedinaccordance
withASC718,ofstockoptions,grantedtoMr.Guimaresin2015.Performancevestedstockoptionsvestbasedonachievementofcertaincorporate
performancetargets.InaccordancewithASC718weaccountforperformancevestedstockoptionsbasedontheamountprobabletovestateachperiodend
date.IfweweretoassumethehighestlevelofperformanceontheseperformancevestedstockoptionsMr.Guimares'stotalOptionAwardgrantdatefair
valuewouldbe$13,050,927.PleaserefertoNote13,SharebasedCompensation,inourconsolidatedfinancialstatementsincludedelsewhereinthis
prospectusforadiscussionoftheassumptionsrelatedtothecalculationofsuchvalue.
For2016,includes$7,302forexecutivesupplementaldisabilityplanpremiumspaidbyus.For2015includes$7,302forexecutivesupplementaldisability
planpremiumspaidbyusand$1,070distributionsonunvestedrestrictedshares.For2014,includes$7,302forexecutivesupplementaldisabilityplan
premiumspaidbyus,$596distributionsonunvestedrestrictedshares,$8,012formedicalexpensereimbursement,andotherpersonalexpense
reimbursement.
ArrangementswithCertainNamedExecutiveOfficers
ChairmanandChiefExecutiveOfficerCompensation.WhileourCEOplaysanimportantroleinadvisingtheCompensation
CommitteewithrespecttocompensationdecisionsfortheotherNamedExecutiveOfficers,theCompensationCommitteeevaluatesthe
performanceofourCEOusingitssolediscretion.TheCompensationCommitteebelievesthatourCEO'scompensationpackageismarket
basedandperformancealignedandthatitfacilitatesMr.Becker'sretentionandmotivation,whichtheCompensationCommitteebelieves
tobecriticaltoourcontinuedsuccess.InMarch2016,theCompensationCommitteeevaluatedourandourCEO's2015financialandnon
financialperformance.Overall,theCompensationCommitteebelievesthattheperformanceofourCEOduring2015wasexceptionaland
that,withhiscontinuedleadership,theCompanyiswellpositionedforcontinuedgrowthandinvestorvaluecreation.Becauseofits
assessmentofMr.Becker'soverallperformanceduring2015,inMarch2016,theCompensationCommitteeawardedMr.Beckeracash
awardundertheAIPasdescribedaboveunder"AnnualIncentiveCompensationOpportunity"andawardedMr.Beckerameritbased
salaryincreasefor2016.
ExecutiveDCP.Priortotheleveragedbuyoutin2007,Mr.BeckerhadoptionstopurchasesharesofourcommonstockandPSUs,
andanotherfounderofSterlingPartnershadoptionstopurchasesharesofourcommonstock,which,basedonavalueof$60.50pershare,
wouldhaveentitled
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Mr.Beckerto$78,116,588andsuchotherfounderofSterlingPartnersto$48,622,060ifsuchoptions,andinMr.Becker'scase,PSUs,were
cashedoutinconnectionwiththeleveragedbuyout.PursuanttoMr.Becker'sletteragreementwithLCurveSubInc.,Wengenandus,
datedAugust16,2007,andanAmendedandRestatedCommitmentLetter,datedJune3,2007,amonganotherfounderofSterling
Partners,Wengenandtheotherpartiesthereto,Mr.BeckerandoneoftheotherfoundersofSterlingPartnersagreedtocancelsuchoptions
and,inMr.Becker'scase,PSUs,inexchangeforusestablishingadeferredcompensationplanforeachofthem,underwhichplansthese
twoindividualshadrightstoreceivecashpaymentsinsubsequentyears.Weestablishedadeferredcompensationaccountbalanceplan
(eachan"ExecutiveDCP")withanaccountvalueof$78,116,588forthebenefitofMr.BeckerandanExecutiveDCPwithanaccount
valueof$48,622,060forthebenefitofoneoftheotherfoundersofSterlingPartners.Since2007eachExecutiveDCPhasbeen
administeredasdescribedbelow.Ontheclosingdateoftheleveragedbuyout,eachExecutiveDCPwascreditedwithanumberof
phantomsharesofourcommonstockequaltothenumberofsharesthatMr.BeckerorsuchotherfounderofSterlingPartners,as
applicable,couldhaveacquiredintheleveragedbuyoutifalloftheoptionsandPSUs,asapplicable,hadbeencancelledinexchangefora
numberofshares(the"PhantomShares"),equaltothequotientof(x)theaggregatecashpaymentthatMr.Beckerandsuchotherfounder
ofSterlingPartners,asthecasemaybe,wouldhavereceived(basedonapersharevalueof$60.50)onapretaxbasis,inrespectofsuch
cancelledoptionsandPSUs,asapplicable,ontheclosingdateofleveragedbuyoutdividedby(y)thevalueofoneshareofLaureate
commonstockasitexistedimmediatelyaftergivingeffecttotheleveragedbuyout.
EachofMr.BeckerandoneoftheotherfoundersofSterlingPartnershavebeenfullyvestedatalltimessincetheleveragedbuyoutin
hisrespectiveExecutiveDCP.PursuanttotheExecutiveDCP,thevalueofMr.Becker'sExecutiveDCPwasbasedontheunderlyingvalue
ofourcommonstock,subjecttoamaximum5%compoundannualreturnuntiltheearliestofaninitialpublicofferingofoursharesof
308/620
1/20/2017
ofourcommonstock,subjecttoamaximum5%compoundannualreturnuntiltheearliestofaninitialpublicofferingofoursharesof
commonstock,September17,2014orachangeincontroloftheCompany.OnDecember30,2016,theCompany'sobligationsunderthe
ExecutiveDCPweresatisfiedinfull.
OnSeptember17,2014(the"DistributionDate"),wemadeacashpaymenttoMr.Beckerintheamountof$50millionandthenumber
ofPhantomSharesinhisExecutiveDCPwasreducedaccordingly.TheremainingPhantomSharesinMr.Becker'sExecutiveDCPhadan
imputedvalueof$61.4millionasofDecember31,2014.Underthetermsofthearrangement,$53.0millionwaspayableonSeptember17,
2015,andtheremainderwaspayableonSeptember17,2016.TheparticipantsagreedtoextendthepaymentdueonSeptember17,2015
(the"2015ExecutiveDCPObligation"),thefirstanniversaryoftheDistributionDate,untilDecember31,2015.Theparticipantsalso
agreedtoextendthepaymentdueonSeptember17,2016(the"2016ExecutiveDCPObligation")untilDecember31,2016,inorderto
agreewithusonaformofpaymentthatwebelievemorecloselyalignswithourlongterminterestsandthelongterminterestsofour
securityholders.
InaccordancewithanagreementweenteredintowithMr.BeckeronDecember24,2015,onDecember29,2015(the"2015Executive
DCPClosingDate"),wesatisfiedthe2015ExecutiveDCPObligationtoMr.Beckerbypayinghim$53.8million,including$3.8million
ininterestfromtheDistributionDatetothe2015ExecutiveDCPClosingDate.Thepaymentconsistedof$22.6millionincashand
$31.2millionaggregateprincipalamountofSeniorNotes.AnyremainingPhantomSharesinMr.Becker'sExecutiveDCPweretohave
beendistributedtoMr.BeckeronSeptember17,2016.TheremainingPhantomSharesinMr.Becker'sExecutiveDCPhadanimputed
valueof$10.6millionasofDecember31,2015.
InaccordancewithanagreementweenteredintowithMr.BeckeronDecember30,2016,onDecember30,2016(the"2016Executive
DCPClosingDate"),wesatisfiedthe2016ExecutiveDCPObligationtoMr.Beckerbypayinghim$11.1million,including$0.5million
ininterestfromSeptember17,2015tothe2016ExecutiveDCPClosingDate.Thepaymentconsistedof$4.6millionincashand
$6.4millionaggregateprincipalamountofSeniorNotes.See"2016NonqualifiedDeferred
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Compensation."Followingthesatisfactionofthe2016ExecutiveDCPObligation,theCompany'sobligationsundertheExecutiveDCPs
weresatisfiedinfull.
IncentiveProfitsInterests.Additionally,inconnectionwiththeleveragedbuyoutandinconnectionwithMr.Becker'sserviceas
ChairmanandChiefExecutiveOfficerofLaureate,WengengrantedMr.BeckeraprofitsinterestinWengen("ExecutiveProfitsInterests"
or"EPI"),allowingMr.BeckerthepotentialtoshareinaportionofWengen'sprofits.AsofDecember31,2014,alltheExecutiveProfits
Interestswerevested.Upontheconsummationofthisoffering,allofMr.Becker'sExecutiveProfitsInterestswillbeliquidatedand
exchangedforanumberofsharesofourClassBcommonstockcurrentlyheldbyWengenhavinganaggregatefairmarketvalueequalto
thatportionofWengen'sshareinustowhichMr.BeckerwouldhavebeenentitledonaccountoftheliquidatedExecutiveProfitsInterests
(the"EPIShares").Assuminganinitialpublicofferingpriceof$18.50pershare,themidpointoftherangesetforthonthecoverpageof
thisprospectus,Mr.BeckerwillreceivezeroEPIShares.Inaddition,theCompanywillgranttoMr.Beckeroptionstopurchase
2,773,098shares(representingthatnumberofsharesofourClassBcommonstocknecessary,whenaddedtothesharestransferredby
Wengenpursuanttotheprevioussentenceabove,forMr.BeckertohavethesameownershippercentageofusthattheExecutiveProfits
InterestsrepresentedintheprofitsofWengen)oftheCompany'sClassBcommonstockatapershareexercisepriceequaltotheinitial
publicofferingpriceofashareofourClassAcommonstock,allofwhichoptionswillbefullyvestedonthegrantdate(the"EPI
Options").
Inconnectionwiththeleveragedbuyout,anentityaffiliatedwiththeSterlingFounders,ofwhichMr.Beckerownsapproximately
24%,receivedprofitsinterestsinWengenascompensationforservicesprovidedinconnectionwiththeleveragedbuyout.Effectiveupon
completionofthisoffering,alloftheseprofitsinterestswillbeliquidatedinexchangeforthetransfertothisaffiliatedentitybyWengenof
zerosharesofourClassBcommonstockheldbyWengen,assuminganofferingpriceof$18.50pershare,themidpointoftherangeset
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zerosharesofourClassBcommonstockheldbyWengen,assuminganofferingpriceof$18.50pershare,themidpointoftherangeset
forthonthecoverpageofthisprospectus.
PursuanttoanagreementtheSterlingFoundersenteredintoonJanuary20,1999inconnectionwithapartnershipformedbythem
(the"Founders'Agreement"),theSterlingFoundersshareequally,onanetaftertaxbasis,incertainequitybasedcompensationthey
receive,intheaggregate,inconnectionwithservicesrenderedbyanyofthemtocertainentities,includingLaureate.TheFounders'
Agreementprovides,incertaincircumstances,andsubjecttocontractualrestrictions,thatsecuritiesreceivedbyaSterlingFounderas
compensationforservicesrenderedbyhimtocertainentitiesshallbeassignedortransferredtotheSterlingFoundersprorata,ora
partnershiptheyform,assoonaspracticableaftersuchassignmentortransferispermittedbycontractandapplicablelaw.TheFounders'
Agreementfurtherprovidesthatifsuchsecuritiesorotherpropertyarenottransferableorassignable,therightstoreceivethenetproceeds
ofsuchpropertyupondispositionshallbesotransferredorassigned.Priortoanysuchtransferorassignment,eachSterlingFounder
controlsthevotinganddispositionofanysuchsecuritiesreceivedbysuchSterlingFounder.
Asaresult,eachSterlingFounderhasaneconomicinterestinanysharebasedcompensationreceivedbyMr.Beckerinconnection
withhisemploymentbytheCompanyoranyholdingshehasintheCompany,includinganydividendson,ortheproceedsfromthesale
of,thesharesofClassBcommonstockissuableupontheexerciseoftheEPIOptionsbyMr.Becker.
PresidentandChiefOperatingOfficerCompensation.OnJuly6,2015,theCompanyenteredintoanofferletterwithEnderson
GuimarespursuanttowhichMr.GuimaresagreedtoserveastheCompany'sPresidentandChiefOperatingOfficer,effectiveasof
September1,2015.Thefollowingdescriptionoftheofferletterisqualifiedinitsentiretybythefulltermsandconditionsoftheoffer
letter.Theofferletterisfiledasanexhibittotheregistrationstatementofwhichthisprospectusformsapartandisincorporatedhereinby
reference.
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SalaryandIncentiveCompensation.Pursuanttotheofferletter,Mr.Guimares'sbasesalarywas$900,000annuallyandhistarget
AIPawardis130%ofannualbasesalary.EffectiveMarch1,2016,theCompensationCommitteeincreasedMr.Guimares'sannualbase
salaryto$906,017.
LTIP.Mr.GuimaresisalsoeligibletoparticipateinacashLTIPplanvaluedat$1,000,000in2016and$1,500,000in2017,subject
tothetermsoftheplanasamendedfromtimetotime.GoalsaretiedtoachievementofAdjustedFinancingEBITDAgoalsintheLaureate
longrangeplansfor2016and2017.Paymentwillbebasedonachievementofatleast98%oftheAdjustedFinancingEBITDAtargetfor
eachyear.Payment,ifearned,willbemadeassoonasadministrativelypracticableaftertheendoftheperformanceperiod.
EquityGrant.Mr.Guimaresiseligibletoparticipateinthe2013Plan,asamendedfromtimetotime.Pursuanttotheofferletter,his
annuallongtermequityincentivetargetisequalto408%ofannualbasesalary.Mr.Guimares'sofferletterprovided,subjecttoapproval
bytheCompensationCommittee,foranequityawardtobevaluedat$18.36milliononthedateofgrant,representingthefirstfiveyears
ofannuallongtermequityincentiveawardsdeliveredona"frontloaded"basis,inamixtureoftimeandperformancevestingstock
optionsandPSUs,eachwithrespecttoourcommonstock(withthevalueforthestockoptionstobedeterminedusingtheCompany's
standardBlackScholesassumptionsappliedasofthedateofgrantandthevalueforthePSUstobedeterminedbydividingthetarget
valueforthePSUsbythefairmarketvalueofourcommonstockonthegrantdateasdeterminedbytheCompensationCommitteein
accordancewithitsequitygrantpolicy).Theseequityawardsvestratablyoverafiveyearperiod,subjecttocontinuedemployment.In
additiontotheforgoing,Mr.Guimares'sofferletteralsoprovidedforagrantof62,500timebasedvestingRSUsunderthe2013Planthat
willvestinfullonDecember31,2017.
OnSeptember17,2015,theCompensationCommitteeapprovedthegrantof650,141timebasedstockoptions,332,608performance
basedstockoptions,174,392PSUs,and62,500RSUstoMr.Guimares.ThetimebasedstockoptionsgrantedtoMr.Guimaresvestin
equalannualinstallmentsoverafiveyearperiodbeginningonDecember31,2015,subjecttocontinuedemploymentoneachapplicable
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equalannualinstallmentsoverafiveyearperiodbeginningonDecember31,2015,subjecttocontinuedemploymentoneachapplicable
vestingdate.PerformancebasedstockoptionsgrantedtoMr.Guimaresvestinequalannualinstallmentsoverafiveyearperiodbasedon
satisfactionoftheannualEquityValueTargetdescribedabove,subjecttocontinuedemploymentoneachapplicablevestingdate.See"
OutstandingEquityAwards"forinformationaboutthevestingtermsofouroutstandingoptions.ThePSUsgrantedtoMr.Guimaresvest
inequalannualinstallmentsoverafiveyearperiodsubjecttosatisfactionoftheEquityValueTargetdescribedabove,subjectto
continuedemployment.TheportionoftheinitialgrantofPSUssubjecttoachievementofeachofthe2015and2016EquityValueTargets
willfirstbeeligibletovestafterthepublicationofauditedfinancialstatementsfor2016.TheremainingportionofthePSUsiseligibleto
vestbasedonachievementoftheapplicable2017,2018,and2019EquityValueTargets.AlltheRSUsgrantedtoMr.Guimareswillvest
onDecember31,2017,subjecttocontinuedemployment.Inconsiderationofadecreaseintheestimatedfairmarketvalueofthe
Company'scommonstockaftertheSeptember2015equitygrant,onDecember16,2015theCompensationCommitteeapprovedan
additionalgrantof10,937RSUsand30,518PSUstoMr.Guimares.ThetermsoftheDecember2015grantsaresubstantiallythesameas
thetermsoftheSeptember2015grants.IfMr.Guimares'semploymentisterminatedwithoutcause(otherthanduetodeathordisability)
priortoDecember31,2017,the73,437RSUsgrantedtoMr.Guimaresin2015willvestimmediately,providedMr.Guimaressignsa
requiredseparationandreleaseagreementwithinthetimeperiodspecifiedintheagreements.
Severance.Mr.Guimareswillreceiveseveranceequaltooneyearofbasesalaryandtargetbonusifhisemploymentisterminated
withoutcausewithin24monthsofthebeginningofhisemployment,providedhesignsarequiredseparationandreleaseagreementwithin
thetimeperiodspecifiedintheofferletter.
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Benefits.Mr.GuimareswaseligibleforourstandardU.S.employeebenefitspackageonthefirstdayofthemonthfollowingone
fullcalendarmonthofemployment.Weprovidedprovisionalhousingforuptosixmonthsandreasonablerelocationexpenses.
EilifSerckHanssenOfferLetter.AtthetimeMr.SerckHanssenwashiredasourExecutiveVicePresident,ChiefFinancialOfficerin
July2008,ourotherexecutiveofficerswerepartiestoretentionagreementsenteredintoinconnectionwiththeleveragedbuyout,which
havesinceexpired,thatprovided,amongotherthings,foralumpsumseverancebenefitintheeventweterminatedtheexecutive's
employmentwithoutcause.BecauseMr.SerckHanssenwasbeinghiredasanexecutiveofficeratatimewhentheseretentionagreements
werestillineffect,theCompensationCommitteethoughtitappropriatetoauthorizeMr.SerckHanssen'swrittenofferofemploymentto
includeaprovisionentitlingMr.SerckHanssentothesamelumpsumseverancebenefitintheeventweterminatehisemployment
withoutcause.See"PotentialPayoutsUponTerminationorChangeinControlInvoluntaryTerminationWithoutCause"fora
discussionoftheseverancebenefitsavailabletoMr.SerckHanssen.
GrantsofPlanBasedAwardsin2016
ThetablebelowsetsforthinformationregardinggrantsofplanbasedawardstoourNamedExecutiveOfficersin2016.Thegrants
includeawardopportunitiesforourNamedExecutiveOfficersunderourAIPforperformanceduring2016,equityawardsmadeinOctober
totheNamedExecutiveOfficersotherthanMr.GuimaresandBerckemeyer,andtheincrementalfairvalueonthemodificationdateof
June17ofrepricingcertainstockoptionsgrantedunderthe2013Plan.See"CompensationDiscussionandAnalysisElementsof
Laureate'sCompensationProgramIncentiveOpportunity"and"2016StockOptionRepricing/RetentionEquityGrant"abovefor
furtherdiscussionofthesegrants.
GRANTSOFPLANBASEDAWARDS
All
Other
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Name
DouglasL.
Becker
EilifSerck
Hanssen
Other
Stock
EstimatedFuturePayouts
EstimatedFuturePayouts Awards: AllOther Exercise Grant
UnderNonEquity
UnderEquity
Number Option
or
Date
IncentivePlanAwards
of
Awards:
Base FairValue
IncentivePlanAwards
Shares Numberof Price
ofStock
of
Securities
of
and
Stockor Underlying Option Option
Threshold Target Maximum Threshold Target Maximum Units
Options Awards Awards
($)
($)
($)
(#)
(#)
(#)
($)
(#)
(#)
($/share)
Grant
Award
Date Type
2/10/16 AIP(1)(2)
10/2/13 Options(3)
Time
10/25/16 Options(4)
Performance
10/25/16 Options(5)
2/10/16 AIP(1)(2)
10/2/13 Options(3)
10/25/16 RSUs(6)
10/25/16 PSUs(7)
RicardoM.
Berckemeyer 2/10/16 AIP(1)(2)
10/2/13 Options(3)
10/25/16 RSUs(6)
10/25/16 PSUs(7)
Enderson
Guimares
2/10/16
9/17/15
PaulaSinger 2/10/16
10/2/13
AIP(1)(2)
(2)
802,212
23.20 2,117,841
114,790
23.36 1,382,072
23,73947,477
47,477
23.36
571,632
1 504,879 1,009,758
254,777
23.20
672,613
21,607
504,739
201,900
4,321 8,643
8,643
1 835,877 1,671,755
256,250
23.20
676,500
21,607
504,745
201,895
1 1,177,821 2,355,643
4,321 8,643
8,643
8,642
982,750
23.20
746,890
AIP(1)(2)
1 696,564 1,393,129
Options(3)
256,250
23.20
676,500
10,714
250,285
100,115
Options(3)
10/25/16 RSUs(6)
10/25/16 PSUs(7)
(1)
11,221,8922,443,784
2,143 4,285
4,285
Thisrowdisclosesestimatedpossiblefuturepayoutsunderour2016AIP.TheCompensationCommitteeapprovedthe2016AIPtargetawardopportunities
fortheNamedExecutiveOfficersatitsFebruary10,2016meeting.ThetargetawardswereequaltoapercentageofeachNamedExecutiveOfficer'sbase
salaryonDecember31,2016.ThepercentageofbasesalaryforeachNamedExecutiveOfficer's2016AIPtargetawardwas:Mr.Becker120%,Mr.Serck
Hanssen85%Mr.Berckemeyer120%Mr.Guimares130%andMs.Singer100%.Themaximum2016AIPopportunityforeachNamedExecutiveOfficer
wasequalto200%ofhisorher2016AIPtargetaward.See"AnnualCashIncentiveOpportunity"aboveformoreinformationregardingtheAIP.
Asofthedateofthisprospectus,theCompensationCommitteehasnotyetassessed2016performanceunderanyofourperformancebasedcompensation
programs.Accordingly,2016AIPawardshavenotbeendeterminedatthistime.TheCompanyintendstofileaCurrentReportonForm8Korotherwise
disclosethe2016
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performancebasedcompensationaftertheCompensationCommitteehasassessed2016performanceunderourperformancebasedcompensationprogramsand
individualincentiveawardsaredetermined.
(3)
(4)
(5)
(6)
(7)
OnJune17,2016,theboardofdirectorsapprovedtherepricingofcertainstockoptionsgrantedunder2013Plan.Theexercisepriceofstockoptionsgranted
onOctober31,2013wasreducedfrom$34.52to$23.20.TheexercisepriceofstockoptionsgrantedonSeptember17,2015wasreducedfrom$26.32to
$23.20.TheamountsincolumnGrantDateFairValueofStockandOptionAwardsrepresenttheincrementalfairvalueonthemodificationdatewithrespect
totherepricingoftheseoptions.ThisincrementalfairvalueisalsoreportedintheOptionsAwardscolumnoftheSummaryCompensationTable.
Grantedunderthe2013Plan.Thesetimebasedvestingoptionshavea10yeartermandwillvestonJune17,2018,subjecttocontinuedemployment(with
limitedexceptionsforterminationofemploymentduetodeath,permanentdisabilityandqualifyingterminationfollowingachangeofcontrol).
Grantedunderthe2013Plan.Theseperformanceoptionshavea10yeartermand50%willbeeligibletovestbaseduponachievementoftheapplicable
EquityValueTargetforeachof2016and2017,subjectineachcasetocontinuedemploymentthroughJune17,2018(withlimitedexceptionsfor
terminationofemploymentduetodeath,permanentdisabilityandqualifyingterminationfollowingachangeofcontrol).
Grantedunderthe2013Plan.TheseRSUswillvestonJune17,2018,subjecttocontinuedemployment(withlimitedexceptionsforterminationof
employmentduetodeath,permanentdisabilityandqualifyingterminationfollowingachangeofcontrol).
Grantedunderthe2013Plan.50%ofthesePSUswillbeeligibletovestbaseduponachievementoftheapplicableEquityValueTargetforeachof2016and
2017,subjectineachcasetocontinuedemploymentthroughJune17,2018(withlimitedexceptionsforterminationofemploymentduetodeath,permanent
disabilityandqualifyingterminationfollowingachangeofcontrol).
OutstandingEquityAwardsat2016YearEnd
Thefollowingtableprovidesinformationconcerningunexercisedoptions,PSUs,RSUsandrestrictedsharesthathavenotvestedasof
theendofthemostrecentlycompletedfiscalyearforeachNamedExecutiveOfficer.Eachoutstandingawardisrepresentedbyaseparate
row,whichindicatesthenumberofsecuritiesunderlyingtheaward,includingawardsthathavebeentransferredotherthanforvalue(if
any).
Foroptionawards,thetabledisclosesthenumberofsharesunderlyingbothexercisableandunexercisableoptions,aswellasthe
exercisepriceandtheexpirationdate.Forstockunitawards,thetableprovidesthetotalnumberofunitsthathavenotvestedandthe
aggregatemarketvalueofsharesofstockissuableuponvestingoftheseunitsthathavenotvested.
WecomputedthemarketvalueofstockunitawardsbymultiplyingtheCompensationCommittee'sestimateofthefairmarketvalueof
ourcommonstockattheendofthemostrecentlycompletedfiscalyear($22.64)bythenumberofsharesofstockorunits.
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Stockoptionsgrantedunderthe2013Planhaveatenyeartermandmusthaveanexercisepriceofnolessthanfairmarketvalueon
thedateofgrant.TheCompensationCommitteehasadoptedanequitygrantpolicythatrequirestheCompensationCommitteetohave
receivedanindependentappraisalofourcommonstockfromanationallyrecognizedinvestmentbankingfirmthatisbasedonour
financialresultswithinonecalendarquarteroftheoptiongrantdate("currentappraisal")beforegrantingoptionsunderthe2013Plan.
Whengrantingoptions,theCompensationCommitteereviewsthecurrentappraisaland,iftheCompensationCommitteedeterminesthat
nofactshavearisensincethedeliveryofthecurrentappraisalthatwouldmakethecurrentappraisalunreasonable,setsafairmarketvalue
foroursharesitbelievestobereasonableandsupportableconsideringthedataincludedinthecurrentappraisal.Pursuanttoitsequity
grantpolicy,theexercisepriceforalloptionsisequaltothefairmarketvaluesetbytheCompensationCommitteeinaccordancewithits
equitygrantpolicy.Thevalueofourstockoptionstoeachgranteeisentirelydependentonstockpriceappreciationbeyondthedateof
grantandtheabilitytosellthesharesacquireduponexerciseofoptions.See"CertainRelationshipsandRelatedPartyTransactions
ManagementStockholder'sAgreements"foradiscussionofthevotingandtransferrestrictionsapplicabletosharesacquireduponexercise
ofvestedoptions.OnJune17,2016,theboardofdirectorsapprovedarepricingofcertainstockoptionsissuedunderthe2013Plan.See
"2016StockOptionRepricing/RetentionEquityGrant."
ThefollowingtablesetsforthinformationregardingoutstandingequityawardsheldbyourNamedExecutiveOfficersasoftheendof
2016,includingequityawardsgrantedunderour2007Planand2013PlantotheNamedExecutiveOfficers.
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OUTSTANDINGEQUITYAWARDSATFISCALYEAREND
OptionAwards
Name
DouglasL.
Becker
10/2/13
595,929
114,601
91,681 $
23.20(6)
10/2/23
10/25/16
114,790
47,477 $
23.36 10/25/26
8/5/08
281,250
21.28
8/5/18
10/2/13
189,263
36,396
29,117 $
23.20(6)
10/2/23
23,027
521,343
5/14/15
20,380
461,403
10/25/16
21,607
489,182
8,643
195,678
Ricardo
Berckemeyer 10/2/07
402,500
18.36
10/2/17
10/2/13
190,357
36,607
29,285 $
23.20(6)
10/2/23
23,160
524,354
21,607
489,188
8,642
195,672
EilifSerck
Hanssen
Equity
Equity
Incentive
Incentive
Plan
Plan
Awards:
Equity
Awards:
Market
Incentive
Number orPayout
Plan
Number
of
Valueof
Awards:
ofShares Market Unearned Unearned
Numberof
orUnits Valueof
Shares,
Shares,
Numberof
Numberof
Securities
ofStock Sharesor Unitsor
Units
Securities
Securities
Underlying
That
Unitsof
Other
orOther
Underlying
Underlying
Unexercised
Have
Stock
Rights
Rights
Original Unexercised
Unexercised
Unearned Option
Option
Not
ThatHave ThatHave ThatHave
Grant Options(#)
Options(#)
Options
Exercise Expiration Vested NotVested NotVested NotVested
(#)(3)
Date (#)(4)
($)
($)
Date Exercisable(1) Unexercisable(2)
Price($)
(#)(5)
StockAwards
72,506 1,641,536

10/25/16
Enderson
Guimares 9/17/15
326,578
390,085
266,087 $
23.20(6)
9/17/25
62,500 1,415,000
12/16/15
PaulaSinger 10/2/07
445,000
18.36
10/2/17
10,937
247,625
10/2/13
190,357
36,607
29,285 $
23.20(6)
10/2/23
23,160
524,354
174,392 3,948,235
30,518
690,945
314/620
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10/25/16
(1)
(2)
(3)
(4)
(5)
(6)
10,714
242,571
4,285
97,029
Thenumbersinthiscolumnrepresentvestedtimeandvestedperformanceoptions.
Thenumbersinthiscolumnrepresentunvestedtimeoptions.Thevestingdatesofunvestedtimeoptionsareasfollows:Mr.Becker114,601on
December31,2017and114,790onJune17,2018Mr.SerckHanssen36,396onDecember31,2017Mr.Berckemeyer36,607onDecember31,2017
Mr.Guimares130,028onDecember31,2017,130,028onDecember31,2018and130,029onDecember31,2019andMs.Singer36,607on
December31,2017.
ThenumbersinthiscolumnrepresentunvestedperformanceoptionsasofDecember31,2016.Thetermsofouroutstandingperformanceoptionsprovide
thatvestingoccursonlyafterauditedfinancialstatementsfortheapplicabletargetyearareavailableandtheCompensationCommitteecandeterminethe
extenttowhichtheperformancegoalhasorhasnotbeenachieved,andinthecaseofperformanceoptionsgrantedonOctober25,2016only,subjectto
continuedemploymentthroughJune18,2018.Thenumberofperformanceoptionssubjecttoannualperformancetargetisasfollows:Mr.Becker45,840
for2016,45,840for2017,23,738subjectto2016performancebutnoteligibletovestuntilJune17,2018,and23,739subjectto2017performancebutnot
eligibletovestuntilJune17,2018Mr.SerckHanssen14,558for2016and14,559for2017Mr.Berckemeyer14,642for2016and14,643for2017
Mr.Guimares66,521for2016,66,522for2017,66,522for2018and66,522for2019andMs.Singer14,642for2016and14,643for2017.Asofthe
dateofthisprospectus,theCompensationCommitteehasnotyetassessed2016performanceunderanyofourperformancebasedcompensationprograms.
Accordingly,thevestingofperformanceoptionssubjectto2016performancetargetshasnotbeendeterminedatthistime.TheCompanyintendstofilea
CurrentReportonForm8Korotherwisedisclosethe2016performancebasedcompensationaftertheCompensationCommitteehasassessed2016
performanceunderourperformancebasedcompensationprogramsandindividualincentiveawardsaredetermined.
ThenumbersinthiscolumnrepresentunvestedRSUs.ThemarketvalueoftheRSUsisequivalentto$22.64pershare,theestimatedfairmarketvalueof
ourcommonstockasofDecember31,2016,assetbytheCompensationCommitteeinaccordancewithitsequitygrantpolicy.Thevestingdatesof
unvestedRSUsareasfollows:Mr.SerckHanssen20,380onMay14,2018and21,607onJune17,2018Mr.Berckemeyer21,607onJune17,2018
Mr.Guimares73,437onDecember31,2017andMs.Singer10,714onJune17,2018.
ThenumbersinthiscolumnrepresentunvestedPSUs.ThemarketvalueofthePSUsisequivalentto$22.64pershare,theestimatedfairmarketvalueofour
commonstockasofDecember31,2016,assetbytheCompensationCommitteeinaccordancewithitsequitygrantpolicy.Thetermsofouroutstanding
PSUsprovidethatvestingoccursonlyafterauditedfinancialstatementsfortheapplicabletargetyearareavailableandtheCompensationCommitteecan
determinetheextenttowhichtheperformancegoalhasorhasnotbeenachieved,andinthecaseofPSUsgrantedonOctober25,2016only,subjectto
continuedemploymentthroughJune17,2018.ThenumberofPSUssubjecttoannualperformancetargetisasfollows:Mr.Becker36,253for2016and
36,253for2017Mr.SerckHanssen11,513for2016,11,514for2017,4,321subjectto2016performancebutnoteligibletovestuntilJune17,2018,and
4,322subjectto2017performancebutnoteligibletovestuntilJune17,2018Mr.Berckemeyer11,580for2016,11,580for2017,4,321subjectto2016
performancebutnoteligibletovestuntilJune17,2018,and4,321subjectto2017performancebutnoteligibletovestuntilJune17,2018Mr.Guimares
40,982for2016,40,982for2017,40,982for2018and40,982for2019andMs.Singer11,580for2016and11,580for2017,2,142subjectto2016
performancebutnoteligibletovestuntilJune17,2018,and2,143subjectto2017performancebutnoteligibletovestuntilJune17,2018.For
Mr.Guimaresonly,thePSUssubjecttothe2015annualperformancetargetcannotvest,ifatall,untilafterpublicationoftheCompany'saudited
consolidatedfinancialstatementsforfiscal2016.Asofthedateofthisprospectus,theCompensationCommitteehasnotyetassessed2016performance
underanyofourperformancebasedcompensationprograms.Accordingly,thevestingofPSUssubjectto2016performancetargetshasnotbeendetermined
atthistime.TheCompanyintendstofileaCurrentReportonForm8Korotherwisedisclosethe2016performancebasedcompensationafterthe
CompensationCommitteehasassessed2016performanceunderourperformancebasedcompensationprogramsandindividualincentiveawardsare
determined.
Theexercisepriceofthisstockoptionwasmodifiedto$23.20onJune17,2016.
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OptionExercisesandRestrictedStockVestedDuringFiscal2016
Thefollowingtableincludescertaininformationwithrespecttovestingofrestrictedsharesduringfiscal2016.Wehaveomittedthe
columnspertainingtoOptionAwardsastheyareinapplicable,becausenoNamedExecutiveOfficerexercisedanyoptionsduringfiscal
2016.
OPTIONEXERCISESANDSTOCKVESTED
DouglasL.Becker
EilifSerckHanssen
RicardoBerckemeyer
EndersonGuimares
PaulaSinger
(1)
(2)
(3)
(4)
StockAwards
Number
ofShares
Value
Acquiredon
Realizedon
Vesting(#)
Vesting($)
36,253(1)$
16,513(2)$
11,580(3)$

19,080(4)$
842,520
374,108
269,125
433,698
36,253PSUsvestedonApril15,2016,uponachievementofthe2015EquityValueTarget.Thefairmarket
valueofourcommonstockasdeterminedbytheCompensationCommitteeinaccordancewithitsequity
grantpolicyonApril15,2016was$23.24.
11,513sharesofrestrictedstockvestedonJanuary28,2016and5,000PSUsvestedonApril15,2016,upon
achievementofthe2015EquityValueTarget.Thefairmarketvalueofourcommonstockasdeterminedby
theCompensationCommitteeinaccordancewithitsequitygrantpolicyonJanuary28,2016,andApril15,
2016was$22.40and$23.24,respectively.
11,580PSUsvestedonApril15,2016,uponachievementofthe2015EquityValueTarget.Thefairmarket
valueofourcommonstockasdeterminedbytheCompensationCommitteeinaccordancewithitsequity
grantpolicyonApril15,2016was$23.24.
11,580sharesofrestrictedstockvestedonJanuary28,2016and7,500PSUsvestedonApril15,2016,upon
achievementofthe2015EquityValueTarget.Thefairmarketvalueofourcommonstockasdeterminedby
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2016was$22.40and$23.24,respectively.
2016PensionBenefits
NoNamedExecutiveOfficerparticipatesinanydefinedbenefitpensionplanorarrangementprovidedbyLaureate.
2016NonqualifiedDeferredCompensation
OurPost2004DCPpermitseligibleemployeestheopportunitytodeferupto85%oftheirbasesalariesand100%ofanybonus,or
annualcashand/orlongtermincentiveawards,whichmaybeallocatedtonotionalinvestmentsselectedbytheparticipantsthatare
similartoinvestmentalternativesavailableinour401(k)RetirementSavingsPlanandpayoutfollowingterminationofemploymentor
otherselectedpayoutschedule,whichpayoutswillbemadeinalumpsumorininstallments,attheelectionoftheparticipants.The
minimumannualdeferralamountunderthePost2004DCPis$5,000.Eachyear,aparticipantmayelecttoreceivethatyear'sdeferral
balanceinafutureyearwhiletheparticipantisstillemployed(ascheduledinservicewithdrawal)orafteremploymentterminates(a
retirementpayment).Eachyear,wehavetheability,butnottheobligation,tomakematching
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employercontributionstoeachparticipant'sPost2004DCPaccountiftheparticipantmadesalaryreductioncontributionstothe
401(k)RetirementSavingsPlan,receivedlessthanthefullmatchunderthe401(k)RetirementSavingsPlanonthesalaryreduction
contributionbecauseofthelimitinSection401(a)(17)oftheCodeoncompensationandmadeatleasta$5,000minimumcontributionto
hisorher401(k)RetirementSavingsPlanaccount.Todate,wehavenotchosentomakeamatchingcontributiontoanyparticipant'sPost
2004DCPaccount,norhavewechosentomakeanyotherdiscretionaryemployercontributionspermittedunderthePost2004DCP.Inthe
eventofdeathordisabilitypriortoterminatingemployment,theparticipant'sPost2004DCPbalancewillbedistributed(tothe
participant'sbeneficiaries,inthecaseofdeath),inalumpsumtheFebruaryfollowingtheyearinwhichdeathordisabilityoccurs.Inthe
eventofterminationofemployment,Post2004DCPbalanceswillbedistributedinalumpsumorinuptotenannualinstallments(based
ontheterminationpaymentelectiontheparticipanthadpreviouslymadeforeachPost2004DCPannualyearcontribution),beginningin
Februaryfollowingtheyearinwhichtheparticipant'semploymentwasterminated.Ifthereisaseparationofservicewithoutaneffective
terminationpaymentelectionforaPlanyear,thatPlanyear'sdeferralbalancewillbepaidinalumpsumintheFebruaryfollowingtheyear
ofseparationofservice.Mr.Beckeralsoparticipatesinadeferredcompensationplanthatwasfrozenandclosedtonewparticipantsin
December2004(the"Pre2005DCP").NocontributionsweremadetothePre2005DCPin2016.ThepayouttermsofthePre2005DCP
arelikethoseofthePost2004DCP.NootherNamedExecutiveOfficerparticipatesinthePre2005DCP.
Priortotheleveragedbuyoutin2007,Mr.BeckerhadoptionstopurchasesharesofourcommonstockandPSUs,which,basedona
valueof$60.50pershare,wouldhaveentitledMr.Beckerto$78.1millionifsuchoptionsandPSUswerecashedoutinconnectionwith
theleveragedbuyout.Inconnectionwiththeleveragedbuyout,Mr.BeckeragreedtocancelhisoptionsandPSUsinexchangeforus
establishingadeferredcompensationplanforhim,underwhichMr.Beckerhadrightstoreceivecashpaymentsinsubsequentyears.We
establishedMr.Becker'sExecutiveDCPwithanaccountvalueof$78.1million.Ontheclosingdateoftheleveragedbuyout,Mr.Becker's
ExecutiveDCPwascreditedwithanumberofphantomsharesofourcommonstockequaltothenumberofsharesthatMr.Beckercould
haveacquiredintheleveragedbuyoutifalloftheoptionsandPSUshadbeencancelledinexchangeforPhantomSharesequaltothe
quotientof(x)theaggregatecashpaymentthatMr.Beckerwouldhavereceived(basedonapersharevalueof$60.50)onapretaxbasis,
inrespectofsuchcancelledoptionsandPSUsontheclosingdateoftheleveragedbuyoutdividedby(y)thevalueofoneshareof
Laureatecommonstockasitexistedimmediatelyaftergivingeffecttotheleveragedbuyout.
Mr.BeckerhasbeenfullyvestedatalltimessincetheleveragedbuyoutinhisExecutiveDCP.PursuanttotheExecutiveDCP,the
valueofMr.Becker'sExecutiveDCPwasbasedontheunderlyingvalueofourcommonstock,subjecttoamaximum5%compound
annualreturnuntiltheearliestofaninitialpublicofferingofoursharesofcommonstock,September17,2014orachangeincontrolofthe
Company.AsofDecember31,2016theCompany'sobligationsundertheExecutiveDCPhavebeensatisfiedinfull.See"
CompensationDiscussionandAnalysisArrangementswithCertainNamedExecutiveOfficersChairmanandChiefExecutiveOfficer
Compensation"aboveforfurtherdiscussionoftheExecutiveDCPandthepaymentsmadein2016.
InformationregardingMr.Becker'sandMs.Singer'sparticipationinthePost2004DCPandMr.Becker'sparticipationinthePre2005
DCPandtheExecutiveDCPisincludedinthefollowingtable.
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NONQUALIFIEDDEFERREDCOMPENSATION
Name
DouglasL.Becker(1)
EilifSerckHanssen
EndersonGuimares
PaulaSinger
(1)
(2)
(3)
Executive
Contributions
inLastFY
($)(1)
121,464
Registrant
Contributions
inLastFY
($)
Aggregate
Earnings(Loss)
inLast
FY($)(2)
1,231,301
54,853
Aggregate
Withdrawals/
Distributions
($)
$ 11,059,241 $
Aggregate
BalanceatLast
FYE($)
8,410,008
1,198,469
Theamountincludedinthiscolumnisincludedinthe"Salary"columnoftheSummaryCompensationTablefor
2016.
Amountsinthiscolumnarenotreportedascompensationforfiscalyear2016inthe"SummaryCompensationTable"
becausetheydonotreflectabovemarketorpreferentialearnings.Deferralsmaybeallocatedamongdifferent
investmentcreditingoptions.
AmountsshowncompriseMr.Becker'sparticipationintheExecutiveDCP,ourPost2004DCPandourPre2005
DCP.Mr.Becker'searningsandbalanceundertheExecutiveDCPin2016were$447,258and$0,respectively.
Mr.Becker'searningsandbalanceunderthePost2004DCPduring2016were$521,995and$5,599,159,
respectively.Mr.Becker'searningsandbalanceunderthePre2005DCPduring2016were$262,048and$2,810,849,
respectively.
PotentialPaymentsUponTerminationorChangeinControl
ThetablebelowreflectspotentialpaymentstoeachofourNamedExecutiveOfficersinvariousterminationandchangeincontrol
scenariosbasedoncompensation,benefitsandequitylevelsineffectonDecember30,2016,whichwasthelastbusinessdayoffiscal
2016.TheamountsshownassumethattheterminationorchangeincontroleventwaseffectiveasofDecember30,2016.Forstock
valuations,wehaveassumedthatthepricepershareisthefairmarketvalueofourstockatDecember30,2016,asdeterminedbythe
CompensationCommitteeinaccordancewithitsequitygrantpolicy,whichwas$22.64.Thetablebelowexcludesanyamountspayableto
theNamedExecutiveOfficertotheextentthattheseamountsareavailablegenerallytoallsalariedemployeesanddonotdiscriminatein
favorofourexecutiveofficers.
PotentialPaymentsuponTermination
PaymentsRegardlessofMannerofTermination.Regardlessoftheterminationscenario,theNamedExecutiveOfficerswillreceive
earnedbutunpaidbasesalarythroughtheemploymentterminationdate,alongwithanyotheraccruedorvestedpaymentsorbenefits
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owedunderanyofourplansoragreementscoveringtheNamedExecutiveOfficerasgovernedbythetermsofthoseplansoragreements.
PaymentsUponTerminationDuetoDeathorDisability.Intheeventofaterminationduetodeathordisability,withrespecttoeach
NamedExecutiveOfficer,allunvestedRSUs,PSUsoroptionswillbeforfeited,exceptthat:(i)anysuchunvestedRSUsortimeoptions
thatwouldhavevestedsubsequentto,butduringthesamecalendaryearas,thedeathordisabilitywillbecomevestedand(ii)any
unvestedperformanceoptionsorPSUsthatwould,butfortheterminationofemploymentduetodeathordisability,havevestedhadthe
applicableperformancegoalforthecalendaryearduringwhichthedeathordisabilityoccurredbeenachievedwillremainoutstanding
untiltheCompensationCommitteedetermineswhethertheapplicableperformancegoalhasbeenachievedandwillbecomevestedifand
whentheCompensationCommitteedeterminesthattheapplicableperformancegoalhas
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beenachievedorwillterminateonthedatetheCompensationCommitteedeterminesthattheapplicableperformancegoalhasnotbeen
achieved,andthebalanceoftheunvestedportionoftheperformanceoptionorPSUwillterminateasofthedateofterminationof
employmentduetodeathordisability.Intheeventofaterminationduetodeathordisability,vestedoptionsmay(bytheemployee's
beneficiaryinthecaseofdeath)beexercisedonlyforaperiodoftwoyearsfromtheterminationduetodeathordisabilityoftheNamed
ExecutiveOfficer.
Intheeventofterminationduetodeathordisability,Mr.Becker'sorMs.Singer'sPost2004DCPbalanceorMr.Becker'sPre2005
DCPbalancewillbedistributed(tohisorherbeneficiaries,inthecaseofdeath),inalumpsumtheFebruaryfollowingtheyearinwhich
hisorherdeathordisabilityoccurs.
InvoluntaryTerminationandResignationforGoodReason.IfaNamedExecutiveOfficer'semploymentisterminatedbyuswithout
causeorheorsheresignsforgoodreasonallunvestedRSUs,PSUsandoptionswillbeforfeitedprovided,however,thatifthetermination
occurssubsequenttotheendofafiscalyearbutpriortothepublicationofourauditedfinancialstatementsforsuchyearandthe
CompensationCommitteedetermines,uponpublicationofsuchfinancialstatements,thatoneormoretranchesofperformancevested
stockoptionsorPSUswouldhavevestedandbecomenonforfeitablebasedupontheauditedfinancialstatementsforsuchyear,that
portionoftheperformancevestedstockoptionsorPSUsthatwouldotherwisehavebecomevestedandnonforfeitablehadthetermination
occurredafterthedateoftheCompensationCommittee'sdeterminationwillbecomevestedandnonforfeitableuponsuchdetermination,
andheorshewillhave90daysfromtheterminationdatetoexerciseanyvestedoptionsheldontheterminationdate.Notwithstandingthe
foregoing,upontheterminationofMr.Guimares'semploymentasaresultof:(x)terminationbytheCompanywithoutcausepriorto
December31,2017,providedheexecutesandallowstobecomeeffectiveacustomaryreleaseagreement,(y)hisdeathduring2017or
(z)histerminationduetopermanentdisabilityduring2017,alloftheRSUsgrantedtohiminSeptemberandDecemberof2015will
becomevestedandnonforfeitableontheeffectivedateofsuchqualifyingtermination.
ForeachNamedExecutiveOfficerotherthanMr.Becker,"goodreason"isdefinedas(i)areductioninbasesalary(otherthana
generalreductioninbasesalarythataffectsallsimilarlysituatedemployees),(ii)asubstantialdiminutionintheNamedExecutiveOfficer's
title,dutiesandresponsibilities,otherthananyisolated,insubstantialandinadvertentfailurebytheCompanyoritssubsidiariesthatisnot
inbadfaith,or(iii)atransferoftheNamedExecutiveOfficer'sprimaryworkplacebymorethan50milesfromhisorhercurrentworkplace
provided,however,thatinanyevent,suchconductisnotcuredwithintenbusinessdaysaftertheNamedExecutiveOfficergivesthe
Companynoticeofsuchevent.
ForMr.Becker,"goodreason"isdefinedas(i)demotionfromthepositionofCEO,orhisdutiesandresponsibilitiesaremateriallyand
substantiallydiminishedasawhole(ii)areductioninhisbasesalary(iii)theremovaloforfailuretoreelecthimasamemberoftheboard
ofdirectorsotherthanasaresultofhisvoluntaryresignationorchoicenottostandforreelectionorreappointmentorasrequiredby
applicablelaw(iv)requiringhimtobebased(excludingtravelresponsibilitiesintheordinarycourseofbusiness)atanyofficeorlocation
morethan25milesfromourBaltimoreoffice(v)thefailurebyanysuccessortoexpresslyassumeallofourobligationsunderhis
employmentagreement,ifanyor(vi)afterachangeincontrol,hisdutiesareinconsistentinanymaterialrespectwithhisposition
(including,withoutlimitation,hisstatus,office,title,orreportingrelationship),authority,control,dutiesorresponsibilitiesimmediately
priortothechangeincontrol.
IfMr.SerckHanssen'semploymentisterminatedbyuswithoutcause,hewillreceivealumpsumcashpaymentequalto18months'
basesalaryand150%ofthetargetcashawardundertheAIPforthefiscalyearinwhichtheterminationoccurs,ifMr.SerckHanssen
executesandallowstobecomeeffectiveacustomaryreleaseagreement,whichincludesatwoyearcovenantnottocompeteordisclose
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executesandallowstobecomeeffectiveacustomaryreleaseagreement,whichincludesatwoyearcovenantnottocompeteordisclose
confidentialinformation,asrequiredinhisofferletter.
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If,onorpriortoSeptember1,2017,theCompanyterminatesMr.Guimares'sorMr.Berckemeyer'semploymentwithoutcause,
providedtheexecutiveexecutesandallowstobecomeeffectiveacustomaryreleaseagreement,theCompanywillpaytotheexecutivea
lumpsumcashpaymentinanamountequaltothesumof(i)afullyearoftheexecutive'sannualbasesalaryattherateineffectatthetime
ofhistermination,and(ii)100%ofthetargetcashbonusawardundertheAIPineffectatthetimeofsuchtermination,lessapplicable
taxesandwithholdings,asrequiredintheirExecutiveRetentionAgreements.
ForeachNamedExecutiveOfficer,otherthanMr.Becker,"cause"means(i)grossnegligenceorwillfulmalfeasanceinconnection
withtheperformanceofhisorherduties(ii)convictionof,orpleadingguiltyornolocontendereto,anyfelony(iii)theft,embezzlement,
fraudorothersimilarconductbytheexecutiveinconnectionwiththeperformanceofhisorherdutiesor(iv)awillfulandmaterialbreach
ofanyotherapplicableagreementsincluding,withoutlimitation,engaginginanyactioninbreachofanyapplicablerestrictivecovenants.
InMr.Becker'scase,"cause"means(i)grossnegligenceorwillfulmalfeasanceinconnectionwiththeperformanceofhisduties(other
thanintheeventhehadareasonablegoodfaithbeliefthattheact,omissionorfailuretoactinquestionwasnotaviolationoflaw),in
eachcase,thatwouldbereasonablylikelytohaveamaterialadverseeffectonourbusiness(ii)theabuseofdrugsoralcoholorconduct
involvingmoralturpitudethatwouldbereasonablylikelytohaveamaterialadverseeffectonourbusiness(iii)hismisappropriationof
anymaterialbusinessopportunityprovided,however,that,solelyforthispurpose,heshallnotbedeemedtohavemisappropriateda
materialbusinessopportunitybyvirtueofanyactiontakenbySterlingCapital(anaffiliateofSterling)oranyofitsaffiliates,unlesshe
knowsofsuchactionbeforethedateitoccurs(or,ifearlier,beforethedateofabindingcommitmenttocompletesuchaction)andhefails
todisclosesuchactiontoourdirectors(iv)hisbeingbarredorprohibitedbytheSECoranyothergovernmentalauthorityfromholding
thepositionofCEOor(v)thewillfulandmaterialbreachofanyotherapplicableagreementswithLaureateorWengenincluding,without
limitation,engaginginanyactioninbreachofanyapplicablerestrictivecovenants.
PaymentsUponVoluntaryResignationorTerminationforCause.IfanyNamedExecutiveOfficerresignswithoutgoodreasonoris
terminatedbytheCompanyforcause,heorshewillforfeitallunvestedequitygrantsand,ifheorsheresignswithoutgoodreason,all
vestedbutunexercisedoptionsheldatthetimeofterminationwillbeexercisableforaperiodof90daysposttermination.Ifemployment
isterminatedbytheCompanyforcause,allvestedawardsalsowillbeforfeited.Vestedstockoptionswillremainexercisableforaperiod
oftwoyearspostterminationofemploymentforanyparticipant,includinganyNamedExecutiveOfficer,who(a)hasaminimumoffive
continuousyearsofservicewithusand(b)providesatleastsixmonths'priorwrittennoticeofhisorherresignation.
PotentialPaymentsUponaChangeinControl
Immediatelypriortoachangeincontrolallunvestedrestrictedshareswillvest.
IfaNamedExecutiveOfficerceasestobeaneligibleindividualunderthe2013Plancoincidentwithorwithin18monthsaftera
changeincontrolasaresultofaninvoluntaryterminationwithoutcauseortheNamedExecutiveOfficer'sresignationwithgoodreason(a
"QualifyingTermination"),totheextentnotalreadyvestedorpreviouslyforfeited,(1)thatportionoftimevestedoptionsandthatportion
oftheRSUsthatwouldotherwisehavebecomevestedandexercisableonorbeforethethirdanniversaryoftheeffectivedateofthe
QualifyingTerminationwillbecomevestedandexercisableimmediatelypriortotheeffectivedateoftheQualifyingTerminationandthe
balanceoftheunvestedportionofthetimevestedoptionswillterminatewithoutbecomingvested,and(2)thatportionofperformance
optionsandPSUsthatwouldotherwisehavebecomevestedandexercisablehadweachievedtheapplicableperformancegoalinthethree
fiscalyears(or,ifshorter,theremaininginitial
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targetyears)endingcoincidentwithorimmediatelysubsequenttotheeffectivedateoftheQualifyingTerminationwillbecomevestedand
exercisableimmediatelypriortotheeffectivedateoftheQualifyingTerminationandthebalanceoftheunvestedportionofthe
performanceoptionsorPSUswillterminatewithoutbecomingvested.
Name
EilifSerckHanssen
RicardoM.
Berckemeyer
EndersonGuimares
PaulaSinger
(1)
(2)
Benefit
DouglasL.Becker
Without
Cause/Good
Reason
Termination
Pre2005DCPandPost2004DCP
AccelerationofPSUvesting(2)

Total

CashSeverance(3)
$
AccelerationofRSUvesting


Total
$
CashSeverance(5)
$


Total
$

CashSeverance(5)
$
$

Total
$
Post2004DCP


Total

Termination
dueto
Deathor
Disability(1)
1,648,282
1,648,282
Changein
Controlplus
Qualifying
Termination(1)
$ 8,079,447
$
$ 8,079,447 $
1,641,536
1,641,536
1,648,282
950,586(4)
717,020
3,315,888
1,532,442
$

$

$
1,532,442
$
2,083,838
$
1,662,625(6)
$

$
3,746,463
$
$ 1,173,684

$

$
$ 1,173,684 $
1,532,442
489,188(4)
720,026
2,741,655
2,083,838
1,662,625(4)
4,639,179
8,385,642
242,571(4)
621,383
863,954
Vestingofcertainunvestedtimeandperformancestockoptionswillacceleratebecauseofterminationduetodeathor
disabilityoruponaQualifyingTerminationwithin18monthsfollowingaChangeinControl.However,allunvested
stockoptionsheldbytheNamedExecutiveOfficersonDecember30,2016hadexercisepricesgreaterthanorequal
tothefairmarketvalueofourcommonstock,asdeterminedbytheCompensationCommitteeinaccordancewithits
equitygrantpolicyasofsuchdate,of$22.64.Accordingly,thereisnointrinsicvalueassociatedwiththeaccelerated
vestingofsuchstockoptions.
InconnectionwithaQualifyingTerminationwithin18monthsfollowingaChangeinControl,thatportionof
unvestedPSUsthatwouldotherwisehavebecomevestedandexercisablehadweachievedtheEquityValueTargetin
thethreefiscalyears(or,ifshorter,theremaininginitialtargetyears)endingcoincidentwithorimmediately
subsequenttotheeffectivedateoftheQualifyingTerminationwillbecomevestedandexercisableimmediatelyprior
totheeffectivedateoftheQualifyingTermination.Representstheaggregatefairmarketvalue,asdeterminedbythe
CompensationCommitteeinaccordancewithitsequitygrantpolicy,ofunvestedPSUsoutstandingonDecember30,
2016andsubjecttothe2016and2017EquityValueTarget.ThetermsofthePSUsprovidethatanyunvestedPSUs
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2016andsubjecttothe2016and2017EquityValueTarget.ThetermsofthePSUsprovidethatanyunvestedPSUs
thatwould,butfortheterminationduetodeathordisability,havevestedhadtheEquityValueTargetforthe
calendaryearduringwhichthedeathordisabilityoccurredbeenachievedwillremainoutstandinguntilthe
CompensationCommitteedetermineswhethertheEquityValueTargetforsuchyearhasbeenachieved.Becausethe
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informationinthistableassumessuchterminationduetodeathordisabilityoccurredasofDecember30,2016,there
isnoaccelerationofPSUvesting.
(3)
(4)
(5)
(6)
Representsalumpsumseverancepaymentequalto18months'basesalaryand150%ofMr.SerckHanssen'starget
cashincentiveawardasofDecember30,2016,ifMr.SerckHanssenexecutesthecustomaryreleaseagreement,which
includesatwoyearcovenantnottocompeteordiscloseconfidentialinformation,asrequiredbyhisofferletter.
InconnectionwithaQualifyingTerminationwithin18monthsfollowingaChangeinControl,thatportionof
unvestedRSUsthatwouldotherwisehavebecomevestedandexercisableinthethreefiscalyears(or,ifshorter,the
remaininginitialyears)endingcoincidentwithorimmediatelysubsequenttotheeffectivedateoftheQualifying
TerminationwillbecomevestedandexercisableimmediatelypriortotheeffectivedateoftheQualifying
Termination.Representstheaggregatefairmarketvalue,asdeterminedbytheCompensationCommitteein
accordancewithitsequitygrantpolicy,ofunvestedPSUsoutstandingonDecember30,2016.
Representsalumpsumseverancepaymentequaltooneyearofbasesalaryandcashbonusattargetasspecifiedin
theexecutive'sExecutiveRetentionAgreement.
ThevestingofMr.Guimares'sRSUswillaccelerateifhisemploymentisterminatedwithoutcause(otherthandueto
deathordisability)priortoDecember30,2017.
DirectorCompensation
Thefollowingtablesummarizesthecompensationpaidtoorearnedbyourdirectorsin2016.Wehaveomittedfromthistablethe
columnsforOptionsAwards,NonEquityIncentivePlanCompensationandChangeinPensionValueandNonqualifiedDeferred
CompensationEarnings,asnoamountsarerequiredtobereportedinanyofthosecolumnsforanydirectorduring2016.
Eachnonemployeedirectorisentitledtoreceiveanannualretainerof$50,000.Thisretainermaybepaidintheformofcash,
commonstockorRSUs,attheelectionofthedirector.ThenumberofsharesofcommonstockorRSUsisdeterminedbasedonthefair
marketvalueofourcommonstockonthedateofboardapproval,withvestingquarterlyinarrears.Newlyelected,nonemployee,
independentdirectorsmayelecttoreceivesharesequaltouptothreeadditionalyearsofannualretainersatthetimeoftheirinitial
electiontoourboardofdirectorsandmayelecttodefervestingoftheseshares.EachdirectorwhoissubjecttoU.S.federalincometaxes
andisnotcontractuallyobligatedtoremithisdirectorcompensationtotheWengenInvestoronwhosebehalfheservesiseligibleto
participateinourPost2004DCPanddeferreceiptofhisannualcompensationinaccordancewiththetermsofthePost2004DCP.No
Wengenaffiliateddirectordeferredanyportionofhis2016compensation.
Inaddition,ourcompensationprogramfornonemployeeindependentdirectorsprovidedforthefollowingannualcashretainersin
2016,whichwerepaidquarterlyinarrears.
AuditCommittee
CompensationCommittee
NominatingCommittee
CommitteeonEducation
Member
Chair
$ 15,000 $ 25,000
$ 10,000 $ 20,000
$ 7,500 $ 15,000
$ 10,000 $ 50,000
Newlyelected,nonemployee,independentdirectorsarealsoeligibletoreceiveanannualstockretainerworth$120,000,intheform
ofrestrictedsharesorRSUs,withthenumberofsharesdeterminedbasedonthefairmarketvalueofourcommonstockasdeterminedby
theCompensationCommitteeinaccordancewithitsequitygrantpolicyontheinitialissuancedate.Newlyelected,nonemployee,
independentdirectorsmayelecttoreceiverestrictedsharesorRSUsequaltoupto
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threeadditionalyearsofannualstockretainersatthetimeoftheirinitialelectiontoourboardofdirectorsandmayelecttodefervestingof
theseshares.
InApril2016,theCompensationCommitteeapprovedadditionalcashcompensationfortheCompany'snonemployee,independent
directors.Fornonemployee,independentdirectorsfirstreceivingastockretainerin2013,theCompensationCommitteeapprovedaone
timeadditionalcashpaymentof$165,000,payablein2016.Fornonemployee,independentdirectorsfirstreceivingastockretainerin
2014,theCompensationCommitteeapprovedaonetimeadditionalcashpaymentof$165,000,payableinJanuary2017,ineachcase
providedthedirectorcontinuestoserveonthepaymentdate.Beginningin2017,nonemployee,independentdirectorswillbeeligibleto
receiveanannualretainerinanaggregateamountequalto$225,000peryear.Theannualretainerwillbepayable50%incashand50%in
sharesofrestrictedstock,withthenumberofsharesofrestrictedstockdeterminedbasedonthefairmarketvalueofourcommonstockon
thegrantdate.Thesharesofrestrictedstockwillvestquarterlyinarrears.
Noneofourdirectorsreceivedseparatecompensationforattendingmeetingsofourboardofdirectorsoranycommitteesthereof.Our
CEO,Mr.Becker,istheonlydirectorwhoisalsoanemployeeofLaureate.Mr.Beckerisnotentitledtoseparatecompensationforhis
serviceonourboardofdirectors.Nonemployeedirectorsarereimbursedfortravelandotherexpensesdirectlyrelatedtodirectoractivities
andresponsibilities.
2016DIRECTORCOMPENSATION
Name
DouglasL.Becker(1)
BrianF.Carroll(2)
AndrewB.Cohen(4)
DarrenM.Friedman(5)
JohnA.Miller(6)
GeorgeMuoz(7)
JudithRodin(8)
JonathanD.Smidt(9)
IanK.Snow(10)
StevenM.Taslitz(11)
QuentinVanDoosselaere(12)
RobertB.Zoellick(13)
(1)
(2)
(3)
(4)
FeesEarnedorPaidin
Cash($)
27,500
60,000
190,000
215,000
15,000
65,000
60,000
10,000
StockAwards($)

49,915(3)
49,915(3)

49,915(3)

49,915(3)

49,915(3)

AllOther
Compensation($)
Total($)
77,415
49,915
60,000
49,915
190,000
215,000
64,915
65,000
60,000
59,915
Mr.BeckerisnotentitledtoreceivecompensationforhisserviceonourBoardofDirectors.
Mr.Carrollreceived$20,000incashasChairmanoftheCompensationCommitteeand$7,500incashasamember
oftheNominatingCommittee.Mr.Carrollelectedtoreceivehisannualretainerinstock.
Eachdirectorwhoelectedtoreceivehisannualretainerinstockreceived2,151sharesofourcommonstock.Allof
theseshareswerefullyvestedonDecember31,2016.
Mr.Cohenelectedtoreceivehisannualretainerinstock.Mr.CohenwasrequiredbyprioragreementwithPoint72to
haveallsharesissuedinpaymentofhisdirector'sfeesissuedtoPoint72.Therefore,weissuedtoPoint722,151shares
ofourcommonstockascompensationforMr.Cohen'sservicesasadirectorduring2016.
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(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
Mr.Friedmanreceived$10,000incashasamemberoftheCompensationCommitteeandelectedtoreceivehis
$50,000annualretainerincash.Mr.FriedmanwasrequiredbyprioragreementwithStepStonetohavehis2016
director'sfeespaidtoStepStone.
Mr.Millerelectedtoreceivehisannualretainerinstock.
Mr.Muozreceived$25,000incashasChairmanoftheAuditCommittee.Mr.Muozalsoelectedtoreceivedirector
compensationfor20132016inaninitialgrantof19,698restrictedsharesonJune28,2013.Theserestrictedshares
areissuedandoutstandingatDecember31,2016but4,924sharesaresubjecttotransferrestrictionsandsubstantial
riskofforfeitureuntilthevestingcriteriaassociatedwiththerestrictedshareswillhavebeenmetonMarch6,2017.
Notwithstandingtheforegoingsentence,ifMr.Muoz'sserviceasadirectorterminatesbecauseofdeathordisability,
anyportionoftheserestrictedsharesthatweregrantedinconsiderationofhisservicepriortoorduringthecalendar
yearinwhichsuchdeathordisabilityoccurswillbecomevestedandnonforfeitableontheterminationdate,andthe
balanceoftheunvestedrestrictedshareswillterminatewithoutbecomingvested.Mr.Muozreceivedaonetime
$165,000cashpaymentduring2016.
Dr.Rodinreceived$50,000incashasChairoftheCommitteeonEducation.Dr.Rodinelectedtoreceivedirector
compensationfor20132016inaninitialgrantof19,698sharesofrestrictedstockonAugust6,2013.These
restrictedsharesareissuedandoutstandingatDecember31,2016but4,924sharesaresubjecttotransferrestrictions
andsubstantialriskofforfeitureuntilthevestingcriteriaassociatedwiththerestrictedshareswillhavebeenmeton
March6,2017.Notwithstandingtheforegoingsentence,ifDr.Rodin'sserviceasadirectorterminatesbecauseof
deathordisability,anyportionoftheserestrictedsharesthatweregrantedinconsiderationofherservicepriortoor
duringthecalendaryearinwhichsuchdeathordisabilityoccurswillbecomevestedandnonforfeitableonthe
terminationdate,andthebalanceoftheunvestedrestrictedshareswillterminatewithoutbecomingvested.Dr.Rodin
receivedaonetime$165,000cashpaymentduring2016.
Mr.Smidtreceived$15,000incashasamemberoftheAuditCommittee.Mr.Smidtelectedtoreceivehisannual
retainerinstock.
Mr.Snowreceived$15,000incashasamemberoftheAuditCommitteeandelectedtoreceivehis$50,000annual
retainerincash.Mr.SnowwasrequiredbyprioragreementwithSnowPhippstohavehis2016director'sfeespaidto
SnowPhipps.
Mr.Taslitzreceived$10,000incashasamemberoftheCompensationCommitteeandelectedtoreceivehis$50,000
annualretainerincash.Mr.TaslitzwasrequiredbyprioragreementwithSterlingPartnerstohavehisdirector'sfees
paidtoSterlingPartnersoranaffiliateofitschoosing.AsaresultoftheFounders'Agreement,eachSterlingFounder,
includingMr.Taslitz,isentitledtoreceiveanequalshareof,onanaftertaxbasis,anydividendson,ortheproceeds
fromthesaleof,theEPISharesandthesharesofourClassBcommonstockunderlyingtheEPIOptions.These
prospectiveproceedsarenotincludedinthecompensationsetforthinthetableabove.ThesharesofClassB
commonstocktobetransferredfromWengentoanaffiliateoftheSterlingFoundersinexchangefortheliquidation
ofcertainofitsprofitsinterestsinWengenandtheothersharesofourClassBcommonstockcurrentlyheldby
SterlingFoundersortheiraffiliatesarenotsubjecttotheFoundersAgreement.
Mr.VanDoosselaerereceived$10,000incashasamemberoftheCommitteeonEducation.Mr.VanDoosselaere
electedtoreceivehisannualretainerinstock.Mr.VanDoosselaerewasrequiredbyprioragreementwithBregalto
haveallsharesissuedinpaymentofhisdirector'sfees
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issuedtoBregal.Therefore,weissuedtoBregal2,151sharesofourcommonstockascompensationforMr.Van
Doosselaere'sservicesasadirectorduring2016.
(13)
Mr.Zoellickelectedtoreceivedirectorcompensationfor2014,2015and2016inaninitialgrantof18,558sharesof
restrictedstockonJuly15,2014.Thefairmarketvalueofourcommonstockonthegrantdateasdeterminedbythe
CompensationCommitteeinaccordancewithitsequitygrantpolicywas$29.92pershare.Theserestrictedsharesare
issuedandoutstandingatDecember31,2016butweresubjecttotransferrestrictionsandsubstantialriskofforfeiture
untilthevestingcriteriaassociatedwiththerestrictedshareswasmet.Alloftheserestrictedsharesvestedandbecame
nonforfeitableonJanuary1,2017.Mr.Zoellickalsowillreceivea$165,000onetimecashpaymentinJanuary2017.
CompensationCommitteeInterlocksandInsiderParticipationinCompensationDecisions
StevenTaslitz,amemberoftheCompensationCommittee,istheSeniorManagingDirectorofSterlingPartners,andDouglasBecker,
ourChairmanandCEO,isadirectorofSterlingFundManagement,LLC,themanagementaffiliateofSterlingPartners.During2016no
othermembersoftheCompensationCommittee(i)hadarelationshipwithusotherthanasadirectorand,incertaincases,astockholder
nor(ii)was(A)anofficeroremployeeoraformerofficer,(B)aparticipantina"relatedperson"transactionor(C)anexecutiveofficerof
anotherentitywhereoneofourexecutiveofficersservedontheboardofdirectors.See"CertainRelationshipsandRelatedParty
Transactions"foradiscussionofcertaintransactionstowhichaffiliatesofthemembersoftheCompensationCommitteewereparty.
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SECURITYOWNERSHIPOFCERTAINBENEFICIALOWNERSANDMANAGEMENT
ThefollowingtablesetsforthcertaininformationwithrespecttothebeneficialownershipofourcommonstockatDecember1,2016,
andasadjustedtoreflectthesaleofClassAcommonstockinthisoffering,for:
eachpersonwhoweknowbeneficiallyownsmorethanfivepercentofouroutstandingcapitalstock
eachofourcurrentdirectorsanddirectordesignees
eachofourNamedExecutiveOfficersand
allofourcurrentdirectors,directordesigneesandexecutiveofficersasagroup.
Theaddressofeachbeneficialownerlistedinthetableunlessotherwisenotedisc/oLaureateEducation,Inc.,650SouthExeter
Street,Baltimore,Maryland21202.
WehavedeterminedbeneficialownershipinaccordancewiththerulesoftheSEC.Exceptasindicatedbythefootnotesbelow,we
believe,basedontheinformationfurnishedtous,thatthepersonsandentitiesnamedinthetablebelowhavesolevotingandinvestment
powerwithrespecttoallsharesofcommonstockthattheybeneficiallyown,subjecttoapplicablecommunitypropertylaws.
Applicablepercentageownershipisbasedon133,333,558sharesofClassBcommonstockoutstandingatDecember1,2016,
including31,905sharessubjecttoforfeitureandsubstantialrestrictionontransfer,andassumingthereclassificationofourexisting
commonstockintoanequivalentnumberofsharesofourClassBcommonstock.ThetablebelowdoesnotincludeanysharesofClassA
commonstockissuableuponconversionofourSeriesAPreferredStock.Incomputingthenumberofsharesofcommonstockbeneficially
ownedbyapersonandthepercentageownershipofthatperson,wedeemedoutstandingsharesofcommonstocksubjecttooptionsheld
bythatpersonthatarecurrentlyexercisableorexercisablewithin60daysofDecember1,2016.Wedidnotdeemthesesharesoutstanding,
however,forthepurposeofcomputingthepercentageownershipofanyotherperson.NosharesofClassAcommonstockwillbe
outstandingpriortotheoffering.
NameofBeneficialOwner(1)
WengenAlberta,Limited
Partnership(2)
DouglasL.Becker(3)(4)
BrianF.Carroll(3)(5)
AndrewB.Cohen(3)
WilliamL.Cornog(3)
DarrenM.Friedman(3)
JohnA.Miller(3)(6)
GeorgeMuoz(7)
Dr.JudithRodin(8)
JonathanD.Smidt(3)(9)
IanK.Snow(3)(10)
StevenM.Taslitz(3)(11)
QuentinVan
Doosselaere(3)
RobertB.Zoellick(12)
94.6%
*
*

*
*
*
*

94.6%
*
*

*
*
*
*

18,558
SharesBeneficiallyOwnedAftertheOffering
AssumingNoExerciseof AssumingFullExercise
SharesBeneficiallyOwned
theUnderwriters'
oftheUnderwriters'
PriortotheOffering
Option
Option
Percentage
Percentage
Percentage
ofTotal
Percentage
ofTotal
Percentage
ofTotal
Percentage
Numberof
Common
ofVoting
Common
ofVoting
Common
ofVoting
Shares
Stock
Stock
Stock
Power(1)
Power(1)
Power(1)
126,189,616
676,847
16,844
12,221
19,698
19,698
16,844
6,656
13,889
77.7%
*
*
*
*
*
*
92.6%
*
*
*
*
*
*
75.7%
*
*
*
*
*
*
92.3%
*
*
*
*
*
*
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NameofBeneficialOwner(1)
EilifSerckHanssen(13)
RicardoBerckemeyer(14)
EndersonGuimares(15)
PaulaSinger(13)(16)
AllCurrentDirectors,
DirectorDesigneesand
ExecutiveOfficersasa
Group(24persons)(3)
*
(1)
(2)
SharesBeneficiallyOwnedAftertheOffering
AssumingNoExerciseof AssumingFullExercise
SharesBeneficiallyOwned
theUnderwriters'
oftheUnderwriters'
PriortotheOffering
Option
Option
Percentage
Percentage
Percentage
ofTotal
Percentage
ofTotal
Percentage
ofTotal
Percentage
Numberof
Common
ofVoting
Common
ofVoting
Common
ofVoting
Shares
Stock
Stock
Stock
Power(1)
Power(1)
Power(1)
517,136
634,929
326,578
704,941
4,161,062
*
*
*
*
3.1%
*
*
*
*
3.1%
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
2.6%
3.1%
2.5%
3.0%
Lessthanonepercent.
Uponcompletionofthisoffering,nobeneficialownerlistedinthistablewillownanysharesofourClassAcommon
stock.PercentagetotalvotingpowerrepresentsvotingpowerwithrespecttoallsharesofourClassAcommonstock
andClassBcommonstock,asasingleclass.EachholderofClassBcommonstockshallbeentitledtotenvotesper
shareofClassBcommonstockandeachholderofClassAcommonstockshallbeentitledtoonevotepershareof
ClassAcommonstockonallmatterssubmittedtoourstockholdersforavote.TheClassAcommonstockand
ClassBcommonstockvotetogetherasasingleclassonallmatterssubmittedtoavoteofourstockholders,exceptas
mayotherwiseberequiredbylaworouramendedandrestatedcertificateofincorporation.TheClassBcommon
stockisconvertibleatanytimebytheholderintosharesofClassAcommonstockonashareforsharebasis.The
ClassAcommonstockandClassBcommonstockwillautomaticallyconvertintoasingleclassofcommonstockon
thedateonwhichthenumberofoutstandingsharesofClassBcommonstockrepresentslessthan15%ofthe
aggregatecombinednumberofoutstandingsharesofClassAcommonstockandClassBcommonstock.See
"DescriptionofCapitalStock."
RepresentssharesofClassBcommonstockwhicharedirectlyheldbyWengen.Thelimitedpartnershipinterestsin
WengenareheldbycertaininvestorsincludingtheWengenInvestors.ThegeneralpartnerofWengenisWengen
InvestmentsLimited,whichisgovernedbyaboardofdirectorscomposedofMr.BeckerandrepresentativesofKKR,
Point72,Bregal,StepStone,SterlingPartnersandSnowPhipps.Asaresultofsuchrepresentation,theWengen
InvestorscontrolthevotingofthesharesofClassBcommonstockheldbyWengenintheelectionofcertain
directorsandmaybedeemedtosharebeneficialownershipoverthesecuritiesbeneficiallyownedbyWengen.Does
notinclude1,328,366sharesofClassBcommonstocksubjecttoproxiesgivenbycurrentandformerdirectorsand
employeestoWengentovotetheirsharesofClassBcommonstock(collectively,the"WengenProxy").Theaddress
forWengenanditsgeneralpartnerisc/oKohlbergKravisRoberts&Co.L.P.,9West57thStreet,NewYork,NewYork
10019.
Thefollowingpersonshold,throughtheirinterestsinWengen,over5%ofourcommonstock:KKR2006Fund
(Overseas),LimitedPartnershipandKKRPartnersII(International),L.P.theSterlingPartiesPoint72BregalCaisse
dedptetplacementduQubecaffiliatesofMooreCapitalManagement,LPandaffiliatesofMakenaCapital
Management,LLC.
KKR2006Fund(Overseas),LimitedPartnershipandKKRPartnersII(International),L.P.holdlimitedpartnership
interestsinWengenwhichrelatetoapproximately22,889,952and952,623underlyingsharesofClassBcommon
stockheldbyWengen,respectively,andmayalsobedeemedtohavevotingandinvestmentpoweroversuchportion
ofthesecuritiesownedbyWengenasa
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resultoftheirabilitytodirectWengenwithrespecttocertainvotinganddispositionofsuchsecurities.KKRPIIIGP
LimitedisthegeneralpartnerofKKRPartnersII(International),L.P.KKRAssociates2006(Overseas),Limited
PartnershipisthegeneralpartnerofKKR2006Fund(Overseas),LimitedPartnership.KKR2006Limitedisthe
generalpartnerofKKRAssociates2006(Overseas),LimitedPartnership.KKRFundHoldingsL.P.isthesole
shareholderofKKR2006Limited.KKRFundHoldingsGPLimitedisageneralpartnerofKKRFundHoldingsL.P.
KKRGroupHoldingsL.P.isthesoleshareholderofKKRFundHoldingsGPLimitedandageneralpartnerofKKR
FundHoldingsL.P.KKRGroupLimitedisthegeneralpartnerofKKRGroupHoldingsL.P.KKR&Co.L.P.isthesole
shareholderofKKRGroupLimited.KKRManagementLLCisthegeneralpartnerofKKR&Co.L.P.Messrs.Henry
R.KravisandGeorgeR.RobertsarethedesignatedmembersofKKRManagementLLC.Insuchcapacities,eachof
theentitiesandindividualsreferencedinthisparagraphmayalsobedeemedtobethebeneficialownershaving
sharedvotingpowerandsharedinvestmentpowerwithrespecttothesecuritiesasdescribedabove.Theaddressof
eachofthepersonsandentitieslistedinthisparagraph,exceptMr.Roberts,isc/oKohlbergKravis
Roberts&Co.L.P.,9West57thStreet,NewYork,NewYork10019.TheprincipalbusinessaddressforMr.Robertsis
c/oKohlbergKravisRoberts&Co.L.P.,2800SandHillRoad,Suite200,MenloPark,California94025.
SterlingCapitalPartnersII,L.P.,SterlingCapitalPartnersIII,L.P.,SPLAffiliate,LLC,DouglasL.Becker,StevenM.
TaslitzandcertainoftheirrespectiveaffiliatesholdlimitedpartnershipinterestsinWengenwhichcollectivelyrelate
toapproximately9,582,614underlyingsharesofClassBcommonstockheldbyWengen,andmayalsobedeemedto
havevotingandinvestmentpowerovertheirrespectiveproratasharesofsuchportionofthesecuritiesownedby
WengenasaresultoftheirrespectiveabilitiestodirectWengenwithrespecttocertainvotinganddispositionofsuch
securities.SCPartnersII,L.P.isthesolegeneralpartnerofSterlingCapitalPartnersII,L.P.,andSterlingCapital
PartnersII,LLCisthesolegeneralpartnerofSCPartnersII,L.P.SCPartnersIII,L.P.isthesolegeneralpartnerof
SterlingCapitalPartnersIII,L.P.,andSterlingCapitalPartnersIII,LLCisthesolegeneralpartnerofSCPartners
III,L.P.SterlingCapitalPartnersII,L.P.,SterlingCapitalPartnersIII,L.P.andSPLAffiliate,LLCareultimately
controlledbyMessrs.TaslitzandBeckerandotherprincipalsofSterlingPartners.Eachoftheaforementionedentities
andindividualsmayalsobedeemedtobethebeneficialownershavingvotingpowerand/orinvestmentpowerwith
respecttosecuritiesoftheCompanyowneddirectlybyWengenasdescribedabove.Thebusinessaddressofeachof
thepersonsandentitieslistedinthisfootnote,exceptMr.Becker,isc/oSterlingPartners,401N.MichiganAvenue,
Chicago,Illinois60611.ThebusinessaddressofMr.Beckerisc/oLaureateEducation,Inc.,650S.ExeterStreet,
Baltimore,Maryland21202.
CPVHoldings,LLC,Point72CapitalInternational,Ltd.,Point72Capital,L.P.andPoint72GDF,Ltd.hold,directly
andindirectly,limitedpartnershipinterestsinWengenwhichcollectivelyrelatetoapproximately16,087,099
underlyingsharesofClassBcommonstockheldbyWengen,andmayalsobedeemedtohavevotingandinvestment
poweroversuchportionofthesecuritiesownedbyWengenasaresultoftheirabilitytodirectWengenwithrespect
tocertainvotinganddispositionofsuchsecurities.Pursuanttocertaininvestmentmanagementagreements,Point72
AssetManagement,L.P.maintainsvotingandinvestmentpowerwithrespecttothesecuritiesheldbyPoint72
CapitalInternational,Ltd.,Point72Capital,L.P.andPoint72GDF,Ltd.Point72CapitalAdvisors,Inc.isthegeneral
partnerofPoint72AssetManagement,L.P.StevenA.CohenisthesoleshareholderofPoint72CapitalAdvisors,Inc.
andthemanagingmemberofCPVHoldings,LLC.Insuchcapacities,eachofPoint72AssetManagement,L.P.,
Point72CapitalAdvisors,Inc.andStevenA.Cohenmayalsobedeemedtobethebeneficialownershavingshared
votingpowerandsharedinvestmentpowerwithrespecttothesecuritiesasdescribedabove.Theaddressofeachof
thepersonsandentitieslistedinthisparagraph,exceptCPVHoldings,LLC,isc/oPoint72,L.P.,72CummingsPoint
Road,Stamford,Connecticut06902.TheaddressofCPVHoldings,LLCisc/oCohenPrivateVentures,LLC,510
MadisonAvenue,NewYork,NewYork10022.
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BregalEuropeCoInvestmentLimitedPartnershipholds,directlyandindirectly,limitedpartnershipinterestsin
Wengenwhichrelatetoapproximately11,915,410underlyingsharesofClassBcommonstockheldbyWengen,and
mayalsobedeemedtohavevotingandinvestmentpoweroversuchportionofthesecuritiesownedbyWengenasa
resultofitsabilitytodirectWengenwithrespecttocertainvotinganddispositionofsuchsecurities.TheGeneral
PartnerofBregalEuropeCoInvestmentLimitedPartnershipisBregalGeneralPartnerJerseyLimited.Thedirectors
ofBregalGeneralPartnerJerseyLimitedare:PaulAndrewBradshaw,JohnHammill,JohnDavidDrury,Andrew
Crawford,WolterRudolfBrenninkmeijerandEdwinTheoNiers.Insuchcapacities,eachoftheentitiesand
individualsreferencedinthisparagraphmayalsobedeemedtobethebeneficialownershavingsharedvotingpower
andsharedinvestmentpowerwithrespecttothesecuritiesasdescribedabove.TheaddressofBregalEuropeCo
InvestmentLimitedPartnershipisQuartermileOne,15LauristonPlace,Edinburgh,EH39EP,UnitedKingdom.The
addressofBregalGeneralPartnerJerseyLimitedandtheprincipalbusinessaddressofeachofMessrs.PaulAndrew
Bradshaw,JohnHammill,andAndrewCrawfordis2ndFloor,WindwardHouse,LaRoutedelaLiberation,St.Helier,
JE23BQ,Jersey,ChannelIslands.TheprincipalbusinessaddressofeachofMessrs.JohnDavidDruryandWolter
RudolfBrenninkmeijeris81FulhamRoad,3rdFloor,LondonSW36RD,UnitedKingdom.Theprincipalbusiness
addressofMr.EwinNiersisGrafenauweg10,CH6300,Zug,Switzerland.
CaissededptetplacementduQubecholds,directlyandindirectly,limitedpartnershipinterestsinWengenwhich
relatetoapproximately11,491,277underlyingsharesofClassBcommonstockheldbyWengen,andmaybedeemed
tohavevotingandinvestmentpoweroversuchportionofthesecuritiesownedbyWengenasaresultofitsabilityto
directWengenwithrespecttocertainvotinganddispositionofsuchsecurities.Theprincipalbusinessaddressfor
CaissededptetplacementduQubecis1000,placeJeanPaulRiopelle,Montreal(Qubec)H2Z2B3,Canada.
KendallFamilyInvestments,LLC,MMFMooreETInvestments,LPandMEMMooreETInvestments,LPhold,
directlyandindirectly,limitedpartnershipinterestsinWengenwhichcollectivelyrelatetoapproximately
11,054,982underlyingsharesofClassBcommonstockheldbyWengen,andmaybedeemedtohavevotingand
investmentpowerovertheirrespectiveproratasharesofsuchportionofthesecuritiesownedbyWengenasaresult
oftheirrespectiveabilitiestodirectWengenwithrespecttocertainvotinganddispositionofsuchsecurities.
LouisM.BaconisthechiefexecutiveofficeranddirectorofMooreCapitalManagement,LP,whichservesas
discretionaryinvestmentmanagertoMMFMooreETInvestments,LPandMEMMooreETInvestments,LP,andthe
majorityequityholderofKendallFamilyInvestments,LLC.TheprincipalbusinessaddressofMooreCapital
Management,LPis11TimesSquare,NewYork,NewYork10036.
MakenaCapitalHoldingsM,L.P.andMakenaContingentCapitalAccount,L.P.hold,directlyandindirectly,limited
partnershipinterestsinWengenwhichcollectivelyrelatetoapproximately6,765,025underlyingsharesofClassB
commonstockheldbyWengen,andmaybedeemedtohavevotingandinvestmentpowerovertheirrespectivepro
ratasharesofsuchportionofthesecuritiesownedbyWengenasaresultoftheirrespectiveabilitiestodirectWengen
withrespecttocertainvotinganddispositionofsuchsecurities.MakenaCapitalManagement,LLCisthegeneral
partnerofMakenaCapitalHoldingsM,L.P.andMakenaContingentCapitalAccount,L.P.Theprincipalbusiness
addressofMakenaCapitalManagement,LLCis2755SandHillRoad,Suite200,MenloPark,California94025.
(3)
ThedirectorisorhasformerlybeenaffiliatedwithaninvestorinWengen.DoesnotincludetheClassBcommon
stockheldofrecordbyWengenandthe1,328,366sharesofClassBcommonstocksubjecttotheWengenProxy.See
footnote2forfurtherinformationonbeneficialownershipofsecuritiesindirectlyheldthroughWengen.
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(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
Includessharesissuableuponexerciseofoptionstopurchase595,929sharesofClassBcommonstockthatare
exercisablewithin60daysofthedateoftheabovetable.Includes12,490sharesofClassBcommonstockheldby
the2002GSTExemptHarvestTrust,atrustforthebenefitofcertainmembersofMr.Becker'sfamily.Mr.Becker
disclaimsbeneficialownershipoftheseshares.Doesnotincludesharesissuableuponexerciseofoptionstopurchase
2,773,098sharesofClassBcommonstockthatareexercisablewithin60daysofthedateoftheabovetablethatwill
begrantedtoMr.Beckeruponcompletionofthisofferinginconnectionwiththeliquidationofcertainof
Mr.Becker'sExecutiveProfitsInterestsandallofwhicharesubjecttotheprovisionsoftheFounders'Agreement.
Doesnotinclude13,889sharesofClassBcommonstockheldbySterlingFundManagement,LLC,anaffiliateof
SterlingPartners.Mr.BeckersharesvotinganddispositivepowerwithrespecttothesharesofClassBcommonstock
heldbythisaffiliateoftheSterlingFounders,togetherwithMr.TaslitzandtheotherSterlingFounders.Doesnot
includeanindeterminablenumberofsharesoftheCompanyorproceedstherefrom,thatisallocabletoMr.Becker
fromMr.Becker'sownershipofanentitythatisentitledindirectlytocarriedinterestsoncertainsharesofthe
Companyorproceedstherefrom,uponthedistributionorsaleofsuchsharesbycertaindirectownersofWengen.
Includes4,611sharesofClassBcommonstockreservedforissuanceupondistributionofMr.Carroll'sPost2004
DCPaccountwhenheretiresfromtheCompany'sboardofdirectors.Includes538sharesofClassBcommonstock
subjecttoforfeiturepursuanttothetermsofarestrictedstockagreementbetweenMr.CarrollandtheCompany.
These538sharesbecamevestedandnonforfeitableasofDecember31,2016.
Includes538sharesofClassBcommonstocksubjecttoforfeiturepursuanttothetermsofarestrictedstock
agreementbetweenMr.MillerandtheCompany.These538sharesbecamevestedandnonforfeitableasof
December31,2016.
Includes4,924sharesofClassBcommonstocksubjecttoforfeiturepursuanttothetermsofarestrictedstock
agreementbetweenMr.MuozandtheCompany.SubjecttoMr.Muoz'scontinuedservice,theseshareswillvest
andbecomenonforfeitableasofMarch6,2017.
agreementbetweenDr.RodinandtheCompany.SubjecttoDr.Rodin'scontinuedservice,theseshareswillvestand
becomenonforfeitableasofMarch6,2017.
Includes538sharesofClassBcommonstocksubjecttoforfeiturepursuanttothetermsofarestrictedstock
agreementbetweenMr.SmidtandtheCompany.These538sharesbecamevestedandnonforfeitableasof
December31,2016.
Includes3,837sharesofClassBcommonstockheldbySnowPhipps.Doesnotincludethelimitedpartnership
interestsinWengenheld,directlyandindirectly,bySnowPhippswhichrelatetoapproximately3,552,293
underlyingsharesofClassBcommonstockheldbyWengen,overwhichsuchportionofsecuritiesMr.Snowmaybe
deemedtohavevotingandinvestmentpowerasaresultofSnowPhipps'sabilitytodirectWengenwithrespectto
certainvotinganddispositionofsuchsecurities.Mr.SnowservesastheChiefExecutiveOfficerofSnowPhipps
Group,LLC.Mr.Snowdisclaimsbeneficialownershipofthesharesheld,directlyorindirectly,bySnowPhipps.
Includes2,819sharesofClassBcommonstockreservedforissuanceupondistributionofMr.Snow'sPost2004DCP
accountwhenheretiresfromtheCompany'sboardofdirectors.See"ExecutiveCompensationDirector
Compensation."
Includes13,889sharesofClassBcommonstockheldbySterlingFundManagement,LLC,anaffiliateofSterling
Partners,ofwhichMr.TaslitzservesasaSeniorManagingDirector.Mr.Taslitzdisclaimsbeneficialownershipof
theseshares.Doesnotinclude80,918sharesofClassBcommonstockheldbyMr.Becker,595,929sharesofClassB
commonstockissuableupontheexerciseof
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stockoptionsthatareheldbyMr.Beckerandexercisablewithin60daysofthedateoftheabovetableor2,773,098
sharesofClassBcommonstockunderlying2,773,098oftheoptionstheCompanywillgranttoMr.Beckerupon
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sharesofClassBcommonstockunderlying2,773,098oftheoptionstheCompanywillgranttoMr.Beckerupon
completionofthisofferinginconnectionwiththeliquidationandexchangeofcertainofhisexecutiveprofits
interestsinWengen.PursuanttotheFounders'Agreement,(i)thesesharesarerequiredtobeassignedortransferredto
Mr.Taslitz,orapartnershipinwhichhesharescontrol,assoonaspracticableaftersuchassignmentortransferis
permittedbycontractandapplicablelaw,(ii)ifthesesharesarenottransferableorassignable,Mr.Taslitz,ora
partnershipinwhichhesharescontrol,hastherighttoreceivethenetproceedsofsuchsharesupondispositionand
(iii)untilsuchsharesaretransferredorassignedtoMr.Taslitz,orapartnershipinwhichhesharescontrol,heorthat
partnershipcontrolsthevotinganddispositionoftheseshares.Doesnotincludeanindeterminablenumberofshares
oftheCompanyorproceedstherefrom,thatisallocabletoMr.TaslitzfromMr.Taslitz'sownershipofanentitythatis
entitledindirectlytocarriedinterestsoncertainsharesoftheCompanyorproceedstherefrom,uponthedistribution
orsaleofsuchsharesbycertaindirectownersofWengen.
(12)
(13)
(14)
(15)
(16)
agreementbetweenMr.ZoellickandtheCompany.Allofthesharesvestedandbecamenonforfeitableasof
January1,2017.
exercisablewithin60daysofthedateoftheabovetable.
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CERTAINRELATIONSHIPSANDRELATEDPARTYTRANSACTIONS
ManagementStockholder'sAgreements
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EachofthestockholdersoftheCompanywhoareemployeesordirectorsorformeremployeesordirectorsoftheCompanyhasentered
intoastockholder'sagreement(each,a"ManagementStockholder'sAgreement")withtheCompanyandWengenthatgivesWengena
proxytovotesuchholder'ssharesoftheCompany'sClassBcommonstock.Inadditiontothevotingproxyonsharesheldbycurrentand
formeremployeesanddirectorsoftheCompany,theManagementStockholder'sAgreementexecutedbyeachcurrentandformeremployee
whoownsstockorhasbeengrantedoptionstopurchasestockoftheCompanycontainsprovisionsthatprohibittheemployeeorformer
employee(i)atanytimeduringorafteremploymentwiththeCompanyoritssubsidiaries,fromdisclosingorusinganyconfidential
informationpertainingtothebusinessoftheCompanyoranyofitssubsidiariesortheWengenInvestorsoranyoftheirrespective
affiliates,exceptwhenrequiredtoperformhisorherdutiestotheCompanyoroneofitssubsidiaries,bylaworjudicialprocess(ii)atany
timeduringemploymentwiththeCompanyoritssubsidiariesandforaperiodoftwoyearsthereafter,fromdirectlyorindirectlyactingas
aproprietor,investor,director,officer,employee,substantialstockholder,consultant,orpartnerinanybusinessthatdirectlycompetes,at
therelevantdeterminationdate,withthepostsecondarybusinessoftheCompanyoranyoftheirrespectiveaffiliatesinanygeographic
areawheretheCompanyoritsaffiliatesmanufactures,produces,sells,leases,rents,licensesorotherwiseprovidesproductsorservicesand
(iii)atanytimeduringemploymentwiththeCompanyoritssubsidiariesandforaperiodoftwoyearsthereafter,fromdirectlyorindirectly
(a)solicitingcustomersorclientsoftheCompany,anyofitssubsidiaries,theWengenInvestorsoranyoftheirrespectiveaffiliatesto
terminatetheirrelationshipwiththeCompany,anyofitssubsidiaries,theWengenInvestorsoranyoftheirrespectiveaffiliatesor
otherwisesolicitingsuchcustomersorclientstocompetewithanybusinessoftheCompany,anyofitssubsidiaries,theWengenInvestors
oranyoftheirrespectiveaffiliatesor(b)solicitingorofferingemploymenttoanypersonwhois,orhasbeenatanytimeduringthe
12monthsimmediatelyprecedingtheterminationoftheemployee'semployment,employedbytheCompanyoranyofitsaffiliates.
SubsequenttotheinitialpublicofferingoftheCompany'scommonstock,theManagementStockholder'sAgreementspermiteachof
thestockholdersoftheCompanywhoareemployeesordirectorsorformeremployeesordirectorsoftheCompanytoparticipateinany
saleoftheCompany'scommonstockbyWengenoranyoftheWengenInvestorsthatisregisteredundertheSecuritiesAct(the"piggyback
registrationrights"),subjecttocustomaryunderwriters'restrictionsincludingproratareductionandexecutionofcustomarycustodyand
lockupagreements.ThepiggybackregistrationrightsprovidedintheManagementStockholder'sAgreementsexpireuponachangein
controloftheCompany.Theregistrationrightsalsoprovideforourindemnificationofthestockholdersandtheiraffiliatesinconnection
withthe"piggyback"registrationoftheirsecurities.
AgreementswithWengen
WengenSecurityholders'Agreement.TheWengenInvestorsaresubjecttotheWengenSecurityholders'Agreement,pursuantto
whichthegeneralpartnerofWengenispermittedtodevelopandimplementaninitialpublicofferingofoursecuritiesandcertainofthe
WengenInvestorshavetherighttoappointmemberstotheboardofdirectorsofWengen'sgeneralpartnerandLaureate.TheCompanyand
Wengenhaveagreedthat,effectiveupontheclosingofthisoffering,theWengenSecurityholders'Agreementwillbeamendedandrestated
tomaketheCompanyapartytheretoandtoprovidethatcertainoftheWengenInvestorswillcontinuetohavetherighttoelectamajority
ofourboardofdirectorsandcoordinatethesaleofallsharesofourClassBcommoncurrentlyheldbyWengenwhichmaybedistributed
totheWengenInvestorsfromtimetotime.TherightofWengentodesignatedirectorsshallsurvivethedissolutionofWengenandshall
becomerightsoftheWengenInvestorsuntiltheyholdlessthan40%oftheoutstandingcommonstockofLaureate.Inaddition,the
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rightofKKR,SterlingCapitalPartnersII,L.P.,BregalandPoint72todesignatedirectorsshallsurvivethedissolutionofWengen.
RegistrationRightsAgreement.WengenandtheWengenInvestorsarepartiestoaregistrationrightsagreement(the"Registration
RightsAgreement"),pursuanttowhichtheWengenInvestorshavebeengrantedcertainregistrationrightsinconnectionwiththisoffering.
PursuanttotheexistingRegistrationRightsAgreement,theWengenInvestorsweregrantedtheright,beginning180daysfollowingthe
completionofthisofferingtocauseus,atourexpense,touseourreasonablebesteffortstoregistercertainsharesofcommonstockheldby
theWengenInvestorsandanysecuritiesissuedinreplacementoforinexchangeforsuchsharesofcommonstockforpublicresale,subject 332/620
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theWengenInvestorsandanysecuritiesissuedinreplacementoforinexchangeforsuchsharesofcommonstockforpublicresale,subject
tocertainlimitationsassetforthintheRegistrationRightsAgreement.Theexerciseofthis"demand"rightislimitedtotenrequestsinthe
aggregate.Intheeventthatweregisteranyofourcommonstockfollowingcompletionofthisoffering,theWengenInvestorsand
management(pursuanttoaprovisionintheManagementStockholder'sAgreements)havea"piggybackright"whichallowsthemto
requireustouseourreasonablebesteffortstoincludesharesofourcommonstockheldbytheminsuchregistration,subjecttocertain
limitations.TheexistingRegistrationRightsAgreementalsoprovidesforourindemnificationoftheWengenInvestorsandmanagement
inconnectionwiththeregistrationoftheirsecurities.TheCompanyhasagreed,effectiveupontheconsummationofthisoffering,to
becomeapartytotheRegistrationRightsAgreement.Acopyofthisagreementhasbeenfiledasanexhibittotheregistrationstatementof
whichthisprospectusisapart.
SFUADSharedServicesAgreement.InJune2008,LaureateenteredintoanagreementwiththeCollegeoftheChristianBrothersof
NewMexicotoprovidealineofcreditof$2.8millionthatwastomatureontheearlierofsixmonthsfromthedateoftheloanorupon
Laureate'sacquisitionofassetsfromtheChristianBrothersrelativetoCollegeofSantaFe(nowknownastheSantaFeUniversityofArts
andDesign,orSFUAD).Theagreementwassubsequentlyamendedtoincreasethelineofcreditto$3.8million.Theinterestonthelineof
creditwas10%perannumpayableinarrearsonthelineofcreditterminationdate.Theamountsoutstandingundertheagreementwere
securedbylandadjacenttotheSFUADcampus.During2009,LaureatetransferredtheSFUADlineofcredittoanewlyformedsubsidiary.
ThissubsidiarywassoldtoWengenforcashof$2.7million,equaltotheoutstandingprincipalandinterestonthelineofcredit.Nogain
orlosswasrecognizedonthetransfer.InconnectionwiththesaleofthenewlyformedsubsidiarytoWengenin2009,Laureateentered
intoasharedservicesagreementwithSFUAD.During2014,LaureateenteredintoanewsharedservicesagreementwithSFUADthat
replacedthesharedservicesagreementpreviouslyenteredintoin2009.LaureateprovidesSFUADwithcertainmanagementconsulting,
legal,tax,finance,accounting,treasury,humanresources,andnetworkentryservices.Thenewsharedservicesagreementhasatermoffive
yearsandautomaticallyrenewsfortwoyearperiodsthereafter,unlessterminatedbyeitherparty.AsofDecember31,2015,Laureatehad
recordedareceivablefromSFUADof$0.7millionrelatedtothesharedservicesagreement,substantiallyallofwhichwascollected
subsequenttoyearend.AsofSeptember30,2016,LaureaterecordedarelatedpartyreceivablefromSFUADof$0.2million.Acopyof
thisagreementhasbeenfiledasanexhibittotheregistrationstatementofwhichthisprospectusisapart.
During2013,14LaureateinstitutionsenteredintoglobalpartnershipagreementswithSFUAD,whichhaveaninitialtermoffiveyears
andprovideLaureatestudentswitheducationalopportunitiestostudycertainacademicprogramsatSFUAD.Underthetermsofthese
agreements,thepartneringLaureateinstitutionscommittopaySFUADanannualamounteachcalendaryear,whichSFUADthenbillsto
theLaureateinstitutionsonaquarterlybasis.TheglobalpartnershipagreementscanbeunilaterallycanceledbyeitherSFUADorthe
Laureateinstitutionswithatleastsixmonthspriorwrittennotice.Anyremainingunpaidcommitmentamountforthatcalendaryearis
contractuallyowedtoSFUAD.AsofSeptember30,2016andDecember31,2015,LaureaterecordedarelatedpartypayabletoSFUADof
$0.5millionand$0.2million,respectively,forunpaidcommitmentsthatweareobligatedtopaytoSFUADundertheglobalpartnership
agreements.
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AgreementswithHoldersofSeriesAPreferredStock
SubscriptionAgreement
OnDecember4,2016,wesignedtheSubscriptionAgreementwithsixinvestors,includingKKRandSnowPhipps,pursuanttowhich
weagreedtoissueanaggregateof400,000sharesofSeriesAPreferredStockinaprivateofferingfortotalgrossproceedsof$400million
andtotalnetproceedsofapproximately$383million.ClosingofthefirsttrancheoffundingforthistransactionoccurredonDecember20,
2016andwereceivednetproceeds,afterissuancecosts,ofapproximately$328million.Oneinvestorwillfundaportionofitspurchase
priceequalto$57million(approximately$55millionnetofissuancecosts)priortoJanuary23,2017.TheproceedsfromtheSeriesA
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priceequalto$57million(approximately$55millionnetofissuancecosts)priortoJanuary23,2017.TheproceedsfromtheSeriesA
PreferredStockofferinghaveandwillbeusedtopaytransactionexpenses,includingstructuringfeestocertainofthepurchasersofthe
SeriesAPreferredStock(includingafeeof$1.8milliontoKKR),torepayanyportionofouroutstandingdebt(otherthananydebtheld
byourstockholders,employees,officersordirectors,includingtheiraffiliates),andforworkingcapitalandgeneralcorporatepurposes.
TheSubscriptionAgreementrequiresustorepayanyportionofouroutstandingdebt(otherthananydebtheldbyourstockholders,
employees,officers,ordirectors,includingtheiraffiliates)inanamountequaltoatleastthetotalproceedsreceivedbytheCompanyunder
theSubscriptionAgreementlesstheamountusedtopayourtransactionexpensesandotherfeesbynotlaterthanthe18month
anniversaryoftheclosingdate.However,totheextenttheoutstandingdebtrepaidpursuanttotheSubscriptionAgreementrepaidconsists
ofrevolvingloans,wemaysubsequentlyredrawsuchrevolvingloans.Wearenotpermittedtouseanyfundspaidreceivedpursuanttothe
SubscriptionAgreementtoacquiretheassetsorsecuritiesofanotherentityortopurchase,redeem,retireorotherwiseacquire,ormakeany
paymentinrespectof,directlyorindirectly,anyofourequitysecurities.
TheCompanyagreedtoindemnifyeachpurchaserofSeriesAPreferredStockfromandagainstanyandalllossesincurredbyor
assertedagainstanyofthembyvirtueof,amongotherthings,anybreachofrepresentationsorwarrantiesmadebytheCompanyinthe
SubscriptionAgreement,anybreach,noncomplianceornonfulfillmentinanymaterialrespectofanycovenantoragreementofthe
Company,oranyfraudbytheCompany.Inaddition,eachpurchaserofSeriesAPreferredStock,severally(andnotjointlyandseverally),
agreedtoindemnifyandholdharmlesstheCompanyfromandagainstalllossesincurredbyorassertedagainsttheCompanybyvirtueof
anybreachofanyrepresentationorwarrantymadebysuchpurchaserofSeriesAPreferredStockoranyfraudofsuchpurchaserofSeriesA
PreferredStock.WewillnotbeliabletoanypurchaserofSeriesAPreferredStockforanyamountsinexcessofthepurchasepricepaidby
suchpurchaser.
InconnectionwiththetransactionscontemplatedbytheSubscriptionAgreement,ontheClosingDate,theCompanywillexecute
bothastockholdersagreement(the"StockholdersAgreement")andaregistrationrightsagreement(the"SeriesARegistrationRights
Agreement").ThefollowingsummaryoftheSubscriptionAgreement,StockholdersAgreementandSeriesARegistrationRights
AgreementdoesnotpurporttobecompleteandisqualifiedinitsentiretybyreferencetotheprovisionsoftheSubscriptionAgreement,
StockholdersAgreementandSeriesARegistrationRightsAgreement,eachofwhicharefiledasexhibitstotheregistrationstatementof
whichthisprospectusisapart.
StockholdersAgreement
TheStockholdersAgreementprovidesthatthesharesofSeriesAPreferredStockare(i)subjecttocertainrestrictionsontransfer,
includinginadvanceofaQPO,toourcompetitorsandcertainotherthirdparties,(ii)havecustomarypreemptiverightswithrespectto
proposedissuancesofourdebtandequitysecurities,and(iii)havetagalongrightswithrespecttoanyproposedtransferofsharesofour
capitalstockbyWengen.Inaddition,subjecttomaintainingcertainownershipthresholdsanduntiltheclosingofthisoffering,theholders
oftheSeriesAPreferredStockhavetherighttodesignateonepersontobeanonvotingobservertoattendmeetingsoftheBoardofthe
Directors.Aslongasa
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SeriesAInvestorholdssharesoftheCompany'scapitalstockanduntiltheconsummationofthisoffering,theSeriesAInvestorsare
entitledtocertaininformationfromtheCompany.Alloftheforegoingrights,otherthanthetagalongrights,willterminateupon
consummationofthisoffering.Thetagalongrightsterminateupontheearliertooccurof(x)theredemptionofallofthesharesofSeriesA
PreferredStockinaccordancewiththetermsoftheCertificateofDesignationsand(y)theearlierof(A)thedateonwhichtheclosingof
ourfirstfollowonpublicofferingfollowingthisofferinginwhichtheholdersoftheSeriesAPreferredStockreceivenetproceedsnotless
thanthePriorityAmountisconsummatedpursuanttotheCertificateofDesignationsandtheSeriesARegistrationRightsAgreementand
(B)ifthenconverted,thedatewhichis120days(orifaregistrationissuspended,postponedorotherwisenotavailablepursuanttothe
termsoftheSeriesARegistrationRightsAgreement,thenanadditionalnumberofdaysequaltothelengthofsuchsuspension,
postponementorlackofavailability)afterthedateonwhichanamountofConversionStock(asdefinedintheStockholdersAgreement)
equaltoormorethanthePriorityAmounthasbeenregisteredpursuanttoaneffectiveregistrationstatementinaccordancewiththeterms
oftheSeriesARegistrationRightsAgreement,orifearlier,thedateonwhichatleastthePriorityAmountundersuchregistrationstatement
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oftheSeriesARegistrationRightsAgreement,orifearlier,thedateonwhichatleastthePriorityAmountundersuchregistrationstatement
hasbeensold.
FollowingClosing,andsolongasthesharesofSeriesAPreferredStockareoutstanding,theCompanywillbesubjecttofinancial
covenantsrelatingtototalnetleverageandtrailing12monthsrevenueandAdjustedEBITDA(asdefinedintheStockholdersAgreement).
FailurebytheCompanytosatisfythesecovenantswouldresultintheholdersoftheSeriesAPreferredStockobtainingcertainremedies,
including(i)theabilitytoappointanindividualtoadvisetheBoardofDirectorsonimprovingtheCompany'sgrowthandprofitability
and(ii)consentto(A)theincurrenceofcapitalexpendituresinexcessofagreeduponthresholdsassetforthintheStockholders
Agreement,(B)additionalindebtednessand(C)acquisitionsofassetsandtheestablishmentofnewschoolsbytheCompany.Inaddition,
wewouldberequiredtoimplementaonetimecostreductionprogram.
SeriesARegistrationRightsAgreement
PursuanttotheSeriesARegistrationRightsAgreement,theholdersofthesharesofSeriesAPreferredStockareentitledtocertain
demandregistrationrightsfollowingconversionofthesharesorwithin45daysofthesharesbecomingrequiredorentitledtobe
converted.TheholdersoftwothirdsofthesharesofSeriesAPreferredStockareentitledtomakeuptotwodemands,excludingshortform
demands,thatweregistertheresaleofsuchshares,subjecttotherightoftheCompanytoconvertademandregistrationmadebythe
holdersoftheSeriesAPreferredStockintoafollowonpublicofferinginwhichtheholdersoftheSeriesAPreferredStockreceivenet
proceedsnotlessthanthePriorityAmount.TheholdersofSeriesAPreferredStockalsohavecertainpiggybackregistrationrightswith
respecttoregistrationstatementsandrightstorequireustoregisterforresalesuchsecuritiespursuanttoRule415undertheSecuritiesAct.
Forunderwrittenofferings,theholdersoftheSeriesAPreferredStockhaveprioritytoparticipateinanydemandorpiggyback
registrationuptothePriorityAmountoruntilthePriorityAmountissatisfied.OncethePriorityAmountisregisteredorsatisfied,the
sharesoftheholdersoftheSeriesAPreferredStock,Wengenandcertainotherstockholderswithregistrationrightswillthenbeincluded
intheregistrationonaproratabasisbaseduponthenumberofsharesrequestedtobeincludedintheoffering,followedbythesharesof
theCompanyrequestedtobeincludedintheofferingprovided,however,thatthesharesoftheCompanywillhavepriorityoverthe
sharesoftheholdersoftheSeriesAPreferredStock,Wengenandcertainotherstockholderswithregistrationrightsforunderwritten
piggybackregistrationsinitiatedbytheCompany.
TheCompanywillbeartheexpensesincurredinconnectionwiththefilingofanysuchregistrationstatementsinconnectionwiththe
exerciseofdemandandpiggybackregistrationrightsbytheholdersoftheSeriesAPreferredStock.
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PaymentsforAirplaneUsageCosts
In2015,2014and2013,weincurredcostsof$0.3million,$0.2millionand$0.4million,respectively,forthebusinessuseofa
privateairplanethatisownedinpartbyourChiefExecutiveOfficer.
RelationshipwithKKRCapitalMarkets
In2013,wemadepaymentstoKKRCapitalMarketsLLC,anaffiliateofKKR,of$0.7millionforservicesrenderedinconnection
withtherefinancingofourdebtandnewdebtissuances.
Since2013,KKRCorporateLendingLLC,anaffiliateofKKRCapitalMarketsLLC,hasbeenaparticipatinglenderunderthe
Company'sexistingrevolvingcreditfacilitiesandasofSeptember30,2016hadreceivedinterestpaymentsandamendmentconsentfees
ofapproximately$2.6million.
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ofapproximately$2.6million.
Inaddition,KKRCapitalMarketsLLChasactedasafinancialadviserinconnectionwiththisofferingandwehaveagreedtopay
KKRCapitalMarketsLLCaonetimefeeof$1.5millionforitsservices.
RelationshipwithKKRCredit
Since2013,investmentfundsoraccountsmanagedoradvisedbyKKRCreditAdvisors(US)LLC("KKRCredit")wereparticipating
lendersundertheCompany'sexistingcreditagreementsandasofSeptember30,2016hadreceivedaggregateprincipalpaymentsof
$14.8millionandinterestandamendmentfeepaymentsof$30.4million.Since2013,investmentfundsoraccountsmanagedoradvised
byKKRCreditwerealsoholdersofnotesissuedbytheCompanyandasofSeptember30,2016hadreceivedprincipalpaymentsof
approximately$32.5millionandinterestpayments,consentfeesandearlyredemptionpremiumsofapproximately$14.7million.
AsofSeptember30,2016,investmentfundsoraccountsmanagedoradvisedbyKKRCreditheldaportionoftheCompany'sfirstlien
termloan.
RelationshiptoKKRCapstoneAmericasLLC
WehavehistoricallyutilizedKKRCapstone,aconsultingcompanythatworksexclusivelywithKKR'sportfoliocompanies,for
consultingservices,andpaidtoKKRCapstonerelatedfeesandexpenses.Referencesto"KKRCapstone"aretoKKRCapstone
AmericasLLCandtheiraffiliates,whichareownedandcontrolledbytheirseniormanagementteam.KKRCapstoneisnotasubsidiaryor
affiliateofKKR.KKRCapstoneoperatesunderseveralconsultingagreementswithKKRandusesthe"KKR"nameunderlicensefrom
KKR.
AgreementwithSterlingAffiliate
WehaveagreementswithI/ODataCenters,LLC("I/O")pursuanttowhichI/Owillprovidemodulardatacentersolutionstothe
Company.DuringtheninemonthsendedSeptember30,2016andtheninemonthsendedSeptember30,2015,weincurredcostsof
$0.7millionand$0.4million,respectively,fortheseagreements.In2015,2014and2013,weincurredcostsfortheseagreementsof
$0.5million,$0.5millionand$0.4million,respectively.Mr.Taslitz,oneofourdirectorsandaSeniorManagingDirectorofSterling
Partners,isadirectorofI/O.Messrs.BeckerandTaslitz,SterlingPartnersandcertainofitsaffiliatesown,directlyorthroughinvestment
vehicles,anaggregateofapproximately65%oftheoutstandingequityinI/O.
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ConflictsofInterestPolicy
TheAuditCommitteereviewsallrelationshipsandtransactionsinwhichtheCompanyandourdirectorsandexecutiveofficersor
theirimmediatefamilymembersareparticipantstodeterminewhethersuchpersonshaveadirectorindirectmaterialinterestinany
particulartransaction.TheCompany'slegalstaffisprimarilyresponsibleforthedevelopmentandimplementationofprocessesand
controlstoobtaininformationfromthedirectorsandexecutiveofficerswithrespecttorelatedpersontransactionsandforthen
determining,basedonthefactsandcircumstances,whethertheCompanyorarelatedpersonhasadirectorindirectmaterialinterestinthe
transaction.TheAuditCommitteeoftheboardofdirectorsreviewsandapprovesorratifiesanyrelatedpersontransactionthatmeetsthis
standard.InthecourseoftheAuditCommittee'sreviewandapprovalorratificationofadisclosablerelatedpersontransaction,the
committeeconsiders:
thenatureoftherelatedperson'sinterestinthetransaction
thematerialtermsofthetransaction,includingtheamountandtypeoftransaction
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theimportanceofthetransactiontotherelatedperson
theimportanceofthetransactiontotheCompany
whetherthetransactionwouldimpairthejudgmentofadirectororexecutiveofficertoactinthebestinterestofthe
Companyand
anyothermattersthecommitteedeemsappropriate.
AnymemberoftheAuditCommitteewhoisarelatedpersonwithrespecttoatransactionunderreviewmaynotparticipateinthe
deliberationsorvoterespectingapprovalorratificationofthetransaction,providedthatsuchdirectormaybecountedindeterminingthe
presenceofaquorumatameetingofthecommitteethatconsidersthetransaction.ThecurrentWengenSecurityholders'Agreement
requiresapprovalofsixdirectorsforrelatedpartytransactionshavingavalueofatleast$25million.
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DESCRIPTIONOFCAPITALSTOCK
General
Thefollowingdescriptionsofourcapitalstockandcertainprovisionsofouramendedandrestatedcertificateofincorporationand
amendedandrestatedbylawsaresummariesandarequalifiedbyreferencetotheamendedandrestatedcertificateofincorporationandthe
amendedandrestatedbylawsthatwillbeineffectuponcompletionofthisoffering.CopiesofthesedocumentswillbefiledwiththeSEC
asexhibitstoourregistrationstatement,ofwhichthisprospectusformsapart.Thedescriptionsofthecommonstockandpreferredstock
reflectchangestoourcapitalstructurethatwilloccuruponthecompletionofthisoffering.
Uponthecompletionofthisoffering,ouramendedandrestatedcertificateofincorporationwillprovideforthreeclassesofcommon
stock:ClassAcommonstock,ClassBcommonstockandcommonstock.Nosharesofcommonstockwillbeissuedoroutstandinguntil
thedateonwhichthenumberofoutstandingsharesofClassBcommonstockrepresentslessthan15%oftheaggregatenumberofshares
ofthenoutstandingClassAcommonstockandClassBcommonstock,atwhichtimealloutstandingsharesofClassAcommonstockand
ClassBcommonstockwillautomaticallyconvertintosharesofcommonstock.Eachshareofcommonstockoutstandingpriortothis
offeringwillbereclassifiedasashareofClassBcommonstock.Weintendtoeffecta4to1reversestocksplitofourcommonstockprior
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offeringwillbereclassifiedasashareofClassBcommonstock.Weintendtoeffecta4to1reversestocksplitofourcommonstockprior
totheeffectivenessoftheregistrationstatementofwhichthisprospectusisapart.
Priortotheclosingofthisoffering,thetotalamountofourauthorizedcapitalstockwillconsistof1,625,000,000shares,ofwhich
700,000,000shareswillbedesignatedasClassAcommonstock,175,000,000shareswillbedesignatedasClassBcommonstock,
700,000,000shareswillbeundesignatedcommonstock,allwithaparvalueof$0.004pershare,and50,000,000shareswillbedesignated
aspreferredstock,withaparvalueof$0.001pershare.
AsofSeptember30,2016,wehadoutstanding133,300,971sharesofClassBcommonstock,whichexcludes31,905sharesofClassB
commonstocksubjecttoforfeitureandsubstantialrestrictionsontransferandassumesthereclassificationofalloutstandingsharesofour
existingcommonstockintosharesofClassBcommonstockimmediatelypriortothecompletionofthisoffering.Ouroutstandingcapital
stockwasheldbyapproximately195stockholdersofrecordasofSeptember30,2016.AsofSeptember30,2016,wealsohadoutstanding
optionstoacquire10,860,526sharesofcommonstockheldbyemployees,directorsandconsultants,allofwhichwillbecomeoptionsto
acquireanequivalentnumberofsharesofClassBcommonstock,immediatelypriortothecompletionofthisoffering.Uponcompletion
ofthisofferingtherewillbe400,000sharesofSeriesAPreferredStockoutstanding.
ClassAandClassBCommonStock
VotingRights
HoldersofourClassAandClassBcommonstockhaveidenticalrights,exceptthatholdersofourClassAcommonstockareentitled
toonevotepershareandholdersofourClassBcommonstockareentitledtotenvotespershare.HoldersofsharesofClassAcommon
stockandClassBcommonstockwillvotetogetherasasingleclassonallmatters(includingtheelectionofdirectors)submittedtoavote
ofstockholders,exceptthattherewillbeseparatevotesofholdersofsharesofourClassAcommonstockandClassBcommonstockinthe
followingcircumstances:
ifweproposetoamendourcertificateofincorporationtoalterorchangethepowers,preferencesorspecialrightsofthe
sharesofClassAorClassBcommonstocksoastoaffectthemadverselyortoincreaseordecreasetheparvalueofthe
sharesofaclassofourstock
ifweproposetotreatthesharesofClassAorClassBcommonstockdifferentlywithrespecttoanydividendordistribution
ofcash,propertyorsharesofourstockpaidordistributedbyus
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ifweproposetotreatthesharesofClassAorClassBcommonstockdifferentlywithrespecttoanysubdivisionor
combinationofthesharesofClassAorClassBcommonstockor
ifweproposetotreatthesharesofClassAorClassBcommonstockdifferentlyinconnectionwithachangeincontrol,
liquidation,dissolution,distributionofassetsorwindingdownoftheCompanywithrespecttoanyconsiderationinto
whichthesharesareconvertedoranyconsiderationpaidorotherwisedistributedtoourstockholders.
Uponthecompletionofthisoffering,underouramendedandrestatedcertificateofincorporation,wemaynotincreaseordecreasethe
authorizednumberofsharesofClassAcommonstockorClassBcommonstockwithouttheaffirmativevoteoftheholdersofthemajority
ofthecombinedvotingpoweroftheoutstandingsharesofClassAcommonstockandClassBcommonstock,votingtogetherasasingle
class.Inaddition,underouramendedandrestatedcertificateofincorporation,wemaynotissueanysharesofClassBcommonstock,other
than(1)uponexerciseofoptions,warrants,orsimilarrightstoacquirecommonstockoutstanding,(2)inconnectionwithdeferred
compensationandexecutiveprofitinterestarrangementsinexistenceimmediatelypriortothecompletionofthisofferingand(3)in
connectionwithstockdividends,stocksplitsandsimilartransactions.
Wehavenotprovidedforcumulativevotingfortheelectionofdirectorsinouramendedandrestatedcertificateofincorporation.
EconomicRights
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Exceptasotherwiseexpresslyprovidedinouramendedandrestatedcertificateofincorporationorasrequiredbyapplicablelaw,
sharesofourClassAcommonstockandClassBcommonstockwillhavethesamerightsandprivilegesandrankequally,shareratably
andbeidenticalinallrespectsastoallmatters,including,withoutlimitation,thosedescribedbelow.
Dividends.Subjecttopreferencesthatmayapplytoanysharesofpreferredstockoutstandingatthetime,theholdersofClassA
commonstockandClassBcommonstockwillbeentitledtoshareequally,identicallyandratably,onapersharebasis,withrespecttoany
dividendsthatourboardofdirectorsmaydeterminetoissuefromtimetotime,unlessdifferenttreatmentofthesharesofsuchclassis
approvedbytheaffirmativevoteoftheholdersofthemajorityoftheoutstandingsharesofClassAcommonstockandClassBcommon
stock,eachvotingseparatelyasaclass.Intheeventadividendispaidintheformofsharesofcommonstockorrightstoacquiresharesof
commonstock,theholdersofClassAcommonstockshallreceivesharesofClassAcommonstock,orrightstoacquiresharesofClassA
commonstock,asthecasemaybe,andtheholdersofClassBcommonstockshallreceivesharesofClassBcommonstock,orrightsto
acquiresharesofClassBcommonstock,asthecasemaybe.
LiquidationRights.Uponourliquidation,dissolutionorwindingup,theholdersofClassAcommonstockandClassBcommon
stockwillbeentitledtoshareequally,identicallyandratablyinallassetsremainingafterthepaymentofanyliabilitiesandthe
liquidationpreferencesonanyoutstandingpreferredstock,unlessdifferenttreatmentofthesharesofsuchclassisapprovedbythe
affirmativevoteoftheholdersofthemajorityoftheoutstandingsharesofClassAcommonstockandClassBcommonstock,eachvoting
separatelyasaclass.
ChangeofControlTransactions.Upon(1)theclosingofthesale,exchange,transferorotherdispositionofallorsubstantiallyallof
ourassets,(2)theconsummationofamerger,consolidation,businesscombinationorothersimilartransactionwhichresultsinourvoting
securitiesoutstandingimmediatelypriortothetransaction(orthevotingsecuritiesissuedwithrespecttoourvotingsecuritiesoutstanding
immediatelypriortothetransaction)representinglessthanamajorityofthecombinedvotingpowerandoutstandingcapitalstockofthe
votingsecuritiesoftheCompanyorthesurvivingoracquiringentity,or(3)therecapitalization,liquidation,dissolutionorothersimilar
transactionwhich
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resultsinthevotingsecuritiesoutstandingimmediatelypriortothetransactionrepresentinglessthanamajorityoftheofthecombined
votingpowerandoutstandingcapitalstockoftheCompanyorthesurvivingentityorparententity,theholdersofClassAcommonstock
andClassBcommonstockwillbetreatedequallyandidenticallywithrespecttosharesofClassAcommonstockorClassBcommon
stockownedbythem,unlessdifferenttreatmentofthesharesofeachclassisapprovedbytheaffirmativevoteoftheholdersofamajority
oftheoutstandingsharesofClassAcommonstockandClassBcommonstock,eachvotingseparatelyasaclass.
SubdivisionsandCombinations.IfwesubdivideorcombineinanymanneroutstandingsharesofClassAcommonstockorClassB
commonstock,theoutstandingsharesoftheotherclasswillbesubdividedorcombinedinthesameproportionandmanner,unless
differenttreatmentofthesharesofeachclassisapprovedbytheaffirmativevoteoftheholdersofamajorityoftheoutstandingsharesof
ClassAcommonstockandClassBcommonstock,eachvotingseparatelyasaclass.
Conversion
EachshareofClassBcommonstockisconvertibleatanytimeattheoptionoftheholderintooneshareofClassAcommonstock.In
addition,eachshareofClassBcommonstockwillconvertautomaticallyintooneshareofClassAcommonstockuponanytransfer,
whetherornotforvalue,exceptforcertaintransfersdescribedinouramendedandrestatedcertificateofincorporation,includingtransfers
fortaxandestateplanningpurposes,includingtotrusts,corporationsandpartnershipscontrolledbyaholderofClassBcommonstock.
UponthedeathorpermanentincapacityofaholderofClassBcommonstockwhoisanaturalperson,theClassBcommonstockheld
bythatpersonorhisorherpermittedestateplanningentitieswillconvertautomaticallyintoClassAcommonstock.
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OnceconvertedintoClassAcommonstock,theClassBcommonstockwillnotbereissued.
OurClassAcommonstockandClassBcommonstockwilleachconvertautomaticallyintoasingleclassofcommonstockonthe
dateonwhichthenumberofoutstandingsharesofClassBcommonstockrepresentslessthan15%oftheaggregatecombinednumberof
outstandingsharesofClassAcommonstockandClassBcommonstock.Followingtheconversion,noadditionalsharesofClassA
commonstockorClassBcommonstockwillbeissuedandeachshareofcommonstockwillhaveonevotepershareandtherightsofthe
holdersofalloutstandingcommonstockwillbeidentical.Thisprovisionofouramendedandrestatedcertificateofincorporationmaybe
amendedonlybytheaffirmativevoteoftheoutstandingsharesoftheClassAcommonstockandtheoutstandingsharesoftheClassB
commonstock,eachvotingasaseparateclass.
PreferredStock
Ourboardofdirectorsisauthorized,withoutfurtherstockholderaction,toclassifyorreclassifyanyunissuedportionofourauthorized
sharesofcommonstocktoprovidefortheissuanceofsharesofotherclassesorseries,includingpreferredstockinoneormoreseries.We
mayissuepreferredstockfromtimetotimeinoneormoreclassesorseries,withtheexacttermsofeachclassorseriesestablishedbyour
board.Thepowersandrelative,participating,optionalandotherspecialrights,ifany,andanyqualifications,limitationsorrestrictionsof
thesharesofsuchserieswillbefixedbythecertificateofdesignationrelatingtoeachseries.Certificatesofdesignationrelatingtoeach
serieswillspecifythetermsofthepreferredstock,including,butnotlimitedto:
thedistinctivedesignationandthemaximumnumberofsharesintheseries
thetermsonwhichdividends,ifany,willbepaid
thevotingrights,ifany,onthesharesoftheseries
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thetermsandconditions,ifany,onwhichthesharesoftheseriesshallbeconvertibleinto,orexchangeablefor,sharesof
anyotherclassorclassesofcapitalstock
thetermsonwhichthesharesmayberedeemed,ifatall
theliquidationpreference,ifanyand
anyorallotherpreferences,rights,restrictions,includingrestrictionsontransferability,andqualificationsofsharesofthe
series.
Theissuanceofpreferredstockmaydelay,deterorpreventachangeincontrol.
SeriesAPreferredStock
OnDecember4,2016,wesignedtheSubscriptionAgreement,pursuanttowhichweagreedtoissueanaggregateof400,000sharesof
theSeriesAPreferredStockinaprivateofferingfortotalgrossproceedsof$400millionandtotalnetproceedsofapproximately
$383million.ClosingoccurredonDecember20,2016andwereceivednetproceeds,afterissuancecosts,ofapproximately$328million.
Oneinvestorwillfundaportionofitspurchasepriceequalto$57million(approximately$55millionnetofissuancecosts)priorto
January23,2017.ToaccomplishthedesignationandissuanceoftheSeriesAPreferredStock,wefiledaCertificateofDesignationswith
theSecretaryofStateoftheStateofDelaware.ThefollowingsummaryoftheSeriesAPreferredStockandCertificateofDesignationsof
theCompanydoesnotpurporttobecompleteandisqualifiedinitsentiretybyreferencetotheprovisionsofapplicablelawandtothe
CertificateofDesignations,whichisfiledasanexhibittotheregistrationstatementofwhichthisprospectusisapart.
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See"CertainRelationshipsandRelatedPartyTransactions"foradetaileddescriptionofeachoftheSubscriptionAgreement,the
StockholdersAgreementandtheSeriesARegistrationRightsAgreement.
Dividends
Dividendscompoundquarterlyand,ifnotpaidinsharesofSeriesAPreferredStockonaquarterlybasisorincash,accruewhen,as
andifdeclaredbytheboardofdirectorsoftheCompany,oneachshareofSeriesAPreferredStockasfollows:(i)fromtheissuedateand
continuingthroughandincludingthesecondanniversaryoftheissuedate,10.0%peryear(ii)fromthesecondanniversaryoftheissue
dateandcontinuingthroughandincludingthethirdanniversaryoftheissuedate,13.0%peryearand(iii)fromthethirdanniversaryof
theissuedateandthereafter,16.0%peryear.Unlessweelecttopaythedividendincash,dividendsareautomaticallypaidtotheholder
thereofinsharesofSeriesAPreferredStockoraccrue.ForanyperiodinwhichdividendsontheSeriesAPreferredStockarepaidincash,
thedividendrateisreducedby75basispoints.
LiquidationRights
TheSeriesAPreferredStockwill,withrespecttoitsspecialandrelativerightsandpreferences,includingconversion,redemption,
paymentofdividendsanddistributionsofassets,rankseniortoallJuniorSecurities.TheholdersofsharesofSeriesAPreferredStockare
entitledtothepaymentoftheirliquidationpreferenceincashincertaincircumstances,includinguponthesaleoftheCompanyorthesale
ofallorsubstantiallyalloftheCompany'sassets,anduponachangeincontrolofWengen.If,uponasaleoftheCompany,the
considerationreceivedbytheholdersofourcommonstockconsistsoforincludesequitysecuritiesinapubliclytradedcompanywith(i)a
marketcapitalizationofatleast$5,000,000,000and(ii)apublicfloatofatleast$2,000,000,000,ineachcaseonaproforma,post
transactionbasis,theholdersoftheSeriesAPreferredStockhaveagreedthatreceiptoftheirprorataportionofsuchequitysecurities
(plusanyrelatedcashpayments)willsatisfyinfulltheCompany'sliquidationpreferencepaymentobligation.
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Conversion
ExceptassetforthintheCertificateofDesignations,thesharesofSeriesAPreferredStockmaynotbeconvertibleintoanyotherclass
orseriesofourcapitalstock.EachholderofsharesofSeriesAPreferredStockmayelecttoconvertallofitssharesofSeriesAPreferred
StockintosharesofourcommonstockupontheclosingofasaleoftheCompanyorWengenandintheeventWengennolonger
exclusivelycontrolsus,ineachcaseata15%discounttotheimpliedequityvalueoftheCompanyattheclosingoftheapplicable
transaction.Inaddition,boththeCompanyandeachholderofsharesofSeriesAPreferredStockmayelecttoconvertallofthesharesof
SeriesAPreferredStockintosharesofourClassAcommonstockatanytimeafterourinitialpublicofferingcommencingontheearlierto
occurofonedayfollowingthefirstanniversaryoftheclosingofourinitialpublicofferingandtheFollowonConversionDate(asdefined
intheCertificateofDesignations).ThesharesofSeriesAPreferredStockshallgenerallyconvertata15%discounttothelesserofthe
pricepershareatwhichtheCompany'ssharesofcommonstockaresoldtothepublicorthe30daytrailingpricepershareofourClassA
commonstock,butinnocaseshalltheconversionpricebelessthan75%ofthepriceatwhichthesharesofourClassAcommonstockare
soldtothepublic.IncertaincircumstancesafteraQPOthatclosesafterAugust15,2017,theholdersofsharesofSeriesAPreferredStock
mayconverttheirsharessoonerifcertainconditionsaresatisfied.IntheeventofaQPO,anysharesofSeriesAPreferredStockthatremain
outstandingonthedatethatisonedayfollowingthefirstanniversaryoftheclosingoftheQPOareautomaticallyconvertedintosharesof
ourClassAcommonstock.Incertaincircumstances,theCompanyandtheholdersoftheSeriesAPreferredStockhavetherighttodelaya
conversionforaperiodof90daysfollowingaproposedconversiondate.WearenotpermittedtoconvertanysharesofSeriesAPreferred
StockuntilthereisaneffectiveregistrationstatementavailabletotheholdersoftheSeriesAPreferredStockwhichprovidetheholdersthe
opportunitytoregisteratleastanamountofsharesofourClassAcommonstockequaltothePriorityAmount.
Redemption
We,atouroption,mayredeeminwholeatanytimeorinpartfromtimetotime,andafterthefifthanniversaryoftheissuedate,each
holdermayrequestthatweredeemall(butnotlessthanall),ofsuchholder'ssharesofSeriesAPreferredStockthenoutstanding,ata
redemptionpricepershareequalto115%ofthesumoftheissueamountpershareplusanyaccruedandunpaiddividends.AfteraQPO,we
mayonlyredeemsharesofSeriesAPreferredStockifonthedatewhennoticeofredemptionisgiven,sharesofourClassAcommonstock
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mayonlyredeemsharesofSeriesAPreferredStockifonthedatewhennoticeofredemptionisgiven,sharesofourClassAcommonstock
aretradingatorbelowaspecifiedthreshold.IfwefailtoredeemthesharesofSeriesAPreferredStockwhenrequiredafterthefifth
anniversaryoftheissuedate,theholdersoftheSeriesAPreferredStockareentitledtoappointtwoadditionalmemberstoourboardof
directorsandthedividendrategenerallyincreasesto18.0%perannum.Foraperiodof120daysfollowingtheappointmentofsuch
directors,wemustworkingoodfaithwiththeholdersoftheSeriesAPreferredStocktostructureamutuallyagreeablecapitalfundraising
transactiontoredeemthethenoutstandingsharesofSeriesAPreferredStock.If,aftersuch120dayperiod,anysharesofSeriesAPreferred
Stockremainoutstanding,theholdersoftheSeriesAPreferredStockmayrequestthatthedirectorsincreasethesizeofourboardof
directorsbytwoseatsandnominateandappointtothosetwoadditionalseatstheindividualsnominatedbytheholdersoftheSeriesA
PreferredStock.IfthedirectorsfailtonominateandappointtheindividualsasrequestedbytheholdersoftheSeriesAPreferredStock
withinfivebusinessdaysaftertherequestismade,theholdersoftheSeriesAPreferredStockmaynominateanumberofindividualstoour
boardofdirectorssuchthataftersuchnominationtheholdersoftheSeriesAPreferredStockcontrolamajorityofourboardofdirectors
and,afterwhich,theholdersofSeriesAPreferredStockmaycauseasaleoftheCompanyand/orcausetheCompanytoraisedebtorequity
capitalinanamountsufficienttoredeemtheremainingoutstandingsharesofSeriesAPreferredStock.Intheeventofsuchasaleorcapital
raise,Wengenhas,amongotherthings,agreedtovoteitssharesofourcapitalstockinfavorof
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thetransactionandgrantedaproxytoanindividualdesignatedbytheholdersoftheSeriesAPreferredStocktovoteitssharesofour
commonstockinfavorofsuchatransaction.A"QPO"means(a)onorpriortoAugust15,2017,aninitialunderwrittenpublicofferingof
commonstockbytheCompanywithnetcashproceedstotheCompanyofnotlessthan$450,000,000and(b)afterAugust15,2017,an
initialunderwrittenpublicofferingofcommonstockbytheCompanywithnetcashproceedstotheCompanyofnotlessthan
$250,000,000.
EducationalApprovals
TotheextentthatanyEducationalLaw(asdefinedintheCertificateofDesignations)requiresthatthepartiesobtainanEducational
Approval(asdefinedintheCertificateofDesignations)inordertoconsummatecertaintransactionsoractionsdescribedintheCertificate
ofDesignations,wewillobtainsuchEducationalApprovalandtheholdersoftheSeriesAPreferredStockagreedtocooperateingood
faithwithustoobtainthem.TheprocessofdeterminingwhichEducationalApprovalsmayberequiredwillbeinitiatedatleastnine
monthsbeforethefifthanniversaryofthefirstdateonwhichashareofSeriesAPreferredStockisissued,includingapplyingforand
seekingtoobtainanysuchEducationApprovalsatleastsixmonthspriortoanycontemplatedchangeinthecompositionofourboardof
directors,anyForcedLiquidationEvent(asdefinedintheCertificateofDesignations),exerciseofanyproxy,oranycertainothereventsor
seriesoftransactionssetforthintheCertificateofDesignations.TotheextentthatanyEducationalLawrequiresustoobtainEducational
ApprovalspriortoconsummatinganyofcertaintransactionssetforthintheCertificateofDesignations,wewillobtainsuchEducational
ApprovalsandtheholdersoftheSeriesAPreferredStockwillcooperateingoodfaithwithustoobtainthempriortosuchtransaction
effectivedate.TheCompanywillincuranycosts,feesandexpensesreasonablyrequiredinconnectionwithobtainingsuchEducational
Approvals.
VotingRightsProtectiveProvisions
TheholdersofSeriesAPreferredStockdonothaveanyvotingrightsexceptasrequiredbylawandwithrespecttocertain
extraordinaryactions,including,amongothers,to(i)enterintocertaintransactionswithaffiliates,(ii)payanydividendorother
distributiononsharesofourClassAcommonstock,(iii)amendorrepealanyprovisionofourCertificateofIncorporationorBylawssoas
toadverselyaffecttherights,preferences,privilegesorvotingpowersoftheSeriesAPreferredStock,includinganyamendmentthatwould
increaseordecreasetheauthorizednumberofsharesofSeriesAPreferredStock,(iv)ifitisnotafollowonpublicofferingafterthis
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increaseordecreasetheauthorizednumberofsharesofSeriesAPreferredStock,(iv)ifitisnotafollowonpublicofferingafterthis
offeringinwhichtheholdersoftheSeriesAPreferredStockreceivenetproceedsnotlessthanthePriorityAmount,thefirstpublicoffering
ofourcommonstockfollowingthisoffering,and(v)anyproposedinitialpublicofferingthatisnotaQPO.
PublicBenefitCorporationStatus
InOctober2015,weredomiciledinDelawareasapublicbenefitcorporationasademonstrationofourlongtermcommitmenttoour
missiontobenefitourstudentsandsociety.Publicbenefitcorporationsarearelativelynewclassofcorporationsthatareintendedto
produceapublicbenefitandtooperateinaresponsibleandsustainablemanner.UnderDelawarelaw,publicbenefitcorporationsare
requiredtoidentifyintheircertificateofincorporationthepublicbenefitorbenefitstheywillpromoteandtheirdirectorshaveadutyto
managetheaffairsofthecorporationinamannerthatbalancesthepecuniaryinterestsofthestockholders,thebestinterestsofthose
materiallyaffectedbythecorporation'sconduct,andthespecificpublicbenefitorpublicbenefitsidentifiedinthepublicbenefit
corporation'scertificateofincorporation.PublicbenefitcorporationsorganizedinDelawarearealsorequiredtopubliclydiscloseatleast
bienniallyareportthatassessestheirbenefitperformance.Inconnectionwiththisreport,ourBoardofDirectorsisrequiredtoset
objectivesandstandardstoassessourbenefitperformanceandtoassessourperformancebasedonthosestandards.WhileaDelaware
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publicbenefitcorporationmayprovideinitscertificateofincorporationthatitwillmeasurethecorporation'sbenefitperformanceagainst
anobjectivethirdpartystandard,ourcertificateofincorporationdoesnotcontainthatrequirementandweexpectthatourBoardof
Directorswillmeasureourbenefitperformanceagainsttheobjectivesandstandardsitsets.
Wedonotbelievethataninvestmentinthestockofapublicbenefitcorporationdiffersmateriallyfromaninvestmentina
corporationthatisnotdesignatedasapublicbenefitcorporation.Webelievethatourongoingeffortstoachieveourpublicbenefitgoals
willnotmateriallyaffectthefinancialinterestsofourstockholders.HoldersofourClassAcommonstockwillhavevoting,dividendand
othereconomicrightsthatarethesameastherightsofstockholdersofacorporationthatisnotdesignatedasapublicbenefitcorporation.
Ourpublicbenefit,asprovidedinourcertificateofincorporation,is:toproduceapositiveeffect(orareductionofnegativeeffects)
forsocietyandpersonsbyofferingdiverseeducationprogramsdeliveredonlineandonpremisesoperatedinthecommunitiesthatwe
serve.Bydoingso,webelievethatweprovidegreateraccesstocosteffective,highqualityhighereducationthatenablesmorestudentsto
achievetheiracademicandcareeraspirations.MostofouroperationsareoutsidetheUnitedStates,wherethereisalargeandgrowing
imbalancebetweenthesupplyanddemandforqualityhighereducation.Ourstatedpublicbenefitisfirmlyrootedinourcompanymission
andourbeliefthatwhenourstudentssucceed,countriesprosperandsocietiesbenefit.Becomingapublicbenefitcorporationunderscores
ourcommitmenttoourpurposeandourstakeholders,includingstudents,regulators,employers,localcommunitiesandstockholders.
ExclusiveVenue
Ouramendedandrestatedcertificateofincorporation,asitwillbeineffectupontheclosingofthisoffering,willrequire,tothefullest
extentpermittedbylaw,that(i)anyderivativeactionorproceedingbroughtonourbehalf,(ii)anyactionassertingaclaimofbreachofa
fiduciarydutyowedbyanyofourdirectors,officersorotheremployeestousorourstockholders,(iii)anyactionassertingaclaimagainst
usarisingpursuanttoanyprovisionoftheDGCLorouramendedandrestatedcertificateofincorporationorthebylawsor(iv)anyaction
assertingaclaimagainstusgovernedbytheinternalaffairsdoctrinewillhavetobebroughtonlyintheCourtofChanceryintheStateof
Delawareunlessweotherwiseconsentinwritingtoanalternativeform.Althoughwebelievethisprovisionbenefitsusbyproviding
increasedconsistencyintheapplicationofDelawarelawinthetypesoflawsuitstowhichitapplies,theprovisionmayhavetheeffectof
discouraginglawsuitsagainstourdirectorsandofficers.
AntitakeoverEffectsofProvisionsofourAmendedandRestatedCertificateofIncorporation,ourCertificateofDesignations,our
BylawsandDelawareLaw
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BylawsandDelawareLaw
Ouramendedandrestatedcertificateofincorporation,CertificateofDesignationsandbylaws,astheywillbeineffectupon
completionofthisoffering,alsocontainprovisionsthatmaydelay,deferordiscourageanotherpartyfromacquiringcontrolofus.We
expectthattheseprovisions,whicharesummarizedbelow,willdiscouragecoercivetakeoverpracticesorinadequatetakeoverbids.These
provisionsarealsodesignedtoencouragepersonsseekingtoacquirecontrolofustofirstnegotiatewithourboardofdirectors,whichwe
believemayresultinanimprovementofthetermsofanysuchacquisitioninfavorofourstockholders.However,theyalsogiveourboard
ofdirectorsthepowertodiscourageacquisitionsthatsomestockholdersmayfavor.
AuthorizedbutUnissuedShares.Theauthorizedbutunissuedsharesofcommonstockandpreferredstockareavailableforfuture
issuancewithoutstockholderapproval,subjecttoanylimitationsimposedbyNasdaqlistingstandards.Theseadditionalsharesmaybe
usedforavarietyofcorporatefinancetransactions,acquisitionsandemployeebenefitplans.Theexistenceofauthorizedbutunissued
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andunreservedcommonstockandpreferredstockcouldmakemoredifficultordiscourageanattempttoobtaincontrolofusbymeansofa
proxycontest,tenderoffer,mergerorotherwise.
RequirementsforAdvanceNotificationofStockholderMeetings,NominationsandProposals.ExceptasprovidedintheWengen
Securityholders'Agreement,ouramendedandrestatedcertificateofincorporationandbylawswillprovidethatstockholdersatanannual
meetingmayonlyconsiderproposalsornominationsspecifiedinthenoticeofmeetingorbroughtbeforethemeetingbyoratthe
directionofourboardofdirectorsorbyaqualifiedstockholderofrecordontherecorddateforthemeetingandwhohasdeliveredtimely
writtennoticeinproperformtooursecretaryofthestockholder'sintentiontobringsuchbusinessbeforethemeeting.Ouramendedand
restatedcertificateofincorporationwillprovidethat,subjecttoapplicablelaw,specialmeetingsofthestockholdersmaybecalledonlyby
aresolutionadoptedbytheaffirmativevoteofthemajorityofthedirectorstheninofficeprovided,however,atanytimeWengenorany
affiliatebeneficiallyowns,intheaggregate,atleast40%ofthetotalnumberofoutstandingsharesofstockoftheCompany,special
meetingsofourstockholdersshallalsobecalledattherequestofWengenorsuchaffiliatepursuanttoaresolutionadoptedbyamajority
ofboardofdirectorsorthechairmanoftheboardofdirectors.Ourbylawswillprohibittheconductofanybusinessataspecialmeeting
otherthanasspecifiedinthenoticeforsuchmeeting.Inaddition,anystockholderwhowishestobringbusinessbeforeanannualmeeting
ornominatedirectorsmustcomplywiththeadvancenoticeanddurationofownershiprequirementssetforthinourbylawsandprovideus
withcertaininformation.Theseprovisionsmayhavetheeffectofdeferring,delayingordiscouraginghostiletakeoversorchangesin
controlofusorourmanagement.
BusinessCombinations.WehaveoptedoutofSection203oftheDGCLhowever,ouramendedandrestatedcertificateof
incorporationcontainssimilarprovisionsprovidingthatwemaynotengageincertain"businesscombinations"withany"interested
stockholder"forathreeyearperiodfollowingthetimethatthestockholderbecameaninterestedstockholder,unless:
priortosuchtime,ourboardofdirectorsapprovedeitherthebusinesscombinationorthetransactionwhichresultedinthe
stockholderbecominganinterestedstockholder
uponconsummationofthetransactionthatresultedinthestockholderbecominganinterestedstockholder,theinterested
stockholderownedatleast85%ofourvotingstockoutstandingatthetimethetransactioncommenced,excludingcertain
sharesor
atorsubsequenttothattime,thebusinesscombinationisapprovedbyourboardofdirectorsandbytheaffirmativevoteof
holdersofatleast66 2/3%oftheoutstandingvotingstockthatisnotownedbytheinterestedstockholder.
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Generally,a"businesscombination"includesamerger,assetorstocksaleorothertransactionresultinginafinancialbenefittothe
interestedstockholder.Subjecttocertainexceptions,an"interestedstockholder"isapersonwho,togetherwiththatperson'saffiliatesand
associates,owns,orwithinthepreviousthreeyearsowned,15%ormoreofourvotingstock.Forpurposesofthissectiononly,"voting
stock"hasthemeaninggiventoitinSection203oftheDGCL.
Undercertaincircumstances,thisprovisionwillmakeitmoredifficultforapersonwhowouldbean"interestedstockholder"toeffect
variousbusinesscombinationswithacorporationforathreeyearperiod.Thisprovisionmayencouragecompaniesinterestedinacquiring
ourCompanytonegotiateinadvancewithourboardofdirectorsbecausethestockholderapprovalrequirementwouldbeavoidedifour
boardofdirectorsapproveseitherthebusinesscombinationorthetransactionwhichresultsinthestockholderbecominganinterested
stockholder.Theseprovisionsalsomayhavetheeffectofpreventingchangesinourboardofdirectorsandmaymakeitmoredifficultto
accomplishtransactionswhichstockholdersmayotherwisedeemtobeintheirbestinterests.
OuramendedandrestatedcertificateofincorporationprovidesthatWengenandthepartiestotheWengenSecurityholders'Agreement
andtheiraffiliatesandanyoftheirrespectivedirectorindirect
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transfereesandanygroupastowhichsuchpersonsareapartydonotconstitute"interestedstockholders"forpurposesofthisprovision.
OurelectiontooptoutofSection203oftheDGCLwillbeeffectiveoneyearafterthedateoffilingouramendedandrestated
certificateofincorporation.
NoCumulativeVoting.TheDGCLprovidesthatstockholdersarenotentitledtotherighttocumulatevotesintheelectionof
directorsunlessouramendedandrestatedcertificateofincorporationprovidesotherwise.Ouramendedandrestatedcertificateof
incorporationwillnotexpresslyprovideforcumulativevoting.
StockholderActionbyWrittenConsent.PursuanttoSection228oftheDGCL,anyactionrequiredtobetakenatanyannualor
specialmeetingofthestockholdersmaybetakenwithoutameeting,withoutpriornoticeandwithoutavoteifaconsentorconsentsin
writing,settingforththeactionsotaken,issignedbytheholdersofoutstandingstockhavingnotlessthantheminimumnumberofvotes
thatwouldbenecessarytoauthorizeortakesuchactionatameetingatwhichallsharesofourstockentitledtovotethereonwerepresent
andvoted,unlessouramendedandrestatedcertificateofincorporationprovidesotherwise.Ouramendedandrestatedcertificateof
incorporationwillprovidethatstockholderactionbywrittenconsentwillbepermittedonlyiftheactiontobeeffectedbysuchwritten
consentandthetakingofsuchactionbysuchwrittenconsenthavebeenpreviouslyapprovedbytheboardofdirectors.Followingthe
conversionofallofourClassBcommonstockintoClassAcommonstock,ouramendedandrestatedcertificateofincorporationwill
providethatourstockholdersmaynotactbywrittenconsent,whichmaylengthentheamountoftimerequiredtotakestockholderactions.
Asaresult,aholdercontrollingamajorityofourcapitalstockwouldnotbeabletoamendourcertificateofincorporationorbylawsor
removedirectorswithoutholdingameetingofourstockholderscalledinaccordancewithourbylaws.
AmendmentofAmendedandRestatedCertificateofIncorporationorBylaws.TheDGCLprovidesgenerallythattheaffirmative
voteofamajorityofthesharesentitledtovoteonanymatterisrequiredtoamendacorporation'scertificateofincorporationorbylaws,
unlessacorporation'scertificateofincorporationorbylaws,asthecasemaybe,requiresagreaterpercentage.Uponcompletionofthis
offering,ourbylawsmaybeamendedorrepealedbyamajorityvoteofourboardofdirectorsorbytheaffirmativevoteoftheholdersofat
least66 2/3%ofthevoteswhichallourstockholderswouldbeentitledtocastinanyannualelectionofdirectors.Inaddition,the
affirmativevoteoftheholdersofatleast66 2/3%ofthevoteswhichallourstockholderswouldbeentitledtocastinanyelectionof
directorswillberequiredtoamendorrepealortoadoptanyprovisionsinconsistentwiththeprovisionsofourcertificate.
SeriesAPreferredStock.TheCertificateofDesignationsprovidesthat,amongotherthingsandincertaincircumstances,theshares
ofSeriesAPreferredStockareconvertibleintosharesofourClassAcommonstockandredeemablebytheholdersoftheSeriesAPreferred
Stock.
PublicBenefitCorporation.Asapublicbenefitcorporation,anaffirmativevoteof66 2/3%oftheoutstandingstockisrequiredto
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PublicBenefitCorporation.Asapublicbenefitcorporation,anaffirmativevoteof66 2/3%oftheoutstandingstockisrequiredto
effectanoncashmergerwithanentitythatisnotapublicbenefitcorporationwithanidenticalpublicbenefit.
Theforegoingprovisionsofouramendedandrestatedcertificateofincorporation,CertificateofDesignationsandbylawscould
discouragepotentialacquisitionproposalsandcoulddelayorpreventachangeincontrol.Theseprovisionsareintendedtoenhancethe
likelihoodofcontinuityandstabilityinthecompositionofourboardofdirectorsandinthepoliciesformulatedbyourboardofdirectors
andtodiscouragecertaintypesoftransactionsthatmayinvolveanactualorthreatenedchangeofcontrol.Theseprovisionsaredesigned
toreduceourvulnerabilitytoanunsolicitedacquisitionproposal.Theprovisionsalsoareintendedtodiscouragecertaintacticsthatmay
beusedinproxyfights.However,suchprovisionscouldhavetheeffectofdiscouragingothersfrommakingtenderoffersforourshares
and,asaconsequence,theyalsomayinhibitfluctuationsinthemarketpriceofoursharesofClassA
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commonstockthatcouldresultfromactualorrumoredtakeoverattempts.Suchprovisionsalsomayhavetheeffectofpreventingchanges
inourmanagementordelayingorpreventingatransactionthatmightbenefityouorotherminoritystockholders.See"RiskFactors
RisksRelatingtoInvestinginOurClassACommonStockProvisionsinourcertificateofincorporationandbylawsandtheDelaware
GeneralCorporationLawcouldmakeitmoredifficultforathirdpartytoacquireusandcoulddiscourageatakeoverandadverselyaffect
theholdersofourClassAcommonstock."
LimitationsonLiabilityandIndemnificationofOfficersandDirectors
TheDGCLauthorizescorporationstolimitoreliminatethepersonalliabilityofdirectorstocorporationsandtheirstockholdersfor
monetarydamagesforbreachesofdirectors'fiduciaryduties,subjecttocertainexceptions.Ouramendedandrestatedcertificateof
incorporationincludesaprovisionthateliminatesthepersonalliabilityofdirectorsformonetarydamagesforanybreachoffiduciaryduty
asadirector,excepttotheextentsuchexemptionfromliabilityorlimitationthereofisnotpermittedundertheDGCL.Theeffectofthese
provisionsistoeliminatetherightsofusandourstockholders,throughstockholders'derivativesuitsonourbehalf,torecovermonetary
damagesfromadirectorforbreachoffiduciarydutyasadirector,includingbreachesresultingfromgrosslynegligentbehavior.
Ouramendedandrestatedbylawsprovidethatwemustgenerallyindemnify,andadvanceexpensesto,ourdirectorsandofficerstothe
fullestextentauthorizedbytheDGCL.Wealsoareexpresslyauthorizedtocarrydirectors'andofficers'liabilityinsuranceproviding
indemnificationforourdirectors,officersandcertainemployeesforsomeliabilities.Webelievethattheseindemnificationand
advancementprovisionsandinsuranceareusefultoattractandretainqualifieddirectorsandexecutiveofficers.
Thelimitationofliability,indemnificationandadvancementprovisionsinouramendedandrestatedcertificateofincorporationand
amendedandrestatedbylawsmaydiscouragestockholdersfrombringingalawsuitagainstdirectorsforbreachoftheirfiduciaryduty.
Theseprovisionsalsomayhavetheeffectofreducingthelikelihoodofderivativelitigationagainstdirectorsandofficers,eventhough
suchanaction,ifsuccessful,mightotherwisebenefitusandourstockholders.Inaddition,yourinvestmentmaybeadverselyaffectedto
theextentwepaythecostsofsettlementanddamageawardsagainstdirectorsandofficerspursuanttotheseindemnificationprovisions.
Dissenters'RightsofAppraisalandPayment
UndertheDGCL,withcertainexceptions,ourstockholderswillhaveappraisalrightsinconnectionwithamergerorconsolidationof
Laureate.PursuanttotheDGCL,stockholderswhoproperlyrequestandperfectappraisalrightsinconnectionwithsuchmergeror
consolidationwillhavetherighttoreceivepaymentofthefairvalueoftheirsharesasdeterminedbytheDelawareCourtofChancery.
Stockholders'DerivativeActions
UndertheDGCL,anyofourstockholdersmaybringanactioninournametoprocureajudgmentinourfavor,alsoknownasa
derivativeaction,providedthatthestockholderbringingtheactionisaholderofoursharesatthetimeofthetransactiontowhichthe
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derivativeaction,providedthatthestockholderbringingtheactionisaholderofoursharesatthetimeofthetransactiontowhichthe
actionrelatesorsuchstockholder'sstockthereafterdevolvedbyoperationoflawandsuchsuitisbroughtintheCourtofChanceryinthe
StateofDelaware.See"ExclusiveVenue"above.
TransferAgentandRegistrar
Uponthecompletionofthisoffering,thetransferagentandregistrarforourClassAcommonstockwillbeAmericanStockTransfer&
TrustCompany,LLC.
StockExchangeListing
WehaveappliedforalistingofourClassAcommonstockonNasdaqunderthesymbol"LAUR."
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DESCRIPTIONOFCERTAININDEBTEDNESS
Thefollowingdescriptionsofindebtednessareonlysummariesofmaterialprovisionsoftherespectivetermsofsuchindebtedness,
andarequalifiedintheirentiretybyreferencetotheprovisionsofthecreditagreements,indentureandotherinstrumentsevidencing
suchindebtedness.See"WhereYouCanFindMoreInformation."
SeniorSecuredCreditFacilities
Overview
OnJune16,2011,weamendedandrestatedourcreditagreementdatedasofAugust17,2007,inorderto,amongotherthings,extend
maturitydates.PursuanttotheAmendedandRestatedCreditAgreement,certainlendersinthesyndicate:(1)extendedthematuritydates
applicableto$155.0millionofourthenexisting$400.0millionrevolvinglineofcreditfacilityfromAugust2013toJune2016,
(2)converted$245.0millionofthenexistingrevolvingloansandrevolvingcreditcommitmentsintotermloanswithamaturitydatein
June2018,and(3)extendedthematuritydatesapplicabletothreeseriesofourtermloans,totaling$858.9millionofaggregateprincipal,
fromAugust2014toJune2018.Inaddition,someexistinglendersincreasedtheamountoftheirseniorsecuredmulticurrencyrevolving
creditfacilitycommitmentsandnewlendersbecamelenderswithrespecttotheseniorsecuredmulticurrencyrevolvingcreditfacilitywith
amaturitydateinJune2016.Thematuritydatefortheseniorsecuredmulticurrencyrevolvingcreditfacilitywasfurtherextendedto
June7,2019,subjecttoaspringingmaturitydateasfurtherdescribedbelowpursuanttotheSixthAmendmententeredintoonJuly7,
2016,asdescribedbelow.Asaresultofthisamendmentandrestatement,thecreditfacilitiesunderourAmendedandRestatedCredit
AgreementonJune16,2011werecomposedofthefollowing:
$300.0millionrevolvinglineofcreditfacilityand
$1,269.7millionseniorsecuredtermloanfacility,consistingofthefollowingseries:
$1,103.9million2018ExtendedTermLoans
$129.1millionClosingDateTermLoan
$19.1millionDelayedDrawTermLoanand
$17.6millionSeriesANewTermLoan.
ThetermloanlendersholdingamajorityofthetermloansagreedtoextendthematuritydateofsuchtermloanstoMarch17,2021,
subjecttoaspringingmaturitydateasfurtherdescribedbelow,pursuanttothatcertainFifthAmendmententeredintoonJune3,2016,as
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subjecttoaspringingmaturitydateasfurtherdescribedbelow,pursuanttothatcertainFifthAmendmententeredintoonJune3,2016,as
describedbelow.
$25.0MillionSeriesA2018NewTermLoanIncreaseinRevolvingLineofCreditFacility
OnDecember22,2011,weenteredintoajoinderagreementtotheAmendedandRestatedCreditAgreementtoborrowanadditional
$25.0milliononthesametermsasthe2018ExtendedTermLoans(the"SeriesA2018NewTermLoan"),includinginterestratesand
quarterlyprincipalpaymentdates.WealsoenteredintoajoinderagreementtotheAmendedandRestatedCreditAgreementtoincrease
theborrowingcapacityunderourrevolvinglineofcreditfacilityto$350.0million.
$250.0MillionSeriesBNewTermLoans
OnJanuary18,2013,weenteredintoajoinderagreementandtheFirstAmendmenttotheAmendedandRestatedCreditAgreementto
borrowanadditional$250.0milliononthesametermsasthe2018ExtendedTermLoanswiththeissuanceoftheSeriesBNewTerm
Loans,includinginterestratesandquarterlyprincipalpaymentdates.Thisadditionalloanwasissuedatanoriginalissue
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discountof$1.25million,andwepaiddebtissuancecostsof$2.9millioninconnectionwiththeborrowing,bothofwhichwillbe
amortizedtointerestexpenseoverthetermoftheloan.
$310.0MillionSeriesBAdditionalTermLoans
OnApril23,2013,weenteredintoajoinderagreementandtheSecondAmendmenttotheAmendedandRestatedCreditAgreement
toborrowanadditional$310.0milliononthesametermsasthe2018ExtendedTermLoanswiththeissuanceoftheSeriesBAdditional
TermLoans,includinginterestratesandquarterlyprincipalpaymentdates.Thisadditionalloanwasissuedatanoriginaldebtpremiumof
$1.55million,andwepaiddebtissuancecostsof$3.9millioninconnectionwiththeborrowing,bothofwhichwillbeamortizedto
interestexpenseoverthetermoftheloan.Inaddition,thirdpartycostsof$0.4millionwerechargedtogeneralandadministrative
expensesfortheyearendedDecember31,2013.TheproceedsfromthisborrowingwereusedtorepayalloftheoutstandingSenior
SubordinatedNotes.
ThirdAmendmenttoAmendedandRestatedCreditAgreementNewSeries2018ExtendedTermLoans
OnOctober3,2013,weenteredintoaThirdAmendmenttoAmendedandRestatedCreditAgreement(the"ThirdAmendment"),
pursuanttowhichtheoutstanding2018ExtendedTermLoans,SeriesA2018NewTermLoan,SeriesBNewTermLoansandSeriesB
AdditionalTermLoanswererefinancedwithNewSeries2018ExtendedTermLoanseffectivelyreducingthemarginapplicabletoour
2018ExtendedTermLoans,SeriesA2018NewTermLoan,SeriesBNewTermLoansandSeriesBAdditionalTermLoansfrom4.00%to
3.75%forLIBORloansandfrom3.00%to2.75%forABRloans.Inadditiontoloweringthemarginonthesetermloans,theamendment
providedadditionalflexibilityformortgagefinancings.
$200.0MillionAdditionalNewSeries2018ExtendedTermLoans
OnDecember16,2013,weenteredintoajoinderagreementtoborrowanadditional$200.0milliononthesametermsastheNew
Series2018ExtendedTermLoans.Thisadditionalloanwasissuedatanoriginaldebtdiscountof$0.5million,andwepaiddebtissuance
costsof$2.2millioninconnectionwiththeborrowing,bothofwhichwillbeamortizedtointerestexpenseoverthetermoftheloan.
FourthAmendmenttoAmendedandRestatedCreditAgreementandAmendmenttotheU.S.ObligationsSecurityAgreementandtheU.S.
PledgeAgreement
OnJuly7,2015,weenteredintotheFourthAmendment,pursuanttowhichthematuritydateoftheseniorsecuredmulticurrency
revolvingcreditfacilitywasextendedfromJune2016toMarch2018andtheAmendedandRestatedCreditAgreementwasamendedto
(a)provideforcompliancewiththeConsolidatedSeniorSecuredDebttoConsolidatedEBITDARatio,asdefinedintheseniorsecured
creditagreement,solelywithrespecttotherevolvinglineofcreditfacility,whichfinancialcovenantistobetestedquarterlyprovidedthat
followingaQualifyingIPO(asdefinedintheAmendedandRestatedCreditAgreement)orcertainprivateofferingsofcommonstockor
preferredstock,iftheconsolidatedtotaldebttoconsolidatedEBITDAratioislessthanorequalto4.75to1.0onthelastdayofthe
respectivetestperiod,themaintenancefinancialcovenantshallonlyapplyif25%ormoreoftherevolvinglineofcreditfacilityisutilized
and(b)revisecertaincovenantsrelatingtorestrictedpayments,investmentsandothermatterssuchthatsuchcovenantsaremore
restrictive.TheU.S.ObligationsSecurityAgreementandU.S.PledgeAgreementwereamendedtoextendthesecuredobligationsto
includecashmanagementprogramsandtoincreasethesecuredamountofobligationsrelatingtocashmanagementprogramsfrom
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includecashmanagementprogramsandtoincreasethesecuredamountofobligationsrelatingtocashmanagementprogramsfrom
$2millionto$20million.
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FifthAmendmenttoAmendedandRestatedCreditAgreement
OnJune3,2016,weenteredintotheFifthAmendmenttotheAmendedandRestatedCreditAgreement(the"FifthAmendment"),
pursuanttowhichcertainlenders(the"ExtendingLenders")holdingapproximately$1.526billionoftheCompany'sapproximately
$1.810billionoftermloansthenoutstandingagreedtoextendthematuritydatefromJune2018toMarch2021(the"2021Extended
TermLoan").
TheamendmentandextensionsetforthintheFifthAmendmentbecameeffectiveonJuly29,2016uponthesatisfactionofthe
followingconditions,amongothers:
theclosingofboth(i)thesaleoftheGlionandLesRocheshospitalitymanagementschoolsand(ii)thesaleofthe
ownershipinterestinLIUF
thecontemporaneousvoluntaryprepaymentbytheCompanyof$300.0millionofthe2021ExtendedTermLoanand
thefurtheramendmentoftheAmendedandRestatedCreditAgreementpursuanttowhichtherevolvingcreditlenders
thereunderholdingrevolvingcreditcommitmentinanaggregateprincipalamountsatisfactorytotheCompanyand
IniciativasCulturalesdeEspaaS.L.,asubsidiaryoftheCompany(the"ForeignBorrower"),agreedtoextendthematurity
datetoJune7,2019.
OntheeffectivedateoftheFifthAmendment,theoutstandingprincipalamountofthe2021ExtendedTermLoan,aftergivingeffect
tothe$300.0millionvoluntaryprepaymentandtheprincipalamortizationpaymentsmadeonoraboutJune30,2016pursuanttothe
termsoftheAmendedandRestatedCreditAgreement,wasapproximately$1.222billionandtheoutstandingprincipalamountofthenon
extendingtermloanswasapproximately$283.3million.
Thestatedmaturitydateofthe2021ExtendedTermLoanisMarch17,2021providedthatthematuritydatewillbesubjecttoa
customary"springingmaturity"91dayspriortoSeptember1,2019intheeventthattheSeniorNotes(otherthannotmorethan
$250millionthereof)arenotrepaidorsufficientlyextended.
The2021ExtendedTermLoanhaveaninterestrateequaltoLIBOR+7.50%,orifborrowedasABRloans,ABR+6.50%.The
marginsshallbeincreasedby0.50%eachquarter,commencingwiththefiscalquarterendingSeptember30,2016providedthatinno
eventshalltheLIBORmarginexceed8.50%ortheABRmarginexceed7.50%.Upontheconsummationofcertainequityofferings,the
LIBORmarginwillbeimmediatelyreducedto7.50%andtheABRmarginwillbeimmediatelyreducedto6.50%.Thereisno"floor"on
LIBORorABR(otherthantheFederalFundsRatemaynotbelessthanzero)forthe2021ExtendedTermLoan.
TheFifthAmendmentalsoprovidesthatiftheCompanyprepaysallorpartofthe2021ExtendedTermLoanonorpriortothefirst
anniversaryoftheeffectivedateoftheFifthAmendment,(otherthanscheduleamortizationpayments,thevoluntaryprepaymentof
$300.0million,whichiscontemporaneouswiththeeffectivenessoftheFifthAmendment,ortheadditionalpaymentdescribedbelow),the
Companywillbeobligatedtopayaprepaymentpremiumof1.0%oftheamountof2021ExtendedTermLoanthatareprepaid.
Withrespecttoour2021ExtendedTermLoan,wearerequiredtomakefixedquarterlyprincipalpaymentsinanaggregateamount
equaltoapproximately$3.06millionperquarter.TheFifthAmendmentalsoprovidesthatifcertainequityofferingsoftheCompanydo
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equaltoapproximately$3.06millionperquarter.TheFifthAmendmentalsoprovidesthatifcertainequityofferingsoftheCompanydo
notoccuronorbeforeAugust15,2017,theCompanywillberequiredtomake,onAugust16,2017,anadditionalscheduledpaymentof
principalonthe2021ExtendedTermLoanintheamountof$62.5million.
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RevolvingLineofCreditFacility
Borrowingsunderourseniorsecuredmulticurrencyrevolvingcreditfacilitybearinterestatarateperannumwhich,atouroption,can
beeitheraLIBORoranABRplus,ineachcase,amargin.LIBORloansunderourseniorsecuredmulticurrencyrevolvingcreditfacility
accrueinterestattheapplicableLIBORrateplusa3.75%margin,subjecttoadjustmentasdescribedbelow.TheLIBORratewithrespect
toourseniorsecuredmulticurrencyrevolvingcreditfacilityissubjecttoa"floor"equalto1.25%.InterestonABRrevolvingborrowings
accruesattheABR(whichisthehigheroftheFederalFundsrateplus0.50%ortheprimeratefortheagentbank)plusa2.75%margin,
subjecttoadjustmentasdescribedbelow.TheABRwithrespecttoourseniorsecuredmulticurrencyrevolvingcreditfacilityissubjectto
a"floor"equalto2.25%.ForLIBORrevolvingborrowings,theinterestperiodissetatouroptionforaperiodofone,two,three,sixor(if
suchaperiodisavailabletoalllendersundertheapplicableLIBORborrowing)nineor12months,andthecostoffundscomponentofany
LIBORrevolvingborrowingissubjecttochangewhentheunderlyingindiceschange.Oncetheinterestperiodisset,theinterestrateis
fixeduntiltheselectedinterestperiodends,subjecttocustomary"break"costprovisions.ABRrevolvingborrowingsandinterestthereon
arepayablequarterlyinarrearsandtheinterestrateonanyABRrevolvingborrowingissubjecttochangewhentheunderlyingindices
change.Inaddition,ourAmendedandRestatedCreditAgreementprovidesforthepaymentofacommitmentfeebasedonthedaily
unusedportionofourseniorsecuredmulticurrencyrevolvingcreditfacility.Thecommitmentfeerateof0.625%perannumispayable
quarterlyinarrears.
OnJuly7,2016weenteredintoaSixthAmendmenttotheAmendedandRestatedCreditAgreement(the"SixthAmendment")to
extendthematuritydateoftherevolvingcreditfacilitytoJune7,2019,subjecttotheclosingoftheFifthAmendmentandother
conditionsneedingtobesatisfied.TheSixthAmendmentalsoreducedtheborrowingcapacityoftherevolvinglineofcreditfacilityfrom
$350.0millionto$325.0million.TheconditionsfortheeffectivenessoftheSixthAmendmentweresatisfiedandtheSixthAmendment
becameeffectiveonJuly29,2016.Ifonthedatethatis91dayspriortoSeptember1,2019morethan$250.0millionoftheprincipal
amountoftheSeniorNotesdue2019isoutstanding,thenthematuritydateoftherevolvinglineofcreditfacilityshallbethedatethatis
91dayspriortoSeptember1,2019.Further,ifonthedatethatis91dayspriortothematuritydateofthe2018ExtendedTermLoanmore
than$250.0millionoftheprincipalamountofthe2018ExtendedTermLoanisoutstanding,thenthematuritydateoftherevolvingline
ofcreditfacilityshallbethedatethatis91dayspriortothe2018ExtendedTermLoanmaturitydate.
PursuanttotheSixthAmendment,themarginsontheLIBORloansandABRloanunderourseniorsecuredmulticurrencyrevolving
creditfacilityshallbeincreasedby0.50%perquarter,commencingwiththequarterendingSeptember30,2016,providedinnotevent
shallsuchLIBORloanmarginexceed4.75%andABRloanmarginexceed3.75%.Upontheconsummationofcertainequityofferings,
suchLIBORloanmarginandABRloanmarginshallbeimmediatelyreducedto3.75%and2.75%,respectively.
AtSeptember30,2016,thetotalamountoutstandingunderourseniorsecuredmulticurrencyrevolvingcreditfacilitywas
$160.0million,whichconsistedof$160.0millioninLIBORloansataninterestrateof6.25%.AtDecember31,2015,thetotalamount
outstandingunderourseniorsecuredmulticurrencyrevolvingcreditfacilitywas$269.3million,whichconsistedof$269.3millionin
LIBORloansataninterestrateof5.00%.
2021ExtendedTermLoan
Asdescribedabove,ofthe$1,810.1milliontermloansthatwereoutstandingasofJune3,2016whentheFifthAmendmentwas
executed,thetermloanlendersholding$1.526millionofsuchtermloansagreedtoextendthematuritydateoftheirtermloansto
March17,2021(suchextendedterm
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loansbeingreferredtohereinasthe2021ExtendedTermLoan).Thetermsofthe2021ExtendedTermLoanaredescribedabove.
NewSeries2018ExtendedTermLoan
FollowingtheamendmentandrestatementonJune16,2011,theaggregateamountofthe2018ExtendedTermLoanswas
$1,103.9million.PursuanttotheThirdAmendment,the2018ExtendedTermLoans,SeriesA2018NewTermLoan,SeriesBNewTerm
LoansandSeriesBAdditionalTermLoanswererefinancedwithNewSeries2018ExtendedTermLoans.TheinterestrateforourNew
Series2018ExtendedTermLoanissetatarateperannumwhich,atouroption,canbeeithertheLIBORrateortheABRrate,plusineach
case,amargin.TheNewSeries2018ExtendedTermLoanshavethesametermsasthe2018ExtendedTermLoans,otherthantheinterest
rateasdescribedbelow.
FollowingtheThirdAmendmenttotheAmendedandRestatedCreditAgreementinOctober2013,themarginforLIBORloansis
3.75%andthemarginforABRloansis2.75%.TheLIBORrateissubjecttoa"floor"equalto1.25%andtheABRissubjecttoa"floor"
equalto2.25%.ForLIBORloans,theinterestperiodissetatouroptionforaperiodofone,two,three,sixor(ifsuchaperiodisavailable
toalllendersundertheapplicableLIBORborrowing)nineor12months.Oncetheinterestperiodisset,theinterestrateisfixeduntilthe
selectedinterestperiodends.ABRloansandinterestthereonarepayablequarterlyinarrearsandtheinterestrateonanyABRloanis
subjecttochangewhentheunderlyingindiceschange.
WithrespecttoourNewSeries2018ExtendedTermLoans,wearerequiredtomakefixedquarterlyprincipalpayments.Allunpaid
principalandinterestontheseloans(totheextentnotextendedasthe2021ExtendedTermLoanontheFifthAmendmentEffectiveDate)
shallbepaidinfullinJune2018.AsofSeptember30,2016andDecember31,2015,theseloanshadanaggregateoutstandingbalanceof
$282.6million(netoforiginalissuediscountof$0.1million)and$1,814.8million(netoforiginalissuediscountof$0.1million)
respectively,andaninterestrateof5.00%ateachdate.
TheportionsofourNewSeries2018ExtendedTermLoansthatwerenotextendedasthe2021ExtendedTermLoanpursuanttothe
FifthAmendmentcontinuetohaveamaturitydateofJune2018.
ClosingDateTermLoan
Ofthe$675.0millionClosingDateTermLoanmadetousupontheclosingoftheoriginalcreditagreement,$651.4millionwas
outstandingimmediatelypriortotheJune16,2011effectivedateoftheAmendedandRestatedCreditAgreement.Ofthatamount,
approximately$522.3millionwasconvertedintothe2018ExtendedTermLoans,andapproximately$129.1millionremained
outstandingandwasnotconvertedintothe2018ExtendedTermLoans.Wewererequiredtomakefixedquarterlyprincipalpaymentson
theClosingDateTermLoanofapproximately$334,000.TheClosingDateTermLoanwaspaidinfullonNovember16,2012with
proceedsfromtheissuanceoftheSeniorNotes.
DelayedDrawTermLoan
Ofthe$100.0millionDelayedDrawTermLoanmadetousunderthetermsoftheoriginalcreditagreement,approximately
$97.5millionwasoutstandingimmediatelypriortotheJune16,2011effectivedateoftheAmendedandRestatedCreditAgreement.Of
thatamount,approximately$78.4millionwasconvertedintothe2018ExtendedTermLoans,andapproximately$19.1millionremained
outstandingandwasnotconvertedintothe2018ExtendedTermLoans.Wewererequiredtomakequarterlyprincipalpaymentsequalto
0.25%oftheprincipalbalanceoutstandingontheDelayedDrawTermLoan.TheDelayedDrawTermLoanwaspaidinfullon
November16,2012withproceedsfromtheissuanceoftheSeniorNotes.
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SeriesANewTermLoan
Ofthe$280.0millionSeriesANewTermLoanmadepursuanttothetermsofajoindertotheoriginalcreditagreement,$275.8million
wasoutstandingimmediatelypriortotheJune16,2011effectivedateoftheAmendedandRestatedCreditAgreement.Ofthatamount,
approximately$258.2millionwasconvertedintothe2018ExtendedTermLoans,andapproximately$17.6millionremainedoutstanding
andwasnotconvertedintothe2018ExtendedTermLoans.WewererequiredtomakefixedquarterlyprincipalpaymentsontheSeriesA
NewTermLoanofapproximately$45,000.TheSeriesANewTermLoanwaspaidinfullonNovember16,2012withproceedsfromthe
issuanceoftheSeniorNotes.
DefaultInterest
Intheeventthatwefailtopayalloraportionoftheprincipalandinterestamountswhendue,theinterestratesunderourSenior
SecuredCreditFacilitieswillbeincreasedby2.00%fromthedateofsuchnonpaymenttothedateonwhichthepaymentispaidinfull.
SeniorSecuredCreditFacilitiesOutstanding
AsofSeptember30,2016,the$1,661.7millionbalanceoftheSeniorSecuredCreditFacilitiesconsistsof$1,219.1millioninthe
2021ExtendedTermLoan,$282.6millionintheNewSeries2018ExtendedTermLoanandtheAdditionalNewSeries2018Extended
TermLoans,andtheseniorsecuredmulticurrencyrevolvingcreditfacilityof$160.0million.AsofDecember31,2015,the
$2,084.1millionbalanceoftheSeniorSecuredCreditFacilitiesconsistsof$1,814.8millionintheNewSeries2018ExtendedTermLoan
andtheAdditionalNewSeries2018ExtendedTermLoans,andtheseniorsecuredmulticurrencyrevolvingcreditfacilityof
$269.3million.
SeniorSecuredCreditFacilitiesBorrowersandGuarantors
Theseniorsecuredmulticurrencyrevolvingcreditfacility,theNewSeries2018ExtendedTermLoanandtheAdditionalNew
Series2018ExtendedTermLoansarecollectivelyreferredtoastheSeniorSecuredCreditFacilities.LaureateEducation,Inc.(the"U.S.
Borrower")istheborrowerunderourSeniorSecuredCreditFacilities.IniciativasCulturalesdeEspaaS.L.(the"ForeignBorrower")isa
borroweronlyundertheseniorsecuredmulticurrencyrevolvingcreditfacilityofourSeniorSecuredCreditFacilities,whichis
$100.0millionofthe$325.0milliontotalseniorsecuredmulticurrencyrevolvingcreditfacility.
AllofLaureate'srequiredU.S.legalentities,excludingWaldenUniversity,KendallCollege,NewSchoolofArchitectureandDesign,
TheNationalHispanicUniversityandSt.Augustine,areguarantorsoftheSeniorSecuredCreditFacilities,andalloftheguarantors'assets,
bothrealandintangible,arepledgedascollateral.CertainWaldenassetsarealsopledgedascollateral,includingallofWalden'sU.S.
receivablesotherthanTitleIVstudentloans,andallofitscopyrights,patents,andtrademarks.AsofSeptember30,2016and
December31,2015,thecarryingvalueoftheWaldenreceivablesandintangiblespledgedascollateralwas$420.8millionand
$404.3million,respectively.Additionally,notmorethan65%ofthesharesheldbyU.S.guarantorsinnondomesticsubsidiariesare
pledgedascollateral.ThereisalsoaseparateguaranteeandpledgeagreementfortheForeignBorrowersubfacilityoftheseniorsecured
multicurrencyrevolvingcreditfacility(the"SpanishTranche").TheSpanishTrancheissecuredbycertainoftheForeignBorrower's
assets,includingintercompanyloansandsharesownedinothernondomesticsubsidiaries,tosecuretheforeignobligationsand
guaranteedbycertainnondomesticsubsidiaries.Ofthe$325.0millionrevolvinglineofcreditfacilitynotedabove,wecanborrowupto
$100.0millionundertheSpanishTranche.
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CertainCovenants
transactionsand(4)limitationsonliens,guarantees,loansorinvestments.OnJuly7,2015,pursuanttotheFourthAmendment,the
AmendedandRestatedCreditAgreementwasamendedtoprovideforaconsolidatedseniorsecureddebttoconsolidatedEBITDA
maintenancefinancialcovenant,solelywithrespecttotherevolvinglineofcreditfacility,whichfinancialcovenantistobetested
quarterlyprovidedthatfromandafteraQualifyingIPO(asdefinedintheAmendedandRestatedCreditAgreement)orcertainprivate
offeringsofcommonstockorpreferredstockand,ifthattheconsolidatedtotaldebttoconsolidatedEBITDAratioisthereafterlessthanor
equalto4.75to1.0onthelastdayoftherespectivetestperiod,themaintenancefinancialcovenantshallonlyapplyif25%ormoreofthe
revolvinglineofcreditfacilityisutilized.
OnApril4,2014,wenotifiedourlendersofthe2013AuditedFinancialStatementDeliveryDefault.Thereasonforthe2013Audited
FinancialStatementDeliveryDefaultistheadditionaltimeneededtocompletelyandaccuratelyreflectseveralitemsinthe2013
ConsolidatedFinancialStatements.Wecuredthe2013AuditedFinancialStatementDeliveryDefaultbydeliveringthe2013consolidated
financialstatementstotheadministrativeagentonApril14,2014,thedatethatthe2013consolidatedfinancialstatementswereissued,
whichwaswithinthe30daygraceperiodprovidedforintheAmendedandRestatedCreditAgreement.Therearenoeventscausing
noncompliancewiththesecovenantsasoftheissuancedateofthisprospectus.
SeniorNotes
OnJuly25,2012,wecompletedanofferingof$350.0millionaggregateprincipalamountof9.250%SeniorNotesdue2019.Weused
thenetproceedsreceivedfromthedebtofferingtorepayaportionofourseniorsecuredmulticurrencyrevolvingcreditfacility.On
November13,2012,wecompletedanofferingof$1,050.0millionaggregateprincipalamountofadditionalSeniorNotes.Thenotesare
treatedasasingleserieswiththe$350.0millionofSeniorNotesthatwereissuedinJuly2012.Weusedthenetproceedsfromthesaleof
theadditionalSeniorNotestopurchasecertainoutstandingnotes,andtofullyrepaycertaindebtinstrumentsunderourseniorsecured
termloanfacility.Ofthetotal$1,400.0millionofSeniorNotes,$350.0millionwereissuedinJuly2012atpar,whiletheremaining
$1,050.0millionwereissuedinNovember2012atapriceof97.750%offaceamount,resultinginanoriginaldebtdiscountof
$23.6million,whichisamortizedtointerestexpenseoverthematurityofthenotes.
OnDecember29,2015,weissued$50.1millionaggregateprincipalamountofadditionalSeniorNotestotheparticipantsinthe
ExecutiveDCPinpartialsettlementofthe2015ExecutiveDCPObligation.Thenotesaretreatedasasingleserieswiththe
$1,400.0millionofSeniorNotesthatwereissuedinJulyandNovember2012.SeeNote13,SharebasedCompensationinour
consolidatedfinancialstatementsincludedelsewhereinthisprospectusforfurtherinformationonourdeferredcompensationobligations.
AsofSeptember30,2016,theoutstandingbalanceontheSeniorNoteswas$1,376.7million,netoftheremainingdebtdiscountof
$9.6million.
OnApril15,2016,weenteredintoNoteExchangeAgreementswithcertainExistingHoldersoftheSeniorNotespursuanttowhichwe
willexchange$250.0millioninaggregateprincipalamountofSeniorNotesforsharesofourClassAcommonstock.Weexpectthe
stockissuablewillequal104.625%oftheaggregateprincipalamountofSeniorNotestobe
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exchanged,or$261.6million,dividedbytheinitialpublicofferingpricepershareofClassAcommonstockinthisoffering.
thatisapplicableasofthedateofpricingofthisoffering,plusaccruedandunpaidinterestandspecialinterest.
TheSeniorNotesarefullyandunconditionallyguaranteed,jointlyandseverally,onanunsecuredseniorbasis,byeachofourwholly
owneddomesticsubsidiariesthatguaranteeLaureate'sobligationsundertheSeniorSecuredCreditFacilities.TheSeniorNotesrankjunior
totheSeniorSecuredCreditFacilities,totheextentofthevalueofthecollateralsecuringsuchfacility.
TheSeniorNoteshaveastatedmaturityofSeptember1,2019.FromandafterSeptember1,2015,wemayredeemallorpartofthe
SeniorNotesatredemptionpricesstartingat106.938%oftheprincipalamountthereofanddecreasingfromthereratablyeachyear
thereafteruntilSeptember1,2018,plusaccruedandunpaidinterest.FromandafterSeptember1,2018,wemayredeemallorpartofthe
SeniorNotesataredemptionpriceof100%,plusaccruedandunpaidinterest.
Laureateanditsguarantorsagreedto(1)filearegistrationstatementwiththeSECwithrespecttoaregisteredoffertoexchangethe
SeniorNotesfornewnoteshavingtermssubstantiallyidenticalinallmaterialrespectstotheoutstandingnotes(exceptthatthenewnotes
willnotcontaintransferrestrictionsorprovideforspecialinterest)or(2)fileashelfregistrationfortheresaleofthenotes.Wewere
SincetheregistrationstatementwasnotdeclaredeffectivebyJuly25,2014,wehaveincurredadditionalinterestatarateequalto0.25%
perannumforthefirst90dayperiodoftheoutstandingindentureindebtednessontheoutstandingnotes,0.50%perannumforthenext
90dayperiod,and0.75%thereafter,asliquidateddamagesuntiltheregistrationstatementisdeclaredeffectiveandtheexchangeofferis
completed.Accordingly,wehaverecordedaliabilityfortheamountofspecialinterestontheSeniorNotesthatwehavedeterminedtobe
probableandestimablebasedonourexpectedtimingofregistrationasofeachbalancesheetdate.AsofSeptember30,2016,wehada
totalcontingentliabilityforadditionalinterestontheSeniorNotesof$7.0million.
Asdescribedunder"UseofProceeds,"weintendtousethenetproceedsfromthisofferingtorepay,redeemorrepurchaseour
outstandingSeniorNotes,ourtermloansunderourSeniorSecuredCreditFacilitiesand/orthesellernotesusedtopartiallyfinancethe
acquisitionofFMUGroup.
OtherDebt
LinesofCredit
IndividualLaureatesubsidiarieshavetheabilitytoborrowpursuanttounsecuredlinesofcreditandsimilarshorttermborrowing
arrangements(collectively,"linesofcredit").Thelinesofcreditareavailableforworkingcapitalpurposesandenableustoborrowforand
repayuntilthoselinesmature.
Interestratesonourlinesofcreditrangedfrom1.75%to20.00%atSeptember30,2016andourweightedaverageshortterm
borrowingratewas7.59%atSeptember30,2016.
Laureate'saggregatelinesofcredit(outstandingbalancesplusavailableborrowingcapacity)were$119.6millionasofSeptember30,
2016.AtSeptember30,2016,theaggregateoutstandingbalancesonourlinesofcreditwere$64.7million,whichareincludedinthe
currentportionoflongtermdebt.
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Accordingly,theavailableborrowingcapacityunderourlinesofcreditwas$54.9millionatSeptember30,2016.
NotesPayable
Notespayableincludemortgagespayablethataresecuredbycertainfixedassets.Thenotespayablehavevaryingmaturitydatesand
repaymenttermsthrough2030.TheseloanscontaincertainfinancialmaintenancecovenantsandasofSeptember30,2016,Laureateisin
compliancewiththesecovenants.Interestratesonnotespayablerangedfrom3.00%to19.03%atSeptember30,2016.
OnDecember21,2007,UVMMexicoenteredintoanagreementwithabankforaloanofMXN2,750.0million(approximately
$250.0millionatthattime).Underthetermsoftheloan,UVMMexicocouldborrowthetotalamountoftheloanthroughoneormore
draws,providedthateachdrawoftheloanwasevidencedbyapromissorynote.OnJuly1,2008,Laureatemadeadrawintheamountof
MXN2,575.6million($250.0millionatJuly1,2008)toacquireUNITECMexico.TheloanwasoriginallyscheduledtomatureonJuly1,
2015.UVMMexicobegansemiannualrepaymentsofMXN257.6milliononJuly15,2010.Inordertoalignthepaymentswiththenew
loandescribedbelow,inMay2014theloanmaturitydatewasextendedtoMay15,2021,andtherepaymentsweresuspendeduntil
May16,2016,whenUVMMexicowasscheduledtoresumesemiannualrepaymentsofMXN120.4million.Thesepaymentswillcontinue
throughmaturityin2021.Interestispayablemonthlyandaccruedatthe28dayMexicanInterbankingOfferRate("TIIE"),plusthe
applicablemargin.TheapplicablemarginfortheinterestcalculationisestablishedbasedontheratioofdebttoEBITDA,asdefinedinthe
agreement.InMay2016,thisloanwascombinedwiththeloanfromMay2012,asfurtherdescribedbelow.
InMay2012,UVMMexicoenteredintoanagreementwithabankforaloanofMXN900.0million,inordertofundpaymentofthe
amountsowedtotheformernoncontrollinginterestholdersofPlansiunderthetermsoftheagreementtopurchasetheirremaining10%
interestinPlansi.TheloancarriedavariableinterestrateandwasoriginallyscheduledtomatureonMay15,2019.InMay2014,theloan
maturitydatewasextendedtoMay15,2021,andtherepaymentsweresuspendeduntilMay16,2016.InMay2016,thisloanwas
combinedwiththeloanfrom2007,asfurtherdescribedbelow.
OnMay12,2016,theoutstandingloansfrom2007and2012wererefinancedandcombinedintooneloan.Thematuritydateofthe
combinedloanwasextendedtoMay15,2023.Therepaymentsoftheprincipal,whichwereoriginallysuspendeduntilMay16,2016,
werefurthersuspendeduntilMay15,2018.Thenewrefinancedloancarriesavariableinterestratebasedonthe28dayMexican
InterbankingOfferRate("TIIE"),plustheapplicablemargin.Theapplicablemarginfortheinterestcalculationisestablishedbasedonthe
ratioofdebttoEBITDA,asdefinedintheagreement.InterestispaidmonthlycommencingonMay15,2016.AsofSeptember30,2016,
theinterestrateontheloanwas7.71%,andtheoutstandingbalanceontheloanwas$114.1million.
Inadditiontotheloansabove,inAugust2015,UVMMexicoenteredintoanagreementwithabankforaloanofMXN1,300million
(approximately$79.0millionatthetimeoftheloan).Theloancarriesavariableinterestrate(6.86%atSeptember30,2016)andmatures
inAugust2020.
LaureatehasalsoobtainedfinancingtofundtheconstructionoftwonewcampusesatoneofourinstitutionsinPeru,UPC.Asof
September30,2016,theoutstandingbalanceontheloanswas$51.9million,andhadaweightedaverageinterestrateof7.97%.These
loanshavevaryingmaturitydateswiththefinalpaymentdueinOctober2022.AsofSeptember30,2016,$24.6millionoftheoutstanding
balancesontheloanswerepayabletooneoftheinstitutionalinvestorsreferredtoinourconsolidatedfinancialstatementsincluded
elsewhereinthisprospectus.
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InMay2014,Laureateobtained$7.5millionoffinancingtofundtheconstructionofanewcampusatoneofourinstitutionsin
Panama.InDecember2014,weborrowedanadditional$5.0million.InJune2015,weborrowedanadditional$12.5million.Asof
September30,2016andDecember31,2015,theoutstandingbalanceofthisloanwas$25.0millionand$25.0million,respectively.This
loanispayabletooneoftheinstitutionalinvestorsreferredtoinourconsolidatedfinancialstatementsincludedelsewhereinthis
prospectus.Ithasafixedinterestrateof8.11%andmaturesin2024.
LaureatehasoutstandingnotespayableatHIEUinChina.AsofSeptember30,2016,theoutstandingbalanceontheloanswas
$83.9million.Theinterestratesontheseloansrangefrom4.75%to7.84%perannumasofSeptember30,2016.Thesenotesarerepayable
ininstallmentswiththefinalinstallmentdueinNovember2019.
LaureatehasoutstandingnotespayableatarealestatesubsidiaryinChile.AsofSeptember30,2016,theoutstandingbalanceonthe
loanswas$65.2million.Theinterestratesontheseloansrangefrom5.04%to9.58%perannumasofSeptember30,2016.Thesenotesare
repayableininstallmentswiththefinalinstallmentdueinAugust2028.
InDecember2013,LaureateacquiredTHINKandfinancedaportionofthepurchasepriceforTHINKbyborrowingAUD45.0million
($34.5millionatSeptember30,2016)underasyndicatedfacilityagreementintheformoftwotermloansofAUD22.5millioneach.The
syndicatedfacilityagreementalsoprovidesforadditionalborrowingsofuptoAUD20.0million($15.3millionatSeptember30,2016)
underacapitalexpenditurefacilityandaworkingcapitalfacility.Thefirsttermloan("FacilityA")hasatermoffiveyearsandprincipalis
payableinquarterlyinstallmentsofAUD1.1million($0.9millionatSeptember30,2016)beginningonMarch31,2014.Thesecondterm
loan("FacilityB")hasatermoffiveyearsandthetotalprincipalbalanceofAUD22.5millionispayableatitsmaturitydateof
December20,2018.Thetwotermloansbearinterestatavariablerateplusamarginofupto3.2%forFacilityAand3.5%forFacilityB
thatisdeterminedbasedonTHINK'sleverageratio,andinterestispayableperiodically.AsofSeptember30,2016,theinterestrateson
FacilityAandFacilityBwere4.60%and4.63%,respectively.ThetermsofthesyndicatedfacilityagreementrequiredTHINKtoenterinto
aninterestrateswapwithin45daysfromtheagreement'sDecember20,2013effectivedate,inordertoconvertatleast50%oftheAUD
45.0millionoftermloandebtfromavariableinterestratetoafixedinterestrate.Accordingly,onJanuary31,2014THINKexecutedan
interestrateswapagreementtosatisfythisrequirementandconvertedAUD22.5million($17.3millionatSeptember30,2016)ofthe
variableratecomponentofthetermloandebttoafixedinterestrateof3.86%.Thisinterestrateswapwasnotdesignatedasahedgefor
accountingpurposes.AsofSeptember30,2016,$14.7millionwasoutstandingundertheseloanfacilities.
InJune2016,theseloanfacilitieswereamendedandrestated.AsaresultofthisamendmentandarepaymentofAUD11.0million
($8.1millionatthedateofpayment):
FacilityAhasbeenamendedtobeatermloanofAUD10.0million($7.7millionatSeptember30,2016),andprincipalis
repayableinquarterlyinstallmentsofAUD0.8million($0.6millionatSeptember30,2016)beginningonSeptember30,
2016.ThefinalbalanceisrepayableatitsmaturitydateofDecember20,2018and
FacilityBhasbeenamendedtobearevolvingfacilityofuptoAUD15.0million($11.5millionatSeptember30,2016)
andanybalanceoutstandingisrepayableatitsmaturitydateofDecember20,2018.Thisfacilitybearsinterestatavariable
rateplusamarginof2.75%.
Theabovedescribedinterestrateswapagreementrelatedtothesefacilitiesremainsnotdesignatedasahedgeforaccounting
purposes.
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InSeptember2014,LaureateacquiredFMUandfinancedaportionofthepurchasepricebyborrowingamountsundertwoloansthat
totaledBRL259.1million($110.3millionattheborrowingdate).TheloansrequiresemiannualprincipalpaymentsbeginningatBRL
6.5millioninOctober2014andincreasingtoamaximumofBRL22.0millionbeginninginOctober2017andcontinuingthroughtheir
maturitydatesinApril2021.AsofSeptember30,2016,theoutstandingbalanceoftheseloanswas$66.5million.Bothloansmatureon
April15,2021andbearinterestatanannualvariablerateofCDIplus3.7%(approximately18%atSeptember30,2016).
OnNovember18,2015,theCompanyenteredintoanagreementwithtwobankstoborrowatotalofEUR100million($106.5million
attheborrowingdate)asdescribedinNote9,Debt,inourconsolidatedfinancialstatementsincludedelsewhereinthisprospectus.
CapitalLeaseObligationsandSaleLeasebackFinancings
Capitalleasesandsaleleasebackfinancings,primarilyrelatingtorealestateobligations,areincludedindebtandhavebeenrecorded
usinginterestratesrangingfrom1.00%to42.87%.During2015and2014,wehadadditionstoassetsandliabilitiesrecordedassale
leasebackfinancingsandbuildtosuitarrangementsof$8.1millionand$67.8million,respectively,includingadditionsthrough
acquisition.Wehadassetsundercapitalleasesandsaleleasebackfinancingsof$203.0millionatSeptember30,2016,netofaccumulated
amortization.Theamortizationexpenseforcapitalleaseassetsisrecordedindepreciationandamortizationexpense.
Theaggregatematuritiesofourtotalfuturevalueandpresentvalueoftheminimumcapitalleasepaymentsandpaymentsrelatedto
saleleasebackfinancingsatSeptember30,2016wereasfollows:
October1,2016September30,2017
Thereafter
Totalcapitalleasedebt
FutureValueof
PresentValueof
MinimumLease
MinimumLease
Payments
Interest
Payments
(amountsinthousands)
43,407
56,462
42,766
37,594
44,184
281,776
506,189
$ 30,770 $
30,326
28,655
27,395
25,900
103,474
$ 246,520 $
12,637
26,136
14,111
10,199
18,284
178,302
259,669
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MATERIALU.S.FEDERALTAXCONSEQUENCES
FORNONU.S.HOLDERSOFCLASSACOMMONSTOCK
ThefollowingisageneraldiscussionofthematerialU.S.federalincomeandestatetaxconsequencestoNonU.S.Holderswithrespect
totheacquisition,ownershipanddispositionofourClassAcommonstock.Ingeneral,a"NonU.S.Holder"isanyholderofourClassA
commonstockotherthanthefollowing:
anindividualcitizenorresidentoftheUnitedStates,includinganalienindividualwhoisalawfulpermanentresidentof
theUnitedStatesormeetsacertain"substantialpresence"testundersection7701(b)(3)oftheCode
acorporation(oranentitytreatedasacorporationforU.S.federalincometaxpurposes)createdororganizedintheUnited
StatesorunderthelawsoftheUnitedStates,anystatethereof,ortheDistrictofColumbia
apartnership(oranentitytreatedasapartnershipforU.S.federalincometaxpurposes)
anestate,theincomeofwhichissubjecttoU.S.federalincometaxregardlessofitssourceor
atrust,if(i)aU.S.courtcanexerciseprimarysupervisionovertheadministrationofthetrustandoneormoreU.S.persons
cancontrolallsubstantialdecisionsofthetrust,or(ii)thetrusthasavalidelectiontobetreatedasaU.S.personineffect.
Underthe"substantialpresencetest",anindividualholderofourClassAcommonstockmay,inmanycases,bedeemedtobea
residentalien,asopposedtoanonresidentalien,byvirtueofbeingpresentintheUnitedStatesforatleast31daysinthecalendaryearand
foranaggregateofatleast183daysduringathreeyearperiodendinginthecurrentcalendaryear.Forthesepurposes,allthedayspresent
inthecurrentyear,onethirdofthedayspresentintheimmediatelyprecedingyear,andonesixthofthedayspresentinthesecond
precedingyeararecounted.ResidentaliensaresubjecttoU.S.federalincometaxasiftheywereU.S.citizens.Suchanindividualisurged
toconsulthisorherowntaxadvisorregardingtheU.S.federalincometaxconsequencesoftheacquisition,ownershipordispositionof
ourClassAcommonstock.IfabusinessentitythatistreatedasapartnershipforU.S.federalincometaxpurposes(a"partnership")isa
beneficialownerofourClassAcommonstock,thetreatmentofamemberofthepartnershipwillgenerallydependuponthestatusofthe
partnerandtheactivitiesofthepartnership.MembersofpartnershipsholdingourClassAcommonstockareparticularlyurgedto
consulttheirtaxadvisorsregardingthetaxconsequencesofacquiring,holding,anddisposingofsharesofClassAcommonstock.
ThisdiscussionisbasedoncurrentprovisionsoftheCode,TreasuryRegulationspromulgatedundertheCode,judicialopinions,
publishedpositionsoftheInternalRevenueService,orIRS,andallotherapplicableauthorities,allofwhicharesubjecttochange,
possiblywithretroactiveeffect.ThisdiscussiondoesnotaddressallaspectsofU.S.federalincomeandestatetaxationoranyaspectsof
state,local,ornonU.S.taxation,nordoesitconsideranyspecificfactsorcircumstancesthatmayapplytoparticularNonU.S.Holdersthat
maybesubjecttospecialtreatmentundertheU.S.federalincometaxlaws,suchascontrolledforeigncorporations,passiveforeign
investmentcompanies,insurancecompanies,taxexemptorganizations,qualifiedforeignpensionfunds,financialinstitutions,brokers,
dealersinsecurities,U.S.expatriates,personsholdingourClassAcommonstockaspartofahedging,integrated,conversionor
constructivesaletransactionorastraddle,tradersinsecuritiesthatelecttouseamarktomarketmethodofaccounting,personsliablefor
thealternativeminimumtaxorpersonswhoacquiredourClassAcommonstockascompensationforservices.Thisdiscussionassumes
thattheNonU.S.HolderwillholdourClassAcommonstockasacapitalasset,generallypropertyheldforinvestment.
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PROSPECTIVEINVESTORSAREURGEDTOCONSULTTHEIRTAXADVISORSREGARDINGTHEU.S.FEDERAL,STATE,
LOCAL,ANDNONU.S.INCOMEANDOTHERTAXCONSIDERATIONSOFACQUIRING,HOLDING,ANDDISPOSINGOFSHARESOF
CLASSACOMMONSTOCK.
Dividends
DistributionsonourClassAcommonstockwillconstitutedividendsforU.S.federalincometaxpurposestotheextentpaidfromour
currentandaccumulatedearningsandprofits,asdeterminedunderU.S.federalincometaxprinciples.Totheextentthosedistributions
exceedourcurrentandaccumulatedearningsandprofits,theywillconstituteareturnofcapitalandwillfirstreducetherecipient'sbasisin
ourClassAcommonstock,butnotbelowzero,andthenwillbetreatedasgainfromthesaleofstockasdescribedbelowunder"Gainon
SaleorOtherDispositionofClassACommonStock."
Ingeneral,dividendspaidtoaNonU.S.HolderwillbesubjecttoU.S.withholdingtaxatarateequalto30%ofthegrossamountof
thedividend,unless(i)thedividendsaretaxedatalowerrateprescribedbyanincometaxtreatybetweentheUnitedStatesandtheNon
U.S.Holder'scountryofresidenceor(ii)thedividendsareeffectivelyconnectedwithatradeorbusinesscarriedonbytheNonU.S.Holder
withintheUnitedStates.UnderapplicableTreasuryRegulations,aNonU.S.Holderwillberequiredtosatisfycertaincertification
requirements,generallybyprovidingtotheapplicablewithholdingagentanIRSFormW8BENorIRSFormW8BENE,oranysuccessor
form,directlyorthroughanintermediary,inordertoclaimareducedrateofwithholdingunderanapplicableincometaxtreaty.Iftaxis
withheldinanamountinexcessoftheamountprescribedbyanapplicableincometaxtreaty,arefundoftheexcessamountmaygenerally
beobtainedbyfilinganappropriateclaimforrefundwiththeIRS.
DividendsthatareeffectivelyconnectedwithaU.S.tradeorbusiness(and,ifrequiredbyanapplicabletaxtreaty,areattributabletoa
U.S.permanentestablishment(or,incertaincasesinvolvingindividualholders,aU.S.fixedbase)maintainedbytherecipient)generally
willnotbesubjecttoU.S.withholdingtaxiftheNonU.S.HolderfilesanIRSFormW8ECI,oranysuccessorform,withtheapplicable
withholdingagent,butinsteadsuchdividendsgenerallywillbesubjecttoU.S.federalincometaxonanetincomebasisinthesame
mannerasiftheNonU.S.HolderwerearesidentoftheUnitedStates.AcorporateNonU.S.Holderthatreceiveseffectivelyconnected
dividendsmaybesubjecttoanadditionalbranchprofitstaxatarateof30%,oralowerrateprescribedbyanapplicableincometaxtreaty,
withrespecttoeffectivelyconnecteddividends(subjecttoadjustment).
GainonSaleorOtherDispositionofClassACommonStock
Ingeneral,aNonU.S.HolderwillnotbesubjecttoU.S.federalincometaxonanygainrealizeduponthesaleorothertaxable
dispositionoftheNonU.S.Holder'ssharesofClassAcommonstockunless:
thegainiseffectivelyconnectedwithatradeorbusinesscarriedonbytheNonU.S.HolderwithintheUnitedStates(and,if
requiredbyanapplicabletaxtreaty,isattributabletoaU.S.permanentestablishment(or,incertaincasesinvolving
individualholders,aU.S.fixedbase)maintainedbytheNonU.S.Holder)
theNonU.S.HolderisanindividualwhoholdssharesofClassAcommonstockascapitalassetsandispresentinthe
UnitedStatesfor183daysormoreinthetaxableyearofdispositionandcertainotherconditionsaremetor
ourClassAcommonstockconstitutesaU.S.realpropertyinterestbyreasonofourstatusasa"UnitedStatesrealproperty
holdingcorporation,"orUSRPHC,forU.S.federalincometax
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purposesatanytimewithintheshorterofthefiveyearperiodprecedingthedispositionortheNonU.S.Holder'sholding
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purposesatanytimewithintheshorterofthefiveyearperiodprecedingthedispositionortheNonU.S.Holder'sholding
periodforourClassAcommonstock.
IftheNonU.S.Holderisdescribedinthefirstbulletabove,itwillberequiredtopaytaxonthenetgainderivedfromthesaleunder
regulargraduatedU.S.federalincometaxratesapplicabletoU.S.persons,andacorporateNonU.S.Holderdescribedinthefirstbullet
abovemaybesubjecttoanadditionalbranchprofitstaxata30%rateorsuchlowerrateasmaybespecifiedbyanapplicableincometax
treaty.IftheNonU.S.Holderisanindividualdescribedinthesecondbulletabove,heorshewillberequiredtopayaflat30%(orsuch
lowerrateasmaybeprescribedbyanapplicableincometaxtreaty)taxonthegainderivedfromthesale,whichgainmaybeoffsetby
UnitedStatessourcecapitallosses.
WebelievethatwearenotcurrentlyandwillnotbecomeaUSRPHC.However,becausethedeterminationofwhetherwearea
USRPHCdependsonthefairmarketvalueofourU.S.realpropertyrelativetothefairmarketvalueofourotherbusinessassets,therecan
benoassurancethatwewillnotbecomeaUSRPHCinthefuture.EvenifwebecomeaUSRPHC,however,aslongasourClassAcommon
stockisregularlytradedonanestablishedsecuritiesmarket,suchClassAcommonstockwillbetreatedasaU.S.realpropertyinterestonly
iftheNonU.S.Holderactuallyorconstructivelyheldmorethan5%ofourClassAcommonstockatanytimewithintheshorterofthe
fiveyearperiodprecedingthedispositionortheNonU.S.Holder'sholdingperiodforourClassAcommonstock.
InformationReportingandBackupWithholding
Generally,theapplicablewithholdingagentmustreportannuallytotheIRStheamountofdividendspaidtoaNonU.S.Holder,the
nameandaddressoftherecipient,andtheamount,ifany,oftaxwithheld.Asimilarreportissenttotherecipient.Theseinformation
reportingrequirementsapplyevenifwithholdingwasnotrequiredbecausethedividendswereeffectivelyconnecteddividendsor
withholdingwasreducedbyanapplicableincometaxtreaty.Undertaxtreatiesorotheragreements,theIRSmaymakeitsreportsavailable
totaxauthoritiesintherecipient'scountryofresidence.
PaymentsmadetoaNonU.S.Holderthatisnotanexemptrecipientgenerallywillbesubjecttobackupwithholding,currentlyata
rateof28%,unlessaNonU.S.Holdercertifiesastoitsforeignstatus,whichcertificationmaybemadeonIRSFormW8BENorW8BEN
E(andtheapplicablewithholdingagentdoesnothaveactualknowledgeorreasontoknowtheholderisaU.S.person),ortheNonU.S.
Holderotherwiseestablishesanexemptionfrombackupwithholding.
ProceedsfromthedispositionofClassAcommonstockbyaNonU.S.HoldereffectedbyorthroughaUnitedStatesofficeofabroker
willbesubjecttoinformationreportingandbackupwithholding,currentlyatarateof28%ofthegrossproceeds,unlesstheNonU.S.
Holdercertifiestothepayorunderpenaltiesofperjuryasto,amongotherthings,itsaddressandstatusasaNonU.S.Holder(andthe
brokerdoesnothaveactualknowledgeorreasontoknowtheholderisaU.S.person)orotherwiseestablishesanexemption.Generally,
UnitedStatesinformationreportingandbackupwithholdingwillnotapplytoapaymentofdispositionproceedsifthetransactionis
effectedoutsidetheUnitedStatesbyorthroughanonU.S.officeofabroker.However,ifthebrokeris,forU.S.federalincometax
purposes,aU.S.person(includingaforeignbranchorofficeofsuchperson),acontrolledforeigncorporation,aforeignpersonwhoderives
50%ormoreofitsgrossincomeforspecifiedperiodsfromtheconductofaU.S.tradeorbusiness,specifiedU.S.branchesofforeignbanks
orinsurancecompaniesoraforeignpartnershipwithcertainconnectionstotheUnitedStates,informationreportingbutnotbackup
withholdingwillapplyunless:
thebrokerhasdocumentaryevidenceinitsfilesthattheholderisaNonU.S.Holder(andthebrokerhasnoactual
knowledgeorreasontoknowtothecontrary)andotherconditionsaremetor
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theholderotherwiseestablishesanexemption.
Backupwithholdingisnotanadditionaltax.Rather,theamountoftaxwithheldisappliedtotheU.S.federalincometaxliabilityof
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Backupwithholdingisnotanadditionaltax.Rather,theamountoftaxwithheldisappliedtotheU.S.federalincometaxliabilityof
personssubjecttobackupwithholding.IfbackupwithholdingresultsinanoverpaymentofU.S.federalincometaxes,arefundmaybe
obtained,providedtherequireddocumentsarefiledwiththeIRS.
AdditionalWithholdingRequirements
UnderSections1471through1474oftheCode,suchSectionsbeingcommonlyreferredtoasFATCA,a30%U.S.federalwithholding
taxmayapplytoanydividendspaidonClassAcommonstock,and,foradispositionofClassAcommonstockoccurringafter
December31,2018,thegrossproceedsfromsuchdisposition,ineachcasepaidto(i)a"foreignfinancialinstitution"(asspecifically
definedintheCode)whichdoesnotprovidesufficientdocumentation,typicallyonIRSFormW8BENE,evidencingeither(x)an
exemptionfromFATCA,or(y)itscompliance(ordeemedcompliance)withFATCA(whichmayalternativelybeintheformofcompliance
withanintergovernmentalagreementwiththeUnitedStates)inamannerthatavoidswithholding,or(ii)a"nonfinancialforeignentity"
(asspecificallydefinedintheCode)whichdoesnotprovidesufficientdocumentation,typicallyonIRSFormW8BENE,evidencing
either(x)anexemptionfromFATCA,or(y)adequateinformationregardingcertainsubstantialUnitedStatesbeneficialownersofsuch
entity(ifany).IfadividendpaymentisbothsubjecttowithholdingunderFATCAandsubjecttothewithholdingtaxdiscussedabove
under"Dividends,"thewithholdingunderFATCAmaybecreditedagainst,andthereforereduce,suchotherwithholdingtax.Investors
shouldconsulttheirowntaxadvisorregardingtheserequirementsandwhethertheymayberelevanttotheownershipanddispositionof
ourClassAcommonstock.
EstateTax
OurClassAcommonstockownedortreatedasownedbyanindividualwhoisnotacitizenorresidentoftheUnitedStates(as
specificallydefinedforU.S.federalestatetaxpurposes)atthetimeofdeathwillbeincludibleintheindividual'sgrossestateforU.S.
federalestatetaxpurposes,unlessanestatetaxtreatybetweentheUnitedStatesandthedecedent'scountryofresidenceprovides
otherwise.
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SHARESELIGIBLEFORFUTURESALE
SincethecompletionofourleveragedbuyoutinAugust2007,therehasnotbeenanypublicmarketforourcapitalstock,andwe
cannotpredictwhateffect,ifany,marketsalesofsharesofClassAcommonstockortheavailabilityofsharesofClassAcommonstockfor
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cannotpredictwhateffect,ifany,marketsalesofsharesofClassAcommonstockortheavailabilityofsharesofClassAcommonstockfor
salewillhaveonthemarketpriceofourClassAcommonstock.Nevertheless,salesofsubstantialamountsofsharesofClassAcommon
stock,includingsharesissuedupontheexerciseofoutstandingoptions,inthepublicmarket,ortheperceptionthatsuchsalescouldoccur,
couldmateriallyadverselyaffectthemarketpriceofourClassAcommonstockandcouldimpairourfutureabilitytoraisecapitalthrough
thesaleofourequityorequityrelatedsecuritiesatatimeandpricethatwedeemappropriate.
Uponthecompletionofthisoffering,wewillhaveoutstandinganaggregateof29,000,000sharesofClassAcommonstockand
133,300,971sharesofClassBcommonstock,assumingnoexerciseoftheunderwriters'optiontopurchaseadditionalsharesandno
exerciseofoutstandingoptions.Oftheseoutstandingshares,the29,000,000sharesofClassAcommonstocktobesoldinthisoffering
willbefreelytradablewithoutrestrictionorfurtherregistrationundertheSecuritiesAct,exceptthatanysharespurchasedinthisoffering
byour"affiliates,"asthattermisdefinedunderRule144oftheSecuritiesAct,maybesoldonlyincompliancewiththelimitations
describedbelow.
ThesharesofClassBcommonstockoutstandingafterthisofferingwillberestrictedasaresultofsecuritieslawsorlockup
agreementsasdescribedbelow.Followingtheexpirationofthelockupperiod,allshareswillbeeligibleforresaleincompliancewith
Rule144orRule701."Restrictedsecurities"asdefinedunderRule144wereissuedandsoldbyusinrelianceonexemptionsfromthe
registrationrequirementsoftheSecuritiesAct.Thesesharesmaybesoldinthepublicmarketonlyifregisteredorpursuanttoan
exemptionfromregistration,suchasRule144orRule701undertheSecuritiesAct.
PursuanttotheNoteExchangeAgreements,wewillexchange$250.0millioninaggregateprincipalamountofSeniorNotesforshares
ofourClassAcommonstock.Weexpecttheexchangetobecompletedwithinoneyearandonedayaftertheconsummationofthis
offering,subjecttocertainexceptionsthatcouldresultintheexchangebeingcompletedpriortothattime.Thenumberofsharesof
ClassAcommonstockissuablewillequal104.625%oftheaggregateprincipalamountofSeniorNotestobeexchanged,or
$261.6million,dividedby,theinitialpublicofferingpricepershareofClassAcommonstock.Assuminganinitialpublicoffering
priceof$18.50pershare,whichisthemidpointoftherangesetforthonthecoverpageofthisprospectus,andassumingthecompletionof
theexchangetransactionontheoneyearanniversaryofthisoffering,weexpecttoissueanaggregateof14,138,514sharesofClassA
commonstock.ThesharesofClassAcommonstockissueduponcompletionoftheexchangewillnotbesubjecttoanylockup
agreementsandmaybesoldpursuanttoRule144undertheSecuritiesAct,dependingontheirholdingperiodandsubjecttorestrictions
inthecaseofsharesheldbypersonsdeemedtobeouraffiliates.
Inaddition,theholdersofthesharesofSeriesAPreferredStockmayconverttheirsharesofSeriesAPreferredStockintosharesofour
ClassAcommonstockwithinoneyearandonedayaftertheconsummationofthisoffering,subjecttocertainexceptionsthatcouldresult
intheholdersbeingabletoconverttheirsharesofSeriesAPreferredStockpriortothattime.ThenumberofsharesofClassAcommon
stockissuableuponconversionwilldependupon,amongotherthings,thenumberofsharesofClassAcommonstocksoldandtheinitial
publicofferingpricepershareofClassAcommonstockinthisoffering.Assuminganinitialpublicofferingpriceof$18.50pershare,
whichisthemidpointoftherangesetforthonthecoverpageofthisprospectus,andassumingallinterestispaidincashthroughthe
conversiondateandthecompletionoftheexchangetransactionontheoneyearanniversaryofthisoffering,weexpecttoissuean
aggregateof25,437,202sharesofClassAcommonstock.DependingonwhenandinwhatmannerthesharesofSeriesAPreferredStock
areconverted,thesharesofClassAcommonstockissueduponconversionmayormaynotbesubjecttoanylockupagreementsandmay
besoldpursuanttoRule144undertheSecuritiesAct,dependingontheirholding
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periodandsubjecttorestrictionsinthecaseofsharesheldbypersonsdeemedtobeouraffiliates.Asrestrictionsonresaleend,themarket
priceofourClassAcommonstockcoulddeclineiftheholdersofrestrictedsharessellthemorareperceivedbythemarketasintendingto
sellthem.FormoreinformationonourSeriesAPreferredStock,see"DescriptionofCapitalStockPreferredStockSeriesAPreferred
Stock."
Rule144
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Ingeneral,underRule144asineffectonthedateofthisprospectus,oncewehavebeensubjecttopubliccompanyreporting
requirementsforatleast90days,apersonwhoisnotdeemedtohavebeenoneofouraffiliatesforpurposesoftheSecuritiesActatany
timeduringthe90daysprecedingasaleandwhohasbeneficiallyownedthesharesofourClassAcommonstockproposedtobesoldfor
atleastsixmonths,includingtheholdingperiodofanypriorownerotherthanouraffiliates,isentitledtosellthosesharesofourClassA
commonstockwithoutcomplyingwiththemannerofsale,volumelimitationornoticeprovisionsofRule144,subjecttocompliancewith
thepublicinformationrequirementsofRule144.IfsuchapersonhasbeneficiallyownedthesharesofourClassAcommonstock
proposedtobesoldforatleastoneyear,includingtheholdingperiodofanypriorownerotherthanouraffiliates,thenthatpersonis
entitledtosellthosesharesofourClassAcommonstockwithoutcomplyingwithanyoftherequirementsofRule144.
Ingeneral,underRule144,ascurrentlyineffect,ouraffiliatesorpersonssellingsharesofourClassAcommonstockonbehalfofour
affiliatesareentitledtosellupontheexpirationofthelockupagreementsdescribedbelow,withinanythreemonthperiodbeginning
90daysafterthedateofthisprospectus,anumberofsharesofourClassAcommonstockthatdoesnotexceedthegreaterof:
1%ofthenumberofsharesofourClassAcommonstockthenoutstanding,whichwillequalapproximately290,000shares
immediatelyaftercompletionofthisoffering,or
theaverageweeklytradingvolumeofthesharesofourClassAcommonstockontheapplicablestockexchangeduringthe
fourcalendarweeksprecedingthefilingofanoticeonForm144withrespecttosuchsale.
SalesunderRule144byouraffiliatesorpersonssellingsharesonbehalfofouraffiliatesarealsosubjecttocertainmannerofsale
provisionsandnoticerequirementsandtotheavailabilityofcurrentpublicinformationaboutus.
Rule701
Rule701undertheSecuritiesAct,asineffectonthedateofthisprospectus,permitsresalesofsharesinrelianceuponRule144but
withoutcompliancewithcertainrestrictionsofRule144,includingtheholdingperiodrequirement.Mostofouremployees,executive
officersordirectorswhoacquiredsharesunderawrittencompensatoryplanorcontractmaybeentitledtorelyontheresaleprovisionsof
Rule701,butallholdersofRule701sharesarerequiredtowaituntil90daysafterthedateofthisprospectusbeforesellingtheirshares.
However,substantiallyallRule701sharesaresubjecttolockupagreementsasdescribedbelowandunder"Underwriting"andwill
becomeeligibleforsaleupontheexpirationoftherestrictionssetforthinthoseagreements.
StockOptionandIncentivePlans
WeintendtofileoneormoreregistrationstatementsonFormS8undertheSecuritiesActfollowingthisofferingtoregisterthe
ClassAcommonstockthatisissuableuponexerciseofstockoptionsoutstandingorunderourstockoptionandincentiveplansor
issuableuponconversionoftheClassBcommonstockthatisissuableuponexerciseofexistingoptions.Theseregistrationstatementsare
expectedtobecomeeffectiveuponfiling.Sharescoveredbytheseregistrationstatementswillthenbeeligibleforsaleinthepublic
markets,subjecttoanyapplicablelockupagreementsandtoRule144limitationsapplicabletoaffiliates.
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LockupAgreements
Inconnectionwiththisoffering,we,ourdirectorsandexecutiveofficersandholdersofsubstantiallyallofouroutstandingcommon
stock(includingWengenandtheIFCInvestors(otherthantheKoreanInvestmentCorporation,whichholds1,390,902sharesofour
commonstock))haveagreednotto(i)offer,pledge,sell,contracttosell,sellanyoptionorcontracttopurchase,purchaseanyoptionor
contracttosell,grantanyoption,rightorwarranttopurchase,lendorotherwisetransferordisposeof,directlyorindirectly,anysharesof
ClassAcommonstockoranysecuritiesconvertibleintoorexercisableorexchangeableforsharesofClassAcommonstock(ii)fileany
registrationstatementwiththeSECrelatingtotheofferingofanysharesofClassAcommonstockoranysecuritiesconvertibleintoor
exercisableorexchangeableforClassAcommonstockor(iii)enterintoanyswaporotherarrangementthattransferstoanother,inwhole
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exercisableorexchangeableforClassAcommonstockor(iii)enterintoanyswaporotherarrangementthattransferstoanother,inwhole
orinpart,anyoftheeconomicconsequencesofownershipofClassAcommonstock,withouttheconsentoftherepresentativesofthe
underwritersforaperiodof180daysfromthedateofthisprospectus,subjecttocertainexceptions.Foradditionalinformation,see
"Underwriting."
Therestrictionsintheimmediatelyprecedingparagraphdonotapplytocertaintransfersincluding,butnotlimitedto,transfersof
sharesofourClassAcommonstockorsecuritiesconvertibleintoorexchangeableforsharesofourClassAcommonstock(i)acquiredin
openmarkettransactionsaftercompletionofthisoffering,subjecttocertainconditions,(ii)tosatisfytaxwithholdingrequirements,
subjecttocertainconditions,(iii)pursuanttoourequityincentiveplansdescribedelsewhereinthisprospectus,(iv)pursuanttoan
establishmentofaRule10b51plan,subjecttocertainconditionsand(v)incertainothertransactions.
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UNDERWRITING
Underthetermsandsubjecttotheconditionscontainedinanunderwritingagreementdated,2017,wehaveagreedtosell
totheunderwritersnamedbelow,forwhomCreditSuisseSecurities(USA)LLC,MorganStanley&Co.LLCandBarclaysCapitalInc.are
actingasrepresentatives,thefollowingrespectivenumbersofsharesofClassAcommonstock:
Underwriter
CreditSuisseSecurities(USA)LLC
MorganStanley&Co.LLC
BarclaysCapitalInc.
Number
ofShares
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BarclaysCapitalInc.
MacquarieCapital(USA)Inc.
J.P.MorganSecuritiesLLC
BMOCapitalMarketsCorp.
CitigroupGlobalMarketsInc.
Goldman,Sachs&Co.
RobertW.Baird&Co.Incorporated
BarringtonResearchAssociates,Inc.
PiperJaffray&Co.
Stifel,Nicolaus&Company,Incorporated
WilliamBlair&Company,L.L.C.
BancoBradescoBBIS.A.
BTGPactualUSCapital,LLC.
Total
29,000,000
TheunderwritingagreementprovidesthattheunderwritersareobligatedtopurchaseallthesharesofClassAcommonstockinthe
offeringifanyarepurchased,otherthanthosesharescoveredbytheoptiontopurchaseadditionalsharesdescribedbelow.The
underwritingagreementalsoprovidesthatifanunderwriterdefaults,thepurchasecommitmentsofnondefaultingunderwritersmaybe
increasedortheofferingmaybeterminated.
Wehavegrantedtotheunderwritersa30dayoptiontopurchaseonaproratabasisupto4,350,000additionalsharesfromusatthe
initialpublicofferingpricelesstheunderwritingdiscountsandcommissions.
TheunderwritersproposetoofferthesharesofClassAcommonstockinitiallyatthepublicofferingpriceonthecoverpageofthis
prospectusandtosellinggroupmembersatthatpricelessasellingconcessionofupto$pershare.Aftertheinitialpublicoffering
therepresentativesmaychangethepublicofferingpriceandsellingconcessionanddiscounttobroker/dealers.
Thefollowingtablesummarizesthecompensationandestimatedexpenseswewillpay:
Underwritingdiscountsandcommissionspaidbyus
PerShare
Without
With
Option Option
Total
Without
With
Option Option
MacquarieCapital(USA)Inc.,whichisaFINRAmember,hasactedasafinancialadviserinconnectionwithourpreparationforthis
offering.WehaveagreedtopayMacquarieCapital(USA)Inc.aonetimefeeof$2.2millionforitsservices.
OnDecember20,2016,weissuedandsold23,000sharesofourSeriesAPreferredStocktoanaffiliateofMacquarieCapital
(USA)Inc.,anunderwriterinthisoffering,inaprivateplacementata
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purchasepriceof$1,000.00pershareforaggregateproceedsof$23.0million.The23,000sharesofSeriesAPreferredStockaredeemedto
beunderwritingcompensationpursuanttoFINRARule5110.Suchsecuritiesmaynotbesoldduringthisofferingorsold,transferred,
assigned,pledgedorhypothecated,orbethesubjectofanyhedging,shortsale,derivative,putorcalltransactionthatwouldresultinthe
effectiveeconomicdispositionofthesharesforaperiodof180daysimmediatelyfollowingthedateofeffectivenessofthisofferingor
commencementofsalesofthisoffering.
MacquarieCapital(USA)Inc.hasbeengrantedtherighttoparticipateinfuturefinancingsbytheCompanythisrightisdeemedto
constitute1%inunderwritingcompensationforthisofferingpursuanttoFINRARule5110.
Weestimatethatouroutofpocketexpensesforthisofferingwillbeapproximately$9million.
Wehaveagreedtoreimbursetheunderwritersforexpensesofapproximately$20,000relatedtoclearanceofthisofferingwiththe
FinancialIndustryRegulatoryAuthority,Inc.
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FinancialIndustryRegulatoryAuthority,Inc.
Theunderwritershaveinformedusthattheydonotintendsalestodiscretionaryaccountstoexceed5%ofthetotalnumberofshares
ofClassAcommonstockofferedbythem.
Wehaveagreedthatwewillnotoffer,sell,contracttosell,pledgeorotherwisedisposeof,directlyorindirectly,orfilewiththe
SecuritiesandExchangeCommissionaregistrationstatementundertheSecuritiesActrelatingto,anysharesofourClassAcommonstock
orsecuritiesconvertibleintoorexchangeableorexercisableforanysharesofourClassAcommonstock,orpubliclydisclosetheintention
tomakeanyoffer,sale,pledge,dispositionorfiling,withoutthepriorwrittenconsentoftherepresentativesforaperiodof180daysafter
thedateofthisprospectus.
Ourdirectorsandexecutiveofficersandholdersofsubstantiallyallofouroutstandingcommonstock(includingWengenandtheIFC
Investors(otherthantheKoreanInvestmentCorporation,whichholds1,390,902sharesofourcommonstock)),haveagreedthattheywill
notoffer,sell,contracttosell,pledgeorotherwisedisposeof,directlyorindirectly,anysharesofourClassAcommonstockorsecurities
convertibleintoorexchangeableorexercisableforanysharesofourClassAcommonstock,enterintoatransactionthatwouldhavethe
sameeffect,orenterintoanyswap,hedgeorotherarrangementthattransfers,inwholeorinpart,anyoftheeconomicconsequencesof
ownershipofourClassAcommonstock,whetheranyofthesetransactionsaretobesettledbydeliveryofourClassAcommonstockor
othersecurities,incashorotherwise,orpubliclydisclosetheintentiontomakeanyoffer,sale,pledgeordisposition,ortoenterintoany
transaction,swap,hedgeorotherarrangement,without,ineachcase,thepriorwrittenconsentoftherepresentativesforaperiodof
180daysafterthedateofthisprospectus,subjecttocertainexceptions.
Therestrictionsintheimmediatelyprecedingparagraphdonotapplytocertaintransfersincluding,butnotlimitedto,transfersof
sharesofourClassAcommonstockorsecuritiesconvertibleintoorexchangeableforsharesofourClassAcommonstock(i)acquiredin
openmarkettransactionsaftercompletionofthisoffering,subjecttocertainconditions,(ii)tosatisfytaxwithholdingrequirements,
subjecttocertainconditions,(iii)pursuanttoourequityincentiveplansdescribedelsewhereinthisprospectus,(iv)pursuanttoan
establishmentofaRule10b51plan,subjecttocertainconditionsand(v)incertainothertransactions.
WehaveagreedtoindemnifytheunderwritersagainstliabilitiesundertheSecuritiesAct,orcontributetopaymentsthatthe
underwritersmayberequiredtomakeinthatrespect.
WehaveappliedtolistthesharesofClassAcommonstockonNasdaqunderthesymbol"LAUR".
Priortotheoffering,therehasbeennopublicmarketforourClassAcommonstock.Theinitialpublicofferingpricewillbe
determinedthroughnegotiationsbetweenusandtherepresentatives.In
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determiningtheinitialpublicofferingprice,weandtherepresentativesexpecttoconsideranumberoffactorsincluding:
theinformationsetforthinthisprospectusandotherwiseavailabletotheunderwriters
ourprospectsandthehistoryandprospectsfortheindustryinwhichwecompete
anassessmentofourmanagement
ourprospectsforfutureearnings
therecentmarketpricesof,anddemandfor,publiclytradedcommonstockofgenerallycomparablecompanies
thegeneralconditionofthesecuritiesmarketsatthetimeoftheofferingand
otherfactorsdeemedrelevantbytheunderwritersandus.
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otherfactorsdeemedrelevantbytheunderwritersandus.
NeitherwenortheunderwriterscanassureinvestorsthatanactivetradingmarketwilldevelopforourClassAcommonstock,orthat
sharesofourClassAcommonstockwilltradeinthepublicmarketatorabovetheinitialpublicofferingprice.
Inconnectionwiththeofferingtheunderwritersmayengageinstabilizingtransactions,overallotmenttransactions,syndicate
coveringtransactions,penaltybidsandpassivemarketmakinginaccordancewithRegulationMundertheExchangeAct.
Stabilizingtransactionspermitbidstopurchasetheunderlyingsecuritysolongasthestabilizingbidsdonotexceeda
specifiedmaximum.
Overallotmentinvolvessalesbytheunderwritersofsharesinexcessofthenumberofsharestheunderwritersareobligated
topurchase,whichcreatesasyndicateshortposition.Theshortpositionmaybeeitheracoveredshortpositionoranaked
shortposition.Inacoveredshortposition,thenumberofsharesoverallottedbytheunderwritersisnotgreaterthanthe
numberofsharesthattheymaypurchaseintheoptiontopurchaseadditionalshares.Inanakedshortposition,thenumber
ofsharesinvolvedisgreaterthanthenumberofsharesintheoptiontopurchaseadditionalshares.Theunderwritersmay
closeoutanycoveredshortpositionbyeitherexercisingtheiroptiontopurchaseadditionalsharesand/orpurchasing
sharesintheopenmarket.
SyndicatecoveringtransactionsinvolvepurchasesoftheClassAcommonstockintheopenmarketafterthedistribution
hasbeencompletedinordertocoversyndicateshortpositions.Indeterminingthesourceofsharestocloseouttheshort
position,theunderwriterswillconsider,amongotherthings,thepriceofsharesavailableforpurchaseintheopenmarketas
comparedtothepriceatwhichtheymaypurchasesharesthroughtheoptiontopurchaseadditionalshares.Ifthe
underwriterssellmoresharesthancouldbecoveredbytheoptiontopurchaseadditionalshares,anakedshortposition,the
positioncanonlybeclosedoutbybuyingsharesintheopenmarket.Anakedshortpositionismorelikelytobecreatedif
theunderwritersareconcernedthattherecouldbedownwardpressureonthepriceofthesharesintheopenmarketafter
pricingthatcouldadverselyaffectinvestorswhopurchaseintheoffering.
PenaltybidspermittherepresentativestoreclaimasellingconcessionfromasyndicatememberwhentheClassAcommon
stockoriginallysoldbythesyndicatememberispurchasedinastabilizingorsyndicatecoveringtransactiontocover
syndicateshortpositions.
Inpassivemarketmaking,marketmakersintheClassAcommonstockwhoareunderwritersorprospectiveunderwriters
may,subjecttolimitations,makebidsfororpurchasesofourClassAcommonstockuntilthetime,ifany,atwhicha
stabilizingbidismade.
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Thesestabilizingtransactions,overallotmenttransactions,syndicatecoveringtransactions,penaltybidsandpassivemarketmaking
mayhavetheeffectofraisingormaintainingthemarketpriceofourClassAcommonstockorpreventingorretardingadeclineinthe
marketpriceoftheClassAcommonstock.AsaresultthepriceofourClassAcommonstockmaybehigherthanthepricethatmight
otherwiseexistintheopenmarket.ThesetransactionsmaybeeffectedonNasdaqorotherwiseand,ifcommenced,maybediscontinuedat
anytime.
Aprospectusinelectronicformatmaybemadeavailableonthewebsitesmaintainedbyoneormoreoftheunderwriters,orselling
groupmembers,ifany,participatinginthisofferingandoneormoreoftheunderwritersparticipatinginthisofferingmaydistribute
prospectuseselectronically.Therepresentativesmayagreetoallocateanumberofsharestounderwritersandsellinggroupmembersfor
saletotheironlinebrokerageaccountholders.Internetdistributionswillbeallocatedbytheunderwritersandsellinggroupmembersthat
willmakeinternetdistributionsonthesamebasisasotherallocations.
OtherRelationships
Theunderwritersandtheirrespectiveaffiliatesarefullservicefinancialinstitutionsengagedinvariousactivities,whichmayinclude
securitiestrading,commercialandinvestmentbanking,financialadvisory,investmentmanagement,principalinvestment,hedging,
financingandbrokerageactivities.Certainoftheunderwritersandtheirrespectiveaffiliateshave,fromtimetotime,performed,andmayin
thefutureperform,variousfinancialadvisoryandinvestmentbankingservicesforusorouraffiliates,forwhichtheyreceivedorwill
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thefutureperform,variousfinancialadvisoryandinvestmentbankingservicesforusorouraffiliates,forwhichtheyreceivedorwill
receivecustomaryfeesandexpenses.Certainoftheunderwritersortheiraffiliatesarelendersunderourseniorsecuredmulticurrency
creditfacility.Forexample,Citibank,N.A.,anaffiliateofCitigroupGlobalMarketsInc.,actsasanadministrativeagentunderoursenior
securedmulticurrencyrevolvingcreditfacility.AffiliatesofcertainoftheunderwritersholdaportionoftheSeniorNotesand/ortheterm
loansunderourSeniorSecuredCreditFacilities,andasaresult,mayreceiveaportionoftheproceedsfromthisoffering.See"Useof
Proceeds."
Intheordinarycourseoftheirvariousbusinessactivities,theunderwritersandtheirrespectiveaffiliatesmaymakeorholdabroad
arrayofinvestmentsandactivelytradedebtandequitysecurities(orrelatedderivativesecurities)andfinancialinstruments(including
bankloans)fortheirownaccountandfortheaccountsoftheircustomersandmayatanytimeholdlongandshortpositionsinsuch
securitiesandinstruments.Suchinvestmentandsecuritiesactivitiesmayinvolveoursecuritiesandinstruments.Theunderwritersandtheir
respectiveaffiliatesmayalsomakeinvestmentrecommendationsorpublishorexpressindependentresearchviewsinrespectofsuch
securitiesorinstrumentsandmayatanytimehold,orrecommendtoclientsthattheyacquire,loanorshortpositionsinsuchsecuritiesand
instrument.
SellingRestrictions
NoticetoProspectiveInvestorsinCanada
Thesharesmaybesoldonlytopurchaserspurchasing,ordeemedtobepurchasing,asprincipalthatareaccreditedinvestors,as
definedinNationalInstrument45106ProspectusExemptionsorsubsection73.3(1)oftheSecuritiesAct(Ontario),andarepermitted
clients,asdefinedinNationalInstrument31103RegistrationRequirements,ExemptionsandOngoingRegistrantObligations.Anyresale
ofthesharesmustbemadeinaccordancewithanexemptionfrom,orinatransactionnotsubjectto,theprospectusrequirementsof
applicablesecuritieslaws.
SecuritieslegislationincertainprovincesorterritoriesofCanadamayprovideapurchaserwithremediesforrescissionordamageif
thisprospectus(includinganyamendmentthereto)containsamisrepresentation,providedthattheremediesforrescissionordamagesare
exercisedbythepurchaserwithinthetimelimitprescribedbythesecuritieslegislationofthepurchaser'sprovinceorterritory.The
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purchasershouldrefertoanyapplicableprovisionsofthesecuritieslegislationofthepurchaser'sprovinceorterritoryforparticularsof
theserightsorconsultwithalegaladvisor.
Pursuanttosection3A.3ofNationalInstrument33105UnderwritingConflicts(NI33105),theunderwritersarenotrequiredto
complywiththedisclosurerequirementsofNI33105regardingunderwriterconflictsofinterestinconnectionwiththisoffering.
NoticetoProspectiveInvestorsintheEuropeanEconomicArea
InrelationtoeachMemberStateoftheEuropeanEconomicArea(each,a"RelevantMemberState"),noofferofsharesmaybemadeto
thepublicinthatRelevantMemberStateotherthan:
(a)
toanylegalentitywhichisaqualifiedinvestorasdefinedintheProspectusDirective
(b)
tofewerthan150naturalorlegalpersons(otherthanqualifiedinvestorsasdefinedintheProspectusDirective),subjectto
obtainingthepriorconsentoftherepresentativesor
(c)
inanyothercircumstancesfallingwithinArticle3(2)oftheProspectusDirective,
providedthatnosuchofferofsharesshallrequireusortherepresentativestopublishaprospectuspursuanttoArticle3oftheProspectus
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Directive.
EachpersoninaRelevantMemberStatewhoinitiallyacquiresanysharesortowhomanyofferismadewillbedeemedtohave
represented,acknowledgedandagreedthatitisa"qualifiedinvestor"withinthemeaningofthelawinthatRelevantMemberState.Inthe
caseofanysharesbeingofferedtoafinancialintermediaryasthattermisusedinArticle3(2)oftheProspectusDirective,eachsuch
financialintermediarywillbedeemedtohaverepresented,acknowledgedandagreedthatthesharesacquiredbyitintheofferhavenot
beenacquiredonanondiscretionarybasisonbehalfof,norhavetheybeenacquiredwithaviewtotheirofferorresaleto,personsin
circumstanceswhichmaygiverisetoanofferofanysharestothepublicotherthantheirofferorresaleinaRelevantMemberStateto
qualifiedinvestorsassodefinedorincircumstancesinwhichthepriorconsentoftherepresentativeshasbeenobtainedtoeachsuch
proposedofferorresale.
We,therepresentativesandtheiraffiliateswillrelyuponthetruthandaccuracyoftheforegoingrepresentations,acknowledgements
andagreements.
ThisprospectushasbeenpreparedonthebasisthatanyofferofsharesinanyRelevantMemberStatewillbemadepursuanttoan
exemptionundertheProspectusDirectivefromtherequirementtopublishaprospectusforoffersofshares.Accordinglyanyperson
makingorintendingtomakeanofferinthatRelevantMemberStateofshareswhicharethesubjectoftheofferingcontemplatedinthis
prospectusmayonlydosoincircumstancesinwhichnoobligationarisesforusoranyoftheunderwriterstopublishaprospectuspursuant
toArticle3oftheProspectusDirectiveinrelationtosuchoffer.Neitherwenortheunderwritershaveauthorized,nordotheyauthorize,the
makingofanyofferofsharesincircumstancesinwhichanobligationarisesforusortheunderwriterstopublishaprospectusforsuchoffer.
Forthepurposesoftheaboveprovisions,theexpressionan"offertothepublic"inrelationtoanysharesinanyRelevantMember
Statemeansthecommunicationinanyformandbyanymeansofsufficientinformationonthetermsoftheofferandthesharestobe
offeredsoastoenableaninvestortodecidetopurchaseorsubscribetheshares,asthesamemaybevariedinthatMemberStatebyany
measureimplementingtheProspectusDirectiveintheRelevantMemberStateandtheexpression"ProspectusDirective"meansDirective
2003/71/EC(asamended,includingtheDirective2010/73/EU),andincludesanyrelevantimplementingmeasureintheRelevantMember
State.
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NoticetoProspectiveInvestorsintheUnitedKingdom
Inaddition,intheUnitedKingdom,thisdocumentisbeingdistributedonlyto,andisdirectedonlyat,andanyoffersubsequently
mademayonlybedirectedatpersonswhoare"qualifiedinvestors"(asdefinedintheProspectusDirective)(i)whohaveprofessional
experienceinmattersrelatingtoinvestmentsfallingwithinArticle19(5)oftheFinancialServicesandMarketsAct2000(Financial
Promotion)Order2005,asamended(the"Order")and/or(ii)whoarehighnetworthcompanies(orpersonstowhomitmayotherwisebe
lawfullycommunicated)fallingwithinArticle49(2)(a)to(d)oftheOrder(allsuchpersonstogetherbeingreferredtoas"relevantpersons").
AnypersonintheUnitedKingdomthatisnotarelevantpersonshouldnotactorrelyontheinformationincludedinthisdocumentor
useitasbasisfortakinganyaction.IntheUnitedKingdom,anyinvestmentorinvestmentactivitythatthisdocumentrelatestomaybe
madeortakenexclusivelybyrelevantpersons.AnypersonintheUnitedKingdomthatisnotarelevantpersonshouldnotactorrelyon
thisdocumentoranyofitscontents.
NoticetoProspectiveInvestorsinSwitzerland
ThesharesmaynotbepubliclyofferedinSwitzerlandandwillnotbelistedontheSIXSwissExchange("SIX"),oronanyotherstock
exchangeorregulatedtradingfacilityinSwitzerland.Thisdocumentdoesnotconstituteaprospectuswithinthemeaningof,andhasbeen
preparedwithoutregardtothedisclosurestandardsforissuanceprospectusesunderart.652aorart.1156oftheSwissCodeofObligations
orthedisclosurestandardsforlistingprospectusesunderart.27ff.oftheSIXListingRulesorthelistingrulesofanyotherstockexchange
orregulatedtradingfacilityinSwitzerland.Neitherthisdocumentnoranyotherofferingormarketingmaterialrelatingtothesharesorthe
offeringmaybepubliclydistributedorotherwisemadepubliclyavailableinSwitzerland.
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Neitherthisdocumentnoranyotherofferingormarketingmaterialrelatingtotheoffering,usortheshareshavebeenorwillbefiled
withorapprovedbyanySwissregulatoryauthority.Inparticularthisdocumentwillnotbefiledwith,andtheofferofshareswillnotbe
supervisedby,theSwissFinancialMarketSupervisoryAuthorityFINMA,andtheofferoftheshareshasnotbeenandwillnotbe
authorizedundertheSwissFederalActonCollectiveInvestmentSchemes("CISA").Theinvestorprotectionaffordedtoacquirersof
interestsincollectiveinvestmentschemesundertheCISAdoesnotextendtoacquirersoftheshares.
NoticetoProspectiveInvestorsinHongKong
TheshareshavenotbeenofferedorsoldandwillnotbeofferedorsoldinHongKong,bymeansofanydocument,otherthan(a)to
"professionalinvestors"asdefinedintheSecuritiesandFuturesOrdinance(Cap.571)ofHongKongandanyrulesmadeunderthat
Ordinanceor(b)inothercircumstanceswhichdonotresultinthedocumentbeinga"prospectus"asdefinedintheCompaniesOrdinance
(Cap.32)ofHongKongorwhichdonotconstituteanoffertothepublicwithinthemeaningofthatOrdinance.Noadvertisement,
invitationordocumentrelatingtotheshareshasbeenormaybeissuedorhasbeenormaybeinthepossessionofanypersonforthe
purposesofissue,whetherinHongKongorelsewhere,whichisdirectedat,orthecontentsofwhicharelikelytobeaccessedorreadby,
thepublicofHongKong(exceptifpermittedtodosounderthesecuritieslawsofHongKong)otherthanwithrespecttoshareswhichare
orareintendedtobedisposedofonlytopersonsoutsideHongKongoronlyto"professionalinvestors"asdefinedintheSecuritiesand
FuturesOrdinance(Cap.571)andanyrulesmadeunderthatOrdinance.
NoticetoProspectiveInvestorsinSingapore
ThisprospectushasnotbeenregisteredasaprospectuswiththeMonetaryAuthorityofSingapore.Accordingly,thisprospectusand
anyotherdocumentormaterialinconnectionwiththeofferorsale,
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orinvitationforsubscriptionorpurchase,ofthesharesmaynotbecirculatedordistributed,normaythesharesbeofferedorsold,orbe
madethesubjectofaninvitationforsubscriptionorpurchase,whetherdirectlyorindirectly,topersonsinSingaporeotherthan(i)toan
institutionalinvestorunderSection274oftheSecuritiesandFuturesAct,Chapter289ofSingapore(the"SFA"),(ii)toarelevantperson
pursuanttoSection275(1),oranypersonpursuanttoSection275(1A),andinaccordancewiththeconditionsspecifiedinSection275,of
theSFAor(iii)otherwisepursuantto,andinaccordancewiththeconditionsof,anyotherapplicableprovisionoftheSFA.
WherethesharesaresubscribedorpurchasedunderSection275oftheSFAbyarelevantpersonwhichis:
acorporation(whichisnotanaccreditedinvestor(asdefinedinSection4AoftheSFA))thesolebusinessofwhichisto
holdinvestmentsandtheentiresharecapitalofwhichisownedbyoneormoreindividuals,eachofwhomisanaccredited
investoror
atrust(wherethetrusteeisnotanaccreditedinvestor)whosesolepurposeistoholdinvestmentsandeachbeneficiaryofthe
trustisanindividualwhoisanaccreditedinvestor,
securities(asdefinedinSection239(1)oftheSFA)ofthatcorporationorthebeneficiaries'rightsandinterest(howsoeverdescribed)inthat
trustshallnotbetransferredwithinsixmonthsafterthatcorporationorthattrusthasacquiredthesharespursuanttoanoffermadeunder
Section275oftheSFAexcept:
toaninstitutionalinvestorortoarelevantpersondefinedinSection275(2)oftheSFA,ortoanypersonarisingfroman
offerreferredtoinSection275(1A)orSection276(4)(i)(B)oftheSFA
wherenoconsiderationisorwillbegivenforthetransfer
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wherethetransferisbyoperationoflaw
asspecifiedinSection276(7)oftheSFAor
asspecifiedinRegulation32oftheSecuritiesandFutures(OffersofInvestments)(SharesandDebentures)
Regulations2005ofSingapore.
356
TableofContents
LEGALMATTERS
ThevalidityofthesharesofClassAcommonstockofferedherebywillbepasseduponforusbyDLAPiperLLP(US),Baltimore,
Maryland,andthevalidityofthesharesofClassAcommonstockofferedherebywillbepasseduponfortheunderwritersbySimpson
Thacher&BartlettLLP,NewYork,NewYork.
EXPERTS
ThefinancialstatementsofLaureateEducation,Inc.,asofDecember31,2015and2014andforeachofthethreeyearsintheperiod
endedDecember31,2015includedelsewhereinthisProspectushavebeensoincludedinrelianceonthereportof
PricewaterhouseCoopersLLP,anindependentregisteredpublicaccountingfirm,givenontheauthorityofsaidfirmasexpertsinauditing
andaccounting.
ThefinancialstatementsofFMUGroupasofSeptember12,2014andfortheperiodfromJanuary1,2014throughSeptember12,
2014includedelsewhereinthisProspectushavebeensoincludedinrelianceofthereportofPricewaterhouseCoopersAuditores
Independentes,SoPaulo,Brazil,independentaccountants,givenontheauthorityofsaidfirmasexpertsinauditingandaccounting.
ThefinancialstatementsofSociedadeEducacionalSulRioGrandenseLtda.asofDecember31,2013and2012andforeachofthe
twoyearsintheperiodendedDecember31,2013includedelsewhereinthisProspectushavebeensoincludedinrelianceofthereportof
PricewaterhouseCoopersAuditoresIndependentes,PortoAlegre,RS,Brazil,independentaccountants,givenontheauthorityofsaidfirm
asexpertsinauditingandaccounting.
WHEREYOUCANFINDMOREINFORMATION
371/620
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WHEREYOUCANFINDMOREINFORMATION
WehavefiledwiththeSECaregistrationstatementonFormS1undertheSecuritiesActwithrespecttothesharesofClassAcommon
stockofferedhereby.Thisprospectus,whichconstitutesapartoftheregistrationstatement,doesnotcontainalloftheinformationsetforth
intheregistrationstatementortheexhibitsandschedulesfiledtherewith.ForfurtherinformationaboutusandtheClassAcommonstock
offeredhereby,wereferyoutotheregistrationstatementandtheexhibitsandschedulesfiledthereto.Statementscontainedinthis
prospectusregardingthecontentsofanycontractoranyotherdocumentthatisfiledasanexhibittotheregistrationstatementarenot
necessarilycomplete,andeachsuchstatementisqualifiedinallrespectsbyreferencetothefulltextofsuchcontractorotherdocument
filedasanexhibittotheregistrationstatement.Followingthisoffering,wewillberequiredtofileperiodicreports,proxystatements,and
otherinformationwiththeSECpursuanttotheExchangeAct.YoumayreadandcopythisinformationatthePublicReferenceRoomof
theSEC,100FStreet,N.E.,Room1580,Washington,D.C.20549.YoumayobtaininformationontheoperationofthePublicReference
RoombycallingtheSECat1800SEC0330.TheSECalsomaintainsawebsitethatcontainsreports,proxystatementsandother
informationaboutissuers,likeus,thatfileelectronicallywiththeSEC.Theaddressofthatsiteiswww.sec.gov.
Youmayobtainacopyofanyofourfilings,atnocost,bywritingortelephoningusat:
650S.ExeterStreet
(410)8436100
Attn:CorporateSecretary
Ourwebsiteisaccessiblethroughwww.laureate.net.Informationon,oraccessiblethrough,ourwebsiteisnotpartof,andisnot
incorporatedinto,thisprospectus.
357
TableofContents
LaureateEducation,Inc.AuditedFinancialStatements
ReportofIndependentRegisteredAccountingFirm
ConsolidatedStatementsofOperationsfortheyearsendedDecember31,2015,2014and2013
ConsolidatedStatementsofComprehensiveIncomefortheyearsendedDecember31,2015,2014and
2013
ConsolidatedBalanceSheetsasofDecember31,2015and2014
ConsolidatedStatementsofStockholders'EquityfortheyearsendedDecember31,2015,2014and
2013
ConsolidatedStatementsofCashFlowsfortheyearsendedDecember31,2015,2014and2013
NotestoConsolidatedFinancialStatements
LaureateEducation,Inc.UnauditedFinancialStatements
ConsolidatedStatementsofOperationsfortheninemonthsendedSeptember30,2016and
September30,2015
ConsolidatedStatementsofComprehensiveIncomefortheninemonthsendedSeptember30,2016
andSeptember30,2015
ConsolidatedBalanceSheetsasofSeptember30,2016andDecember31,2015
ConsolidatedStatementsofCashFlowsfortheninemonthsendedSeptember30,2016and
September30,2015
NotestoUnauditedConsolidatedFinancialStatements
FMUGroupCombinedAuditedFinancialStatements
IndependentAuditor'sReport
CombinedStatementofComprehensiveIncomefortheperiodfromJanuary1,2014through
Page
F2
F3
F4
F5
F7
F8
F9
F127
F128
F129
F131
F132
F188
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CombinedStatementofComprehensiveIncomefortheperiodfromJanuary1,2014through
September12,2014
CombinedBalanceSheetasofSeptember12,2014
CombinedStatementofInvestedEquityfortheperiodfromJanuary1,2014throughSeptember12,
2014
CombinedStatementofCashFlowsfortheperiodfromJanuary1,2014throughSeptember12,2014
NotestoCombinedFinancialStatements
SociedadeEducacionalSulRioGrandenseLtda.AuditedFinancialStatements
IndependentAuditor'sReport
StatementsofOperationsfortheyearsendedDecember31,2013and2012
BalanceSheetsasofDecember31,2013and2012
StatementsofQuotaholder'sEquityfortheyearsendedDecember31,2013and2012
StatementsofComprehensiveIncomefortheyearsendedDecember31,2013and2012
StatementsofCashFlowsfortheyearsendedDecember31,2013and2012
NotestoFinancialStatements
F189
F190
F191
F192
F193
F211
F212
F213
F214
F215
F216
F217
F1
TableofContents
ReportofIndependentRegisteredPublicAccountingFirm
ThereversestocksplitdescribedinNote1totheconsolidatedfinancialstatementshasnotbeenconsummatedatJanuary17,2017.
Whenithasbeenconsummated,wewillbeinapositiontofurnishthefollowingreport.
/s/PricewaterhouseCoopersLLP
Baltimore,Maryland
January17,2017
"ReportofIndependentRegisteredPublicAccountingFirm
TotheBoardofDirectorsandStockholders
ofLaureateEducationInc.
Inouropinion,theaccompanyingconsolidatedbalancesheetsandtherelatedconsolidatedstatementsofoperations,
comprehensiveincome,stockholders'equityandcashflowspresentfairly,inallmaterialrespects,thefinancialpositionofLaureate
Education,Inc.anditssubsidiariesatDecember31,2015andDecember31,2014,andtheresultsoftheiroperationsandtheircash
flowsforeachofthethreeyearsintheperiodendedDecember31,2015inconformitywithaccountingprinciplesgenerally
acceptedintheUnitedStatesofAmerica.Inaddition,inouropinion,thefinancialstatementschedulelistedintheindexappearing
underItem16(b)presentsfairly,inallmaterialrespects,theinformationsetforththereinwhenreadinconjunctionwiththerelated
consolidatedfinancialstatements.Thesefinancialstatementsandfinancialstatementschedulearetheresponsibilityofthe
Company'smanagement.Ourresponsibilityistoexpressanopiniononthesefinancialstatementsandfinancialstatementschedule
basedonouraudits.WeconductedourauditsofthesestatementsinaccordancewiththestandardsofthePublicCompany
AccountingOversightBoard(UnitedStates).Thosestandardsrequirethatweplanandperformtheaudittoobtainreasonable
assuranceaboutwhetherthefinancialstatementsarefreeofmaterialmisstatement.Anauditincludesexamining,onatestbasis,
evidencesupportingtheamountsanddisclosuresinthefinancialstatements,assessingtheaccountingprinciplesusedand
significantestimatesmadebymanagement,andevaluatingtheoverallfinancialstatementpresentation.Webelievethatouraudits
provideareasonablebasisforouropinion.
373/620
1/20/2017
provideareasonablebasisforouropinion.
AsdiscussedinNote2totheconsolidatedfinancialstatements,theCompanychangedthemannerinwhichitclassifies
deferredfinancingcostsin2016.
Baltimore,Maryland
March25,2016,exceptforthechangeinthemannerinwhichtheCompanyclassifiesdeferredfinancingcostsasdiscussedin
Note2,astowhichthedateisMay20,2016,andexceptforthechangeincompositionofreportablesegmentsasdiscussedin
Note6,astowhichthedateisDecember14,2016,andexceptfortheeffectsofthereversestocksplitasdiscussedinNote1,asto
whichthedateis[]"
F2
TableofContents
LAUREATEEDUCATION,INC.ANDSUBSIDIARIES
ConsolidatedStatementsofOperations
INTHOUSANDS
FortheyearsendedDecember31,
Revenues
Costsandexpenses:
Directcosts
Operatingincome
Interestincome
Interestexpense
Otherincome(expense),net
(Loss)incomefromcontinuingoperationsbeforeincometaxes
andequityinnetincome(loss)ofaffiliates
Equityinnetincome(loss)ofaffiliates,netoftax
Lossfromcontinuingoperations
Incomefromdiscontinuedoperations,netoftaxof$0forall
years
Gainonsalesofdiscontinuedoperations,netoftaxof$0,$0
Netloss
Net(income)lossattributabletononcontrollinginterests
2015
796

(315,845) (162,453)
(403)
4,162
$ (316,248) $ (158,291) $
4,350
(85,076)
15,398
(69,678)
(201,671)
39,060
158
(162,453)
$ 3,913,881
3,418,449
141,197
33,582
320,653
21,805
(350,196)
(1,361)
6,631
7,499
(3,102)
2013
4,414,682
3,838,179
151,215
125,788
299,500
21,822
(385,754)
(22,984)
(3,101)
(1,184)
(109,970)
1,929
(91,246)
(905)
(90,222)
(200,610)
(117,730)
2,495
(315,845)
2014
4,291,659
3,760,016
194,686
336,957
13,328
(398,042)
(1,263)
(2,607)
195
(149,178)
374/620
1/20/2017
Basicanddilutedearnings(loss)pershare:
LossfromcontinuingoperationsattributabletoLaureate
Education,Inc.
IncomefromdiscontinuedoperationsattributabletoLaureate
Education,Inc.
Basicanddilutednetlosspershareattributabletocommon
stockholders
(2.44) $
(1.24) $
(0.64)
0.04
(2.44) $
(1.24) $
(0.60)
Theaccompanyingnotesareanintegralpartoftheseconsolidatedfinancialstatements.
F3
TableofContents
ConsolidatedStatementsofComprehensiveIncome
INTHOUSANDS
2015
2014
2013
Netloss
Othercomprehensive(loss)income:
Foreigncurrencytranslationadjustment,netoftaxof$0forall
years
Unrealizedgain(loss)onderivativeinstruments,netoftaxof$0
forallyears
Minimumpensionliabilityadjustment,netoftaxof$982,$715
Totalothercomprehensiveloss
Comprehensiveloss
Netcomprehensiveloss(income)attributabletononcontrolling
interests
ComprehensivelossattributabletoLaureateEducation,Inc.
$ (315,845) $ (162,453) $
(85,076)
(386,310) (307,101) (193,589)
5,629
(733)
2,667
2,966
(6,994)
2,585
(377,715) (314,828) (188,337)
(693,560) (477,281) (273,413)
3,234
(8,759)
16,936
$ (690,326) $ (486,040) $ (256,477)
F4
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TableofContents
ConsolidatedBalanceSheets
INTHOUSANDS,exceptpershareamounts
December31,
Assets
Currentassets:
Cashandcashequivalents(includesVIEamountsof$120,944and
$122,712,seeNote2)
Restrictedcashandinvestments
Receivables:
Accountsandnotesreceivable
Otherreceivables
Relatedpartyreceivables
Allowancefordoubtfulaccounts
Receivables,net
Deferredincometaxes
Incometaxreceivable
Prepaidexpensesandothercurrentassets
Totalcurrentassets(includesVIEamountsof$307,043and$315,579,see
Note2)
Notesreceivable,net
Propertyandequipment:
Land
Buildings
Furniture,equipmentandsoftware
Leaseholdimprovements
Constructioninprogress
Accumulateddepreciationandamortization
Landuserights,net
Goodwill
Otherintangibleassets:
Tradenames
2015
2014
1,135,684 1,153,438
59,272
13,728
419,977
470,993
1,294,263 1,340,333
1,142,176 1,161,892
384,655
391,435
93,260
121,978
(1,043,431) (972,312)
2,290,900 2,514,319
50,336
53,992
2,115,897 2,469,795
1,361,125 1,461,762
458,673
160,585
441,051
35,788
7,336
(158,006)
326,169
87,895
17,048
85,314
$ 461,584
149,438
452,509
40,239
13,743
(164,764)
341,727
95,835
10,595
94,259
376/620
1/20/2017
Tradenames
Deferredcosts,net
Deferredincometaxes
Otherassets
Longtermassetsheldforsale
Totalassets(includesVIEamountsof$1,346,908and$1,449,560,seeNote2)
1,361,125 1,461,762
52,197
93,064
58,169
59,494
80,754
87,741
234,782
308,935

141,856
$ 7,439,116 $ 8,358,124
F5
TableofContents
ConsolidatedBalanceSheets(Continued)
December31,
Liabilitiesandstockholders'equity
Currentliabilities:
Accountspayable
Accruedexpenses
Accruedcompensationandbenefits
Deferredrevenueandstudentdeposits
Currentportionoflongtermdebt
Currentportionofduetoshareholdersofacquiredcompanies
Incometaxespayable
Deferredincometaxes
Derivativeinstruments
Othercurrentliabilities
Totalcurrentliabilities(includesVIEamountsof$305,067and$388,588,
seeNote2)
Longtermdebt,lesscurrentportion
Duetoshareholdersofacquiredcompanies,lesscurrentportion
Incometaxespayable
Deferredincometaxes
Otherlongtermliabilities
Totalliabilities(includesVIEamountsof$455,373and$505,330,see
Note2)
Stockholders'equity:
Preferredstock,parvalue$0.001pershareauthorized50,000shares,no
sharesissuedandoutstandingasofDecember31,2015and
December31,2014
Commonstock,parvalue$0.004pershareauthorized175,000shares,
issuedandoutstandingsharesof133,255and132,973asof
2015
2014
111,749
371,621
237,659
482,723
192,354
21,050
17,463
48,369
9,310
688
55,197
1,548,183
4,318,934
165,669
14,880
169,951
507,477
19,326
287,524
107,385
392,088
252,133
471,755
233,286
26,048
82,165
41,998
21,968
40,489
1,669,315
4,253,487
222,013
33,410
155,728
570,364
24,255
329,128
7,031,944
51,746

7,257,700
43,876
377/620
1/20/2017
December31,2015andDecember31,2014,respectively
Accumulateddeficit
Noncontrollinginterests
Totalliabilitiesandstockholders'equity
533
2,686,451
(1,409,548)
(952,677)
324,759
30,667
355,426
$ 7,439,116 $
532
2,688,877
(1,093,300)
(579,041)
1,017,068
39,480
1,056,548
8,358,124
F6
TableofContents
ConsolidatedStatementsofStockholders'Equity
INTHOUSANDS
BalanceatDecember31,
2012
Capitalcontributionfrom
parent
Noncashstock
compensation
Cashdividendsto
stockholders
Commonstockissuednetof
stockissuancecost
Exerciseofput,vestingof
restrictedstockand
exerciseofstockoptions,
netofshareswithheldto
satisfyminimumemployee
taxwithholding
Changesinnoncontrolling
interests
Dividendstononcontrolling
interests
Capitalcontributionsfrom
noncontrollinginterest
holders
Accretionofredeemable
andequity
Reclassificationof
comprehensiveincometo
redeemablenoncontrolling
interestsandequity
Reclassificationof
interests
Netloss
Foreigncurrencytranslation
adjustment,netoftaxof
$0
Unrealizedgainon
derivatives,netoftaxof
$0
Minimumpensionliability
$1,235
LaureateEducation,Inc.Stockholders

Sharesof
(Accumulated
Accumulated
common
Additional
deficit)
other
Total
stock
Common
paidin
retained
comprehensive Noncontrolling stockholders'
earnings
interests
equity
outstanding stock capital
(loss)income
126,577 $
(865,331) $
(76,132) $
36,579 $
1,632,676
13,568
13,568
41,140
41,140
(22,872)
(22,872)
5,791
23
199,697
199,720
93
(1,971)
(1,970)
(87,970)
(5,879)
(23)
(93,872)
195
(1,304)
(1,109)
11,823
11,823
(9,797)
(9,797)
9,672
9,672

(69,678)
3,571
(15,398)
3,571
(85,076)
(192,051)
(1,538)
(193,589)
2,667
2,667
2,585
2,585
506 $ 2,537,054 $
378/620
1/20/2017
2013
Noncashstock
compensation
Cashdistributionsto
stockholders
Equitytoliabilityaward
modification
Exerciseofstockoptions
Vestingofrestrictedstock
andexerciseofstock
options,netofshares
withheldtosatisfy
minimumemployeetax
withholding
interests
interests
holders
andequity
Reclassificationof
interestsandequity
Other,net
Netloss
$0
Unrealizedlosson
$0
$715
2014
Noncashstock
compensation
Cashdistributionsto
stockholders
Exerciseofstockoptions
Vestingofrestrictedstock
andexerciseofstock
options,netofshares
withheldtosatisfy
minimumemployeetax
withholding
interests
interests
holders
andequity
Reclassificationof
interestsandequity
Net(loss)income
$0
Unrealizedgainon
$0
$982
2015
132,470 $
(935,009) $
(268,810) $
43,382 $
1,509,137
11
40,693
40,693
(5,271)
(5,271)
(25)
52
(2,986)
964
(2,986)
964
465
(2,242)
(2,240)
(4,498)
3,769
(729)
(2,461)
1,050
(1,411)
4,821
166
4,987
(9,187)
(9,187)

(158,291)
(119)
(9)
(4,162)
(119)
(9)
(162,453)
(302,504)
(4,597)
(307,101)
(733)
(733)
(6,994)
(6,994)
532 $ 2,688,877 $
(1,093,300) $
(579,041) $
39,480 $
1,056,548
530 $ 2,669,044 $
132,973 $
34,120
34,120

111
(18,975)
2,040
(18,975)
2,040
163
(3,869)
(3,868)
(1,554)
442
(2,253)
(3,365)
(1,147)
(95)
(1,242)
1,382
1,382
(13,041)
(13,041)

(316,248)
(4,613)
403
(4,613)
(315,845)
(382,673)
(3,637)
(386,310)
5,629
5,629
2,966
2,966
533 $ 2,686,451 $
(1,409,548) $
(952,677) $
30,667 $
355,426
133,255 $
F7
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TableofContents
ConsolidatedStatementsofCashFlows
INTHOUSANDS
Cashflowsfromoperatingactivities
Netloss
Adjustmentstoreconcilenetlosstonetcashprovidedbyoperatingactivities:
(Gain)lossonsaleofsubsidiaryanddisposalofpropertyandequipment
Loss(gain)onderivativeinstruments
Noncashinterestexpense
Noncashsharebasedcompensationexpense
Baddebtexpense
Deferredincometaxes
Unrealizedforeigncurrencyexchangeloss
Noncashloss(gain)fromnonincometaxcontingencies
Noncashexpense(income)fromprofitsharinglegislation
Other,net
Changesinoperatingassetsandliabilities:
Restrictedcash
Receivables
Inventory,prepaidexpensesandotherassets
Accountspayableandaccruedexpenses
Incometaxreceivable/payable,net
Deferredrevenueandotherliabilities
Netcashprovidedbyoperatingactivitiesofcontinuingoperations
Cashflowsfrominvestingactivities
Purchaseofpropertyandequipmentandlanduserights
Expendituresfordeferredcosts
Receiptsfromsaleofpropertyandequipmentandsubsidiary
Propertyinsurancerecoveries
Businessacquisitions,netofcashacquired
Paymentsofcontingentconsiderationforacquisitions
Proceedsfrom(investmentsin)affiliates
Paymentsfrom(to)relatedparties
Changeinrestrictedcashandinvestments
Proceedsfromsaleormaturityofavailableforsalesecurities,net
Netcashusedininvestingactivitiesofcontinuingoperations
Cashflowsfromfinancingactivities
Proceedsfromissuanceoflongtermdebt
Paymentsonlongtermdebt
Paymentsofdeferredpurchasepriceforacquisitions
Paymentstopurchasenoncontrollinginterests
Capitalcontributionsfromparent
Paymentsofdividends
Saleofcommonstock,netofissuancecosts
Proceedsfromexerciseofstockoptions
Withholdingofsharestosatisfyminimumemployeetaxwithholdingforvestedstockawardsand
exercisedstockoptions
Paymentsofdebtissuancecostsandmodificationfees
InterestpaidtolendersonissuanceoftheSeniorNotesdue2019
Noncontrollinginterestholder'sloantosubsidiaries
(Distributionsto)andcapitalcontributionsfromnoncontrollinginterestholders
Netcashprovidedbyfinancingactivitiesofcontinuingoperations
Cashflowsfromdiscontinuedoperations
Netcashprovidedbyoperatingactivitiesofdiscontinuedoperations
2015
(315,845)
282,946
(5,141)
1,988
331
55,786
39,021
107,162
(15,563)
124,487
182
937
1,646
(932)
(225,027)
(15,533)
15,237
13,673
105,131
170,486
(344,056)
(22,802)
204,076
2,198
(6,705)
(1,275)
5,047
3,849
(15,452)
1,478
(173,642)
628,512
(528,025)
(25,582)
(5,351)
(20,472)
2,040
(3,868)
(13,020)
2,772
(2,582)
34,424
2014
(162,453)
288,331
125,788
8,006
(29,801)
22,984
52,908
49,190
110,302
(163,257)
98,767
(3,355)
(22,755)
2,410
(12,778)
(166,008)
(28,517)
13,034
63,564
22,796
269,156
(416,746)
(19,672)
4,565
(287,945)
2,745
224,424
3,448
(489,181)
589,476
(358,086)
(41,052)
(9,567)
(6,526)
964
2013
$ (85,076)
242,725
33,582
(7,181)
(44,208)
1,361
46,650
49,512
102,661
(16,207)
790
9,336
8,389
3,501
(3,016)
(95,295)
(35,452)
26,574
(11,871)
50,427
277,202
(500,886)
(18,645)
66,960
(177,550)
(5,674)
(8,789)
(8,724)
(235,775)
(889,083)
1,304,527
(644,125)
(30,544)
(15,950)
13,568
(22,872)
199,720
(2,240)
(3,282)
4,754
(1,855)
172,586
(1,970)
(30,618)
(29,138)
2,393
11,672
756,663
344
380/620
1/20/2017
Netcashprovidedbyoperatingactivitiesofdiscontinuedoperations
Netcashprovidedbydiscontinuedoperations
Cashandcashequivalentsatbeginningofperiod
Cashandcashequivalentsatendofperiod

344

344
(34,179) (50,877) (12,531)
(2,911) (98,316) 132,595

461,584 559,900 427,305
$ 458,673 $ 461,584 $ 559,900
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LaureateEducation,Inc.andSubsidiaries
(Dollarsandsharesinthousands)
Note1.DescriptionofBusiness
LaureateEducation,Inc.andsubsidiaries(hereinafterLaureate,we,us,our,ortheCompany)providehighereducationprogramsand
servicestostudentsthroughaninternationalnetworkoflicenseduniversitiesandhighereducationinstitutions(institutions).Wearea
subsidiaryofWengenAlberta,LimitedPartnership(Wengen),anAlbertalimitedpartnership,whichacquiredLaureateonAugust17,2007
throughamergerusingleveragedbuyoutfinancing(theLBO).
OnAugust5,2008,WengenformedLEIHoldingsCooperatieU.A.andsubsidiaries(Cooperatie)throughanequityinfusion.
Cooperatie'ssubsidiaryLEIInternationalHoldings,B.V.(LIHBV)andLIHBV'ssubsidiariesincludingLaureateEducationAsiaLimited
(LaureateAsia),providedhighereducationprogramsandservicestostudentsthroughanetworkoflicensedinstitutionslocatedinthe
followingcountries:Australia,China,India,Indonesia,Malaysia,andThailand.LaureateAsiawasasistercompanytoLaureate,since
bothentitiesweresubsidiariesofWengen.OnDecember18,2013,theboardsofdirectorsofWengenandLaureateunanimouslyauthorized
atransactiontocombineLaureateandLaureateAsia.Accordingly,effectiveDecember20,2013,LIHBVtransferredtoWengen100%of
theissuedandoutstandingequityofLEICombinationHoldingsLimited,LIHBV'snewlyformedsubsidiaryandindirectparentof
LaureateAsia.EffectiveDecember23,2013,Wengentransferred100%oftheissuedandoutstandingequityofLEICombinationHoldings
LimitedtoLaureateinexchangeforapaymentofoneUnitedStatesDollar(USD).WeaccountedforthistransactionunderAccounting
StandardsCodification(ASC)80550155,"TransactionsBetweenEntitiesUnderCommonControl."Accordingly,theaccountsof
LaureateAsiaareretrospectivelyincludedintheLaureateConsolidatedFinancialStatements.OnOctober1,2015,weredomiciledin
Delawareasapublicbenefitcorporationasademonstrationofourlongtermcommitmenttoourmissiontobenefitourstudentsand
society.
Laureate'sprogramsareprovidedthroughinstitutionsthatarecampusbasedandinternetbased,orthroughelectronicallydistributed
educationalprograms(online).Oureducationalofferingsaredeliveredthroughfouroperatingsegments:LatinAmerica(LatAm),Europe
(Europe),Asia,MiddleEast&Africa(AMEA),andGlobalProductsandServices(GPS).LatAmhaslocationsinBrazil,Chile,CostaRica,
Honduras,Mexico,PanamaandPeruandhascontractualrelationshipswithalicensedinstitutioninEcuador.Europehaslocationsin
Cyprus,France,Germany,Italy,Morocco,Portugal,SpainandTurkey.TheAMEAsegmentconsistsofcampusbasedinstitutionswith
operationsinAustralia,China,India,Malaysia,NewZealand,SouthAfricaandThailand.AMEAalsomanages11licensedinstitutionsin
theKingdomofSaudiArabiaandmanagesoneadditionalinstitutioninChinathroughajointventurearrangement.TheGPSsegment
includesfullyonlinedegreeprogramsintheUnitedStatesofferedthroughWaldenUniversity,LLC,whichisaU.S.basedaccredited
institution,andthroughtheUniversityofLiverpoolandtheUniversityofRoehamptonintheUnitedKingdom.GPSalsoincludescampus
basedinstitutionslocatedinSpain,Switzerland,theUnitedKingdomandtheUnitedStates.TheGPSsegmentalsomanagesone
hospitalityandculinaryinstitutioninChinaandonehospitalityandculinaryinstitutioninJordanthroughjointventureandother
contractualarrangements.
Thesefinancialstatementsreflecta4to1reversestocksplitofourcommonstockthatweintendtoeffectpriortotheeffectivenessof
ourregistrationstatementonFormS1.
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NotestoConsolidatedFinancialStatements(Continued)
Note2.SignificantAccountingPolicies
ThepreparationoftheConsolidatedFinancialStatementsinconformitywithaccountingprinciplesgenerallyacceptedintheUnited
States(GAAP)requiresourmanagementtomakeestimatesandassumptionsthataffectthereportedamountsofassets,liabilities,revenues
andexpenses,andtherelateddisclosureofcontingentassetsandliabilities.Actualresultscoulddifferfromtheseestimates.
PrinciplesofConsolidationandInvestmentsinAffiliates
General
OurConsolidatedFinancialStatementsincludeallaccountsofLaureate,ourmajorityownedsubsidiaries,andeducational
institutionsthatarepartofournetworkand,althoughnotownedbyLaureate,areVIEspursuanttoASCTopic81010,"Consolidation."
AsofDecember31,2015,theLaureatenetworkincludes16VIEinstitutionsinninecountries.Laureatehasdetermineditisthe"primary
beneficiary"oftheseVIEs,assuchtermisdefinedinASC8101020,andhasconsolidatedthefinancialresultsofoperations,assetsand
liabilities,andcashflowsoftheseVIEsintheCompany'sConsolidatedFinancialStatements.Intercompanyaccountsandtransactions
havebeeneliminatedinconsolidation.
NoncontrollingInterests
Anoncontrollinginterestistheportionofasubsidiarythatisnotattributabletouseitherdirectlyorindirectly.Anoncontrolling
interestcanalsobereferredtoasaminorityinterest.Werecognizenoncontrollinginterestholders'shareofequityandnetincomeorloss
separatelyinNoncontrollinginterestsintheConsolidatedBalanceSheetsandNet(income)lossattributabletononcontrollinginterestsin
theConsolidatedStatementsofOperations.FortheVIEsinournetwork,wegenerallydonotrecognizeanoncontrollinginterest.A
noncontrollinginterestisonlyrecognizedwhenaVIE'seconomicsaresharedwithathirdparty(e.g.,whenthetransferorofthecontrolof
theVIEretainedaportionoftheeconomicsassociatedwithit).
TheVIEArrangements
countriesandtheyareoperatedincompliancewiththeirrespectivenotforprofitlegalregimes,webelievetheydonotmeetthedefinition
ofanotforprofitentityunderGAAP,andwetreatthemas"forprofit"entitiesforaccountingpurposes.Theseentitiesgenerallycannot
declaredividendsordistributetheirnetassetstotheentitiesthatcontrolthem.Webelievethatwefullycomplywithalllocallawsand
regulations.
UnderASCTopic81010,"Consolidation,"wehavedeterminedthattheseinstitutionsareVIEsandthatLaureateistheprimary
beneficiaryoftheseVIEsbecausewehave,asfurtherdescribedherein:(1)thepowertodirecttheactivitiesoftheVIEsthatmost
significantlyaffecttheireducationalandeconomicperformance,and(2)therighttoreceiveeconomicbenefitsfromcontractualandother
arrangementswiththeVIEsthatcouldpotentiallybesignificanttotheVIEs.WeaccountfortheacquisitionoftherighttocontrolaVIEin
accordancewithASC805.
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Note2.SignificantAccountingPolicies(Continued)
Aswithallofoureducationalinstitutions,theVIEinstitutions'primarysourceofincomeistuitionfeespaidbystudents,forwhichthe
studentsreceiveeducationalservicesandgoodsthatareproportionatetothepricescharged.LaureatemaintainscontroloftheseVIEs
throughitsrightstodesignateamajorityofthegoverningentities'boardmembers,throughwhichwehavethelegalabilitytodirectthe
activitiesoftheentities.LaureatemaintainsavariableinterestintheseVIEsthroughmutualcontractualarrangementsatmarketratesand
termsthatprovidethemwithnecessaryproductsandservices,and/orintellectualproperty,andhastheabilitytoenterintoadditionalsuch
contractualarrangementsatmarketratesandterms.WealsohavetheabilitytotransferourrightstogoverntheseVIEs,ortheentitiesthat
possessthoserights,tootherparties,whichcouldyieldareturnifandwhentheserightsaretransferred.
WegenerallydonothavelegalentitlementtodistributethenetassetsoftheVIEs.Generally,intheeventofliquidationorthesaleof
thenetassetsoftheVIEs,thenetproceedscanonlybetransferredeithertoanotherVIEinstitutionwithsimilarpurposesortothestate.In
theunlikelycaseofliquidationorasaleofthenetassetsoftheVIE,wemaybeabletoretaintheresidualvaluebynaminganother
LaureatecontrolledVIEresidentinthesamejurisdictionastherecipient,ifoneexistshoweverwegenerallycannotnameaforprofit
entityastherecipient.Moreover,becausetheinstitutiongenerallywouldberequiredtoprovideforthecontinuededucationofits
students,liquidationwouldnotbealikelycourseofactionandwouldbeunlikelytoresultinsignificantresidualassetsavailablefor
distribution.However,weoperateourVIEsasgoingconcernenterprises,maintaincontrolinperpetuity,andhavetheabilitytoprovide
additionalcontractualarrangementsforeducationalandotherservicespricedatuptomarketrateswithLaureatecontrolledservice
companies.Typically,wearenotlegallyobligatedtomakeadditionalinvestmentsintheVIEinstitutions.
Laureateforprofitentitiesprovidenecessaryproductsandservices,and/orintellectualproperty,toallinstitutionsintheLaureate
InternationalUniversitiesnetwork,includingtheVIEinstitutions,throughcontractualarrangementsatmarketratesandterms,whichare
accretivetoLaureate.Weperiodicallymodifytherateswechargeunderthesearrangementstoensurethattheyarepricedatorbelowfair
marketvalueandtoaddadditionalservices.Ifitisdeterminedthatcontractualarrangementswithanyinstitutionarenotonmarketterms,
itcouldhaveanadverseregulatoryimpactonsuchinstitution.Webelievethesearrangementsimprovethequalityoftheacademic
curriculumandthestudents'educationalexperience.Therearecurrentlyfourtypesofcontractualarrangements:(i)intellectualproperty
(IP)royaltyarrangements(ii)networkfeearrangements(iii)managementservicearrangementsand(iv)leasearrangements.
(i)
UndertheIProyaltyarrangements,institutionsintheLaureateInternationalUniversitiesnetworkpaytoLaureateroyalty
paymentsfortheuseofLaureate'stradenameandbestpracticepoliciesandprocedures.
(ii)
InstitutionsintheLaureateInternationalUniversitiesnetworkgainaccesstoothernetworkresources,includingacademic
content,supportwithcurriculumdesign,onlineprograms,professionaldevelopment,studentexchangeandaccesstodual
degreeprograms,throughnetworkfeearrangementswherebytheinstitutionspaystipulatedfeestoLaureateforsuchaccess.
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(iii)
InstitutionsintheLaureateInternationalUniversitiesnetworkcontractwithLaureateandpayfeesundermanagement
servicesagreementsfortheprovisionofsupportandmanagerialservicesincludingaccesstomanagement,legal,tax,
finance,accounting,treasuryandotherservices,whichinsomecasesLaureateprovidesthroughsharedservice
arrangementsincertainjurisdictions.
(iv)
Laureateforprofitentities,includingforprofitentitiesinwhichtheVIEsareinvestors,ownvariouscampusrealestate
propertiesandhaveenteredintolongtermleasecontractswiththerespectiveinstitutionsintheLaureateInternational
Universitiesnetwork,wherebytheypaymarketbasedrentsfortheuseofthepropertiesintheconductoftheireducational
operations.
RevenuesrecognizedbyLaureate'sforprofitentitiesfromthesecontractualarrangementswithourconsolidatedVIEswere
approximately$106,005,$113,500and$111,580fortheyearsendedDecember31,2015,2014and2013,respectively.Theserevenuesare
eliminatedinconsolidation.
Underouraccountingpolicy,weallocatealloftheincomeorlossesoftheseVIEstoLaureateunlessthereisanoncontrollinginterest
wheretheeconomicsoftheVIEaresharedwithathirdparty.TheincomeorlossesoftheseVIEsallocatedtoLaureaterepresentthe
earningsafterdeductingchargesrelatedtocontractualarrangementswithourforprofitentitiesasdescribedabove.Webelievethatthe
incomeremainingattheVIEsafterthesechargesaccretesvaluetoourrightstocontroltheseentities.
Laureate'sVIEsaregenerallyexemptfromincometaxes.Asaresult,theVIEsgenerallydonotrecorddeferredtaxassetsorliabilities
orrecognizeanyincometaxexpenseintheConsolidatedFinancialStatements.Nodeferredtaxesarerecognizedbytheforprofitservice
companiesfortheremainingincomeintheseVIEsasthelegalstatusoftheseentitiesgenerallypreventsthemfromdeclaringdividendsor
makingdistributionstotheirsponsors.However,theseforprofitservicecompaniesrecordincometaxesrelatedtorevenuesfromtheir
contractualarrangementswiththeseVIEs.
RisksinrelationtotheVIEs
WebelievethatalloftheVIEinstitutionsintheLaureatenetworkareoperatedinfullcompliancewithlocallawandthatthe
contractualarrangementswiththeVIEsarelegallyenforceablehowever,theseVIEsaresubjecttoregulationbyvariousagenciesbasedon
therequirementsoflocaljurisdictions.Theseagencies,aswellaslocallegislativebodies,reviewandupdatelawsandregulationsasthey
deemnecessaryorappropriate.Wecannotpredicttheformofanylawsthatmaybeenacted,orregulationsthatultimatelymaybeadopted
inthefuture,orwhateffectstheymighthaveonourbusiness,financialcondition,resultsofoperationsandcashflows.Iflocallawsor
regulationsweretochange,iftheVIEswerefoundtobeinviolationofexistinglocallawsorregulations,oriftheregulatorswereto
questionthefinancialsustainabilityoftheVIEsand/orwhetherthecontractualarrangementswereatfairvalue,localgovernmentagencies
could,amongotheractions:
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voidorrestrictrelatedpartytransactions,suchasthecontractualarrangementsbetweenLaureateandtheVIEinstitutions
imposefinesthatsignificantlyimpactbusinessperformanceorotherrequirementswithwhichtheVIEsmaynotbeableto
comply
requireLaureatetochangetheVIEs'governancestructures,suchthatLaureatewouldnolongermaintaincontrolofthe
activitiesoftheVIEsor
disallowatransferofourrightstogoverntheseVIEs,ortheentitiesthatpossessthoserights,toathirdpartyfor
consideration.
Laureate'sabilitytoconductourbusinesswouldbenegativelyaffectediflocalgovernmentsweretocarryoutanyofthe
aforementionedorothersimilaractions.Inanysuchcase,LaureatemaynolongerbeabletoconsolidatetheVIEs.
SelectedConsolidatedStatementsofOperationsinformationfortheseVIEswasasfollows,netofthechargesrelatedtotheabove
describedcontractualarrangements:
2015
Revenues,bysegment:
LatAm
Europe
AMEA
Revenues
LatAm
Europe
AMEA
Netincome(loss)
Netincome(loss)attributabletoLaureate
Education,Inc.
2014
417,711
128,605
136,051
682,367
53,019
(14,778)
13,591
9,249
8,062
11,760
2013
458,080
130,353
139,146
727,579
54,821
(50,028)
(11,243)
4,386
(56,885)
(51,471)
$ 566,154
115,800
93,690
775,644
50,159
21,728
8,660
2,756
33,144
41,111
11,538 (50,941)
41,061
IncludedinNetincome(loss)fortheVIEsinthetableaboveisnonoperatinginvestmentincomethatwasrecordedbythreeofthe
Chileaninstitutionsrelatingtoinvestmentsthattheseinstitutionshaveinaforprofit,educationrelatedrealestatesubsidiaryofLaureate
inChile.Thisnonoperatinginvestmentincome,whicheliminatedinconsolidation,totaled$10,297,$11,981and$11,021fortheyears
endedDecember31,2015,2014and2013,respectively.Also,ofLaureate'simpairmentchargesof$125,788and$33,582fortheyears
endedDecember31,2014and2013,respectively,$47,965and$1,987relatedtotheVIEs.In2014,theimpairmentchargesrelatedtoVIE
institutionswereallwithintheLatAmsegment.In2013,theimpairmentchargesallrelatedtoVIEinstitutionswithintheAMEAsegment.
SeeNote7,GoodwillandOtherIntangibleAssets,forfurtherdiscussionoftheimpairmentchargesrecorded.
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ThefollowingtablereconcilestheNetincome(loss)attributabletoLaureateEducation,Inc.aspresentedinthetableabove,tothe
amountsinourConsolidatedStatementsofOperations:
2015
Education,Inc.:
Otheroperations
2013
$ 11,538 $ (50,941)
118,001 291,212
(445,787) (398,562)
$ (316,248) $ (158,291)
$ 41,061
211,742
(322,481)
$ (69,678)
2014
ThefollowingtablepresentsselectedassetsandliabilitiesoftheconsolidatedVIEs.ExceptforGoodwill,theassetsinthetablebelow
creditorsoftheVIEsdonothaverecoursetothegeneralcreditofLaureate.
SelectedConsolidatedBalanceSheetamountsfortheseVIEswereasfollows:
BalanceSheetsdata:
Othercurrentassets
Totalcurrentassets
Goodwill
Tradenames
Otherlongtermassets
Totalassets
Totalliabilities
Totalstockholders'equityattributableto
December31,2015
VIE
Consolidated
December31,2014
VIE
Consolidated
$ 120,944 $ 458,673 $ 122,712 $ 461,584
186,099
677,011
192,867
691,854
307,043 1,135,684
315,579 1,153,438
196,869 2,115,897
256,668 2,469,795
104,952 1,361,125
118,652 1,461,762
25
52,197
284
93,064
738,019 2,774,213
758,377 3,180,065
1,346,908 7,439,116 1,449,560 8,358,124
305,067 1,548,183
388,588 1,669,315
150,306 5,483,761
116,742 5,588,385
455,373 7,031,944
505,330 7,257,700
891,535
355,426
944,230 1,056,548
874,610
324,759
920,073 1,017,068
TheVIEs'CashandcashequivalentsbalancesaregenerallyrequiredtobeusedonlyforthebenefitoftheoperationsoftheseVIEs.
ThesebalancesareincludedinCashandcashequivalentsinourConsolidatedBalanceSheets.
Asaconsequenceofstudentprotestsandpoliticaldisturbancesduring2011and2012,theformerChileangovernmentannounced
severalproposedreformstothehighereducationsystem.Thereforms,ifadopted,couldhaveincludedchangingthecurrentaccreditation
systemtomakeitmoredemanding,revisingthestudentfinancingsystemtoprovideasinglefinancingsystemforstudentsinallhigher
educationinstitutions(replacingthegovernmentsponsoredstudentfinancingprogramknownasthe
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CrditoconAvaldelEstado,theCAEProgram),establishingasystemofinformationtransparencyforhighereducation,creatingan
agencytopromoteaccountabilitybyhighereducationinstitutions,changingcertaincorporategovernancerulesforuniversities(suchas
theneedforaminimumnumberofindependentdirectors),andestablishingproceduresfortheapprovaloftransactionsbetweenhigher
educationinstitutionsandrelatedparties.OtherlegislativereformswerepromotedbymembersoftheChileanCongressbutwerenot
supportedbythepreviousChileangovernment,includingproposalstorestrictrelatedpartytransactionsbetweenhighereducation
institutionsandentitiesthatcontrolthem.InNovemberandDecember2013,Chileheldnationalelections.Thepresidentialelectionwas
wonbyformerpresidentMichelleBachelet,whoassumedofficeonMarch11,2014,andapoliticalcoalitionledbyMs.Bacheletwonthe
electionsforbothhousesoftheChileanCongress,ineachcaseforthefouryearsstartingMarch11,2014.Althoughtheelectionplatform
ofthenewgovernmentmentionedthatstrongerregulationofhighereducationwasrequired,itdidnotcontainspecificcommitmentswith
respecttotheabovementionedreforms,otherthanthecreationofaspecialagencytooverseehighereducationinstitutions'compliance
withlawandregulations.Inthesecondquarterof2014,thenewgovernmentannouncedthewithdrawalofalloftheprioradministration's
highereducationproposalsanditsintenttosubmitnewbillstotheChileanCongress.
OnJuly14,2015,theMinistryofEducationpublishedonitswebsitea"workingdocument"(DocumentodeTrabajo)entitled"Bases
forReformtotheNationalSystemofHigherEducation",inwhichitsetoutaproposedframeworkforthehighereducationlegislationthat
itisconsideringintroducingandrequestedpubliccommentontheproposalsnotlaterthanAugust20,2015.Theprincipalelementsofthe
proposalincludeanewregulatoryframeworkforhighereducation(includingaSuperintendencyofHigherEducation),amandatory
commonadmissionsprocessforallhighereducationinstitutions,amandatoryunifiedaccreditationsystemforallinstitutionsand
programs,anewpublicfinancingsystemwiththeultimategoalofprovidingfreetuitionforallundergraduatestudentsatqualifying
highereducationinstitutionsthatchoosetoparticipate,andaprohibitiononrelatedpartytransactions.Inorderforahighereducation
institutiontobeeligibleforitsundergraduatestudentstoreceivefreetuition,amongotherthings,theinstitutionwouldhavetobe
organizedasanotforprofitentity,nothaveanyforprofitentitiesasmembersorsponsorsoftheinstitution,andownaspecified
percentageofitsfixedassets(whichpercentagehasnotyetbeenspecified).TheproposalsdescribedintheDocumentodeTrabajohave
notbeentransformedintoalegislativeproposalandwecannotpredictwhetheranylegislativeproposalthattheMinistryofEducation
introduceswouldcontainanyoralloftheseterms,orthattheChileanCongresswouldenactanysuchlegislativeproposal.However,if
theseproposals,orotherreformproposalsthatmaybemade,weretobeenacted,itcouldhaveamaterialadverseeffectonourresultsof
operationsandfinancialcondition.
OnNovember27,2015,theChileanCongresspassedthe2016budgetlaw(theBudgetLaw).BymeansoftheBudgetLaw,the
administrationsoughttoimplementapolicytograntfreeaccesstohighereducationtostudentsfromthefirstfiveincomedecileswho
attendcertainuniversitiesortechnicalvocational(tech/voc)institutions.Foruniversitystudents,theBudgetLawwouldhaverequired
themtobeenrolledinuniversitiesthateitheraremembersoftheConsejodeRectoresdelasUniversidadesChilenas(theCRUCh)orare
privateuniversitiesthatarenotmembersoftheCRUChthat,onSeptember30,2015,metthefollowingrequirements:(a)beingaccredited
forfouryearsormore(b)notbeingrelatedtoforprofitlegalentitiesand(c)havingarepresentativeofthestudentsornonacademic
personnelasamemberoftheirgoverningbody.Fortech/vocstudents,theBudget
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Lawwouldhaverequiredthemtobeenrolledininstitutionsorganizedasnotforprofitlegalentitiesthatwereaccreditedforfourormore
years.
OnDecember21,2015,theConstitutionalTribunal(CT)declaredportionsoftheBudgetLawdealingwithhighereducation
institutionstobeunconstitutional,inparticularthoseportionsthatwouldrequirestudentstoattendinstitutionswithspecific
characteristicsinordertoobtainfreetuitionas,undertheChileanConstitution,thatwouldconstitutearbitrarydiscriminationaffecting
studentswhoareinthesameeconomiccondition.
However,afewhoursbeforetheCTpublishedthetextofitsdecision,theadministrationsubmittedtotheChileanCongressabill
modifyingtheBudgetLawthatestablishesdifferentconditionstoaccessfreehighereducation(theleycortaorShortLaw).TheShortLaw
wasapprovedbyCongresstwodaysafteritssubmission,onDecember23,2015,andpublishedonDecember26,2015.TheShortLawis
UndertheShortLaw,foruniversitystudentstobeeligibleforfreetuition,theymustcomefromthefirstfiveincomedecilesandenroll
eitherinaStateowneduniversityorinaprivateuniversitythatonDecember27,2015wasaccreditedforatleastfouryearsandcontrolled
byindividualsornotforprofitlegalentities.TheShortLawexcludestech/vocstudentsfromeligibilityforfreetuitionin2016.However,
theShortLawprovidesthatfreetuitionfortech/vocstudentswillbeimplementedwithinthreeyearsprovidedthattheyattendtech/voc
institutionsthatareaccreditedforatleastfouryearsandareorganizedasnotforprofitlegalentities.TheShortLawprovidedthat
tech/vocinstitutionsthatarecurrentlyorganizedasforprofitentitiesshould,notlaterthanDecember27,2015,statetheirintentionto
reorganizeasnotforprofitentitiesinordertobeeligibletoparticipateinthefreetuitionprogramwhenitisimplemented.
participateinthefreetuitionprogram,theShortLawmodifiedtheallocationsoftheNuevoMilenioScholarship(NMS).TheShortLaw
dividedthisscholarshipprogramintothreeparts:(i)NMSI,whichgrantsstudentswhometcertainpersonalconditionsscholarshipsofup
toChileanPeso(CLP)600peryear(ii)NMSII,whichgrantsstudentsscholarshipsofuptoCLP850peryear,providedthestudentscome
fromthefirstfiveincomedecilesandthetech/vocinstitutioninwhichtheyareenrolledisorganizedasanotforprofitlegalentityor,if
thetech/vocinstitutionisnotsoorganized,theinstitutionhasstatedinwritingitsintentiontobecomeanotforprofitentityandtobe
accreditedand(iii)NMSIII,whichgrantsstudentsscholarshipsofuptoCLP900peryear,providedthatsuchstudentsandtheinstitution
inwhichtheyenrollmeettherequirementsforNMSIIandthetech/vocinstitutionis,onDecember31,2015,accreditedforfouryearsor
more.
TheChileanuniversitiesandtech/vocinstitutionsintheLaureateInternationalUniversitiesnetworkdonotmeeteachofthesetests,
sostudentsattheseinstitutionswillnotbeeligibleforfreetuitionorNMSIIorNMSIIIscholarshipsundertheShortLaw.Itispossible
thattheprovisionsoftheShortLawcouldhaveamaterialadverseeffectonourresultsofoperationsandfinancialcondition.
TheChileangovernmenthasalsoannouncedthatitintendstosubmithighereducationreformlegislationduringthefirsthalfof2016,
whichmayincludemakingpermanenttheprovisionsoftheShortLawaswellasotherprovisions,suchasthecreationofa
SuperintendencyofHigherEducation.Weanticipatethatanysuchproposedlegislationwould,ifadopted,introducesignificantchanges
tothe
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regulatoryenvironmentforhighereducationinChileandcouldhaveamaterialadverseeffectonourresultsofoperationsandfinancial
condition.
TheChileanCongressalsorecentlyapprovedlegislationthatprovidesfortheappointmentofaprovisionaladministratororclosing
administratortohandletheaffairsoffailinguniversitiesoruniversitiesfoundtohavebreachedtheirbylaws.Inaddition,theChilean
Congresshasrecentlyapprovedlegislationthatwouldpermit,butnotrequire,universitiesandtechnical/vocationalinstitutestoinclude
intheirbylawsprovisionscontemplatingtheparticipationofstudents,professorsandemployeesinthegovernanceoftheinstitution.
economicgroups.TheinvestigativecommitteereferreditsreporttotheMinistryofEducationandtothePublicProsecutorofChileto
determinewhethertherehasbeenanyviolationofthelaw.ThePublicProsecutorappointedaregionalprosecutortoinvestigatewhether
anycriminalchargesshouldbebroughtforallegedviolationsofthelawsonhighereducationand,morethanthreeyearslater,nocharges
havebeenbroughtbytheregionalprosecutoragainstanyinstitutionsintheLaureateInternationalUniversitiesnetwork.OnJuly19,
2012,theChileanChamberofDeputiesrejectedthereportoftheinvestigativecommittee.InDecember2012,inlightofthecriminal
prosecutionoftheformerpresidentoftheNationalAccreditationCommissionforallegedbribery,theChileanChamberofDeputies
mandateditsEducationCommissiontobeaninvestigativecommitteeregardingthefunctioningoftheNationalAccreditation
Commission,especiallywithrespecttocompliancewiththeNationalAccreditationCommission'sdutytooverseehighereducation
entities.TheEducationCommissiondeliveredareport,whichwasapprovedbytheChamberofDeputiesonOctober1,2013,containing
severalrecommendationstoimproveregulationofthehighereducationaccreditationsystem.Additionally,theChileanChamberof
Deputiesapprovedthecreationofaspecialinvestigativecommitteetoresumetheinvestigationofhighereducationperformedbythe
investigativecommitteethatissuedtheJune2012reportthatwaspreviouslyrejectedbytheChamberofDeputies.OnJanuary15,2014,
thatinvestigativecommitteeapprovedanewreportrecommending,amongotherthings,improvementstotheChileanhighereducation
systemregulations,amendmentstothehighereducationfinancingsystem,particularlytheCAEProgram,impositionofcriminalpenalties
forviolationoftherequirementthatuniversitiesbenotforprofit,andsupportoflegislationthatwouldprohibitrelatedpartytransactions,
prohibitthetransferofcontrolofuniversities,andrequireuniversitiestohaveindependentboardmembers.Thereportwasapprovedby
thefullChamberofDeputiesonApril1,2014.
OnFebruary18,2014,theMinistryofEducationdisclosedthatonNovember15,2013andFebruary11,2014,ithadinitiatedinternal
investigationsintoUniversidaddeLasAmricasChile(UDLAChile)andUniversidadAndrsBello(UNABChile),respectively.The
investigationswereinitiateduponreferralsfromtheNationalEducationCouncilandtheNationalAccreditationCommission,whichhad
conveyedtotheMinistryofEducationtheirconcernsregardingcertainagreementsenteredintobyUDLAChileandUNABChilewith
theircontrollingentities,including
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concernsabouttheamountandrealusemadebytheuniversitiesoftheservicesprovidedunderthoseagreements.Theinvestigationsare
aninitialstepbytheMinistryofEducationtodeterminewhethertheMinistryshouldbeginformalsanctionproceedingsagainstthe
universities.TheMinistryofEducationalsodisclosedthatithaddeliveredrelevantdocumentationonthemattertothePublicProsecutor.
InJanuary2016,theMinistryofEducationannouncedthatithadclosedtheinvestigationintoUNAB.
WhilewebelievethatallofourinstitutionsinChileareoperatinginfullcompliancewithChileanlaw,wecannotpredicttheextentor
outcomeofanyeducationalreformsthatmaybeimplementedinChile,whethertheMinistryofEducationorthePublicProsecutorwill
takeanyactioninresponsetothereportsoftheChamberofDeputiesinvestigativecommittees,orwhatoutcomemayresultfromany
investigationsundertakenbytheMinistryofEducationorPublicProsecutorinresponsetothereferralsfromtheNationalEducation
CouncilandNationalAccreditationCommission.
TheNationalSystemofQualityAssuranceinHigherEducationisalawthatestablishesasystemofinstitutionalaccreditationanda
processofaccreditationofcoursesofstudyorprograms.TheNationalAccreditationCommissionisanautonomousentitythatdelivers
opinionsontheinstitutionalaccreditationofhighereducationinstitutionsandauthorizestheprivateagenciesinchargeofaccreditation.
InstitutionalaccreditationisrequiredfornewstudentstobeeligibletoparticipateintheCAEProgram.OnOctober17,2013,UDLAChile
wasnotifiedbytheNationalAccreditationCommissionthatitsinstitutionalaccreditationwouldnotberenewed.UDLAChileappealed
thisdecisionbutreceivedafinaldeterminationthattheappealwasdeniedonJanuary22,2014.UDLAChilebegananewaccreditation
processduringthelastquarterof2015.SeealsoNote25,SubsequentEvents.
Affiliates
WhenLaureateexercisessignificantinfluenceoveranaffiliatedentity,butdoesnotcontroltheentity,weaccountforourinvestments
usingtheequitymethodofaccounting.Significantinfluenceoccursgenerallythroughownership,directlyorindirectly,ofatleast20%
andupto50%ofthevotinginterests.Undertheequitymethodofaccounting,Laureaterecordstheproportionateshareofthese
investmentsinOtherassetsintheConsolidatedBalanceSheets.Ourproportionateshareofincomeorlossrelatedtotheseinvestmentsis
recordedinEquityinnetincome(loss)ofaffiliates,netoftax,intheConsolidatedStatementsofOperations.
Equityinvestmentsinwhichwedonotexercisesignificantinfluence,generallythroughownershipoflessthan20%ofthevoting
rights,areaccountedforusingthecostmethodofaccounting.Underthecostmethodofaccounting,theinvestmentiscarriedatcostonthe
ConsolidatedBalanceSheetsinOtherassetsandincomeisrecognizedwhendividendsarereceived.
Impairmentsarerecognizedforanequityorcostmethodinvestmentwhenandiftheinvestmentsuffersanotherthantemporary
declineinvalue.Atthattime,theinvestmentisadjustedtoitsnewfairvalue,andthedifferenceisrecognizedasalossinourConsolidated
StatementsofOperations.Forequitymethodinvestments,thisimpairmentlossisincludedinEquityinnetincome(loss)ofaffiliates,net
oftax.
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BusinessCombinations
EffectiveJanuary1,2009,LaureateadoptedtheaccountingguidanceforbusinesscombinationsasprescribedbyASC805,"Business
Combinations."Whenwecompleteabusinesscombination,alltangibleandidentifiableintangibleassetsacquiredandallliabilities
assumedarerecordedatfairvalue.Anyexcesspurchasepriceisrecordedasgoodwill.Transactioncostsassociatedwithbusiness
combinationsareexpensedasincurred.IfLaureateacquireslessthan100%ofanentity(apartialacquisition)andconsolidatestheentity
uponacquisition,allassetsandliabilities,includingnoncontrollinginterests,arerecordedattheirestimatedfairvalue.Whenapartial
acquisitionresultsinLaureateobtainingcontrolofanentity,Laureateremeasuresanypreviouslyexistinginvestmentintheentityatfair
valueandrecordsagainorloss.PartialacquisitionsinwhichLaureate'scontroldoesnotchangeareaccountedforasequitytransactions.
RevenuesandtheresultsofoperationsoftheacquiredbusinessareincludedintheaccompanyingConsolidatedFinancialStatements
commencingonthedateofacquisition.
Duringeachoftheyearspresented,Laureateacquiredbusinessesthatwereaccountedforusingtheacquisitionmethodofaccounting.
Certainacquisitionsrequirethepaymentofcontingentamountsofpurchaseconsiderationifspecifiedoperatingresultsareachievedin
periodssubsequenttotheacquisitiondate.ForacquisitionsconsummatedonorafterJanuary1,2009,werecordsuchcontingent
considerationatfairvalueontheacquisitiondate,withsubsequentadjustmentsrecognizedinDirectcostsinourConsolidatedStatements
ofOperations.Weclassifythesubsequentcashpaymentsofcontingenciesthatarerecordedattheacquisitiondatewithinfinancing
activitiesintheConsolidatedStatementsofCashFlows.Contingentconsiderationarrangementsrelatedtoacquisitionsconsummated
priortoJanuary1,2009resultinadditionalgoodwillbeingrecordeduponsettlementoftheunderlyingcontingencies,withthesettlement
ofthesecontingenciesbytransferofcashclassifiedwithininvestingactivitiesintheConsolidatedStatementsofCashFlows.
Laureategenerallyobtainsindemnificationfromthesellersofthehighereducationinstitutionsuponacquisitionforvarious
contingentliabilitiesthatmayariseandarerelatedtopreacquisitioneventsinordertoprotectitselffromeconomiclossesarisingfrom
suchexposures.PriortoJanuary1,2009,wedidnotrecordindemnificationassetsrelatedtoanyliabilitiesrecordedaspartofthepurchase
priceallocation.Instead,anindemnificationassetwasrecordedwhenthesellerwasobligatedtomakeapaymentunderthe
indemnificationandtheamountwasdeterminedtobereasonablyassuredofcollection.Incasesinwhichthecontingentliabilitywas
extinguishedforanamountlessthanoriginallyestablishedortherelatedstatuteoflimitationslapsessuchthatthecontingentamountwas
nolongerrequiredtobepaid,theremainingliabilitywasreversed,andanydifferencebetweentheliability'scarryingvalueandsettlement
amountwasrecognizedinourConsolidatedStatementsofOperations.
ForacquisitionsconsummatedonorafterJanuary1,2009,werecognizeanindemnificationassetatthesametimeandonthesame
basisastherelatedindemnifieditem,subjecttoanycontractuallimitationsandtotheextentthatcollectionisreasonablyassured,in
accordancewithASC805.Insubsequentperiods,changesintheindemnifieditemareoffsetbychangesintheindemnificationasset.We
assesstherealizabilityoftheindemnificationassetseachreportingperiod.However,changesinuncertainincometaxpositionsare
recordedasacomponentofIncometax(expense)benefit,whilerelatedchangestotheindemnificationassetareincludedinOperating
incomeintheConsolidatedStatementsofOperations.
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Incertaincases,Laureateinitiallypurchasesamajorityownershipinterestinacompanyandusesvariousputandcallarrangements
withthenoncontrollinginterestholdersthatrequireorenableustopurchasealloraportionoftheremainingminorityownershipatalater
date.ThenatureoftheseMinorityPutArrangementsandouraccountingfortheredeemablenoncontrollinginterestsarediscussedbelow.
MinorityPutArrangements
MinorityPutArrangementsgivenoncontrollinginterestholderstherighttorequireLaureatetopurchasetheirshares(i.e.,Putoption).
ThePutoptionpriceisgenerallyestablishedbymultiplyinganagreeduponearningsmeasurementoftheacquiredcompanybya
negotiatedfactorwithinaspecifiedtimeframe.Thefutureearningsmeasurementisbasedonanagreeduponsetofrulesthatarenot
necessarilyconsistentwithGAAP,whichwerefertoas"nonGAAPearnings."
LaureateaccountsforalloftheseMinorityPutArrangementsastemporaryequityinanaccountpresentedbetweenliabilitiesand
equitycalledRedeemablenoncontrollinginterestsandequityontheConsolidatedBalanceSheets.Thisclassificationisappropriate
becausetheinstrumentsarecontingentlyredeemablebasedoneventsoutsideLaureate'scontrol.Thisaccountingtreatmentisin
accordancewithASC48010S99,"DistinguishingLiabilitiesfromEquity."
Redeemablenoncontrollinginterestsareaccretedtotheirredemptionvalue(Putvalue)overtheperiodfromthedateofissuancetothe
firstdateonwhichthePutoptionisexercisable.ThechangeinPutvalueisrecordedagainstAdditionalpaidincapitalsinceLaureatehas
anAccumulateddeficit.IfLaureatehadretainedearnings,thenthechangeinPutvaluewouldberecordedagainstretainedearnings.Ina
computationofearningspershare,theaccretionofredeemablenoncontrollingintereststotheirredemptionvaluewouldbeareductionof
earningsavailabletocommonstockholders.
ForeignCurrencyTranslationandTransactionGainsandLosses
TheUSDisthefunctionalcurrencyofLaureateandoursubsidiariesoperatingintheUnitedStates.Oursubsidiaries'financial
statementsaremaintainedintheirfunctionalcurrencies.Thefunctionalcurrencyofeachofourforeignsubsidiariesisthecurrencyofthe
economicenvironmentinwhichthesubsidiaryprimarilydoesbusiness.Ourforeignsubsidiaries'financialstatementsaretranslatedinto
USDusingtheexchangeratesapplicabletothedatesofthefinancialstatements.AssetsandliabilitiesaretranslatedintoUSDusingthe
periodendspotforeignexchangerates.Incomeandexpensesaretranslatedattheweightedaverageexchangeratesineffectduringthe
period.Equityaccountsaretranslatedathistoricalexchangerates.Theeffectsofthesetranslationadjustmentsarereportedasacomponent
ofAccumulatedothercomprehensiveincome(loss)includedintheConsolidatedStatementsofStockholders'Equity.
Laureatehascertainintercompanyloansthataredeemedtohavethecharacteristicsofalongterminvestment.Thatis,thesettlement
oftheintercompanyloanisnotplannedoranticipatedintheforeseeablefuture.Transactiongainsandlossesrelatedtothesetypesof
loansarerecordedasacomponentofAccumulatedothercomprehensiveincome(loss)includedintheConsolidatedStatementsof
Stockholders'Equity.Transactiongainsandlossesrelatedtoallotherintercompanyloans
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areincludedinForeigncurrencyexchangegain(loss),netintheConsolidatedStatementsofOperations.
Foranytransactionthatisinacurrencydifferentfromtheentity'sfunctionalcurrency,Laureaterecordsagainorlossbasedonthe
differencebetweentheexchangerateatthetransactiondateandtheexchangerateatthetransactionsettlementdate(orrateatperiodend,
ifunsettled)asForeigncurrencyexchangegain(loss),netintheConsolidatedStatementsofOperations.
CashandCashEquivalents
Laureateconsidersallhighlyliquidinvestmentsthatarepurchasedwithanoriginalmaturityofthreemonthsorlesstobecash
equivalents.
TheDepartmentofEducationoftheHunanProvinceinChinaconsidersitprudentforuniversitiesinHunantodemonstratethatthey
haveadequatecashtomeetoperationalneedsfortheremainderoftheacademicyear.Althoughthereisnoformalruleorlaw,itis
customarytoretainontheuniversity'syearendbalancesheetapproximately25%ofthecashreceivedfromtheSeptemberenrollment
cycle.ItistheCompany'spositionthatthisisnotarestrictedcashrequirementandthereforethiscashhasbeenclassifiedasCashandcash
equivalentsontheCompany'sConsolidatedBalanceSheets.
RestrictedCashandInvestments
Laureate'sUnitedStatesinstitutionsparticipateintheUnitedStatesDepartmentofEducation(DOE)TitleIVstudentfinancing
assistancelendingprograms(TitleIVprograms).Restrictedcashandinvestmentsincludescashequivalentsandshortterminvestments
heldtocollateralizestandbylettersofcreditinfavoroftheDOE.LettersofcreditarerequiredbytheDOEinordertoallowourUnited
StatesinstitutionstoparticipateintheTitleIVprogram.Inaddition,Laureatemayhaverestrictedcashinescrowpendingpotential
acquisitiontransactions,holdaUnitedStatesdepositforaletterofcreditinlieuofasuretybond,orotherwisehavecashthatisnot
immediatelyavailableforuseincurrentoperations.
FinancialInstruments
Laureate'sfinancialinstrumentsconsistofcashandcashequivalents,restrictedcash,accountsandnotesreceivable,otherreceivables,
accountspayable,amountsduetoshareholdersofacquiredcompanies,derivativeinstruments,debt,capitalleaseobligations,and
redeemablenoncontrollinginterestsandequity.Exceptfordebt,asdiscussedinNote9,Debt,thefairvalueofthesefinancialinstruments
approximatestheircarryingamountsreportedintheConsolidatedBalanceSheets.Additionalinformationaboutfairvalueisprovidedin
Note20,FairValueMeasurement.
Ourcashaccountsaremaintainedwithhighqualityfinancialinstitutionswithnosignificantconcentrationinanyoneinstitution.Our
accountsreceivablearenotconcentratedwithanyonesignificantcustomer.OurUnitedStatesinstitutionsparticipateintheDOETitleIV
programandcertainChileaninstitutionsintheLaureatenetworkparticipateinagovernmentsponsoredstudentfinancingprogramknown
astheCAEProgram.Duringthecourseoftheyear,LaureatecouldhavematerialreceivablesrelatedtoTitleIVandtheCAEProgram.
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AccountsandNotesReceivable
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AccountsandNotesReceivable
Werecognizestudentreceivableswhenanacademicsessionbegins,althoughstudentsgenerallyenrollincoursespriortothestartof
theacademicsession.Receivablesarerecognizedonlytotheextentthatamountsaredueandcollectionisreasonablyassured.
Laureateofferslongtermfinancingthroughnotereceivableagreementswithstudentsatcertainofourinstitutions.Thesenotes
receivablegenerallyarenotcollateralized.Noninterestbearing,longtermstudentreceivablesarerecordedatpresentvalueusinga
discountrateapproximatingtheunsecuredborrowingrateforanindividual.Differencesbetweenthepresentvalueandtheprincipal
amountoflongtermstudentreceivablesareaccretedthroughInterestincomeovertheirterms.Certainofourinstitutionshavesoldcertain
longtermstudentreceivablestolocalfinancialinstitutions.Thesetransactionsweredeemedsalesofreceivablesandthereceivableswere
derecognizedfromourConsolidatedBalanceSheets.
CertainChileaninstitutionsintheLaureatenetworkalsoparticipateintheCAEProgram.Inthisprogram,theseinstitutionsprovide
guaranteestothirdpartyfinancinginstitutionsfortuitionloansmadetoqualifyingstudents.RefertoNote11,Commitmentsand
Contingencies,forfurtherdiscussionofthisprogram.
AllowanceforDoubtfulAccounts
Receivablesaredeemedtobeuncollectiblewhentheyhavebeenoutstandingfortwoyears,orearlierwhencollectioneffortshave
ceased,atwhichtimetheyarewrittenoff.Priortothat,Laureaterecordsanallowancefordoubtfulaccountstoreduceourreceivablesto
theirnetrealizablevalue.Ourallowanceestimationmethodologyisbasedontheageofthereceivables,thestatusofpastdueamounts,
historicalcollectiontrends,currenteconomicconditions,andstudentenrollmentstatus.Intheeventthatcurrentcollectiontrendsdiffer
fromhistoricaltrends,anadjustmentismadetotheallowanceaccountandbaddebtexpense.
PropertyandEquipment,andLeasedAssets
Propertyandequipmentincludesland,buildings,furniture,equipment,software,librarybooks,leaseholdimprovements,and
constructioninprogress.Werecordpropertyandequipmentatcostlessaccumulateddepreciationandamortization.Softwarethatis
developedforinternaluseisclassifiedwithinthelineitemtitledFurniture,equipmentandsoftwareinourConsolidatedBalanceSheets.
Repairsandmaintenancecostsareexpensedasincurred.AssetsunderconstructionarerecordedinConstructioninprogressuntiltheyare
availableforuse.Interestiscapitalizedasacomponentofthecostofprojectsduringtheconstructionperiod.
Weconductasignificantportionofouroperationsatleasedfacilities.Laureateanalyzeseachleaseagreementtodeterminewhetherit
shouldbeclassifiedasacapitaloranoperatinglease.Werecognizeoperatingleaserentexpenseonastraightlinebasisovertheexpected
termofeachlease.Insomeinstances,weenterintoarrangementsinwhichthelandlordwillconstructrealestateassetstobeusedforour
businessoperations.Insomecases,weareresponsibleforconstructioncostoverrunsornonstandardtenantimprovements.Laureate
reviewstheseleasestodeterminewhetherwebearsubstantiallyalloftheconstructionperiodrisksand,therefore,shouldbeconsideredfor
accounting
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purposestobethe"owner"oftherealestateproject.Ifwearedeemedtobetheownerwearerequiredtocapitalizetheconstructioncosts
onourConsolidatedBalanceSheet.Uponcompletionoftheproject,weperformasaleleasebackanalysispursuanttoguidanceon
accountingforleasestodetermineifwecanremovetheassetsfromourConsolidatedBalanceSheet.Forsomeoftheseleases,weare
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accountingforleasestodetermineifwecanremovetheassetsfromourConsolidatedBalanceSheet.Forsomeoftheseleases,weare
consideredtohave"continuinginvolvement,"whichprecludesusfromderecognizingtheassetsfromourConsolidatedBalanceSheet
whenconstructioniscomplete(afailedsaleleaseback).Inconjunctionwiththeseleases,wecapitalizetheconstructioncostsonour
ConsolidatedBalanceSheetandalsorecordfinancingobligationsrepresentingpaymentsowedtothelandlord.Wedonotreportrent
expenseforthepropertieswhichareownedforaccountingpurposes.Forcapitalleases,weinitiallyrecordtheassetsattheloweroffair
valueorthepresentvalueofthefutureminimumleasepayments,excludingexecutorycosts.Iftheleaseagreementincludesalegal
obligationthatrequirestheleasedpremisestobereturnedinapredeterminedcondition,werecognizeanassetretirementobligationanda
correspondingdepreciatingasset,whensuchanassetexists.
Depreciationisrecordedonastraightlinebasisovertheestimatedusefullivesoftheassets.Leaseholdimprovements,including
structuralimprovements,areamortizedusingthestraightlinemethodoverthelesseroftheestimatedusefullifeoftheassetorthelease
term,includingreasonablyassuredrenewalsorpurchaseoptionsthatareconsideredlikelytobeexercised.Laureateincludesthe
amortizationofassetsrecordedundercapitalleaseswithindepreciationexpense.Assetsundercapitalleasesaretypicallyamortizedover
therelatedleasetermusingthestraightlinemethod.
Depreciationandamortizationperiodsareasfollows:
Buildings
350years
215years
225years
LandUseRights
CertainofourinstitutionsinChina,Malaysia,MexicoandTurkeyhaveobtainedlanduserightsforcertaintimeperiodsfrom
governmentauthorities.Landuserightsallowustousethelandtobuildourcampusfacilities.Uponexpiryofalanduseright,itwill
eitherberenewedorthelandwillbereturnedtothegovernmentauthority.Landuserightsarestatedatcostlessaccumulatedamortization
andanyrecognizedimpairmentloss.Amortizationisprovidedonastraightlinebasisovertherespectivetermofthelanduseright
agreement,andisrecordedasrentexpensewithinDirectcostsinourConsolidatedStatementsofOperations.
DirectandDeferredCosts
DirectcostsreportedontheConsolidatedStatementsofOperationsrepresentthecostofoperations,includingsellingand
administrativeexpenses,whicharedirectlyattributabletospecificbusinessunits.
DeferredcostsontheConsolidatedBalanceSheetsconsistprimarilyofdirectcostsassociatedwithonlinecoursedevelopmentand
accreditation.Deferredcostsassociatedwiththedevelopmentofonlineeducationalprogramsarecapitalizedaftertechnological
feasibilityhasbeenestablished.Deferred
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onlinecoursedevelopmentcostsareamortizedtoDirectcostsonastraightlinebasisovertheestimatedperiodthattheassociated
productsareexpectedtogeneraterevenues.Deferredonlinecoursedevelopmentcostsareevaluatedonaquarterlybasisthroughreviewof
thecorrespondingcoursecatalog.Ifacourseisnolongerlistedorofferedinthecurrentcoursecatalog,thenthecostsassociatedwithits
developmentarewrittenoff.AsofDecember31,2015and2014,theunamortizedbalancesofonlinecoursedevelopmentcostswere
$54,461and$56,292,respectively.Laureatedefersdirectandincrementalthirdpartycostsincurredforobtaininginitialaccreditationand
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$54,461and$56,292,respectively.Laureatedefersdirectandincrementalthirdpartycostsincurredforobtaininginitialaccreditationand
fortherenewalofaccreditations.TheseaccreditationcostsareamortizedtoDirectcostsoverthelifeoftheaccreditationonastraightline
basis.AsofDecember31,2015and2014,theunamortizedbalancesofaccreditationcostswere$3,708and$3,202,respectively.
AtDecember31,2015and2014,Laureate'stotalDeferredcostswere$156,033and$140,322,respectively,withaccumulated
amortizationof$(97,864)and$(80,828),respectively.
DebtIssuanceCosts
OnJanuary1,2016,LaureateadoptedASU201503,whichsimplifiedthepresentationofdebtissuancecostsbyrequiringdebt
issuancecoststobepresentedasadeductionfromdebt.Thismakesthepresentationofdebtissuancecostsconsistentwiththepresentation
ofdebtdiscountsorpremiums.Therecognitionandmeasurementguidancefordebtissuancecostsisnotaffected,thereforethesecostswill
continuetobeamortizedasinterestexpense.Atadoption,thenewguidancewasappliedretrospectivelytoallpriorperiodspresented.
Debtissuancecostswerepaidasaresultofcertaindebttransactionsandarepresentedasadeductionfromdebt.Thesedebtissuance
costsareamortizedoverthetermoftheassociateddebtinstruments.TheamortizationexpenseisrecognizedasacomponentofInterest
expenseintheConsolidatedStatementsofOperations.AsofDecember31,2015and2014,theunamortizedbalancesofdebtissuance
costswere$69,294and$80,094,respectively.
Goodwill,OtherIntangibleAssetsandLonglivedAssets
Goodwill
GoodwillprimarilyrepresentstheamountspaidbyWengeninexcessofthefairvalueofthenetassetsacquiredinthemerger
transaction(seeNote7,GoodwillandOtherIntangibleAssets),plustheexcesspurchasepriceoverfairvalueofnetassetsforbusinesses
acquiredafterthemergertransaction.
GoodwillisevaluatedannuallyasofOctober1steachyearforimpairmentatthereportingunitlevel,inaccordancewithASC350,
"IntangiblesGoodwillandOther."Wealsoevaluategoodwillforimpairmentonaninterimbasisifeventsorchangesincircumstances
betweenannualtestsindicatethattheassetmaybeimpaired.Goodwillisimpairedwhenthecarryingamountofareportingunit'sgoodwill
exceedsitsimpliedfairvalue.Areportingunitisdefinedasacomponentofanoperatingsegmentforwhichdiscretefinancialinformation
isavailableandregularlyreviewedbymanagementofthesegment.Wehavenotmadematerialchangestothemethodologyusedtoassess
impairmentlossduringthepastthreefiscalyears.
Wehavetheoptionoffirstperformingaqualitativeassessment(i.e.,stepzero)beforecalculatingthefairvalueofthereportingunit
(i.e.,steponeofthetwostepfairvaluebasedimpairmenttest).If
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wedetermineonthebasisofqualitativefactorsthatthefairvalueofthereportingunitismorelikelythannotlessthanthecarrying
amount,thetwostepimpairmenttestisrequired.
Ifwedonotperformthequalitativeassessmentforareportingunitordeterminethatitismorelikelythannotthatthefairvalueofa
reportingunitislessthanitscarryingamount,aquantitativetwostepfairvaluebasedtestisperformed.Inthefirststep,weestimatethe
fairvalueofeachreportingunit,utilizingaweightedcombinationofadiscountedcashflowanalysisandamarketmultiplesanalysis.If
therecordednetassetsofthereportingunitarelessthanthereportingunit'sestimatedfairvalue,thenthereisnogoodwilldeemedtobe
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therecordednetassetsofthereportingunitarelessthanthereportingunit'sestimatedfairvalue,thenthereisnogoodwilldeemedtobe
impaired.Iftherecordednetassetsofthereportingunitexceeditsestimatedfairvalue,thengoodwillispotentiallyimpairedandLaureate
calculatestheimpliedfairvalueofgoodwill,bydeductingtheestimatedfairvalueofalltangibleandidentifiableintangiblenetassetsof
thereportingunitfromtheestimatedfairvalueofthereportingunit.Iftherecordedamountofgoodwillexceedsthisimpliedfairvalue,the
differenceisrecognizedasaLossonimpairmentofassetsintheConsolidatedStatementsofOperations.
Ourvaluationapproachutilizesaweightedcombinationofadiscountedcashflowanalysisandamarketmultiplesanalysis,where
available.Thediscountedcashflowanalysisreliesonhistoricaldataandinternalestimates,whicharedevelopedasapartofourlong
rangeplanprocess,andincludesanestimateofterminalvaluebasedontheseexpectedcashflowsusingthegenerallyacceptedGordon
DividendGrowthformula,whichderivesavaluationusinganassumedperpetualannuitybasedonthereportingunit'sresidualcashflows.
ThediscountrateisbasedonthegenerallyacceptedWeightedAverageCostofCapitalmethodology,andisderivedusingacostofequity
basedonthegenerallyacceptedCapitalAssetPricingModelandacostofdebtbasedonthetypicalratepaidbymarketparticipants.The
marketmultiplesanalysisutilizesmultiplesofbusinessenterprisevaluetorevenues,operatingincomeandearningsbeforeinterest,taxes,
depreciationandamortizationofcomparablepubliclytradedcompaniesandmultiplesbasedonfairvaluetransactionswherepublic
informationisavailable.Significantassumptionsusedinestimatingthefairvalueinclude:(1)discountandgrowthrates,and(2)ourlong
rangeplanwhichincludesenrollment,pricing,plannedcapitalexpendituresandoperatingmargins.Managementreviewsthesumofthe
estimatedfairvalueofallLaureate'sreportingunitstoLaureate'senterprisevaluetocorroboratetheresultsofitsweightedcombination
approachtodeterminingfairvalue.
OtherIntangibleAssets
OtherintangibleassetsontheConsolidatedBalanceSheetsincludeacquiredindefinitelivedTradenames,whicharevaluedusingthe
relieffromroyaltymethod.Thismethodestimatestheamountofroyaltyexpensethatwewouldexpecttoincuriftheassetswerelicensed
fromathirdparty.Weusepubliclyavailableinformationandproprietarythirdpartyarm'slengthagreementsthatLaureatehasenteredinto
withvariouslicensorsindeterminingcertainassumptionstoassistusinestimatingfairvalueusingmarketparticipantassumptions.Any
costsincurredtointernallydevelopnewtradenamesareexpensedasincurred.Accreditationsarenotconsideredaseparateunitofaccount
andtheirvaluesareembeddedinthecashflowsgeneratedbytheinstitution,whichareusedtovalueitstradename.TheCompanydoes
notbelieveaccreditationshavesignificantvalueontheirownduetothefactthattheyareneitherexclusivenorscarce,andthedirectcosts
associatedwithobtainingaccreditationsarenotmaterial.
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IndefinitelivedintangiblesareevaluatedannuallyasofOctober1stofeachyearforimpairmentaswellasonaninterimbasisif
eventsorchangesincircumstancesbetweenannualtestsindicatethattheassetmaybeimpaired.Theimpairmenttestforindefinitelived
intangibleassetsgenerallyrequiresanewdeterminationofthefairvalueoftheintangibleassetusingtherelieffromroyaltymethod.Ifthe
fairvalueoftheintangibleassetislessthanitscarryingvalue,theintangibleassetisadjustedtoitsnewestimatedfairvalue,andan
impairmentlossisrecognized.
OtherintangibleassetsontheConsolidatedBalanceSheetsalsoincludeintangibleassetswithfiniteusefullivessuchasacquired
studentrostersandnoncompeteagreements.Weusetheincomeapproachtoestablishtheassetvaluesoftheseintangibleassets.Thecost
offinitelivedintangibleassetsisamortizedonastraightlinebasisovertheintangibleassets'estimatedusefullives.
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offinitelivedintangibleassetsisamortizedonastraightlinebasisovertheintangibleassets'estimatedusefullives.
LonglivedAssets
Longlivedassets,includingfinitelivedintangibleassets,arereviewedforimpairmentwhenevereventsorchangesincircumstances
indicatethatthecarryingamountofanassetorgroupofassetsmaynotbefullyrecoverable.Theseeventsorchangesincircumstances
mayinclude,butarenotlimitedto,asignificantdeteriorationofoperatingresults,achangeinregulatoryenvironment,changesin
businessplans,oradversechangesinanticipatedfuturecashflows.Ifanimpairmentindicatorispresent,weevaluaterecoverabilitybya
comparisonofthecarryingamountoftheassetstofutureundiscountednetcashflowsexpectedtoresultfromtheuseandeventual
dispositionoftheassets.Iftheassetsaredeterminedtobeimpaired,theimpairmentrecognizedistheexcessofthecarryingamountover
thefairvalueoftheassets.Fairvalueisgenerallydeterminedbythediscountedcashflowmethod.Thediscountrateusedinanyestimate
ofdiscountedcashflowsistheratecommensuratewithasimilarinvestmentofsimilarrisk.
DerivativeInstruments
Inthenormalcourseofbusiness,ouroperationshavesignificantexposuretofluctuationsinforeigncurrencyvaluesandinterestrate
changes.Accordingly,Laureatemitigatesaportionoftheserisksthroughariskmanagementprogramthatincludestheuseofderivative
financialinstruments(derivatives).Laureateselectivelyentersintoforeignexchangeforwardcontractstoreducetheearningsimpact
relatedtoreceivablesandpayablesthataredenominatedinforeigncurrencies.Inaddition,Laureateusesinterestrateswapstomitigate
certainrisksassociatedwithfloatingratedebtarrangements.Wedonotengageinspeculativeorleveragedtransactions,nordoweholdor
issuederivativesfortradingpurposes.LaureatereportsallderivativesonourConsolidatedBalanceSheetsatfairvalue.Realizedand
unrealizedgainsand/orlossesresultingfromderivativesarerecognizedinourConsolidatedStatementsofOperations,unlessdesignated
andeffectiveasahedge.
Forderivativesthatarebothdesignatedandeffectiveascashflowhedges,gainsorlossesassociatedwiththechangeinfairvalueof
thederivativesarerecognizedonourConsolidatedBalanceSheetsasacomponentofAccumulatedothercomprehensiveincome(loss)
andamortizedoverthetermoftherelatedhedgeditems.
RevenueRecognition
Laureate'srevenuesprimarilyconsistoftuitionandeducationalservicerevenues.Wealsogeneraterevenuesfromstudentfees,
dormitory/residencyfees,andeducationrelatedactivities.Revenuesare
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reportednetofscholarshipsandotherdiscounts,refunds,waiversandthefairvalueofanyguaranteesmadebyLaureaterelatedtostudent
financingprograms.Laureate'sinstitutionshavevariousbillingandacademiccycles.Collectibilityisdeterminedonastudentbystudent
basisatthetimeofenrollment.Generally,studentscannotreenrollforthenextacademicsessionwithoutsatisfactoryresolutionofany
pastdueamounts.Tuitionrevenuesarerecognizedratablyonaweeklystraightlinebasisovereachacademicsession.Deferredrevenue
andstudentdepositsonourConsolidatedBalanceSheetsconsistoftuitionpaidpriortothestartofacademicsessionsandunearned
tuitionamountsrecordedasaccountsreceivableafteranacademicsessionbegins.Ifastudentwithdrawsfromaninstitution,Laureate's
obligationtoissuearefunddependsontherefundpolicyatthatinstitutionandthetimingofthestudent'swithdrawal.Generally,our
refundobligationsarereducedoverthecourseoftheacademicterm.WerecordrefundsasareductionofDeferredrevenueandstudent
deposits,asapplicable.Onceastudentwithdraws,theCompanyrecognizesrevenueonacashbasisascollectabilityisnotreasonably
assured.Dormitoryrevenuesarerecognizedovertheoccupancyperiod.Revenuesfromthesaleofeducationalproductsaregenerally
recognizedupondeliveryandwhencollectibilityisreasonablyassured.Studentfeesandotherrevenues,whichincluderevenuesfrom
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recognizedupondeliveryandwhencollectibilityisreasonablyassured.Studentfeesandotherrevenues,whichincluderevenuesfrom
contractualarrangementswithunconsolidatedinstitutions,arerecognizedasearnedovertheappropriateserviceperiod.
ThefollowingtableshowsthecomponentsofRevenuesasapercentageoftotalnetrevenuefortheperiodspresented:
2015
Tuitionandeducationalservices
Studentfees
Dormitory/residency
Other
Grossrevenue
Less:Discounts/waivers/
scholarships
Total
2014
$ 4,562,704 106%
129,521
3%
75,759
2%
225,785
5%
4,993,769 116%
2013
$ 4,651,178 105%
129,267
3%
76,664
2%
254,189
6%
5,111,298 116%
$ 4,064,537 104%
120,090
3%
70,898
2%
212,957
5%
4,468,482 114%
(702,110) (16)% (696,616) (16)% (554,601) (14)%

$ 4,291,659 100% $ 4,414,682 100% $ 3,913,881 100%
Advertising
Laureateexpensesadvertisingcostsasincurred.Advertisingexpenseswere$278,296,$290,830and$265,383fortheyearsended
December31,2015,2014and2013,respectively,andarerecordedinDirectcostsinourConsolidatedStatementsofOperations.
SharebasedCompensation
SharebasedcompensationexpenseisbasedonthegrantdatefairvalueestimatedinaccordancewiththeprovisionsofASC718,
"CompensationStockCompensation."Laureaterecognizessharebasedcompensationexpense,lessestimatedforfeitures,onastraight
linebasisovertherequisiteserviceperiodfortimebasedawardsandgradedvestingbasisforperformancebasedawards.Laureate
estimatesforfeituresbasedonhistoricalactivity,expectedemployeeturnover,andotherqualitativefactorswhichareadjustedforchanges
inestimatesandawardvesting.Allexpensesforanawardwillberecognizedbythetimeitbecomesfullyvested.
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WeusetheBlackScholesMertonoptionpricingmodeltocalculatethefairvalueofstockoptions.Thisoptionvaluationmodel
requirestheuseofsubjectiveassumptions,includingtheestimatedfairvalueoftheunderlyingcommonstock,theexpectedstockprice
volatility,andtheexpectedtermoftheoption.Theestimatedfairvalueoftheunderlyingcommonstockisbasedonthirdparty
valuations.Ourvolatilityestimatesarebasedonapeergroupofcompanies.Weestimatetheexpectedtermofawardstobetheweighted
averagemidpointbetweenthevestingdateandtheendofthecontractualterm.Weusethismethodtoestimatetheexpectedtermsincewe
donothavesufficienthistoricalexercisedata.
Laureatehasgrantedrestrictedstock,restrictedstockunits,stockoptions,andperformanceawardsforwhichthevestingisbasedon
annualperformancemetricsoftheCompany.Forinterimperiods,weuseouryeartodateactualresults,financialforecasts,andother
availableinformationtoestimatetheprobabilityoftheawardvestingbasedontheperformancemetrics.
IncomeTaxes
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Laureaterecordstheamountoftaxespayableorrefundableforthecurrentyear.Deferredincometaxassetsandliabilitiesarerecorded
withrespecttotemporarydifferencesintheaccountingtreatmentofitemsforGAAPfinancialreportingpurposesandforincometax
purposes.Deferredtaxassetsandliabilitiesaremeasuredusingenactedtaxratesineffectfortheyearinwhichthosetemporarydifferences
areexpectedtoberecoveredorsettled.Theeffectondeferredtaxassetsandliabilitiesofachangeintaxratesisrecognizedinearningsin
theperiodinwhichthenewrateisenacted.Where,basedontheweightofallavailableevidence,itismorelikelythannotthatsome
portionofrecordeddeferredtaxassetswillnotberealized,avaluationallowanceisestablishedfortheamountthat,inmanagement's
judgment,issufficienttoreducethedeferredtaxassettoanamountthatismorelikelythannottoberealized.
Ataxpositionmustmeetaminimumprobabilitythresholdbeforeafinancialstatementbenefitisrecognized.Theminimumthreshold
isdefinedasataxpositionthatismorelikelythannottobesustaineduponexaminationbytheapplicabletaxingauthority,including
resolutionofanyrelatedappealsorlitigationprocesses,basedonthetechnicalmeritsofthepositionandhavingfullknowledgeofall
relevantinformation.
WeearnasignificantportionofourincomefromsubsidiarieslocatedincountriesoutsidetheUnitedStates.Deferredtaxliabilities
havenotbeenrecognizedforundistributedforeignearningsbecausemanagementbelievesthattheearningswillbeindefinitelyreinvested
outsidetheUnitedStatesundertheCompany'splannedtaxneutralmethods.Ourassertionthatearningsfromourforeignoperationswill
beindefinitelyreinvestedissupportedbyprojectedworkingcapitalandlongtermcapitalplansineachforeignsubsidiarylocationin
whichtheearningsaregenerated.Additionally,webelievethatwehavetheabilitytoindefinitelyreinvestforeignearningsbasedonour
domesticoperation'scashrepatriationstrategies,projectedcashflows,projectedworkingcapitalandliquidity,andtheexpected
availabilityofcapitalwithinthedebtorequitymarkets.Ifourexpectationschangebasedonfuturedevelopmentssuchthatsomeorallof
theundistributedearningsofourforeignsubsidiariesmayberemittedtotheUnitedStatesintheforeseeablefuture,wewillberequiredto
recognizedeferredtaxexpenseandliabilitiesonthoseamounts.
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Foradditionalinformationregardingincometaxesanddeferredtaxassetsandliabilities,seeNote15,IncomeTaxes.
Contingencies
Laureateaccruesforcontingentobligationswhenitisprobablethataliabilityisincurredandtheamountorrangeofamountsis
reasonablyestimable.Asnewfactsbecomeknowntomanagement,theassumptionsrelatedtoacontingencyarereviewedandadjustments
aremade,asnecessary.Anylegalcostsincurredrelatedtocontingenciesareexpensedasincurred.
RecentlyIssuedAccountingStandards
AccountingStandardsUpdate(ASU)No.201602(ASU201602),Leases(Topic842)
OnFebruary25,2016,theFinancialAccountingStandardsBoard(FASB)issuedASU201602.Lesseeswillneedtorecognizeon
theirbalancesheetarightofuseassetandaleaseliabilityforvirtuallyalloftheirleases(otherthanleasesthatmeetthedefinitionofa
shorttermlease).Theliabilitywillbeequaltothepresentvalueofleasepayments.Theassetwillbebasedontheliability,subjectto
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adjustment,suchasforinitialdirectcosts.Forincomestatementpurposes,theFASBretainedadualmodel,requiringleasestobeclassified
aseitheroperatingorfinance.Operatingleaseswillresultinstraightlineexpense(similartocurrentoperatingleases)whilefinanceleases
willresultinafrontloadedexpensepattern(similartocurrentcapitalleases).Classificationwillbebasedoncriteriathatarelargely
similartothoseappliedincurrentleaseaccounting,butwithoutexplicitbrightlines.ThestandardiseffectiveforLaureatebeginning
January1,2019.Earlyadoptionispermitted.Thenewstandardmustbeadoptedusingamodifiedretrospectivetransition,andprovidesfor
certainpracticalexpedients.Transitionwillrequireapplicationofthenewguidanceatthebeginningoftheearliestcomparativeperiod
presented.LaureateisevaluatingtheimpactofASU201602onourConsolidatedFinancialStatements.
ASUNo.201601(ASU201601),FinancialInstrumentsOverall(Subtopic81510)
InJanuary2016,theFASBissuedASU201601inordertoenhancethereportingmodelforfinancialinstrumentstoprovideusersof
financialstatementswithmoredecisionusefulinformation.TheamendmentsinthisASUrequireallequityinvestments(exceptthose
accountedforundertheequitymethodofaccountingorthosethatresultinconsolidationoftheinvestee)tobemeasuredatfairvalue,
tomeasurefinancialinstrumentsatfairvaluemustdisclose,asaseparateitemincomprehensiveincome,theportionofthetotalchangein
fairvalueofaliabilityresultingfromachangeininstrumentspecificcreditrisk.
ThisASUiseffectiveforLaureatebeginningJanuary1,2018andamendmentsshouldbeappliedasacumulativeeffectadjustmentto
thebalancesheetasofthebeginningofthefiscalyearofadoption.Theamendmentsrelatedtoequitysecuritieswithoutreadily
determinablefairvaluesshouldbeappliedprospectivelytoequityinvestmentsthatexistasofthedateofadoptionoftheASU.Weare
currentlyevaluatingtheimpactofASU201601onourConsolidatedFinancialStatements.
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ASUNo.201517(ASU201517),IncomeTaxes(Topic740)
InNovember2015,theFASBissuedASU201517asapartoftheSimplificationInitiativeandinresponsetoconcernsthatthecurrent
requirementthatentitiesseparatedeferredincometaxliabilitiesandassetsintocurrentandnoncurrentamountsresultsinlittleorno
benefittousersofthefinancialstatements.Thisclassificationdoesnotgenerallyalignwiththetimeperiodinwhichtherecognized
deferredtaxamountsareexpectedtoberecoveredorsettledandtherearecostsincurredbyanentitytoseparatedeferredincometax
liabilitiesandassetsintocurrentandnoncurrentamounts.TheamendmentsinthisASUaimtosimplifythispresentationbyrequiringthat
deferredtaxliabilitiesandassetsbeclassifiedasnoncurrentinaclassifiedstatementoffinancialposition,whichalignstheGAAP
presentationofdeferredincometaxassetsandliabilitieswithInternationalFinancialReportingStandards(IFRS).
ThisASUiseffectiveforLaureatebeginningJanuary1,2017,andmaybeappliedeitherprospectivelytoalldeferredtaxliabilities
andassetsorretrospectivelytoallperiodspresented.Earlyadoptionispermittedasofthebeginningofaninterimorannualreporting
period.WearecurrentlyevaluatingtheimpactofASU201517onourConsolidatedFinancialStatements.
ASUNo.201516(ASU201516),BusinessCombinations(Topic805)
OnSeptember25,2015,theFASBissuedASU201516asapartoftheSimplificationInitiativeandinresponsetoconcernsthatthe
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complexitytofinancialreporting,butdoesnotsignificantlyimprovetheusefulnessoftheinformationprovidedtousers.Theamendments
inthisASUrequirethatadjustmentstoprovisionalamountsthatareidentifiedbytheacquirerduringthemeasurementperiodbe
recognizedinthereportingperiodinwhichtheadjustmentamountsareidentified,ratherthanretrospectively.
TheamendmentsinthisASUalsorequirethattheacquirerrecord,inthesameperiod'sfinancialstatements,theeffectonearningsof
changesindepreciation,amortizationorotherincomeeffects,ifany,asaresultofthechangetotheprovisionalamounts,calculatedasif
theaccountinghadbeencompletedattheacquisitiondate.Theacquirermustalsopresentseparatelyonthefaceoftheincomestatement
ordisclosureinthenotestheportionoftheamountrecordedincurrentperiodearningsbylineitemthatwouldhavebeenrecordedin
previousreportingperiodsiftheadjustmenttotheprovisionalamountshadbeenrecognizedasoftheacquisitiondate.
TheguidanceiseffectiveforLaureatebeginningJanuary1,2016,andshouldbeappliedprospectively.Earlyadoptionispermitted
forfinancialstatementsthathavenotyetbeenmadeavailableforissuance.WedonotexpectASU201516tohaveamaterialimpacton
ourConsolidatedFinancialStatements.
ASUNo.201507(ASU201507),FairValueMeasurement(Topic820)DisclosuresforInvestmentsinCertainEntitiesthatCalculate
NetAssetValueperShare(orItsEquivalent)
OnMay1,2015,theFASBissuedASU201507.UndertheamendmentsinthisASU,investmentsforwhichfairvalueismeasuredat
netassetvaluepershare(oritsequivalent)usingthepracticalexpedientshouldnotbecategorizedinthefairvaluehierarchy.Removing
thoseinvestmentsfromthefairvaluehierarchynotonlyeliminatesthediversityinpracticeresultingfromthewayinwhich
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investmentsmeasuredatnetassetvaluepershare(oritsequivalent)withfutureredemptiondatesareclassified,butalsoensuresthatall
investmentscategorizedinthefairvaluehierarchyareclassifiedusingaconsistentapproach.
TheamendmentsinASU201507areeffectiveforpublicbusinessentitiesforfiscalyearsbeginningafterDecember15,2015,and
interimperiodswithinthosefiscalyears.Areportingentityshouldapplytheamendmentsretrospectivelytoallperiodspresented.The
retrospectiveapproachrequiresthataninvestmentforwhichfairvalueismeasuredusingthenetassetvaluepersharepracticalexpedient
beremovedfromthefairvaluehierarchyinallperiodspresentedinanentity'sfinancialstatements.LaureateplanstoadoptASU201507
onJanuary1,2016andbelievesthisguidancewillapplytothedeferredcompensationplanassetsdiscussedinNote20,FairValue
Measurement.
ASUNo.201503(ASU201503),InterestImputationofInterest(Subtopic83530):SimplifyingthePresentationofDebtIssuanceCosts
OnApril7,2015,theFASBissuedASU201503,whichsimplifiesthepresentationofdebtissuancecostsbyrequiringdebtissuance
coststobepresentedasadeductionfromdebt.Thiswillmakethepresentationofdebtissuancecostsconsistentwiththepresentationof
debtdiscountsorpremiums.Italsoaddressesthelongstandingconflictwiththeconceptualframework,sinceFASBConceptsStatement
No.6,"ElementsofFinancialStatements",requiresthatassetsprovidefutureeconomicbenefit,whichdebtissuancecostsdonot.ASU
201503willalsoalignGAAPwithIFRS,whichrequirestransactioncosts,includingthirdpartycostsandcreditorfees,tobededucted
fromthecarryingvalueofthefinancialliabilityandnotrecordedasaseparateasset.Thenewguidanceislimitedtosimplifyingthe
presentationofdebtissuancecosts.Therecognitionandmeasurementguidancefordebtissuancecostsisnotaffected.Therefore,these
costswillcontinuetobeamortizedasinterestexpenseusingtheeffectiveinterestmethodpursuanttoASC83530352through353.
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costswillcontinuetobeamortizedasinterestexpenseusingtheeffectiveinterestmethodpursuanttoASC83530352through353.
TheguidanceiseffectiveforLaureatebeginningJanuary1,2016.Uponadoption,anentitymustapplythenewguidance
retrospectivelytoallpriorperiodspresentedinthefinancialstatements.TheimpactonourDecember31,2015ConsolidatedBalance
Sheetisstatedinthe'DirectandDeferredCosts'sectionabove.Anentityisalsorequiredintheyearofadoption(andininterimperiods
withinthatyear)toprovidecertaindisclosuresaboutthechangeinaccountingprinciple,includingthenatureofandreasonforthe
change,thetransitionmethod,adescriptionofthepriorperiodinformationthathasbeenretrospectivelyadjustedandtheeffectofthe
changeonthefinancialstatementlineitems(thatis,debtissuancecostassetandthedebtliability).
ASUNo.201502(ASU201502)Consolidation(Topic810)
OnFebruary18,2015,theFASBissuedASU201502,inresponsetostakeholders'concernsabouttherequirementtoconsolidate
certainlegalentitieswherethereportingentity'scontractualrightsdonotgiveittheabilitytoactprimarilyonitsownbehalf,the
reportingentitydoesnotholdamajorityofthelegalentity'svotingrights,orthereportingentityisnotexposedtoamajorityofthelegal
entity'seconomicbenefitsorobligations.Financialstatementusersassertedthatincertainofthosesituationsinwhichconsolidationis
ultimatelyrequired,deconsolidatedfinancialstatementsarenecessarytobetteranalyzethereportingentity'seconomicandoperational
results.ASU201502affectsreporting
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entitiesthatarerequiredtoevaluatewhethertheyshouldconsolidatecertainlegalentities.ThisASUprovidesarevisedconsolidation
modelthatrequiresthefollowing:
1.
modifytheevaluationofwhetherlimitedpartnershipsandsimilarlegalentitiesareVIEsorvotinginterestentities
2.
3.
affecttheconsolidationanalysisofreportingentitiesthatareinvolvedwithVIEs,particularlythosethathavefee
arrangementsandrelatedpartyrelationshipsand
4.
provideascopeexceptionfromconsolidationguidanceforreportingentitieswithinterestsinlegalentitiesthatarerequired
tocomplywithoroperateinaccordancewithrequirementsthataresimilartothoseinRule2a7oftheInvestmentCompany
Actof1940forregisteredmoneymarketfunds.
ASU201502iseffectiveforpublicbusinessentitiesforfiscalyears,andforinterimperiodswithinthosefiscalyears,beginningafter
December15,2015.Forallotherentities,ASU201502iseffectiveforfiscalyearsbeginningafterDecember15,2016,andforinterim
periodswithinfiscalyearsbeginningafterDecember15,2017.Earlyadoptionispermitted.WedonotexpectASU201502tohavea
materialimpactonourConsolidatedFinancialStatements.
ASUNo.201409,(ASU201409):RevenuefromContractswithCustomers(Topic606)
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OnMay28,2014,theFASBissuedASU201409,whichsupersedestherevenuerecognitionrequirementsinTopic605,"Revenue
Recognition"andmostindustryspecificguidance.ThecoreprincipleofASU201409isthatacompanywillrecognizerevenuewhenit
transferspromisedgoodsorservicestocustomersinanamountthatreflectstheconsiderationtowhichthecompanyexpectstobeentitled
inexchangeforthosegoodsorservices.OnJuly9,2015,theFASBdeferredtheeffectivedateofASU201409.Thenewrevenuestandard
iseffectiveforfiscalyears,andinterimperiodswithinthoseyears,beginningafterDecember15,2017(January1,2018forLaureate)and
effectofinitialapplicationoftherevisedguidancerecognizedatthedateofinitialapplication.Wearebeginningtoevaluatetheadoption
alternativesandtheimpactofASU201409onourConsolidatedFinancialStatements.
Note3.DiscontinuedOperationsandAssetsHeldforSale
DiscontinuedOperations
InDecember2012,LaureateapprovedaplantosellUniversidadDelDesarrolloProfessional,SC(UNIDEP),aninstitutioninMexico
thatwasincludedintheLatAmsegment.Thissubsidiarymettheconditionstobereportedasdiscontinuedoperationsinourfinancial
statements,basedontheguidanceinASC20520,"PresentationofFinancialStatementsDiscontinuedOperations"(ASC20520).Thesale
ofUNIDEPwascompletedonJanuary23,2013forasalepriceofapproximately$40,600,or516,300MexicanPesos(MXN),resultingina
gainonsaleof$4,350,netofincometaxexpenseof$1,864.
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Note3.DiscontinuedOperationsandAssetsHeldforSale(Continued)
UNIDEPwassoldsinceitnolongermetLaureate'sstrategicobjectives.Itwillnotgenerateanycontinuingcashflowsforthe
Company.SummarizedoperatingresultsofthediscontinuedoperationsfortheyearendedDecember31,2013arepresentedinthe
followingtable:
Revenues
Incomefromdiscontinuedoperations,netoftaxof$0
Gainonsaleofdiscontinuedoperations,netoftaxof$1,864
$ 691

796
4,350
AssetsHeldforSale
LesRochesandGlion
Duringthefourthquarterof2014,ourGPSsegmententeredintoasaleleasebackagreementforaportionofthecampusesoftwoof
ourinstitutionsinSwitzerland,GlionInstituteofHigherEducation(Glion),andLesRochesInternationalSchoolofHotelManagement
(LesRoches).TheassetgroupdidnotmeettheconditionsrequiredinASC20520tobereportedasdiscontinuedoperationsinour
ConsolidatedFinancialStatementsasitdidnothavediscretecashflowinformationhowevertheassetgroupdidmeetthecriteriafor
classificationasheldforsaleunderASC36010459,"LongLivedAssetsClassifiedasHeldforSale."Accordingly,asofDecember31,
2014,theassetswereclassifiedasheldforsaleandrecordedattheircarryingvalue,whichwaslowerthan'fairvaluelesscosttosell'.Ofthe
total$141,856ofLongtermassetsheldforsalerecordedontheConsolidatedBalanceSheetatDecember31,2014,$137,878relatesto
thisSwisssaleleasebacktransaction,includingLandof$33,695andBuildingsof$104,183.
Inthefirstquarterof2015,thesaleoftheassetswascompletedandLaureatereceivednetproceedsofapproximately$182,000,
resultinginagainonsaleofapproximately$36,000,whichwasdeferredandwillberecognizedintoincomeovertheleasetermof
20years.Aportionofthenetproceedswasusedtorepaymortgagedebtrelatedtotheassetgroup.DuringtheyearendedDecember31,
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20years.Aportionofthenetproceedswasusedtorepaymortgagedebtrelatedtotheassetgroup.DuringtheyearendedDecember31,
2015,LaureaterecordedaLossondebtextinguishmentof$932asaresultofmortgagebreakagefeesthatwerepaidinconnectionwiththe
repaymentofthemortgagedebt.
INTIEducationHoldingsSdnBhd(INTI)
AsofDecember31,2014,INTI,inourAMEAsegment,hadrecorded$3,978ofassetsheldforsalerelatedtoourSarawakcampusin
Malaysia.Duringthefirstquarterof2015theconditionsprecedentforthetransactionweremetandthesalewascompleted,withtitleto
theassetstransferredtothebuyer.ThetotalpurchasepricewasMalaysianRinggit(MYR)21,850(approximatelyUS$5,400).INTI
recognizedagainonsaleoftheSarawakassetsofapproximately$2,200,whichwasrecordedasareductionofDirectcostsinour
ConsolidatedStatementofOperations.
Note4.Acquisitions
2015Acquisitions
DuringtheyearendedDecember31,2015,Laureateconsummatedthebusinessacquisitionsoutlinedbelow,whichareincludedin
ourConsolidatedFinancialStatementscommencingfromthedatesofacquisition.
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Note4.Acquisitions(Continued)
Australia
InJuly2015,ourAMEAsegmentacquiredtheassetsandthebusinessofChifleyBusinessSchool(CBS)inAustraliaforacash
purchasepriceofAustralianDollar(AUD)600(US$464attheacquisitiondate),plusdebtassumedofAUD1,000(US$772atthe
acquisitiondate).Weaccountedforthisasabusinesscombination.PaymentofthedebtistobemadeintwoinstallmentsofAUD500(US
$386attheacquisitiondate),inJanuary2016andJanuary2017,andthefirstinstallmentwaspaidinJanuary2016.Forthisacquisition,
Revenues,OperatingincomeandNetincomeattributabletoLaureateEducation,Inc.wereimmaterialfortheyearendedDecember31,
2015.
Portugal
OnMarch27,2015,weacquiredIADEInstitutodeArtesVisuaisDesigneMarketing,S.A.(IADE),EnsigestGestode
EstabelecimentosdeEnsino,S.A.(Ensigest),EnsicorporateEducaoCorporativa,Lda.(Ensicorporate),andGemeoGabinetedeEstudos
deMercadoeOpiniodoIPAM,Lda.(Gemeo).IADE,Ensigest,andEnsicorporateoperateatotaloffourhighereducationinstitutionsin
Portugal.Gemeowasaforprofitservicescompanythatconductedmarketresearch.Inaddition,IADEandEnsigestcontrolEuropeiaID,a
notforprofitassociationthatwehavedeterminedisaVIEandthatisconsolidatedbyLaureatesincewearetheVIE'sprimarybeneficiary.
Hereafter,wecollectivelyrefertoalloftheentitiesthatwereconsolidatedasaresultofthisacquisitionasIADEGroup.
ThetotalpurchasepriceofIADEGroupwas$10,403,whichincludesaninitialcashpaymentof$6,476,asellernoteof$3,238anda
deferredpaymentof$689relatedtoaworkingcapitalsettlement.ThesellernoteisdiscussedfurtherinNote5,DuetoShareholdersof
AcquiredCompanies.ThepurchaseofIADEGroupallowsLaureatetoexpanditsexistingpresenceinPortugal.Thegoodwillrecordedfor
IADEGroupisrelatedtotheincrementalvaluethisacquisitionbringstotheLaureateInternationalUniversitiesnetworkandLaureate's
existingoperationsinPortugalbyexpandingourpresenceandaddingsynergiestoLaureate'soperations.Forthisacquisition,Revenuesof
$8,194,Operatingincomeof$971andNetincomeof$806areincludedintheConsolidatedStatementofOperationsfortheyearended
December31,2015.
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TheConsolidatedFinancialStatementsincludetheoperatingresultsofIADEGroupandCBSfromthedatesofacquisition.The
followingtablesummarizestheestimatedfairvaluesofallassetsacquiredandliabilitiesassumedatthedatesofacquisition:
Currentassets
Propertyandequipment
Goodwill
Tradenames
Otherintangibleassets
Longtermindemnificationassets
Otherlongtermassets
Totalassetsacquired
Totalliabilities
NetassetsacquiredattributabletoLaureateEducation,Inc.
Debtassumed
NetassetsacquiredattributabletoLaureateEducation,Inc.plusdebt
assumed
Netassetsacquired
Cashacquired
Sellernotesanddeferredpayments
Netcashpaidatacquisition
IADE
Group
Portugal
CBS
Australia
$ 1,476 $
335
5,980
6,071
1,616
2,084
518
18,080

3,124

4,553
7,677
10,403
$ 10,403 $
$ 10,403 $
(235)
(3,927)
$ 6,241 $
Total
4
33
989
342
1,368
386
132
386
904
464
772
1,236
464
464
$ 1,480
368
6,969
6,413
1,616
2,084
518
19,448
386
3,256
386
4,553
8,581
10,867
772
$ 11,639
$ 10,867
(235)
(3,927)
$ 6,705
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2015Summary
Theamountsrecordedinthe2015acquisitionsareprovisionalasLaureateisintheprocessoffinalizingtheamountsrecordedforthe
assetsandliabilitiesprimarilyrelatedtointangibleassets,goodwill,deferredtaxesandtaxcontingencies.Noneofthegoodwillrelatedto
the2015acquisitionsisexpectedtobedeductibleforincometaxpurposes.Aspartofthepurchasepriceallocationsforthe2015
acquisitions,Laureaterecordedliabilitiesfortaxesotherthanincometaxrelatedcontingenciesof$571andlaborcontingenciesof
$1,466.Inaddition,werecordedtotallongtermindemnificationassetsof$2,084.Proformaresultsofoperationsfortheacquisitions
completedduring2015havenotbeenpresentedbecausetheeffectsofthoseacquisitionswerenotmaterialtotheCompany'sfinancial
results.
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Other2015Transactions
India
InApril2015,theCompanyacquiredtheremaining5%noncontrollinginterestinMPowerforapurchasepriceof$2,852.This
paymentwasincludedinPaymentstopurchasenoncontrollinginterestsintheConsolidatedStatementofCashFlows.
Malaysia
DuringtheyearendedDecember31,2015,weacquiredanadditional2.7%noncontrollinginterestinINTIMalaysiafor$2,499.This
paymentwasincludedinPaymentstopurchasenoncontrollinginterestsintheConsolidatedStatementofCashFlows.Thistransaction
increasedLaureate'sownershipinterestinINTItoapproximately90%.
2014Acquisitions
DuringtheyearendedDecember31,2014,Laureateconsummatedthebusinessacquisitionsoutlinedbelow,whichareincludedin
ourConsolidatedFinancialStatementscommencingfromthedatesofacquisition.
SouthAfrica
InAugust2013,wemadeaninvestmentof$2,237fora25%ownershipinterestinaforprofitentitythatcontrolsMonashSouth
Africa(MSA),anotforprofitinstitutioninSouthAfrica.InFebruary2014,LaureateassumedcontrolofMSAandacquiredrealestatefora
totalpurchasepriceof$44,386,foratotalownershipinterestintheforprofitentityof75%.Thepurchasepriceconsistedoftheinitial
investmentof$2,237madein2013,acashpaymentof$6,712,anddeferredpaymentstotaling$35,437(AustralianDollar(AUD)42,500).
RefertoNote5,DuetoShareholdersofAcquiredCompaniesforadescriptionofthedeferredpayments.ThegoodwillrecordedforMSA
relatesprimarilytotheincrementalvalueprovidedbyintroducinganewmarkettoourstudentsandaddingpotentialsynergiestoour
network.MSAwasconvertedtoaforprofitinstitutionduringthefirstquarterof2015.Forthisacquisition,Revenuesof$22,701,
Operatingincomeof$1,925andNetlossof$(397)areincludedintheConsolidatedStatementofOperationsfortheyearended
December31,2014.
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Brazil
OnAugust12,2014,theCompanyacquiredFaculdadePortoAlegrense(FAPA),aninstitutioninPortoAlegre,Brazil.Thetotal
purchasepricewas$4,148,andwaspaidintheformoftwosellernoteswithatotaldiscountedpresentvalueofapproximately$3,003,plus
anadditionaldeferredpaymentofapproximately$1,145.Thedeferredpaymentof$1,145waspaidinSeptember2014.RefertoNote5,
DuetoShareholdersofAcquiredCompanies,forfurtherdescriptionofthetwosellernotes.TheacquisitionofFAPAincreasesLaureate's
presenceinBrazil,oneofourfastestgrowingmarkets,byacceleratingcampusexpansionthatwasplannedatCentroUniversitrioRitter
dosReis(UniRitter),anotherLaureateinstitutionoperatinginPortoAlegre.Thegoodwillrecordedforthisacquisitionrelatestothe
incrementalvaluethatFAPAbringstotheLaureateInternationalUniversitiesnetworkand
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theexistingLaureateoperationsinBrazil.Forthisacquisition,Revenuesof$4,078,Operatinglossof$(56)andNetlossof$(290)are
includedintheConsolidatedStatementofOperationsfortheyearendedDecember31,2014.
OnSeptember12,2014,LaureateacquiredanaffiliatedgroupofhighereducationalinstitutionsinBrazil,collectivelyreferredtoas
FMU.Thetotalpurchasepricewas$387,603,whichwaspaidwithsellernotestotaling$96,829andcashpaidatclosingof$290,641,net
ofcashacquiredof$133.RefertoNote5,DuetoShareholdersofAcquiredCompanies,forfurtherdescriptionofthesellernotes.Thecash
paidatacquisitionincludedapproximately$231,000ofcash,includingaccruedinterest,thathadbeenheldbyLaureateinanescrow
bankaccountpriortotheacquisitiondateandwasrecordedasRestrictedcashandinvestments.Theremainderofthecashpaidatclosing
wasfinancedthroughborrowingsfromthirdpartylenders,asdescribedinNote9,Debt.TheoriginalpurchasepriceofFMUwas
approximatelyBrazilianReais(BRL)1,000,000(approximatelyUS$427,000attheacquisitiondate).Theagreementalsorequiredall
interestearnedontheescrowbankaccountdeposit,whichtotaledapproximatelyBRL35,000,tobeincludedinthepurchasepricepaidto
thesellersatclosing.ThistotalpurchasepriceofBRL1,035,000wasreducedtoapproximatelyBRL930,000asaresultofLaureate
assumingadditionalobligationsfromthesellersofapproximatelyBRL105,000.
AfterthediscountofapproximatelyBRL23,000torecordthesellernotesattheirnetpresentvalue,thepurchasepricerecordedfor
FMUwasapproximatelyBRL907,000(US$387,603atthedateofacquisition).FMUisLaureate'slargestacquisitiontodate,andthe
goodwillrecordedfortheFMUacquisitionrelatestotheincrementalvaluethatFMUprovidestotheLaureateInternationalUniversities
networkbysignificantlyexpandingourpresenceintothehighqualityvalueinstitutionmarketinBrazil.Forthisacquisition,Revenuesof
$73,083,Operatingincomeof$8,644andNetlossof$(4,030)areincludedintheConsolidatedStatementofOperationsfortheyearended
December31,2014.
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TheConsolidatedFinancialStatementsincludetheoperatingresultsofMSA,FAPAandFMUfromthedatesofacquisition.The
followingtablesummarizestheestimatedfairvaluesofallassetsacquiredandliabilitiesassumedatthedatesofacquisition:
Currentassets
Goodwill
Tradenames
Longtermindemnificationassets
Otherlongtermassets
Totalassetsacquired
Totalliabilities
NetassetsacquiredattributabletoLaureate
Education,Inc.
Debtassumed
NetassetsacquiredattributabletoLaureate
Education,Inc.plusdebtassumed
Netassetsacquired
Cashacquired
Fairvalueofexistinginvestment
Netcash(received)paidatacquisition
MSASouth
Africa
$
$
FAPA
Brazil
9,845
30,360
25,197
65,402
1,350
13,756
838
15,944
5,072
46,574
44,386
(7,043)
(35,437)
(2,237)
(331)
Total
$ 5,675 $ 37,156 $
985 34,435
5,435 395,804
95,291
2,664 72,911
3,811 132,279
1,296 41,857
19,866 809,733
19,871
9,706 63,473
11,343
6,012 327,443
15,718 422,130
44,386
2,188
FMU
Brazil
4,148 387,603
31,214
$ 4,148 $ 418,817
$ 4,148 $ 387,603
(3,153)
(133)
(4,148) (96,829)
$ (3,153) $ 290,641
$
$
52,676
65,780
426,436
95,291
75,575
136,090
43,153
895,001
21,221
86,935
12,181
333,455
453,792
5,072
436,137
33,402
469,539
436,137
(10,329)
(136,414)
(2,237)
287,157
2014Summary
During2014,wepaid$788ofadditionalpurchasepriceforaworkingcapitalsettlementrelatedtoTHINK:EducationGroupPty.Ltd.
(THINK),whichweacquiredonDecember20,2013.Thispayment,inadditiontothe$287,157oftotalnetcashpaidfortheacquisitions
ofMSA,FAPAandFMU,resultedin$287,945oftotalcashusedforBusinessacquisitions,netofcashacquired,duringtheyearended
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ofMSA,FAPAandFMU,resultedin$287,945oftotalcashusedforBusinessacquisitions,netofcashacquired,duringtheyearended
December31,2014,asshownintheConsolidatedStatementofCashFlows.Forallofthe2014acquisitions,theallocationsofpurchase
priceconsiderationarenolongersubjecttorevision,asthemeasurementperiodhasclosed.Nomaterialadjustmentsweremadeduring
2015tocompletetheallocationsofpurchasepriceconsideration.ExceptforFMU,thegoodwillrelatedtothe2014acquisitionsisnot
deductibleforincometaxpurposes.Aspartofthepurchasepriceallocationsforthe
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2014acquisitions,Laureaterecordedliabilitiesof$41,222foruncertainincometaxpositionsandliabilitiesof$89,172forcontingencies
relatedtotaxesotherthanincometax.
UnauditedProformaResults
TheunauditedproformacombinedhistoricalresultsofLaureate,asifMSA,FAPAandFMUhadbeenacquiredasofJanuary1,2013,
are:
Revenues
Netloss
2014
2013
$ 4,555,876 $ 4,153,505
(179,920)
(50,589)
TheseamountshavebeencalculatedafterapplyingLaureate'saccountingpoliciesandadjustingtheresultstoreflectadditional
depreciationandamortizationthatwouldhavebeenchargedassumingthefairvalueadjustmentstoproperty,plant,andequipment,and
amortizableintangibleassetshadbeenrecordedasofJanuary1,2013.Inaddition,proformaadjustmentshavebeenmadetoreflectthe
impactofcertainindemnificationsthatthesellersagreedtoprovideusforcertaincontingentliabilities.Theseunauditedproforma
combinedresultsofoperationshavebeenpreparedforcomparativepurposesonly,andtheydonotpurporttobeindicativeoftheresultsof
operationsthatactuallywouldhaveresultedhadtheacquisitionsoccurredonthedateindicated,orthatmayresultinthefuture.
Malaysia
Duringthethirdquarterof2014,Laureateacquiredanadditional2.9%ownershipinterestinINTIEducationHoldingsSdnBhd(INTI)
forcashconsiderationof$3,055.ThispaymentwasincludedinPaymentstopurchasenoncontrollinginterestsintheConsolidated
StatementofCashFlowsfortheyearendedDecember31,2014.
Duringthefourthquarterof2014,Laureateacquiredanadditional6.4%ownershipinterestinINTIfortotalpurchaseconsiderationof
approximately$6,783,ofwhichapproximately$6,200waspaidin2014and$583wasadeferredpaymentthatwaspaidin2015.See
Note5,DuetoShareholdersofAcquiredCompanies,forfurtherdiscussionofthedeferredpayment.Theconsiderationpaidin2014was
paidwithcashofapproximately$1,000andsettlementoftheapproximately$5,200ofrelatedpartynotereceivableandinterestthatwas
owedtoLaureatebythenoncontrollinginterestholder.
Thailand
DuringtheyearendedDecember31,2014,weacquiredadditionalownershipinterestinFareastStamfordInternationalCo.,Ltd.
(FES),increasingLaureate'sownershipinterestinFESfromapproximately92%toapproximately99%.FEShasthelicensetooperate
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(FES),increasingLaureate'sownershipinterestinFESfromapproximately92%toapproximately99%.FEShasthelicensetooperate
StamfordInternationalUniversity(Stamford,togetherwithFES,"STIU").Thepurchasepricefortheadditionalownershipinterestwas
$312,andisincludedinPaymentstopurchasenoncontrollinginterestsintheConsolidatedStatementofCashFlowsfortheyearended
December31,2014.
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2013Acquisitions
DuringtheyearendedDecember31,2013,Laureateconsummatedtheacquisitionsoutlinedbelow,whichareincludedinour
ConsolidatedFinancialStatementscommencingfromthedatesofacquisition.
India
OnApril8,2013,weacquiredanequityinterestofapproximately95%inMPowerEnergyIndiaPvt.Limited(MPower),aforprofit
servicescompany.Thetotalpurchasepricewas$53,940andincluded$44,067incashpaidatclosingandasellernoteof$9,873.InApril
2015,theCompanyacquiredtheremaining5%noncontrollinginterestinMPowerforapurchasepriceof$2,852.OntheApril8,2013
acquisitiondateofMPower,wealsogainedacontrollingmembershipinterestofanotforprofitsociety,aVIE,whichinturncontrolstwo
educationalinstitutionsthatarealsonotforprofitentitieswhichareVIEs:theUniversityofTechnology&Management(UTM)andthe
UniversityofPetroleumandEnergyStudies(UPES).Thenotforprofitentitiescannotdeclaredividends.HereafterwerefertoMPower,
thenotforprofitsociety,UTMandUPEScollectivelyasthe"MPowerGroup."AsdiscussedinNote2,SignificantAccountingPolicies,
LaureatehasdeterminedthatitistheprimarybeneficiaryoftheseVIEsandhasconsolidatedtheseVIEs.ThegoodwillrecordedfortheM
PowerGrouprelatesprimarilytotheincrementalvaluethisacquisitionbringstotheLaureateInternationalUniversitiesnetwork,by
introducinganewmarketforLaureateinIndiaatthetimeoftheacquisition.Forthisacquisition,Revenuesof$18,007,Operatingincome
of$1,309andNetincomeof$1,422areincludedintheConsolidatedStatementofOperationsfortheyearendedDecember31,2013.
France
OnJuly11,2013,LaureateassumedcontroloftheEuropeanBusinessSchoolGroup(EBSGroup)inFrancebyacceptingthe
designationofLaureatecontrolledentitiesasmemberswithmajorityvotingrightsoverthegoverningbodiesoftheEBSGroup.TheEBS
GroupisaVIEthatconsistsoffourentities,twoofwhichareinstitutionsthatarelegallyorganizedasnotforprofitentities,andtwoof
whichareforprofitservicecompanies.Laureatewasnotrequiredtopayanypurchaseconsiderationandisnotcommittedtomakeany
futurepaymentsinconnectionwiththistransaction.WebelievethatthelegalcontrolmechanismsgiveLaureatecontrolovertheEBS
Group,ourcontractualarrangementswiththeEBSGrouprepresentavariableinterest,andthatLaureateistheprimarybeneficiaryofthis
VIE.Accordingly,theliabilities,earningsandlossesoftheEBSGroupwereconsolidatedeffectiveJuly11,2013.Forthisacquisition,
Revenuesof$8,538,Operatinglossof$(748)andNetlossof$(410)areincludedintheConsolidatedStatementofOperationsfortheyear
endedDecember31,2013.
UnitedStates
OnNovember21,2013,Laureateacquired80%oftheownershipandvotingrightsoftheUniversityofSt.AugustineforHealth
Sciences,LLC(St.Augustine).St.AugustineoperatesaneducationalinstitutionwithseverallocationsintheUnitedStatesthatprovide
graduatedegreeprogramsinphysicalandoccupationaltherapy.Thepurchasepriceforthe80%equityinterestwas
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$76,800,whichdecreasedto$75,026asaresultofworkingcapitaladjustmentsrequiredbythepurchaseagreement.Thepurchaseprice
includedacashpaymentatclosingof$57,997,afiveyearpromissorynotefor$14,000,andadeferredpaymentforafinalworkingcapital
adjustmentof$3,029,asdiscussedbelow.DetailsofthepromissorynotearefurtherdiscussedinNote5,DuetoShareholdersofAcquired
Companies.Theremaining20%noncontrollinginterestheldbythesellersissubjecttoaput/calloptionwithanexercisepricebasedona
fixedmultipleofAdjustedEBITDA,asdefinedintheagreement.Theput/calloptionisdiscussedfurtherinNote11,Commitmentsand
Contingencies.ThegoodwillrecordedforSt.Augustinecanbeprimarilyattributedtotheincrementalvaluethisacquisitionbringstothe
LaureateInternationalUniversitiesnetworkbybeingthefirstLaureateinstitutionintheUnitedStatestoofferphysicalandoccupational
therapydegreeprograms.Duringthefirstquarterof2014,Laureateandthesellercompletedaworkingcapitaladjustmentthatwas
requiredbythepurchaseagreement,whichrequiredLaureatetopaytheselleranadditional$3,029inMarch2014.Forthisacquisition,
Revenuesof$4,068,Operatingincomeof$1,055andNetincomeof$131areincludedintheConsolidatedStatementofOperationsfor
theyearendedDecember31,2013.
Australia
OnDecember20,2013,Laureateacquiredtheremaining80%ownershipinterestofTHINKforapurchasepriceof$114,255,which
includesthefairvalueofour20%equitymethodinvestmentinTHINK.Atthedateweacquiredtheremaining80%ownershipinterestof
THINK,weremeasuredour20%equitymethodinvestmenttofairvalueandrecordedagainofapproximately$5,860,whichisclassified
asOtherincome(expense),netintheConsolidatedStatementsofOperations.Theinvestmentwasremeasuredtofairvalueusinga
discountedcashflowapproach,factoringinthecontrolpremiumthatwasincludedinthepurchasepricefortheremaining80%ownership
interest.THINKisaportfolioofeightprivatepostsecondaryeducationprovidersinAustraliathatdeliverdegreesthroughbothcampus
basedandonlineinstitutions,withprogramsinbusiness,hospitality,design,andhealthsciences.TheinvestmentinTHINKallows
LaureatetoexpanditsexistingpresenceinAustralia.ThegoodwillrecordedforTHINKisrelatedtotheincrementalvaluethisacquisition
bringstotheLaureateInternationalUniversitiesnetworkandLaureate'sexistingoperationsinAustralia,byexpandingourpresenceand
addingpotentialsynergiestoLaureate'soperations.Forthisacquisition,Revenuesof$1,363,Operatinglossof$(665)andNetlossof
$(727)areincludedintheConsolidatedStatementofOperationsfortheyearendedDecember31,2013.
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TheConsolidatedFinancialStatementsincludetheoperatingresultsofMPowerGroup,EBSGroup,St.AugustineandTHINKfrom
thedatesofacquisition.Thefollowingtablesummarizestheestimatedfairvaluesofallassetsacquiredandliabilitiesassumedatthedates
ofacquisition:
Currentassets
Goodwill
Tradenames
Otherlongtermassets
Totalassetsacquired
Totalliabilities
Netassetsacquiredattributableto
Debtassumed
Netassetsacquiredattributableto
LaureateEducation,Inc.plusdebt
assumed
Netassetsacquired
Cashacquired
Fairvalueofexistinginvestment
Netcashpaid(received)atacquisition
MPower
Group
India
EBSGroup
France
11,820
33,594
21,272
11,526
127
78,339
1,833
12,235
2,219
5,273
21,560
2,839
53,940
4,052
$
$
57,992
53,940
(8,066)
(9,873)
36,001
4,988
6,037
918
945
12,888
794
7,130
4,205
759
12,888

4,999
$
$
St.Augustine
USA
4,999
(1,137)
(1,137)
$
$
6,707
52,424
49,198
29,367
7,287
317
145,300
345
5,782
47,735
53,862
16,412
THINK
Australia
Total
$ 16,837 $ 40,352
34,719 126,774
88,785 159,255
15,650 57,461
11,885 19,172
247
1,636
168,123 404,650
2,620
5,592
22,330 47,477
18,734 72,893
10,184 16,216
53,868 142,178
19,251
75,026 114,255 243,221

48,080 21,354 78,485
123,106
75,026
(5,797)
(17,029)
52,200
$ 135,609 $ 321,706
$ 114,255 $ 243,221
(5,296) (20,296)
(26,902)
(18,473) (18,473)
$ 90,486 $ 177,550
2013Summary
Forallofthe2013acquisitions,theallocationsofthepurchasepriceconsiderationarenolongersubjecttorevision,asthe
measurementperiodhasclosed.Nomaterialadjustmentsweremadeduring2014tocompletetheallocationsofpurchaseprice
consideration.ExceptforSt.Augustine,noneofthegoodwillrelatedtothe2013acquisitionsisexpectedtobedeductibleforincometax
purposes.Aspartofthepurchasepriceallocationsforthe2013acquisitions,Laureaterecordedliabilitiesof$2,019foruncertainincome
taxpositionsandliabilitiesof$746forcontingenciesrelatedtotaxesotherthanincometax.
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UnauditedProformaResults
TheunauditedproformacombinedhistoricalresultsofLaureatefor2013,asifSt.AugustineandTHINKhadbeenacquiredasof
January1,2012,are:
Revenues
Netloss
2013
$ 4,046,955

(81,245)
ProformaresultsofoperationsfortheMPowerGroupandEBSGroupacquisitionscompletedduring2013havenotbeenpresented
becausetheeffectsofthoseacquisitionswerenotmaterialtotheCompany'sfinancialresults.Theseamountshavebeencalculatedafter
applyingLaureate'saccountingpoliciesandadjustingtheresultstoreflectadditionaldepreciationandamortizationthatwouldhavebeen
chargedassumingthefairvalueadjustmentstoproperty,plant,andequipment,andamortizableintangibleassetshadbeenapplied.In
addition,proformaadjustmentshavebeenmadefortheinterestincurredforfinancingtheacquisitions.Taxeshavealsobeenadjustedfor
theeffectoftheitemsdiscussed.Theseunauditedproformacombinedresultsofoperationshavebeenpreparedforcomparativepurposes
only,andtheydonotpurporttobeindicativeoftheresultsofoperationsthatactuallywouldhaveresultedhadtheacquisitionsoccurred
onthedateindicated,orthatmayresultinthefuture.
Turkey
InJanuary2013,theCompanyacquiredtheremaining25%noncontrollinginterestinCHHoldingNetherlandsBV(CHHolding).
Thetotalpurchasepriceof$29,000includesaninitialcashpaymentof$5,000,whichwasmadeonJanuary24,2013,andanadditional
$24,000ofdeferredpurchasepricepayableoverthenextfiveyears,asfurtherdisclosedinNote5,DuetoShareholdersofAcquired
Companies.Asaresultofthistransaction,Laureatenowowns100%ofCHHolding.
Brazil
InApril2013,Laureateclosedatransactiontoacquiretheremaining49%ownershipinterestinUniversidadeAnhembiMorumbi
(UAMBrazil)forBRL225,621(approximatelyUS$95,456atthetransactiondate),afterreceivingapprovalfromtheConselho
AdministrativodeDefesaEconmica(CADE).Thepurchasepricewaspaidasadepositintwoinstallmentstotaling$11,138.Thefirst
installmentof$1,122waspaidinDecember2012.Thesecondinstallmentof$10,016waspaidinthefirstquarterof2013.Theremaining
balancewillbepaidinnineequalinstallments,asfurtherdiscussedinNote5,DuetoShareholdersofAcquiredCompanies.Thepayments
madein2013areclassifiedinPaymentstopurchasenoncontrollinginterestsintheConsolidatedStatementofCashFlowsfortheyear
endedDecember31,2013.Asaresultofthistransaction,Laureatenowowns100%ofUAMBrazil.Inadditiontoacquiringtheremaining
49%equityinterestfromtheminorityshareholders,Laureatealsoreduceditsfutureleaseobligationsoverasixyearperiodsinceaportion
oftheconsiderationwasallocatedtoprepaidrent.
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UnitedStates
InJuly2013,weinvested$5,000inCoursera,aprivateeducationcompanyheadquarteredinMountainView,Californiathatoperates
aleadingmassiveopenonlinecourse(MOOC)platform.Laureate's$5,000investmentisrecordedinProceedsfrom(investmentsin)
affiliatesintheConsolidatedStatementofCashFlowsfortheyearendedDecember31,2013,andwaspartofaseriesBroundoffunding
totaling$43,000madebyaninvestorgroup.AsasocialentrepreneurshipcompanyandleaderintherapidlyacceleratingMOOC
movement,Courserapartnerswithtoptieruniversitiesandinstitutionstoprovidefreeonlinecoursesacrossabroadrangeofdisciplines,
whilealsoacknowledgingtheimportantroletraditionalinstitutionsplayinthefutureofeducation.WeareaccountingfortheCoursera
investmentasacostmethodinvestment.
SouthAfrica
InAugust2013,wemadeaninvestmentof$2,237inMonashSouthAfrica(MSA),aninstitutioninSouthAfrica,whichisrecordedin
Proceedsfrom(investmentsin)affiliatesintheConsolidatedStatementofCashFlowsfortheyearendedDecember31,2013.Inaddition
tothisinvestment,wealsocommittedtofundadditionalamountsofapproximately$2,200inthefirstquarterof2014andapproximately
$4,500onDecember31,2014,inreturnforacontrollingfinancialinterestinMSAbeginninginthefirstquarterof2014.Afinalpayment
isduein2018,theamountofwhichwillbedeterminedbasedon7.0timesMSA's2017EBITDA,lessdebtandpriorpayments,asdefined
intheagreement.Themaximumamountofthefinalpaymentduein2018isapproximately$11,500.Further,wecommittedtoacquire
certainrealestatein2014foracashpaymentofapproximately$4,600andanotepayableofapproximately$23,000thatmaturesin
January2019andcarriesanannualinterestrateof6.75%.InFebruary2014,wecompletedtheplannedtransactionstoobtainacontrolling
financialinterestinMSAandacquiredtherealestatewehadcommittedtopurchase.Accordingly,underouraccountingpolicywebegan
consolidatingMSAinFebruary2014.
Spain
InJanuary2013,Laureateinvestedanadditional$1,549inHSMGroupManagementFocusEuropeGlobalS.L.(HSM),anequity
methodinvestment,whichisrecordedinProceedsfrom(investmentsin)affiliatesintheConsolidatedStatementofCashFlowsfortheyear
endedDecember31,2013.Duringthethirdquarterof2013,thisadditionalinvestmentwaswrittendowntoacarryingvalueofzero.On
March5,2015,LaureateandHSM'sotherownerscompletedthesaleofHSM.SeeNote17,RelatedPartyTransactionsforfurther
discussion.
Note5.DuetoShareholdersofAcquiredCompanies
TheamountsduetoshareholdersofacquiredcompaniesgenerallyariseinconnectionwithLaureate'sacquisitionofamajorityorall
oftheownershipinterestofcertainsubsidiaries.Promissorynotespayabletothesellersofacquiredcompanies,referredtoas"sellernotes,"
arecommonlyusedasameansofpaymentforbusinessacquisitions.SellernotepaymentsaregenerallyclassifiedasPaymentsofdeferred
purchasepriceforacquisitionswithinfinancingactivitiesinourConsolidatedStatementof
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Note5.DuetoShareholdersofAcquiredCompanies(Continued)
CashFlows.Theamountsduetoshareholdersofacquiredcompanies,currencies,andinterestratesappliedwereasfollows:
December31,
2015
FaculdadesMetropolitanasUnidasEducacionais(FMU)
MonashSouthAfrica(MSA)
CHHoldingNetherlandsB.V.(CHHolding)
UniversityofSt.AugustineforHealthSciences,LLC
(St.Augustine)
UniversidadTecnologicaCentroamericana(UNITEC
Honduras)
IADEGroup
UniversidadAutonomadeVeracruz,S.C.(Veracruz)
CentrodeDesenvolvimentoPessoaleEmpresarialLtda.
(CEDEPE)
InstitutoBrasileirodeMedicinadeReabilitao(Uni
IBMR)
Think:EducationGroupPty.Ltd.(THINK)
UniversidadPrivadadelNorteS.A.C.(UPN)
MPowerGroup
INTIEducationHoldingsSdnBhd(INTI)
Totalduetoshareholdersofacquiredcompanies
Less:Currentportionofduetoshareholdersofacquired
companies
Duetoshareholdersofacquiredcompanies,lesscurrent
portion
89,348
70,894
28,828
16,421
BRL
BRL
AUD
USD
11,550
14,000
USD
6,764
3,994
2,225
2,090
1,541
8,242
2,607
2,769
3,316
464
865
186,719
70,512
48,172
26,662
12,745
Nominal
Currency InterestRate%
2014
4,428
3,273
1,275
1,212
583
248,061
21,050
26,048
$ 165,669 $ 222,013
HNL
EUR
MXN
BRL
EUR
CDI
CDI+2%
n/a,6.75%
n/a
7%
IIBC
3%
CETES
IGPM
3%
BRL
CDI
BRL
AUD
PEN
INR
MYR
IPCA
n/a
n/a
10%
n/a
AUD:AustralianDollar
BRL:BrazilianReal
EUR:EuropeanEuro
HNL:HonduranLempira
INR:IndianRupee
MXN:MexicanPeso
MYR:MalaysianRinggit
PEN:PeruvianNuevoSol
USD:UnitedStatesDollar
CDI:CertificadosdeDepsitosInterbancrios(Brazil)
CETES:28dayCertificadosdelaTesoreriadelaFederacin(Mexico)
IIBC:ndicedeInflacindelBancoCentral(Honduras)
IPCA:ndiceNacionaldePreosaoConsumidorAmplo(Brazil)
IGPM:GeneralIndexofMarketPrices(Brazil)
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TheaggregateannualmaturitiesofDuetoshareholdersofacquiredcompaniesasofDecember31,2015wereasfollows:
2016
2017
2018
2019
2020
Thereafter
Aggregatematurities
Less:imputedinterestdiscount
Total
$ 21,452
89,199
36,169
29,162
10,160
8,159
194,301
(7,582)
$ 186,719
FMU
AsdescribedinNote4,Acquisitions,theacquisitionofFMUwaspartiallyfinancedwithsellernoteshavinganaggregateprincipal
amountofBRL250,000(US$63,808atDecember31,2015).ThematuritydateofthenotesisSeptember12,2017,thethirdanniversary
oftheacquisitionclosingdate,andtheaggregateprincipalbalancewillbeadjustedfromtheclosingdateuntilthedateofpaymentbased
on100%oftheCDIrate.Thesenoteswererecordedontheacquisitiondateattheirdiscountedpresentvalues,whichwillallbeaccreted
overthetermofthenotes.AsofDecember31,2015,theaggregatecarryingvalueofthenoteswas$70,512.
UAMBrazil
AsdescribedinNote4,Acquisitions,inApril2013Laureateclosedatransactiontoacquiretheremaining49%ownershipinterestin
UAMBrazil.AportionoftheacquisitionwasfinancedwithasellernoteintheamountofBRL200,808(US$51,253atDecember31,
2015),whichisscheduledtobepaidinnineequalinstallmentsofBRL22,312(US$5,695atDecember31,2015),adjustedforinflation
basedonCDIplus200basispoints.TheinitialthreeinstallmentswerepaidduringtheyearsendedDecember31,2013,2014,and2015.
TheremainingsixinstallmentsaredueannuallyonAugust31stofeachyear.Theeighthandninthinstallmentsaresubjecttoacceleration
andwillbepaidonAugust31,2019,alongwiththeseventhinstallment,ifacertainfinancialperformancetargetisachievedin2018,as
describedinthepurchaseagreement.Ontheclosingdatewerecordedthenotepayableatitsdiscountedpresentvalue,whichwillbe
accretedoverthetermofthenote.AsofDecember31,2015,thecarryingvalueofthenotewas$48,172.
MSA
AsdescribedinNote4,Acquisitions,LaureatefinancedaportionoftheacquisitionofMSAwithtwosellernotesandafinalearnout
payment.ThefirstsellernoteofAUD5,000(US$4,072atpaymentdate)waspaidinDecember2014.
ThesecondsellernoteofAUD25,000ispayableinfiveinstallments.ThefirstfourinstallmentsofAUD1,000(US$727at
December31,2015)aredueannuallybeginningonJanuary1,2015,andthe
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fifthinstallmentofAUD21,000(US$15,261atDecember31,2015)isdueonJanuary1,2019.Laureatepaidthefirstandsecond
installmentsofAUD1,000eachduringtheyearsendedDecember31,2014and2015.Thenotecarriesanannualinterestrateof6.75%,
whichwasdeemedtobeatmarket.AsofDecember31,2015,thecarryingvalueofthesecondsellernotewasUS$18,794.
Thefinalearnoutpaymentisduein2018,theamountofwhichwillbedeterminedbasedon7.0timesMSA's2017EBITDA,lessdebt
andpriorpayments,asdefinedintheagreement.ThemaximumamountofthefinalinstallmentisAUD12,500(US$9,084atDecember31,
2015).Sincethefinalearnoutpaymentbearsinterestatalowerthanmarketrate,weimputedtheinterestandrecordedtheamountonthe
acquisitiondateatthetotaldiscountedpresentvalue,whichwillbeaccretedovertheremainingtermandhadanaggregatecarryingvalue
of$7,868atDecember31,2015.
CHHolding
AsdescribedinNote4,Acquisitions,inJanuary2013,Laureatefinancedaportionoftheacquisitionoftheremainingminority
interestinCHHoldingwithasellernote.Theprincipalamountofthesellernoteis$24,000andrepaymentisdueinfiveannual
installments.Thefirstfourinstallmentsof$5,000aredueoneachofthefirstfouranniversarydatesofclosingandthefifthinstallmentof
$4,000isdueonthefifthanniversarydateofclosing.Thefirstthreeinstallmentsof$5,000werepaidinJanuary2014,2015,and2016,
respectively.Thesellernoteisnoninterestbearing.Accordingly,attheacquisitiondate,weimputedtheinterestandrecordedthenote
payableatitsdiscountedpresentvalueofapproximately$17,500,whichwillbeaccretedoverthetermofthenote.Duringtheyearended
December31,2015,Laureaterecordedaccretiononthenote,resultinginacarryingvalueof$12,745asofDecember31,2015.
St.Augustine
AsdescribedinNote4,Acquisitions,onNovember21,2013,Laureateacquired80%oftheownershipandvotingrightsofthe
UniversityofSt.Augustine.Aportionofthepurchasepricewasfinancedwithafiveyearsellernoteintheamountof$14,000.The
promissorynoteincursinterestatanannualrateof7%,whichispayablequarterlybeginningonJanuary1,2014,andtheentireprincipal
balanceispayableonNovember21,2018.DuringtheyearendedDecember31,2015,thisnotepayableandareceivablefromtheformer
ownerwerereducedby$2,450followingtheresolutionofcertainpreacquisitionmatters.
UNITECHonduras
InJuly2005,LaureateassumedcontrolofUNITECHondurasandagreedtocauseUNITECHondurastohonoritsseveranceand
retirementpaymentobligationswiththefounders.Pursuanttothisagreement,UNITECHondurasisrequireduntil2020tomakemonthly
payments,whichareadjustedannuallyforinflationbasedontheIIBC.ThemonthlypaymentasofDecember31,2015wasHNL2,876(US
$129).Weoriginallyrecordedtheobligationatitspresentvaluebasedonanincrementalborrowingrateof5%.
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IADEGroup
AsdiscussedinNote4,Acquisitions,theacquisitionofIADEGroupwaspartiallyfinancedwithasellernoteintheamountofEUR
3,000(US$3,293atDecember31,2015).Thesellernotecarriesanannualinterestrateof3%andispayableinthreeequalinstallmentsof
EUR1,000(US$1,098atDecember31,2015)at18monthsaftertheacquisitiondate,36monthsaftertheacquisitiondate,and60months
aftertheacquisitiondate.Additionally,during2015aworkingcapitaladjustmentofEUR639(US$701atDecember31,2015)was
recordedinaccordancewiththepurchaseagreement.AsofDecember31,2015,thetotalcarryingvalueoftheliabilitywas$3,994.
Veracruz
OnJanuary14,2011,LaureatefinancedaportionoftheacquisitionofVeracruzwithapromissorynotepayabletothesellersand
deferredpaymentsforthenunresolvedtaxmatters.TheprincipalamountofthepromissorynoteisMXN38,437(US$2,225asof
December31,2015),andtheobligationwasfullypaidatmaturityinJanuary2016.
FAPA
AsdescribedinNote4,Acquisitions,theacquisitionofFAPAwasfinancedinpartwithtwosellernoteshavinganaggregateprincipal
amountofBRL9,164(US$2,339atDecember31,2015).ThefirstsellernoteofBRL3,055(US$780atDecember31,2015)isdueon
August12,2018,thefourthanniversaryoftheacquisitionclosingdate,andthesecondsellernoteofBRL6,109(US$1,559at
December31,2015)isdueonAugust12,2019,thefifthanniversaryoftheacquisitionclosingdate.Theprincipalamountofeachseller
noteshallbeadjustedaccordingtothevariationoftheIGPMuntilthenotes'maturities.Laureaterecordedthesesellernotesattheir
discountedpresentvaluesattheacquisitiondate,whichwillbeaccretedoverthetermsofthenotes.Duringthefourthquarterof2014,an
additionalworkingcapitaladjustmentwasaccruedandthensubsequentlypaidonFebruary3,2015intheamountofBRL699($263at
dateofpayment).AsofDecember31,2015,thetotalcarryingvalueofthenoteswas$2,090.
UE,formerlyISLA
OnApril1,2011,LaureatefinancedaportionoftheacquisitionofUEwithtwosellernotes.Theprincipalamountofthefirstseller
notewasEUR1,485(US$1,630atDecember31,2015),andrepaymentwasmadeinthreeequalannualinstallmentsofEUR495(US$543
atDecember31,2015)withthefinalinstallmentpaidin2014.Thefirstsellernotewasnoninterestbearing.Theprincipalamountofthe
secondsellernoteisEUR4,650(US$5,103atDecember31,2015)andispayableinfiveinstallments.Thefirstthreeannualinstallments
ofEUR550(US$604)werepaidonDecember31,2012,2013and2014.ThefourthannualinstallmentofEUR1,500(US$1,646)was
paidonDecember31,2015andthefinalannualinstallmentofEUR1,500(US$1,646)ispayableonDecember31,2016.Theannual
interestrateonthesecondsellernoteis3%.Sincethenotesbearinterestatlowerthanmarketrates,attheacquisitiondateLaureate
recordedthesellernotesatthepresentvalueofEUR4,870(US$6,866atthedateofacquisition),whichisbeingaccretedoverthetermsof
thenotes.AsofDecember31,2015,thecarryingvalueoftheremainingnotepayablewas$1,541.
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CEDEPE
LaureatefinancedaportionoftheacquisitionofCEDEPEwithasellernote.TheprincipalamountofthesellernoteisBRL4,400(US
$1,123atDecember31,2015),andrepaymentisdueinfiveinstallments.ThesellernoteincursinterestbasedontheCDI.Thefirst
installmentofBRL700(US$179atDecember31,2015)wasdueonJanuary4,2013.TheremainingfourinstallmentsofBRL925(US
$236atDecember31,2015)aredueannuallyontheanniversaryoftheacquisitionclosingdate,ofwhichtwoinstallmentsremaintobe
paid.Sincethenotebearsinterestatlowerthanmarketrates,Laureaterecordedthesellernoteasoftheacquisitiondateatthepresent
valueofBRL3,872(US$988),whichwillbeaccretedoverthetermofthenote.AsofDecember31,2015,theremainingcarryingvalueof
thenotewas$464.
UniIBMR
OnDecember21,2009,LaureateacquiredamajorityinterestinUniIBMR,financingpartofthepurchasewithasellernote.During
theyearendedDecember31,2015,UniIBMRsettleditsduetoshareholderliabilitythroughthenoncashtransferofacertainbuildingto
theformerownersofUniIBMR,inaccordancewiththetermsoftheoriginalpurchaseagreement.
THINK
AtDecember31,2014,Laureatehasrecordedacurrentliabilityof$3,273payabletotheformerownersofTHINK,representinga
contingentconsiderationpayableunderthetermsofthe2013purchaseagreement.TheliabilitywasrecordedthroughachargetoDirect
costssinceitwasnotameasurementperiodadjustment.ThisliabilitywaspaidinfullinJanuary2015.
UPN
Aspartofthe2007purchaseagreementforUPN,oneofLaureate'sinstitutionsinPeru,anadditionalamountofconsideration(anearn
outpayment)waspayabletothesellersofUPN.OnSeptember16,2013,Laureatemadeapaymentof$11,399tothesellers.Ofthe
$11,399,$5,725relatedtocompensationpaidtothesellersandwasthereforeclassifiedasanoperatingcashflowonthe2013
ConsolidatedStatementofCashFlows.Theremaining$5,674wasrecordedwithinPaymentsofcontingentconsiderationforacquisitions
intheinvestingactivitiessectionofthe2013ConsolidatedStatementofCashFlows.Theremainingliabilitybalanceof$1,275asof
December31,2014relatedtocontingentconsiderationduetooneofthesellers.Fullpaymentwasmadeduringtheyearended
December31,2015andwasincludedinPaymentsofcontingentconsiderationforacquisitionsintheinvestingactivitiessectionofthe
2015ConsolidatedStatementofCashFlows.
MPowerGroup
AsdescribedinNote4,Acquisitions,onApril8,2013,LaureatefinancedaportionoftheacquisitionofMPowerwithasellernote
thatcarriedanannualinterestrateof10%.TheprincipalamountofthesellernotewasapproximatelyINR535,000andrepaymentwasdue
infourinstallments.TheseinstallmentsofapproximatelyINR153,000weredueandpaidinsixmonthincrementsstartingOctober8,
2013withthefinalinstallmentpaidonApril8,2015(US$1,326atdateofpayment).
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INTI
AsdescribedinNote4,Acquisitions,Laureateacquiredanadditional6.4%equityinterestinINTIduringthefourthquarterof2014.
Thetotalpurchasepricewasapproximately$6,783,whichincludedapproximately$6,200ofpurchaseconsiderationpaidin2014and
estimatedadditionalpurchasepriceof$583.PaymentofthisamountwasmadeduringtheyearendedDecember31,2015.
Note6.BusinessandGeographicSegmentInformation
Laureate'seducationalservicesareofferedthroughfouroperatingsegments:LatAm,Europe,AMEA,andGPS.Laureatedeterminesits
operatingsegmentsbasedoninformationutilizedbythechiefoperatingdecisionmakertoallocateresourcesandassessperformance.
institutioninItaly,NuovaAccademiadiBelleArtiMilano(NABA),includingDomusAcademy,movedfromourGPSsegmentintoour
Europesegment.MediaDesignSchool(MDS),locatedinNewZealand,movedfromourGPSsegmentintoourAMEAsegment.Following
thechange,theGPSsegmentwillfocusonLaureate'sfullyonlineinstitutionsoperatinggloballyanditscampusbasedinstitutionsinthe
UnitedStates.Thischangewasreflectedinthesegmentinformationbeginninginthesecondquarterof2016,theperiodinwhichthe
changeoccurred.Inaddition,allsegmentinformationthatispresentedfortheyearsendedDecember31,2015,2014and2013inthese
ConsolidatedFinancialStatementshasalsobeenrevisedtoreflectthissegmentchange.
TheLatAmsegmentconsistsofcampusbasedinstitutionsandhasoperationsinBrazil,Chile,CostaRica,Honduras,Mexico,Panama
andPeruandhascontractualrelationshipswithalicensedinstitutioninEcuador.Theinstitutionsprovideaneducationthatemphasizes
applied,professionalorientedfieldsofstudywithundergraduateandgraduatedegreeprograms.Theprogramsattheseinstitutionsare
mainlycampusbasedandareprimarilyfocusedonlocalstudents.Inaddition,theinstitutionsinourLatAmsegmenthavebegun
introducingonlineandhybrid(acombinationofonlineandinclassroom)coursesandprogramstotheircurriculum.BrazilandChilehave
governmentsupportedfinancingprogramsforhighereducation,whileinothercountriesstudentsgenerallyfinancetheirowneducation.
TheEuropesegmentconsistsofcampusbasedinstitutionswithoperationsinCyprus,France,Germany,Italy,Morocco,Portugal,
SpainandTurkey.Theinstitutionsgeneraterevenuesbyprovidingprofessionalorientedundergraduateandgraduatedegreeprograms.
Severalinstitutionshavebeguntointroduceonlineandhybridprograms.StudentsintheEuropesegmentgenerallyfinancetheirown
education.
AfricaandThailand.AMEAalsomanages11licensedinstitutionsintheKingdomofSaudiArabiaandmanagesoneadditionalinstitution
inChinathroughajointventurearrangement.Theinstitutionsgeneraterevenuesbyprovidingprofessionalorientedundergraduateand
graduatedegreeprograms.StudentsintheAMEAsegmentgenerallyfinancetheirowneducation.
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Note6.BusinessandGeographicSegmentInformation(Continued)
TheGPSsegmentconsistsofaccreditedonlineinstitutions,whichservestudentsglobally,andcampusbasedinstitutionsserving
studentsinSpain,Switzerland,theUnitedKingdomandtheUnitedStates.TheGPSsegmentalsomanagesonehospitalityandculinary
institutioninChinaandonehospitalityandculinaryinstitutioninJordanthroughjointventureandothercontractualarrangements.The
onlineinstitutionsprimarilyserveworkingadultswithundergraduateandgraduatedegreeprograms.Thecampusbasedinstitutions
primarilyservetraditionalstudentsseekingundergraduateandgraduatedegrees,particularlyinthefieldsofhospitality,artanddesign,
culinary,andhealthsciences.IntheUnitedStates,studentshaveaccesstogovernmentsupportedfinancingprograms.
Intersegmenttransactionsareaccountedforinasimilarmannerasthirdpartytransactionsandareeliminatedinconsolidation.The
"Corporate"amountspresentedinthefollowingtablesincludescorporatechargesthatwerenotallocatedtoourreportablesegmentsand
adjustmentstoeliminateintersegmentitems.
WeevaluatesegmentperformancebasedonAdjustedEBITDA,whichisanonGAAPprofitmeasuredefinedas(Loss)incomefrom
continuingoperationsbeforeincometaxesandequityinnetincome(loss)ofaffiliates,addingbackthefollowingitems:Foreigncurrency
exchangeloss,net,Otherincome(expense),net,(Loss)gainonderivatives,Lossondebtextinguishment,Interestexpense,Interest
income,Depreciationandamortizationexpense,Impairmentchargesonlonglivedassets,Sharebasedcompensationexpenseand,
beginningin2014,expensesrelatedtoourExcellenceinProcess(EiP)initiative.EiPisanenterprisewideinitiativetooptimizeand
standardizeLaureate'sprocesses,creatingverticalintegrationofprocurement,informationtechnology,finance,accountingandhuman
resources.Itincludestheestablishmentofregionalsharedservicesorganizationsaroundtheworld,aswellasimprovementstothe
Company'ssystemofinternalcontrolsoverfinancialreporting.
WhenwereviewAdjustedEBITDAonasegmentbasis,weexcludeintercompanyrevenuesandexpenses,relatedtonetworkfeesand
royaltiesbetweenoursegments,thateliminateinconsolidation.Weusetotalassetsasthemeasureofassetsforreportablesegments.
Expendituresforlonglivedassetsincludepurchasesofpropertyandequipment,purchasesoflanduserightsandexpendituresfordeferred
costs,whichareclassifiedasinvestingactivitiesintheConsolidatedStatementsofCashFlows.
Thefollowingtablesprovidefinancialinformationforourreportablesegments,includingareconciliationofAdjustedEBITDAto
(Loss)incomefromcontinuingoperationsbeforeincometaxes
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andequityinnetincome(loss)ofaffiliates,asreportedintheConsolidatedStatementsofOperations,fortheyearsendedDecember31,
2015,2014and2013:
2015:
Revenues
AdjustedEBITDA
Depreciationand
amortizationexpense
Totalassets
Expendituresforlong
livedassets
2014:
Revenues
AdjustedEBITDA
Depreciationand
amortizationexpense
Lossonimpairmentof
assets
Totalassets
Expendituresforlong
livedassets
2013:
Revenues
AdjustedEBITDA
Depreciationand
amortizationexpense
Lossonimpairmentof
assets
Expendituresforlong
livedassets
LatAm
Europe
AMEA

$ 2,415,641 $ 486,235 $ 422,134 $
463,691 78,439 49,869
GPS
Corporate
Total
979,920 $ (12,271) $ 4,291,659

226,804 (115,395) 703,408
147,975 32,407 39,260

55,497
7,807 282,946
3,823,859 690,514 782,613 1,768,009 374,121 7,439,116
230,146
$ 2,532,451
541,975
27,239 40,716

$ 533,862 $ 405,555 $
72,777 30,130
152,142
34,131
46,877
954,494
222,998
38,035
21,880 366,858
$ (11,680) $ 4,414,682
(94,355) 773,525
59,071
4,952
288,331
125,449
273

66
125,788
4,506,531 720,211 839,651 1,909,293 382,438 8,358,124
269,186
$ 2,340,867
466,664
47,694 61,834

$ 501,398 $ 202,251 $
72,745 (4,843)
50,126
872,426
205,581
7,578
$ (3,061)
(93,675)
436,418
$ 3,913,881
646,472
136,758
30,786
18,083
52,535
4,563
242,725
21,967
1,095
1,987
8,533
33,582
367,167
42,008
54,384
45,094
10,878
519,531
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2015
AdjustedEBITDAofreportablesegments:
LatAm
Europe
AMEA
GPS
TotalAdjustedEBITDAofreportablesegments
Reconcilingitems:
Corporate
Sharebasedcompensationexpense
EiPexpenses
Operatingincome
Interestincome
Interestexpense
Otherincome(expense),net
(Loss)incomefromcontinuingoperationsbefore
incometaxesandequityinnetincome(loss)of
affiliates
2014
463,691
78,439
49,869
226,804
818,803
(115,395)
(282,946)
(39,021)
(44,484)
336,957
13,328
(398,042)
(1,263)
(2,607)
195
(149,178)
2013
541,975
72,777
30,130
222,998
867,880
(94,355)
(288,331)
(125,788)
(49,190)
(10,716)
299,500
21,822
(385,754)
(22,984)
(3,101)
(1,184)
(109,970)
$ (200,610) $ (201,671) $
466,664
72,745
(4,843)
205,581
740,147
(93,675)
(242,725)
(33,582)
(49,512)
320,653
21,805
(350,196)
(1,361)
6,631
7,499
(3,102)
1,929
GeographicInformation
Noindividualcustomeraccountedformorethan10%ofLaureate'sconsolidatedrevenues.Revenuesfromcustomersbygeographic
area,primarilygeneratedbystudentsenrolledatinstitutionsinthoseareas,wereasfollows:
2015
Externalrevenue
UnitedStates
Mexico
Brazil
Chile
Peru
Spain
Otherforeigncountries
Consolidatedtotal
2013
$ 731,979 $ 718,641 $ 647,046
678,030
741,649
701,830
672,372
712,921
568,443
536,530
585,645
629,185
356,684
322,938
270,519
200,284
234,781
230,822
1,115,780 1,098,107
866,036
$ 4,291,659 $ 4,414,682 $ 3,913,881
2014
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LonglivedassetsarecomposedofPropertyandequipment,net.Laureate'slonglivedassetsofcontinuingoperationsbygeographic
areawereasfollows:
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2015
Longlivedassets
Chile
Peru
Mexico
Brazil
UnitedStates
Spain
China
Switzerland
Otherforeigncountries
Consolidatedtotal
$ 374,101
278,501
253,459
211,675
197,067
179,957
139,922
79,893
576,325
$ 2,290,900
$ 421,904
258,352
293,331
300,405
176,958
205,510
148,865
79,185
629,809
$ 2,514,319
2014
Note7.GoodwillandOtherIntangibleAssets
Goodwill
ThechangeinthenetcarryingamountofGoodwillfromDecember31,2013throughDecember31,2015wascomposedofthe
followingitems:
BalanceatDecember31,2013
Acquisitions
Dispositions
Impairments
Currencytranslationadjustments
Adjustmentstoprioracquisitions
Acquisitions
Dispositions
Impairments
LatAm
Europe
1,465,704
398,587
(77,094)
(212,472)
1,574,725
(334,714)
2,652
1,242,663
AMEA
142,230
(38,244)
103,986
5,980
(10,570)
99,396
GPS
137,340
25,197
(18,853)
143,684
989
(17,439)
127,234
Total
$ 631,404 $ 2,376,678

423,784

(77,094)
15,996 (253,573)
647,400 2,469,795

6,969
(796) (363,519)

2,652
$ 646,604 $ 2,115,897
AsofbothDecember31,2015and2014,accumulatedgoodwillimpairmentlosseswere$136,430,with$77,094,$19,660and
$39,676relatingtoourLatAm,GPSandAMEAsegments,respectively.
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Note7.GoodwillandOtherIntangibleAssets(Continued)
OtherIntangibleAssets
Amortizationexpenseforintangibleassetssubjecttoamortizationwas$20,430,$17,697and$6,527fortheyearsended
December31,2015,2014and2013,respectively.Theestimatedfutureamortizationexpenseforintangibleassetsfortheyearsending
December31,2016,2017,2018,2019,2020andbeyondis$11,225,$7,219,$6,006,$4,357,$3,077and$20,313,respectively.
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December31,2016,2017,2018,2019,2020andbeyondis$11,225,$7,219,$6,006,$4,357,$3,077and$20,313,respectively.
ThefollowingtablesummarizesouridentifiableintangibleassetsasofDecember31,2015:
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Weighted
Average
Amortization
Period(Yrs)
Subjecttoamortization:
Studentrosters
Noncompeteagreements
Other
Notsubjecttoamortization:
Tradenames
Total
$
94,833 $ (85,794)
6,085
(6,085)
69,822
(26,664)
1,361,125
$ 1,531,865 $ (118,543)

$
9,039
43,158

1,361,125
$ 1,413,322
3.1
12.0
ThefollowingtablesummarizesouridentifiableintangibleassetsasofDecember31,2014:
Subjecttoamortization:
Studentrosters
Noncompeteagreements
Other
Notsubjecttoamortization:
Tradenames
Total
Gross
Carrying
Amount
Accumulated
Amortization
NetCarrying
Amount
Weighted
Average
Amortization
Period(Yrs)
$ 114,909 $ (89,612)
6,935
(6,935)
89,016
(21,249)
1,461,762
$ 1,672,622 $ (117,796)

$
25,297
67,767

1,461,762
$ 1,554,826
3.1
12.8
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ImpairmentTests
ThefollowingtablesummarizestheLossonimpairmentofassets:
ImpairmentsofTradenames,bysegment:
LatAm
Europe
2015

$ $

2014
2013
47,650 $ 21,967
1,094
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Europe
AMEA
GPS
TotalImpairmentsofTradenames
ImpairmentsofGoodwillLatAmsegment
ImpairmentsofDeferredcostsandOtherintangibleassets,net
Impairmentsoflonglivedassets
Total
47,650
77,094
273
771
$ 125,788
1,094
2,632
25,693
4,478
3,411
$ 33,582
Weperformannualimpairmenttestsofournonamortizableintangibleassets,whichconsistofGoodwillandTradenames,inthe
fourthquarterofeachyear.Theimpairmentchargesdiscussedbelowwererecordedtoreducetheassets'carryingvaluestofairvalue.
ForthepurposesofourannualimpairmenttestingoftheCompany'sgoodwill,fairvaluemeasurementsweredeterminedprimarily
usingtheincomeapproach,basedlargelyoninputsthatarenotobservabletoactivemarkets,whichwouldbedeemed"Level3"fairvalue
measurementsasdefinedinNote20,FairValueMeasurement.Theseinputsincludeourexpectationsaboutfuturerevenuegrowthand
profitability,marginalincometaxratesbyjurisdiction,andtherateatwhichthecashflowsshouldbediscountedinordertodeterminethis
fairvalueestimate.Whereamarketapproachisused,theinputsalsoincludepubliclyavailabledataaboutourcompetitors'financialratios
andtransactions.
ForpurposesofourannualimpairmenttestingoftheCompany'sindefinitelivedtradenameassets,fairvaluemeasurementswere
determinedusingtheincomeapproach,basedlargelyoninputsthatarenotobservabletoactivemarkets,whichwouldbedeemed
"Level3"fairvaluemeasurementsasdefinedinNote20,FairValueMeasurement.Theseinputsincludeourexpectationsaboutfuture
revenuegrowthandprofitability,marginalincometaxratesbyjurisdiction,andtherateatwhichthecashflowsshouldbediscountedin
ordertodeterminethefairvalueestimateforindefinitelivedtradenamesusingarelieffromroyaltymethod.Weusepubliclyavailable
informationandproprietarythirdpartyarm'slengthagreementsthatLaureatehasenteredintowithvariouslicensorsindetermining
certainassumptionstoassistusinestimatingfairvalueusingmarketparticipantassumptions.
2014LossonImpairmentofAssets
In2014,werecordedatotalimpairmentlossof$125,788.Tradenameswereimpairedintheaggregateamount$47,650relatedtotwo
ChileaninstitutionsinourLatAmsegment.AlsoinourLatAmsegment,Goodwillwasimpairedintheamountof$77,094,whichrelatedto
ourinstitutionsin
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CostaRica,HondurasandPanama.OurEuropesegmentrecordedimpairmentsofdeferredcostsof$273.OurLatAmandGPSsegments
recordedimpairmentsoflonglivedassetsof$705and$66,respectively.
OfthetotalimpairmentofTradenamesinLatAm,approximately$16,400relatedtoUDLAChile.Thisisanadditionalimpairmentto
thechargetakenin2013.Theprimarydriverforthisadditionalchargewasthesecondaryintakeofenrollmentthatoccurredduringthe
thirdquarterof2014,whichprovideduswithadditionalinformationregardingtheprojectedfinancialperformanceofUDLAChileand
thatindicatedthatthefinancialimpactofthelossofaccreditationwaslargerthaninitiallyestimated.TheCompanyalsorevisedits
estimatesaroundthetimingofenrollmentsfollowingreaccreditation.Asaresult,managementperformedanimpairmenttestand
determinedthattheestimatedfairvalueoftheintangibleassetwaslessthanitscarryingvalue.Accordingly,theCompanyrecordedan
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impairmentchargeinordertoadjustthecarryingvalueoftheintangibleassettoitsnewestimatedfairvalueofapproximately$24,000.
TheremainingimpairmentofTradenamesinLatAmofapproximately$31,250relatedtoUNABinChile,inordertoadjustthe
intangibleassettoitsnewestimatedfairvalueofapproximately$76,000.TheimpairmentatUNABresultedfromourexpectationof
reducedmarginsandlowerpricing,ascomparedtotheassumptionscontainedinthemodelspreviouslyusedtovaluetheintangibleassets.
Thelowerprojectionsreflectweakeroperatingperformancecomparedtothepriorlongrangeplan,combinedwithreducedexpectationsas
aresultofaregulatoryenvironmentthatfavorspublicratherthanprivatesupplyinhighereducation.Inaddition,duetotheuncertainty
thatcurrentlyexistsinChile,theCompanyhasdecidedtoreduceitsexpectedcapitalexpendituresforgrowthinthatmarketforthe
foreseeablefuture.Asaresult,thelongrangeplanusedtocalculatethefairvalueoftheUNABTradenameassetcontainslowergrowthand
profitabilityassumptionsthantheplanusedinprioryearsforsuchpurposes.
TheGoodwillimpairmentof$77,094inLatAmatourinstitutionsinCostaRica,HondurasandPanamacanbeattributedtoaweaker
longrangeoutlookascomparedtotheassumptionscontainedinthemodelspreviouslyusedtovaluetheintangibleassets.Theprimary
driverofthisweakeroutlookisashortfallin2014enrollmentswhichhascausedustodecreaseourlongtermenrollmentprojections.The
softenedenrollmentoutlookhasalsoresultedinpricingpressureonrevenue.Costcuttingmeasureshavebeentakenbymanagementto
mitigatemarginerosion.Thesofterlongtermoutlookresultedinalowervaluationforthereportingunit.Asaresultofthe2014
impairmenttest,theGoodwillbalancesattheseinstitutionswereentirelywrittenoff.
2013LossonImpairmentofAssets
In2013,werecordedatotalimpairmentlossof$33,582.Tradenameswereimpairedintheaggregateamountof$25,693relatedto
institutionsinourLatAm,EuropeandGPSsegments,whichrecordedimpairmentsof$21,967,$1,094and$2,632,respectively.Our
AMEAsegmentrecordedimpairmentsoflonglivedassetsof$1,987forcertainbuildingsthatwereimpairedin2013.OurGPSsegment
alsorecordedimpairmentsoflonglivedassetsof$1,424andimpairmentsofDeferredcostsandOtherintangibleassets,netof$4,478.
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TheimpairmentofTradenamesinLatAmrelatedtoUDLAChile.Theprimarydriverforthischargewasareductioninthisinstitution's
projectedrevenueandincomefollowingUDLAChile'slossofaccreditation,asdiscussedinNote2,SignificantAccountingPolicies.The
currentimpairmentchargeisbasedonmanagement'sbestestimatesusingcurrentavailableandknowableinformationabouttheshortand
longtermimplicationstotheUDLAChilefinancialforecast.Thecurrentprojectionsassumereaccreditationin2016.Wewillcontinueto
monitorthesituationandadditionalimpairmentlossesmayresultfromgreaterthanexpectedattritionandfailuretoobtainreaccreditation
in2016.
TheTradenamesimpairmentof$1,094inourEuropesegmentrelatedtooneinstitutioninItaly,andtheTradenamesimpairmentof
$2,632inourGPSsegmentrelatedtotwoinstitutionsintheU.S.TheimpairmentattheItalianinstitutionof$1,094resultedfromour
expectationofreducedmargins,ascomparedtotheassumptionscontainedinthemodelspreviouslyusedtovaluetheintangibleassets.
ThereducedmarginexpectationsresultprimarilyfromtheongoingweaknessintheEuropeaneconomies,whichhascausedpricing
decreasesatcertainoftheinstitutionsincludedinthissegment,aswellasenrollmentdeclinesascomparedtotheprojectionsusedtovalue428/620
1/20/2017
decreasesatcertainoftheinstitutionsincludedinthissegment,aswellasenrollmentdeclinesascomparedtotheprojectionsusedtovalue
theintangibleassets.
IntheU.S.,oneoftheinstitutionsrecordedaTradenamesimpairmentof$1,300,whichprimarilyresultedfromourexpectationof
furtherreducedmarginsandcashflowsatoneinstitutionascomparedtoourinitialprojectionscontainedinthepreviousmodelusedto
valuetheintangibleassetsatthisinstitutionduringour2012impairmenttesting.Theseexpectationsoffurtherreducedmarginsandcash
flowsarelargelyduetothecontinuingpooreconomicconditionsintheU.S.,continuedmediafocusonthecostofeducationascompared
toearningspotential,aswellastheregulatoryenvironment,whicharediscussedinNote19,LegalandRegulatoryMatters.Allofthese
factorshavecausedtheCompanytoreduceitsexpectationoffutureperformanceforthisinstitution.Inthefirstquarterof2014,oneofour
U.S.institutions,NHU,decidedtostopenrollingnewstudentsandteachouttheexistingcohortofstudents.Thisdecisionwasdrivenin
partbyrecentregulatorychanges.Asaresult,theCompanyhaswrittenofftheentireTradenamesvalueof$1,332relatedtothis
institution.Inaddition,NHULLC,alsowrotedowncapitalizedcurriculum,whichisrecordedinDeferredcosts,netby$4,478and
software,whichisrecordedinPropertyandequipment,by$1,338,asitwasdeterminedthatthecurriculumandsoftwarecannotbe
redeployed.TherewasalsoanimpairmentofotherlonglivedassetsintheGPSsegmentof$86.
Note8.LandUseRights
TheCompanyhasacquiredrightstousecertainpropertiesforperiodsrangingfrom20to899years.Thelanduserightsrecordedfor
AMEAhadacombinednetcarryingvalueof$46,544and$50,290atDecember31,2015and2014,respectively.Thelanduserights
recordedforEuropehaveanetcarryingvalueof$1,983and$1,572atDecember31,2015and2014,respectively.Thelanduserights
recordedfortheLatAmregionhaveanetcarryingvalueof$1,809and$2,130atDecember31,2015and2014,respectively.
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Note8.LandUseRights(Continued)
ThelanduserightsrecordedatnetcarryingvalueontheCompany'sConsolidatedBalanceSheetsaresummarizedasfollows:
December31,
2015
2014
Cost
Less:Accumulatedamortization
Landuserights,net
$ 52,617 $ 54,904
(2,281)
(912)
$ 50,336 $ 53,992
Amortizationexpenseoflanduserightswas$1,496,$1,547and$1,737fortheyearsendedDecember31,2015,2014and2013,
respectively.AsdiscussedinNote17,RelatedPartyTransactions,duringtheyearendedDecember31,2014,HIEUwroteofflanduse
rightswithanetcarryingvalueofapproximately$4,350relatedtoseveralparcelsoflandforwhichitnolongerhaslanduserights.
AsofDecember31,2015,amortizationexpenserelatedtolanduserightsforthenextfiveyearsandthereafterisasfollows:
2016
1,495
429/620
1/20/2017
2016
2017
2018
2019
2020
Thereafter
Total
$ 1,495
1,495
1,495
1,495
1,495
42,861
$ 50,336
Note9.Debt
Outstandinglongtermdebtwasasfollows:
December31,
2015
Seniorlongtermdebt:
SeniorSecuredCreditFacility(statedmaturitydatesMarch2018andJune
2018),netofdiscount
SeniorNotesdue2019(statedmaturitydateSeptember2019),netof
discount
Totalseniorlongtermdebt
Otherdebt:
Linesofcredit
Notespayableandotherdebt
Totalseniorandotherdebt
Capitalleaseobligationsandsaleleasebackfinancings
Totallongtermdebt
Less:totalunamortizeddebtissuancecosts
Less:currentportionoflongtermdebt
2014
$ 2,084,093 $ 2,180,406
1,436,214
3,520,307
74,335
738,684
4,333,326
247,256
4,580,582
69,294
192,354
4,318,934
1,382,711
3,563,117
106,046
593,605
4,262,768
304,099
4,566,867
80,094
233,286
4,253,487
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Note9.Debt(Continued)
AsofDecember31,2015,aggregateannualmaturitiesoftheseniorandotherdebt,excludingcapitalleaseobligationsandsale
leasebackfinancings,wereasfollows:
December31,2015
Seniorand
OtherDebt
2016
2017
2018
2019
2020
Thereafter
Total
Less:discount,net
180,851
156,248
2,155,339
1,541,692
126,477
186,656
4,347,263
(13,937)
4,333,326
Theestimatedfairvalueofourdebtwasdeterminedusingobservablemarketprices,asthemajorityofoursecurities,includingthe
430/620
1/20/2017
SeniorSecuredCreditFacilityandtheSeniorNotesdue2019,aretradedinabrokeredmarket.Thefairvalueofourremainingdebt
instrumentsapproximatescarryingvaluebasedontheirterms.AsofDecember31,2015and2014,ourlongtermdebtwasclassifiedas
Level2withinthefairvaluehierarchy,basedonthefrequencyandvolumeoftradinginthebrokeredmarket.Thelowerestimatedfair
valueatDecember31,2015,ascomparedtothecarryingamount,isprimarilyduetoanapproximately$550,000tradingdiscountrelated
tothe$1,436,214SeniorNotesdue2019andanapproximately$300,000tradingdiscountrelatedtothe$2,084,093SeniorSecured
CreditFacility.Theestimatedfairvalueofourdebtwasasfollows:
December31,2015
Carrying
Estimated
amount
fairvalue
December31,2014
Carrying
Estimated
amount
fairvalue
$ 4,333,326 $ 3,482,417 $ 4,262,768 $ 4,222,334
SeniorNotes
Overview
OnMay13,2008,Laureateincurredcertainindebtednesswithanaggregateprincipalamountof$1,005,822,consistingof:
1.
$260,000ofseniorcashpaynotes(theSeniorCashPayNotes)
2.
$435,822ofseniortogglenotes(theSeniorToggleNotes)and
3.
$310,000ofseniorsubordinatednotes(theSeniorSubordinatedNotes).
TheproceedsfromtheissuanceoftheSeniorCashPayNotes,theSeniorToggleNotesandtheSeniorSubordinatedNoteswereusedto
repaytheoutstandingbalancesofcertainloans,plusaccruedinterestandassociatedfeesandexpenses,originatedaspartofthe2007LBO.
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OnJuly25,2012,wecompletedanofferingof$350,000aggregateprincipalamountof9.250%SeniorNotesdue2019(theSenior
Notesdue2019).Thenetproceedsreceivedfromthedebtofferingwere$343,000,afterpaymentofunderwriterfeesof$7,000,andwere
usedtorepayaportionofourseniorsecuredmulticurrencyrevolvingcreditfacility.
OnNovember13,2012,wecompletedanofferingof$1,050,000aggregateprincipalamountofadditional9.250%SeniorNotesdue
2019.Thenotesaretreatedasasingleserieswiththe$350,000of9.250%SeniorNotesdue2019thatwereissuedinJuly2012.The
CompanyusedthenetproceedsfromthesaleoftheadditionalSeniorNotesdue2019topurchasealloftheoutstandingSeniorToggle
NotesandtheSeniorCashPayNotes,andtofullyrepaycertaindebtinstrumentsundertheCompany'sseniorsecuredtermloanfacility,
includingtheClosingDateTermLoan,theDelayedDrawTermLoan,andtheSeriesANewTermLoan.
AsdiscussedfurtherinNote13,SharebasedCompensation,andNote17,RelatedPartyTransactions,onDecember29,2015we
issued$50,046aggregateprincipalamountofSeniorNotesdue2019totheparticipantsofthenonqualifiedsharebaseddeferred
compensationarrangement.
TheSeniorNotesdue2019arefullyandunconditionallyguaranteed,jointlyandseverally,onanunsecuredseniorbasis,byeachof
Laureate'swhollyowneddomesticsubsidiariesthatguaranteeLaureate'sobligationsundertheSeniorSecuredCreditFacility.TheSenior
Notesdue2019rankjuniortotheSeniorSecuredCreditFacility.
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SeniorNotesdue2019
The$1,450,046SeniorNotesdue2019haveastatedmaturityofSeptember1,2019.LaureatecouldredeemsomeoralloftheSenior
Notesdue2019atanytimepriortoSeptember1,2015,ineachcaseatapriceequalto100%oftheprincipalamountofthenotes
redeemedplustheapplicable"makewhole"premium,andaccruedandunpaidinterestandspecialinterest,asdiscussedin'Registrationof
SeniorNotesdue2019'below.Themakewholepremiumisdefinedasthegreaterof:(1)1.00%ofthenotes'principalamountand(2)any
amountbywhichthepresentvalueoftheredemptionpriceofsuchredeemednotes,plusallrequiredinterestpaymentsthrough
September1,2015,computedusingadiscountrateequaltotheUnitedStatesTreasuryRateplus50basispoints,exceedstheprincipal
amountofsuchredeemednotes.PriortoSeptember1,2015,Laureatecouldredeemupto40%oftheprincipalamountoftheSeniorNotes
due2019ataredemptionpriceequalto109.250%oftheprincipalamount,plusaccruedandunpaidinteresttotheredemptiondate,with
thenetcashproceedsofoneormoreequityofferings.FromandafterSeptember1,2015,wemayredeemallorpartoftheSeniorNotesdue
2019atredemptionpricesstartingat106.938%oftheprincipalamountthereofanddecreasingfromthereeachyearthereafteruntil
September1,2018,plusaccruedandunpaidinterest.FromandafterSeptember1,2018,wemayredeemallorpartoftheSeniorNotesdue
2019ataredemptionpriceof100%,plusaccruedandunpaidinterest.
TheinterestratefortheSeniorNotesdue2019isfixedat9.25%,excludingthespecialinterestdiscussedbelow,andispayablesemi
annuallyinarrearsonMarch1andSeptember1eachyear,beginningMarch1,2013.Ofthetotal$1,450,046ofSeniorNotesdue2019,
$350,000wereissuedinJuly2012atpar,and$1,050,000wereissuedinNovember2012atapriceof97.750%offaceamount,resulting
inanoriginaldebtdiscountof$23,625,whichisbeingamortizedtointerestexpenseoverthe
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termofthenotes.Theremaining$50,046ofSeniorNotesdue2019wereissuedonDecember29,2015asdiscussedabove.Asof
December31,2015,theoutstandingbalanceontheSeniorNotesdue2019was$1,436,214,netoftheremainingdebtdiscountof$13,832.
AsofDecember31,2014,theoutstandingbalanceontheSeniorNotesdue2019was$1,382,711,netoftheremainingdebtdiscountof
$17,289.
RegistrationofSeniorNotesdue2019Laureateanditsguarantorsagreedto(1)filearegistrationstatementwiththeSECwith
respecttoaregisteredoffertoexchangetheSeniorNotesdue2019fornewnoteshavingtermssubstantiallyidenticalinallmaterial
respectstotheoutstandingnotes(exceptthatthenewnoteswillnotcontaintransferrestrictionsorprovideforspecialinterest)or(2)filea
shelfregistrationfortheresaleofthenotes.Wewererequiredtouseallcommerciallyreasonableeffortstocausetheregistrationstatement
tobedeclaredeffectiveonorbeforeJuly25,2014.SincetheregistrationstatementwasnotdeclaredeffectivebyJuly25,2014,wehave
incurredspecialinterestatarateequalto0.25%perannumforthefirst90dayperiodoftheoutstandingindentureindebtednessonthe
outstandingnotes,0.50%perannumforthenext90dayperiod,and0.75%thereafter,asliquidateddamagesuntiltheregistration
statementisdeclaredeffectiveandtheexchangeofferiscompleted.InDecember2015,theCompanyfiledaregistrationstatementwiththe
SECwithrespecttoaregisteredoffertoexchangetheSeniorNotesdue2019.
TherequirementtoregistertheSeniorNotesdue2019qualifiesasa"registrationpaymentarrangement"underASC82520,
"FinancialInstrumentsRegistrationPaymentArrangements."ASC82520requiresustorecordaliabilityifwedeterminethatitis
probablethatconsideration,suchasspecialinterest,willbepaidtothecounterpartyundertheregistrationpaymentarrangement,andif
thatconsiderationcanbereasonablyestimated.Accordingly,wehaverecordedaliabilityfortheamountofspecialinterestontheSenior
Notesdue2019thatwehavedeterminedtobeprobableandestimablebasedonourexpectedtimingofregistrationasofeachbalance
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Notesdue2019thatwehavedeterminedtobeprobableandestimablebasedonourexpectedtimingofregistrationasofeachbalance
sheetdate.AsofDecember31,2015and2014,wehadatotalcontingentliabilityforspecialinterestontheSeniorNotesdue2019of
$8,100and$12,200,respectively,recordedinAccruedexpensesandOtherlongtermliabilitiesinourConsolidatedBalanceSheets,
throughacorrespondingadjustmenttoInterestexpenseinourConsolidatedStatementofOperations.
SeniorCashPayNotesandSeniorToggleNotes
The$260,000SeniorCashPayNotesandthe$435,822SeniorToggleNoteshadastatedmaturityofAugust15,2015.The
redemptionpricesofthesenotesstartedat105%oftheprincipalamountfortheSeniorCashPayNotesand105.125%oftheprincipal
amountfortheSeniorToggleNotesanddecreasedfromthereifredeemedafterAugust15,2012,plusaccruedandunpaidinterest.As
discussedabove,theSeniorCashPayNotesandSeniorToggleNoteswerepaidinfullduringthefourthquarterof2012withproceeds
fromtheissuanceoftheadditionalSeniorNotesdue2019.
SeniorSubordinatedNotes
The$310,000SeniorSubordinatedNoteshadastatedmaturityofAugust15,2017.FromandafterAugust15,2012,wecouldredeem
allorpartoftheSeniorSubordinatedNotesatredemptionpricesstartingat105.875%oftheprincipalamountthereofanddecreasingfrom
thereeachyearthereafter,plusaccruedandunpaidinterest.TheinterestratefortheSeniorSubordinatedNoteswasfixedat
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11.75%,excludingthespecialinterestdiscussedbelow,andwaspayablesemiannuallyinarrearsonFebruary15andAugust15eachyear.
OnApril9,2013,wecommencedatenderoffertopurchaseforcashanyandallofouroutstanding11.75%SeniorSubordinatedNotes,
whichhadanoutstandingbalanceof$285,944atthatdate.SeniorSubordinatedNoteswithaprincipalamountof$67,328weretendered
onorbefore5:00p.m.,NewYorkCitytime,onApril22,2013(theEarlyTenderDate),andtheholdersofthosenotesreceivedthefull
tenderofferconsiderationof$1.06375foreach$1principalamountofnotesacceptedforpurchase.AlsoinApril2013,Laureatecalledfor
redemptionallremainingSeniorSubordinatedNotesnotpurchasedinthetenderoffer.Accordingly,$218,616principalamountofSenior
SubordinatedNoteswererepaidonMay23,2013.Holdersofallpurchasednotesalsoreceivedanyaccruedandunpaidinterestand
specialinterestonthenotesfromthelastinterestpaymentdateto,butnotincluding,thedateofpaymentforpurchasednotes.As
describedbelow,Laureateobtainedtheproceedsrequiredtorepaythenotesbyborrowinganadditional$310,000onthesametermsasits
existing2018ExtendedTermLoaninApril2013.Wepaidatotalof$17,136oftenderpremiumsandfeesandcallpremiumswhichwere
capitalizedasdebtissuancecosts.
RegistrationofSeniorCashPayNotes,SeniorToggleNotes,andSeniorSubordinatedNotesLaureateanditsguarantorsagreedto
(1)filearegistrationstatementwiththeSECforaregisteredoffertoexchangetheSeniorCashPayNotes,theSeniorToggleNotes,andthe
SeniorSubordinatedNotes,fornewnoteshavingtermssubstantiallyidenticalinallmaterialrespectstotheseoutstandingnotes(except
thatthenewnoteswillnotcontaintransferrestrictionsorprovideforspecialinterest)or(2)fileashelfregistrationfortheresaleofthe
notes.Wewererequiredtouseallcommerciallyreasonableeffortstocausetheregistrationstatementtobedeclaredeffectiveandto
completetheexchangeofferonorbeforeJanuary1,2011.
WedidnotcomplywiththisSECfilingrequirementonorbeforeJanuary1,2011,andwerethereforesubjecttoa"Registration
Default"untilthesenoteswererepaid.DuringtheperiodinwhichtheRegistrationDefaultexisted,specialinterestaccruedonthe
outstandingindebtednessundertheSeniorCashPayNotes,theSeniorToggleNotesandtheSeniorSubordinatedNotesatarateequalto
433/620
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outstandingindebtednessundertheSeniorCashPayNotes,theSeniorToggleNotesandtheSeniorSubordinatedNotesatarateequalto
0.25%perannumduringthefirst90dayperiod,0.50%forthesecond90dayperiod,0.75%forthethird90dayperiod,and1.0%
thereafter,beginningOctober1,2011.Accordingly,weincurredapproximately$950ofspecialinterestunderthisregistrationpayment
arrangementduringtheyearendedDecember31,2013.Accrualandpaymentofspecialinterestwastheonlyremedyavailableforthe
RegistrationDefault.WefullyrepaidtheSeniorCashPayNotesandtheSeniorToggleNotesduringthefourthquarterof2012,andfully
repaidtheSeniorSubordinatedNotesduringthesecondquarterof2013,andthereforenolongerincurspecialinterestonthesenotes.
SeniorSecuredCreditFacility
Overview
OnJune16,2011,weamendedandrestatedourCreditAgreementdatedasofAugust17,2007(asamendedandrestated,our
AmendedandRestatedCreditAgreement),inorderto,amongotherthings,extendmaturitydates.Pursuanttothisamendmentand
restatement,certainlendersinthesyndicate:(1)extendedthematuritydatesapplicableto$155,000ofourthenexisting$400,000
revolvinglineofcreditfacilityfromAugust2013toJune2016,(2)converted$245,000ofthenexistingrevolvingloansandrevolving
creditcommitmentsintotermloansthatwillmatureinJune2018,and
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(3)extendedthematuritydatesapplicabletothreeseriestermloans,totaling$858,896ofaggregateprincipal,fromAugust2014toJune
2018.Inaddition,someexistinglendersincreasedtheamountoftheirrevolvercommitmentsandnewlendersbecamelenderswithrespect
totherevolvingcreditfacilitythatoriginallywasscheduledtomatureinJune2016butwasextendedtoMarch2018.Asaresultofthis
amendmentandrestatement,thecreditfacilitiesunderourAmendedandRestatedCreditAgreementonJune16,2011werecomposedof:
1.
$300,000revolvinglineofcreditfacilityand
2.
$1,269,703seniorsecuredtermloanfacility,consistingofthefollowingseries:
(i)
$1,103,896extendedtermloan(the2018ExtendedTermLoan)
(ii)
$129,114ClosingDateTermLoan
(iii)
$19,135DelayedDrawTermLoanand
(iv)
$17,558SeriesANewTermLoan.
$25,000SeriesA2018NewTermLoan
OnDecember22,2011,weenteredintoajoinderagreementtotheAmendedandRestatedCreditAgreementtoborrowanadditional
$25,000onthesametermsasthe2018ExtendedTermLoan(theSeriesA2018NewTermLoan),includinginterestratesandquarterly
principalpaymentdates.Theborrowingcapacityunderourrevolvinglineofcreditfacilitywasalsoincreasedto$350,000.
434/620
1/20/2017
$250,000SeriesBNewTermLoans
OnJanuary18,2013,weenteredintotheSeriesBNewTermLoanJoinderAgreementandtheFirstAmendmenttotheAmendedand
RestatedCreditAgreementtoborrowanadditional$250,000onthesametermsasthe2018ExtendedTermLoan(theSeriesBNewTerm
Loans),includinginterestratesandquarterlyprincipalpaymentdates.Thisadditionalloanwasissuedatanoriginalissuediscountof
$1,250,andwepaiddebtissuancecostsof$2,860inconnectionwiththeborrowing,bothofwhichwillbeamortizedtoInterestexpense
overthetermoftheloan.
$310,000SeriesBAdditionalTermLoans
OnApril23,2013,weenteredintotheSeriesBAdditionalTermLoanJoinderAgreementandtheSecondAmendmenttothe
AmendedandRestatedCreditAgreementtoborrowanadditional$310,000onthesametermsasthe2018ExtendedTermLoan(the
SeriesBAdditionalTermLoans),includinginterestratesandquarterlyprincipalpaymentdates.Thisadditionalloanwasissuedatan
originaldebtpremiumof$1,550,andwepaiddebtissuancecostsof$3,872inconnectionwiththeborrowing,bothofwhicharebeing
amortizedtoInterestexpenseoverthetermoftheloan.Inaddition,thirdpartycostsof$374werechargedtoGeneralandadministrative
expensesfortheyearendedDecember31,2013.TheproceedsfromthisborrowingwereusedtorepayalloftheoutstandingSenior
SubordinatedNotes,asdescribedabove.
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ThirdAmendmenttoAmendedandRestatedCreditAgreement
OnOctober3,2013,weenteredintoaThirdAmendmenttoAmendedandRestatedCreditAgreement(theThirdAmendment),
pursuanttowhichwereducedthemarginapplicabletoour2018ExtendedTermLoan,SeriesA2018NewTermLoan,SeriesBNewTerm
LoansandSeriesBAdditionalTermLoansfrom4.00%to3.75%forLIBORloansandfrom3.00%to2.75%forABRloans.Inadditionto
loweringthemarginonthesetermloans,theamendmentprovidedadditionalflexibilityformortgagefinancings.
$200,000AdditionalNewSeries2018ExtendedTermLoans
OnDecember16,2013,weenteredintotheAdditionalNewSeries2018ExtendedTermLoansJoinderAgreementtoborrowan
additional$200,000onthesametermsasthe2018ExtendedTermLoansasstatedintheThirdAmendment.Thisadditionalloanwas
issuedatanoriginaldebtdiscountof$500,andwepaiddebtissuancecostsof$2,242inconnectionwiththeborrowing.Theoriginaldebt
discountandthedebtissuancecostsarebeingamortizedtoInterestexpenseoverthetermoftheloan.
RevolvingLineofCreditFacility
Borrowingsunderourrevolverbearinterestatarateperannumwhich,atouroption,canbeeitheraLondonInterbankOfferedRate
(LIBOR)oranAlternateBaseRate(ABR)plus,ineachcase,amargin.LIBORloansunderourrevolveraccrueinterestattheapplicable
LIBORrateplusa3.75%margin.TheLIBORratewithrespecttoourrevolverissubjecttoafloorof1.25%.InterestonABRrevolving
borrowingsaccruesattheABR(whichisthehigheroftheFederalFundsrateplus0.50%ortheprimeratefortheagentbank)plusa2.75%
margin.TheABRwithrespecttoourrevolverissubjecttoafloorof2.25%.ForLIBORrevolvingborrowings,theinterestperiodissetat
ouroptionforaperiodofone,two,three,six,nineor12months.ABRrevolvingborrowingshavenointerestperiodandtheinterestrate
onanyABRrevolvingborrowingissubjecttochangewhentheunderlyingindiceschange.Inaddition,ourAmendedandRestatedCredit
Agreementprovidesforthepaymentofacommitmentfeebasedonthedailyunusedportionofourrevolver.Thecommitmentfeerateof
0.625%perannumispayablequarterlyinarrears.
435/620
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OnJuly7,2015,weamendedourSeniorSecuredCreditFacility,inordertoextendthematuritydateofour$350,000revolvingline
ofcreditfacilityfromJune2016toMarch2018.Asaresultofthisamendment,duringthethirdquarterof2015wewroteoff$331of
unamortizeddebtissuancecostsassociatedwiththeoldrevolverasLossondebtextinguishment,asseveraloftheoriginalcreditorsdid
notparticipateinthenewrevolver.Inaddition,inJuly2015wepaidapproximately$11,300indebtissuancecostsrelatedtothe
modification.Thedebtissuancecoststhatwerepaidinconnectionwiththemodificationwerecapitalizedandwillbeamortizedthrough
interestexpenseovertheextendedtermoftherevolver.
AtDecember31,2015,thetotalamountoutstandingunderourrevolverwas$269,261,whichconsistedentirelyofLIBORloansatan
interestrateof5.00%.AtDecember31,2014,thetotalamountoutstandingunderourrevolverwas$346,727,whichconsistedof$301,385
inLIBORloansataninterestrateof5.00%and$45,342inABRloansataninterestrateof6.00%.
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2018ExtendedTermLoan,SeriesA2018NewTermLoan,SeriesBNewTermLoans,SeriesBAdditionalTermLoansandAdditionalNew
Series2018ExtendedTermLoans
TheportionsofourtermloansundertheoriginalCreditAgreementthatdidnotremainoutstandingastheClosingDateTermLoan,
DelayedDrawTermLoanorSeriesANewTermLoan(seebelow)wereextendedtoamaturitydateofJune2018.Inaddition,someexisting
lendersincreasedtheamountoftermloansandnewlendersbecamelenderswithrespecttothe2018ExtendedTermLoan,whichmatures
inJune2018.FollowingtheamendmentandrestatementonJune16,2011,theaggregateamountofthe2018ExtendedTermLoanwas
$1,103,896.Theinterestrateforour2018ExtendedTermLoanissetatarateperannumwhich,atouroption,canbeeithertheLIBORrate
ortheABRrate,plusineachcase,amargin.Asstatedabove,theSeriesA2018NewTermLoan,SeriesBNewTermLoans,SeriesB
AdditionalTermLoansandAdditionalNewSeries2018ExtendedTermLoansallhavethesametermsasthe2018ExtendedTermLoan.
FollowingtheOctober2013amendmenttotheAmendedandRestatedCreditAgreementdiscussedabove,themarginforLIBOR
loansis3.75%andthemarginforABRloansis2.75%.Priortotheamendment,themarginforLIBORloanswas4.00%andthemarginfor
ABRloanswas3.00%.TheLIBORrateissubjecttoafloorequalto1.25%andtheABRissubjecttoafloorequalto2.25%.ForLIBOR
loans,theinterestperiodissetatouroptionforaperiodofone,two,three,six,nine,or12months.Oncetheinterestperiodisset,the
interestrateisfixeduntiltheselectedinterestperiodends.ABRloanshavenointerestperiodandtheinterestrateonanyABRloanis
subjecttochangewhentheunderlyingindiceschange.
Withrespecttoour2018ExtendedTermLoan,SeriesA2018NewTermLoan,SeriesBNewTermLoans,theSeriesBAdditionalTerm
LoansandtheAdditionalNewSeries2018ExtendedTermLoans,wearerequiredtomakefixedquarterlyprincipalpaymentsinan
aggregateamountequalto$4,722perquarter.AllunpaidprincipalandinterestontheseloansshallbepaidinfullinJune2018.Asof
December31,2015and2014,theseloanshadanaggregateoutstandingbalanceof$1,814,832(netofdebtdiscountof$105)and
$1,833,679(netofdebtdiscountof$147),respectively,andaninterestrateof5.00%ateachdate.
DefaultInterest
Intheeventthatwefailtopayalloraportionoftheprincipalandinterestamountswhendue,theinterestratesunderourSenior
SecuredCreditFacilitywillbeincreasedby2.00%fromthedateofsuchnonpaymenttothedateonwhichthepaymentispaidinfull.
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Guarantee
AsoftheeffectivedateoftheAmendedandRestatedCreditAgreement,allobligationsunderourSeniorSecuredCreditFacilityare
unconditionallyguaranteedbythesamesubsidiariesthatwereguarantorsundertheoriginalCreditAgreement.PursuanttoSupplement
No.2totheGuaranteedatedasofJuly15,2011,ExeterStreetHoldingsLLC,aMarylandlimitedliabilitycompanysubsidiary,becamean
additionalguarantoroftheobligationsunderourSeniorSecuredCreditFacility.
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SeniorSecuredCreditFacilityOutstanding
AsofDecember31,2015,the$2,084,093balanceoftheSeniorSecuredCreditFacilityconsistsof$1,814,832inthe2018Extended
TermLoan,theSeriesA2018NewTermLoan,theSeriesBNewTermLoans,andtheSeriesBAdditionalTermLoans,andtherevolverof
$269,261.AsofDecember31,2014,the$2,180,406balanceoftheSeniorSecuredCreditFacilityconsistsof$1,833,679inthe2018
ExtendedTermLoanandtheSeriesA2018NewTermLoan,andtherevolverof$346,727.
SeniorSecuredCreditFacilityBorrowersandGuarantors
Themulticurrencyrevolvinglineofcreditfacility(therevolver),the2018ExtendedTermLoan,theSeriesA2018NewTermLoan,
theSeriesBNewTermLoans,theSeriesBAdditionalNewTermLoans,andtheAdditionalNewSeries2018ExtendedTermLoans,are
collectivelyreferredtoasthe"SeniorSecuredCreditFacility."LaureateEducation,Inc.(theU.S.Borrower)istheborrowerunderour
SeniorSecuredCreditFacility.IniciativasCulturalesdeEspaaS.L.(theForeignBorrower)isaborroweronlyundertherevolverofour
SeniorSecuredCreditFacility.
AllofLaureate'srequiredUnitedStateslegalentities,excludingWaldenUniversity,LLC(Walden),KendallCollege(Kendall),
NewSchoolofArchitectureandDesign(NewSchool),NHUandSt.Augustine,areguarantorsoftheSeniorSecuredCreditFacility,andall
oftheguarantors'assets,bothrealandintangible,arepledgedascollateral.CertainWaldenassetsarealsopledgedascollateral,including
allofWalden'sUnitedStatesreceivablesotherthanTitleIVstudentloans,allofitscopyrights,patents,andtrademarks.Asof
December31,2015and2014,thecarryingvalueoftheWaldenreceivablesandintangiblespledgedascollateralwas$404,331and
$390,827,respectively.Additionally,notmorethan65%ofthesharesheldbyUnitedStatesguarantorsinnondomesticsubsidiariesare
pledgedascollateral.ThereisalsoaseparateguaranteeandpledgeagreementfortheForeignBorrowersubfacilityoftherevolver(the
SpanishTranche).TheSpanishTrancheissecuredbycertainoftheForeignBorrower'sassets,includingintercompanyloansandshares
ownedinothernondomesticsubsidiaries,tosecuretheforeignobligations.Ofthe$350,000revolvinglineofcreditfacilitynotedabove,
wecanborrowupto$100,000undertheSpanishTranche.
CertainCovenants
transactionsand(4)limitationsonliens,guarantees,loansorinvestments.Inconnectionwiththeextensionofourrevolvinglineofcredit
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transactionsand(4)limitationsonliens,guarantees,loansorinvestments.Inconnectionwiththeextensionofourrevolvinglineofcredit
facilityinJuly2015,wearenowsubjecttoaConsolidatedSeniorSecuredDebttoConsolidatedEBITDA,asdefinedinthebank
agreement,financialmaintenancecovenantbeginninginthethirdquarterof2015.Themaximumratio,asdefined,is5.3x,4.5xand3.5x
atDecember31,2015,2016and2017,respectively.TheratioasofDecember31,2015was3.9x.Inaddition,notespayableatsomeofour
locationscontainfinancialmaintenancecovenants.Weareincompliancewithourdebtcovenants.
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OnApril4,2014,wenotifiedourlendersoftheoccurrenceofadefaultunderourAmendedandRestatedCreditAgreement,duetoour
failuretodeliverourauditedConsolidatedFinancialStatementsfortheyearendedDecember31,2013within95daysafterthefiscalyear
end(the2013AuditedFinancialStatementDeliveryDefault).Thereasonforthe2013AuditedFinancialStatementDeliveryDefaultisthe
additionaltimeneededtocompletelyandaccuratelyreflectseveralitemsinthe2013ConsolidatedFinancialStatements.Wecuredthe
2013AuditedFinancialStatementDeliveryDefaultbydeliveringthe2013ConsolidatedFinancialStatementstotheadministrativeagent
onApril14,2014,thedatethatthe2013ConsolidatedFinancialStatementswereissued,whichwaswithinthe30daygraceperiod
providedforintheAmendedandRestatedCreditAgreement.
LossonDebtExtinguishment
DuringtheyearendedDecember31,2015,LaureaterecordedaLossondebtextinguishmentof$1,263,ofwhich$932wasrelatedto
mortgagebreakagefeespaidasapartoftheSwisssaleleasebacktransactiondiscussedinNote3,DiscontinuedOperationsandAssetsHeld
forSale,and$331whichwasrelatedtotheextensionofthematuritydateforthe$350,000revolvinglineofcreditfacilityunderthe
SeniorSecuredCreditFacilityfromJune2016toMarch2018,asdiscussedabove.
DuringtheyearendedDecember31,2014,LaureaterecordedaLossondebtextinguishmentof$22,984thatwasalmostentirely
relatedtothepurchaseofpreviouslyleasedpropertyinBrazilandsettlementoftherelatedleaseobligation.Inconnectionwiththe2010
acquisitionofUniversidadePotiguar(UNP),Laureateenteredintoaleaseagreementforcertainproperty,whichwasaccountedforasa
failedsaleleasebackandrecordedasaleaseassetandliability.ThesellershadarighttoputthepropertytoLaureate,whichthey
exercisedinDecember2014.Laureaterecordedtheexcessoftheapproximately$29,300purchasepriceoverthecapitalleaseliabilityas
LossondebtextinguishmentinaccordancewithASC47050,"ModificationsandExtinguishments."
DuringtheyearendedDecember31,2013,werecordedaLossondebtextinguishmentof$1,361intheaccompanyingConsolidated
StatementsofOperationsinconnectionwiththeThirdAmendmentdiscussedabove.Thislossrelatestothewriteoffofunamortizeddebt
issuancecostsassociatedwithfacilitiesthatweredeemedtobeextinguished.Wealsopaidthirdpartycostsof$1,510inconnectionwith
theamendment,whichwererecordedasGeneralandadministrativeexpensesfortheyearendedDecember31,2013.
DebtIssuanceCosts
issuancecoststobepresentedasadeductionfromdebt.Thismakesthepresentationofdebtissuancecostsconsistentwiththepresentation
ofdebtdiscountsorpremiums.Therecognitionandmeasurementguidancefordebtissuancecostsisnotaffected,thereforethesecostswill
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AmortizationofdebtissuancecostsandaccretionofdebtdiscountsthatarerecordedinInterestexpenseintheConsolidated
StatementsofOperationstotaled$26,100,$24,400and$22,861fortheyearsendedDecember31,2015,2014and2013,respectively.
DuringtheyearsendedDecember31,
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2015,2014and2013,wepaidandcapitalizedatotalof$13,020,$3,282and$30,618,respectively,indebtissuancecosts.Asof
December31,2015and2014,ourunamortizeddebtissuancecostswere$69,294and$80,094,respectively.
CurrencyandInterestRateSwaps
TheinterestandprincipalpaymentsforLaureate'sseniorlongtermdebtarrangementsaretobepaidprimarilyinUSD.Ourabilityto
makedebtservicepaymentsissubjecttofluctuationsinthevalueoftheUSDrelativetoforeigncurrencies,becauseamajorityofour
operatingcashusedtomakethesepaymentsisgeneratedbysubsidiarieswithfunctionalcurrenciesotherthanUSD.Aspartofouroverall
riskmanagementpolicies,Laureatehasenteredintoaforeigncurrencyswapcontractandfloatingtofixedinterestrateswapcontracts.See
Note14,DerivativeInstruments,forfurtherdisclosures.
OtherDebt
LinesofCredit
IndividualLaureatesubsidiarieshavetheabilitytoborrowpursuanttounsecuredlinesofcreditandsimilarshorttermborrowing
arrangements(collectively,linesofcredit).Thelinesofcreditareavailableforworkingcapitalpurposesandenableustoborrowforand
repayuntilthoselinesmature.
Interestratesonourlinesofcreditrangedfrom5.08%to20.00%atDecember31,2015,and4.82%to20.00%atDecember31,2014.
Ourweightedaverageshorttermborrowingratewas7.98%and6.75%atDecember31,2015and2014,respectively.
Laureate'saggregatelinesofcredit(outstandingbalancesplusavailableborrowingcapacity)were$114,706and$155,777asof
December31,2015and2014,respectively.AtDecember31,2015and2014,theaggregateoutstandingbalancesonourlinesofcredit
were$74,335and$106,046,respectively,whichareincludedinthecurrentportionoflongtermdebt.Accordingly,theavailable
borrowingcapacityunderourlinesofcreditwas$40,371and$49,731atDecember31,2015and2014,respectively.
NotesPayable
Notespayableincludemortgagespayablethataresecuredbycertainfixedassets.Thenotespayablehavevaryingmaturitydatesand
repaymenttermsthrough2030.TheseloanscontaincertainfinancialmaintenancecovenantsandLaureateisincompliancewiththese
covenants.Interestratesonnotespayablerangedfrom2.30%to19.04%and2.23%to22.16%atDecember31,2015and2014,
respectively.
OnDecember21,2007,UVMMexicoenteredintoanagreementwithabankforaloanofMXN2,750,000(approximatelyUS
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OnDecember21,2007,UVMMexicoenteredintoanagreementwithabankforaloanofMXN2,750,000(approximatelyUS
$250,000atthattime).Underthetermsoftheloan,UVMMexicocouldborrowthetotalamountoftheloanthroughoneormoredraws,
providedthateachdrawoftheloanwasevidencedbyapromissorynote.OnJuly1,2008,Laureatemadeadrawintheamountof
MXN2,575,600(US$250,000atJuly1,2008)toacquireUniversidadTecnolgicadeMxico(UNITECMexico).Theloanwasoriginally
scheduledtomatureonJuly1,2015.UVMMexicobegansemiannual
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repaymentsofMXN257,560(US$19,685)onJuly15,2010.Inordertoalignthepaymentswiththenewloandescribedbelow,inMay
2014theloanmaturitydatewasextendedtoMay15,2021,andtherepaymentsweresuspendeduntilMay16,2016,whenUVMMexico
willresumesemiannualrepaymentsofMXN120,418(US$6,972atDecember31,2015).Thesepaymentswillcontinuethroughmaturity
in2021.Interestispayablemonthlyandaccruedatthe28dayMexicanInterbankingOfferRate(TIIE),plustheapplicablemargin.The
applicablemarginfortheinterestcalculationisestablishedbasedontheratioofdebttoEBITDA,asdefinedintheagreement.Asof
December31,2015and2014,theinterestrateontheloanwas5.82%and5.30%,respectively,andtheoutstandingbalanceontheloan
was$76,695and$89,855,respectively.
InMay2012,theCompanyenteredintoanagreementwithabankforaloanofMXN900,000(approximatelyUS$52,111at
December31,2015),inordertofundpaymentoftheamountsowedtotheformernoncontrollinginterestholdersofPlaneacinde
Sistemas,S.A.deC.V.(Plansi)underthetermsoftheagreementtopurchasetheirremaining10%interestinPlansi.Theloancarriesa
variableinterestrate(5.82%and5.30%atDecember31,2015and2014,respectively)andwasoriginallyscheduledtomatureonMay15,
2019.InMay2014,theloanmaturitydatewasextendedtoMay15,2021,andtherepaymentsweresuspendeduntilMay16,2016.Asof
December31,2015and2014,thisloanhadanoutstandingbalanceof$52,111and$61,052,respectively.
Inadditiontotheloansabove,inAugust2015,UVMMexicoenteredintoanagreementwithabankforaloanofMXN1,300,000
(approximatelyUS$79,000atthetimeoftheloan).Theloancarriesavariableinterestrate(5.87%atDecember31,2015)andmaturesin
August2020.AsofDecember31,2015,theoutstandingbalanceofthisloanwas$75,271.
TheCompanyhasalsoobtainedfinancingtofundtheconstructionoftwonewcampusesatoneofourinstitutionsinPeru,
UniversidadPeruanadeCienciasAplicadas(UPCPeru).During2012,wemadeaninitialborrowingofapproximately$19,500inorderto
begintheconstruction.Additionalborrowingsforthisconstructionprojectofapproximately$33,000,$25,000and$23,000occurred
during2015,2014and2013,respectively,andduring2015and2014Laureatemaderepaymentsofapproximately$17,000and$10,000,
respectively.AsofDecember31,2015and2014,theoutstandingbalanceontheloanswas$60,553and$52,073,respectively,andhada
weightedaverageinterestrateof7.74%and7.25%,respectively.Theseloanshavevaryingmaturitydateswiththefinalpaymentduein
October2022.AsofDecember31,2015and2014,$26,371and$28,085,respectively,oftheoutstandingbalancesontheloanswere
payabletooneoftheinstitutionalinvestorsreferredtoinNote13,SharebasedCompensation.
InMay2014,theCompanyobtainedfinancingtofundtheconstructionofanewcampusatoneofourinstitutionsinPanama.Asof
December31,2015and2014,theoutstandingbalanceonthisloanwas$25,000and$12,500,respectively.Thisloanispayabletooneof
theinstitutionalinvestorsreferredtoinNote13,SharebasedCompensation.Ithasafixedinterestrateof8.11%andmaturesin2024.
LaureatehasoutstandingnotespayableatHIEUinChina.AsofDecember31,2015and2014,theoutstandingbalanceontheloans
was$90,426and$91,022,respectively.Theinterestratesontheseloansrangefrom4.75%to7.84%perannumasofDecember31,2015
andfrom6.30%to7.20%perannumasofDecember31,2014.Thesenotesarerepayableininstallmentswiththefinalinstallmentduein
November2019.
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LaureatehasoutstandingnotespayableatarealestatesubsidiaryinChile.AsofDecember31,2015and2014,theoutstanding
balanceontheloanswas$55,047and$65,839,respectively.Theinterestratesontheseloansrangefrom5.64%to9.58%perannumasof
December31,2015andfrom4.79%to8.31%perannumasofDecember31,2014.Thesenotesarerepayableininstallmentswiththefinal
installmentdueinAugust2028.
AsdiscussedinNote4,Acquisitions,LaureateacquiredTHINKonDecember20,2013.Laureatefinancedaportionofthepurchase
priceforTHINKbyborrowingAUD45,000(US$32,702atDecember31,2015)underasyndicatedfacilityagreementintheformoftwo
termloansofAUD22,500each.ThesyndicatedfacilityagreementalsoprovidesforadditionalborrowingsofuptoAUD20,000(US
$14,534atDecember31,2015)underacapitalexpenditurefacilityandaworkingcapitalfacility.Thefirsttermloan(FacilityA)hasa
termoffiveyearsandprincipalispayableinquarterlyinstallmentsofAUD1,125(US$818atDecember31,2015)beginningon
March31,2014.Thesecondtermloan(FacilityB)hasatermoffiveyearsandthetotalprincipalbalanceofAUD22,500ispayableatits
maturitydateofDecember20,2018.Thetwotermloansbearinterestatavariablerateplusamarginofupto3.2%forFacilityAand3.5%
forFacilityBthatisdeterminedbasedonTHINK'sleverageratio,andinterestispayableperiodically.AsofDecember31,2015,the
interestratesonFacilityAandFacilityBwere4.68%and4.98%,respectively,andasofDecember31,2014,theinterestratesonFacility
AandFacilityBwere5.19%and5.49%,respectively.ThetermsofthesyndicatedfacilityagreementrequiredTHINKtoenterintoan
interestrateswapwithin45daysfromtheagreement'sDecember20,2013effectivedate,inordertoconvertatleast50%oftheAUD
45,000oftermloandebtfromavariableinterestratetoafixedinterestrate.Accordingly,onJanuary31,2014THINKexecutedaninterest
rateswapagreementtosatisfythisrequirementandconvertedAUD22,500(US$16,351atDecember31,2015)ofthevariablerate
componentofthetermloandebttoafixedinterestrateof3.86%.Thisinterestrateswapwasnotdesignatedasahedgeforaccounting
purposes.AsofDecember31,2015and2014,$25,696and$33,137,respectively,wasoutstandingundertheseloanfacilities.
AsdiscussedinNote4,Acquisitions,LaureateacquiredFMUonSeptember12,2014andfinancedaportionofthepurchasepriceby
borrowingamountsundertwoloansthattotaledBRL259,139(approximatelyUS$110,310attheborrowingdate).Theloansrequire
semiannualprincipalpaymentsbeginningatBRL6,478inOctober2014andincreasingtoamaximumofBRL22,027beginningin
October2017andcontinuingthroughtheirmaturitydatesinApril2021.AsofDecember31,2015and2014,theoutstandingbalanceof
theseloanswas$58,865and$95,071,respectively.BothloansmatureonApril15,2021andbearinterestatanannualvariablerateofCDI
plus3.7%(approximately18%and15%atDecember31,2015and2014,respectively).
OnNovember18,2015,theCompanyenteredintoanagreementwithtwobankstoborrowatotalofEUR100,000(approximatelyUS
$106,500attheagreementdate)foratermof10yearsatafixedannualinterestrateof3%.Theloaniscollateralizedbyrealestateatone
ofourcampusesinSpainandrequires40quarterlyprincipalpaymentsofEUR1,875beginninginFebruary2016,andafinalprincipal
paymentofEUR25,000uponmaturityoftheloan,inNovember2025.AsofDecember31,2015,theoutstandingbalanceonthisloanwas
$107,100.
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CapitalLeaseObligationsandSaleLeasebackFinancings
Capitalleasesandsaleleasebackfinancings,primarilyrelatingtorealestateobligations,areincludedindebtandhavebeenrecorded
usinginterestratesrangingfrom1.00%to42.87%.During2015and2014,wehadadditionstoassetsandliabilitiesrecordedassale
leasebackfinancingsandbuildtosuitarrangementsof$8,147and$67,846,respectively,includingadditionsthroughacquisition.Wehad
assetsundercapitalleasesandsaleleasebackfinancingsof$210,840and$271,878atDecember31,2015and2014,respectively,netof
accumulatedamortization.TheamortizationexpenseforcapitalleaseassetsisrecordedinDepreciationandamortizationexpense.
Theaggregatematuritiesofourtotalfuturevalueandpresentvalueoftheminimumcapitalleasepaymentsandpaymentsrelatedto
saleleasebackfinancingsatDecember31,2015wereasfollows:
FutureValueof
Payments
2016
2017
2018
2019
2020
Thereafter
Total
Interest
40,263
46,965
47,172
38,940
33,130
284,021
490,491
PresentValueof
Payments
$ 28,760 $
28,187
27,034
25,473
24,367
109,414
$ 243,235 $
11,503
18,778
20,138
13,467
8,763
174,607
247,256
Note10.Leases
Laureateconductsasignificantportionofitsoperationsfromleasedfacilities.Thesefacilitiesincludeourcorporateheadquarters,
otherofficelocations,andmanyofLaureate'shighereducationfacilities.Thetermsoftheseoperatingleasesvaryandgenerallycontain
renewaloptions.Someoftheoperatingleasesprovideforincreasingrentsoverthetermsoftheleases.Laureatealsoleasescertain
equipmentundernoncancelableoperatingleases,whicharetypicallyfortermsof60monthsorless.Totalrentexpenseundertheseleases
isrecognizedratablyovertheinitialtermofeachlease.Anydifferencebetweentherentpaymentandthestraightlineexpenseisrecorded
asanadjustmenttotheliabilityorasaprepaidasset.
Laureatehasenteredintosubleaseagreementsforcertainleasedofficespace.Theseagreementsallowustoannuallyadjustrental
incometobereceivedforincreasesingrossoperatingrentandrelatedexpenses.Thesubleaseagreementshavevariousexpirationdates
through2026.
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Note10.Leases(Continued)
FutureminimumleasepaymentsandsubleaseincomeatDecember31,2015,byyearandintheaggregate,underallnoncancelable
operatingleasesandsubleasesareasfollows:
2016
2017
2018
2019
2020
Thereafter
Total
LeasePayments
SubleaseIncome
206,646
192,721
177,549
163,818
154,139
1,126,906
2,021,779
5,306
5,044
5,078
4,168
1,103
6,703
27,402
Rentexpense,netofsubleaseincome,forallcancelableandnoncancelableleaseswas$234,003,$230,941and$207,841fortheyears
endedDecember31,2015,2014and2013,respectively.
Note11.CommitmentsandContingencies
NoncontrollingInterestHolderPutArrangementsandCompanyCallArrangements
Thefollowingsectionprovidesasummarytableanddescriptionofthevariousnoncontrollinginterestholderputarrangementsthat
LaureatehadoutstandingasofDecember31,2015.AsfurtherdescribedinNote2,SignificantAccountingPolicies,Laureatehaselected
toaccretechangesinthearrangements'redemptionvaluesovertheperiodfromthedateofissuancetotheearliestredemptiondate.The
redeemablenoncontrollinginterestsarerecordedatthegreateroftheaccretedredemptionvalueorthetraditionalnoncontrollinginterest.
Untilthefirstexercisedate,theputinstruments'reportedvaluesmaybelowerthanthefinalamountsthatwillberequiredtosettlethe
minorityputarrangements.AsofDecember31,2015,thecarryingvalueofallnoncontrollinginterestholderputarrangementswas
$43,149,whichincludesaccretedincrementalvalueof$26,016inexcessoftraditionalnoncontrollinginterests.
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Note11.CommitmentsandContingencies(Continued)
IftheminorityputarrangementswereallexercisableatDecember31,2015,Laureatewouldbeobligatedtopaythenoncontrolling
interestholdersanestimatedamountof$43,149,assummarizedinthefollowingtable:
December31,2015
Noncontrollinginterestholderputarrangements
INTIEducationHoldingsSdnBhd(INTI)10%
PearlRetailSolutionsPrivateLimitedandCreative
ArtsEducationSociety(Pearl)45%
(St.Augustine)20%
NationalHispanicUniversity(NHULLC)20%
StamfordInternationalUniversity(STIU)Puttable
preferredstockofTEDCO
Totalnoncontrollinginterestholderputarrangements
Puttablecommonstockcurrentlyredeemable
Puttablecommonstocknotcurrentlyredeemable
Totalredeemablenoncontrollinginterestsandequity
EstimatedValueas
ofDecember31,
2015redeemable
within12months:
First
Nominal
Exercisable
Date
Currency
Reported
Value
MYR

Current $

9,061 $
9,061
INR
Current
6,666
6,666
USD
USD
Current
Current
27,367 27,367

THB
USD
USD
Current
Current
*
55
43,149
6
43,155
55
43,149
6
8,591
$ 51,746
Contingentlyredeemable
THB:ThaiBaht
Laureate'snoncontrollinginterestputarrangementsarespecifiedinagreementswitheachnoncontrollinginterestholder.Thetermsof
theseagreementsdeterminethemeasurementoftheredemptionvalueoftheputoptionsbasedonanonGAAPmeasureofearningsbefore
interest,taxes,depreciationandamortization(EBITDA,orrecurringEBITDA),thedefinitionofwhichvariesforeachparticularcontract.
Commitmentsandcontingenciesaregenerallydenominatedinforeigncurrencies.
INTI
AspartoftheacquisitionofINTI,formerlyknownasFuturePerspective,SdnBhd,thenoncontrollinginterestholdersofINTIhadput
optionsdenominatedinMYRtorequiretheCompanytopurchasetheremainingnoncontrollinginterest.AsofDecember31,2015,there
isoneputoptionremainingfortheholderoftheapproximately10%minorityinterest.Theputoptionfortheapproximately10%
noncontrollinginterestholderisexercisableforthe30dayperiodcommencingafterissuanceoftheauditedfinancialstatementsforeach
oftheyearsendingDecember31,2012throughDecember31,2025.Theholdermayexercisehisoptiontosellallofhisequityinterestto
theCompanyforapurchasepricethatisequaltodefinedmultiplesofrecurringEBITDA.Purchasepricemultipleshavebeendefinedas
eighttimesuptoapproximatelythefirst$12,200ofEBITDAplussixtimes
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EBITDAabovethisamount.Thisputoptionexpiresafterthe30dayperiodrelatedtodeliveryofthe2025auditedfinancialstatements.
AsofDecember31,2015,theCompanyrecorded$9,061forthisarrangementinRedeemablenoncontrollinginterestsandequityonits
ConsolidatedBalanceSheet.
TheCompanyhascalloptionstopurchaseanyoralloftheremaining10%noncontrollinginterest.Thecalloptionforthe
noncontrollinginterestcanbeexercisedduringthe30dayperiodcommencingaftertheissuanceoftheauditedfinancialstatementsfor
eachoftheyearsendingDecember31,2012throughDecember31,2025.ThecalloptionpriceiseighttimesrecurringEBITDA,as
definedintheagreement.ThiscalloptionhadnoimpactontheCompany'sfinancialstatementsasofDecember31,2015.
Pearl
AspartoftheacquisitionofPearl,theminorityownershaveaputoptiontorequireLaureatetopurchasetheremaining45%
noncontrollinginterest.Theputoptionbecameexercisablein2015,andexpiresfifteendaysafterPearl'sauditedstatutoryfinancial
statementsforthefiscalyearendingMarch31,2017arepresentedtoPearl'sboard.Duringthisperiod,theminorityownersmayexercise
theiroptiontosellanyoralloftheirequityinteresttoLaureateforapurchasepriceequalto6.0timesEBITDAfortheimmediately
precedingfiscalyear,lesslongtermliabilitiesandplusnetcurrentassetsasoftheimmediatelyprecedingMarch31multipliedbythe
noncontrollinginterestpercentagebeingacquired.
Theputoptionalsocontainsaformulaicfloorandceiling.AsofDecember31,2015,theamountrecordedinRedeemable
noncontrollinginterestsandequityontheConsolidatedBalanceSheetis$6,666.
LaureatehasacalloptiontorequiretheminorityownerstoselltoLaureateupto35%ofthetotalequityofPearlthatisstillownedby
thenoncontrollinginterestholders(i.e.approximately78%oftheremaining45%noncontrollinginterest).Thecalloptionisexercisable
beginningfifteendaysafterPearl'sauditedstatutoryfinancialstatementsforthefiscalyearendingMarch31,2016arepresentedtoPearl's
board,andexpiresfifteendaysafterPearl'sauditedstatutoryfinancialstatementsforthefiscalyearendingMarch31,2018arepresentedto
Pearl'sboard.Thepurchasepriceforthecalloptionisdefinedas6.5timesEBITDAfortheimmediatelyprecedingfiscalyear,lesslong
termliabilitiesandplusnetcurrentassetsasoftheimmediatelyprecedingMarch31multipliedbythenoncontrollinginterestpercentage
beingacquired.Thecalloptionalsocontainsaformulaicfloorandceiling.ThiscalloptionhadnoimpactontheCompany'sfinancial
statementsasofDecember31,2015.
St.Augustine
BeginningonNovember21,2015andcontinuinguntilNovember21,2018,thenoncontrollinginterestholdershaveaputoptionto
requireLaureatetopurchaseall,butnotlessthanall,oftheremainingnoncontrollinginterestof20%.BeginningonNovember21,2017
andcontinuinguntilNovember21,2023,Laureatealsohasacalloptiontoacquiretheremainingnoncontrollinginterest.Theputoption
purchasepriceandthecalloptionpurchasepricearebasedon7.0timesAdjustedEBITDAofSt.Augustine,asdefinedintheagreement,
forthetwelvemonthsendedasofthelastdayofthefiscalquartermostrecentlyendedpriortothedateonwhichnoticeofexerciseis
given
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multipliedbythepercentageinterestbeingacquired.AsofDecember31,2015,werecorded$27,367fortheputoptioninRedeemable
noncontrollinginterestsandequityontheConsolidatedBalanceSheet.ThecalloptionhadnoimpactonourConsolidatedFinancial
StatementsasofDecember31,2015.
NHULLC
EffectiveApril16,2014,NHUNFP,thenoncontrollinginterestholderofNHULLC,hastwoputoptionstorequireLaureateto
purchasealloraportionofits20%ownershipinterestinNHULLC.Thefirstputoptiongivesthenoncontrollinginterestholdertheright
torequireustopurchaseaminimumof50%oftheNHULLCequityinterest.Thesecondputoptiongivesthenoncontrollinginterest
holdertherighttorequireustopurchaseallofitsremainingequityinterestinNHULLC.Thereisnoexpirationdateoneitherofthesetwo
putoptions.Thepurchasepriceoftheseputoptionswouldbeequalto6.5timesadjustedEBITDAforcertaindefinedperiods,multiplied
bythepercentageinteresttobepurchased.AsofDecember31,2015,werecorded$0forthesearrangementsinRedeemable
noncontrollinginterestsandequityontheConsolidatedBalanceSheet,astheadjustedEBITDAmeasurespecifiedintheagreementwas
negative.
EffectiveApril16,2020,wehaveacalloptionthatwillallowustopurchaseanyremainingnoncontrollinginterestsinNHULLC.
Thecallpricewouldbeequalto6.5timesadjustedEBITDAmultipliedbythepercentageinterestthatLaureatepurchases,subjecttoa
minimumcallprice.Theminimumcallpricewouldbe(a)$5,000ifthenoncontrollinginterestholder'spercentageownershipisequaltoor
exceedsitsinitial20%interestontheexercisedate,or(b)ifitsownershipislessthanitsinitial20%interest,$5,000timesthequotientof
thenoncontrollinginterestholder'spercentageownershipontheexercisedatedividedby20%.Thiscalloptionhadnoimpactonour
ConsolidatedFinancialStatementsasofDecember31,2015.
UniIBMR
During2015,theputandcalloptionsforUniIBMRexpiredunexercised.Inaddition,weenteredintoacommitmenttopurchasethe
remaining10%minorityinterestinUniIBMRforapurchasepriceofBRL2,500(US$638atDecember31,2015).Theagreementclosed
onMarch10,2016andwepaidBRL2,500.Additionalpurchasepricecouldbepaidpostclosingifcertaincontingentsaleconditionsare
met.
ContingentlyRedeemableEquityInstruments
PuttableCommonStockTerminationAgreement(CurrentlyRedeemable)
During2008,inconnectionwithaterminationagreement,aLaureateemployeewhoheldsharesoftheCompany'scommonstockwas
grantedacontractualrighttoputsharesbacktoLaureateatapriceequaltothefairmarketvalueofourcommonstockatthetimeof
exercise(theputright).Thisputrightisexercisableannuallyduringthe45dayperiodsubsequenttothestockholder'sreceiptof
Laureate'sannualappraisal.TheputrightterminatesattheearliestofachangeincontrolofLaureate,aninitialpublicofferingof
Laureate'scommonstock,orsuchtimeasLaureaterepurchasestheemployee'sshares.Weaccountfortheputtablecommonstockas
contingentlyredeemablesecurities.
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Sincethestockiscurrentlyredeemable,werecognizeitsfairvalue,themaximumredemptionamount,astemporaryequityattheendof
eachreportingperiod,withthechangesinfairvaluerecordedthroughAdditionalpaidincapital.AsofDecember31,2015and2014,$6
and$7,respectively,ofputtablecommonstockwasincludedinRedeemablenoncontrollinginterestsandequityontheConsolidated
BalanceSheets,andonethousandsharesremainedoutstandingasofeachbalancesheetdate.
PuttableCommonStockDirectorStockholderPut(NotCurrentlyRedeemable)
EachoftheindividualdirectorstockholdersofLaureatehasenteredintoastockholder'sagreementwithLaureateandWengen.The
directorstockholder'sagreementmakesallsharesofcommonstocksubjecttoastockholderputoptionatthefairmarketvalueofthestock.
Thestockholderputoptionisonlyexercisableuponthelossofcapacitytoserveasadirectorduetodeathordisability(asdefinedinthe
stockholder'sagreement).ThedirectorstockholderputoptionexpiresonlyuponachangeincontrolofLaureate.
Sincetheputoptioncanonlybeexercisedupondeathordisability,weaccountforthecommonstockascontingentlyredeemable
equityinstrumentsthatarenotcurrentlyredeemableandforwhichredemptionisnotprobable.Accordingly,theredeemableequity
instrumentsarepresentedintemporaryequitybasedontheirinitialmeasurementamount,asrequiredbyASC48010S99,"Distinguishing
LiabilitiesfromEquitySECMaterials."Nosubsequentadjustmentoftheinitialmeasurementamountsforthesecontingentlyredeemable
securitiesisnecessaryunlesstheredemptionofthesesecuritiesbecomesprobable.Accordingly,theamountpresentedastemporaryequity
forthecontingentlyredeemablecommonstockoutstandingisitsissuancedatefairvalue.
AsofDecember31,2015,$2,397ofcontingentlyredeemablecommonstockattributabletodirectorstockholderputswasincludedin
RedeemablenoncontrollinginterestsandequityontheConsolidatedBalanceSheet.AsofDecember31,2014,$1,711wasincludedin
RedeemablenoncontrollinginterestsandequityontheConsolidatedBalanceSheetfordirectorstockholderputs.
PutRightonShareBasedAwardsGrantedtoExecutive(NotCurrentlyRedeemable)
Duringthefirstquarterof2015,theCompanyandanexecutiveenteredintoanagreementwherebythisexecutivewasgrantedcertain
putrightsonhissharebasedawardsoncetheybecomevested.Theputrightbecomesexercisablein2018ifcertaineventshavenot
occurredbythattime.Asaresult,wereclassifiedpermanentequitytotemporaryequityforequityawardsrelatingtoapproximately750
sharesofcommonstockthatarecontingentlyredeemable.AsofDecember31,2015,$6,194ofcontingentlyredeemablecommonstock
attributabletothisputrightwasincludedinRedeemablenoncontrollinginterestsandequityontheConsolidatedBalanceSheet.
OtherLossContingencies
Laureateissubjecttolegalactionsarisingintheordinarycourseofitsbusiness.Inmanagement'sopinion,wehaveadequatelegal
defenses,insurancecoverage,and/oraccruedliabilitieswithrespecttotheeventualityofsuchactions.Wedonotbelievethatany
settlementwouldhaveamaterialimpacton
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ourConsolidatedFinancialStatements.RefertoNote19,LegalandRegulatoryMatters,foradiscussionofcertainmatters.
ContingentLiabilitiesforTaxes
InMay2012,aBrazilianstatesupremecourtrulingdeclaredthatalawpassedbyoneofitsmunicipalgovernmentswas
unconstitutional.Themunicipality'sfederalappealofthestaterulingispending.Thismunicipallaw,passedinthethirdquarterof2010,
hadnullifiedcertaintaxassessmentsagainstoneofourinstitutionsinBrazil.AsaresultoftheMay2012statesupremecourtruling,we
recordedaliabilityforthesetaxcontingenciesofapproximately$20,100.During2013,theCompanyreviseditsestimateforthisBrazil
taxcontingencyandrecordedanadditional$3,800ofDirectcosts.Duringthefourthquarterof2013,wesettledthistaxassessmentwith
themunicipalityandpaidtheentireliability.Weinitiatedlegalproceedingsunderthepurchaseagreementarbitrationprovisionsagainst
theformerownerstorecovertheamountspaidforthistaxcontingencyastheliabilitystemsexclusivelyfromthepreacquisitionperiod.
DuringtheyearendedDecember31,2014,wereachedasettlementwiththeformerownersandrecordedagainofapproximately$6,700in
Operatingincome.
AsofDecember31,2015and2014,Laureatehasrecordedcumulativeliabilitiestotaling$73,775and$121,867,respectively,for
taxesotherthanincometax,principallypayrolltaxrelateduncertaintiesduetoacquisitionsofcompaniesprimarilyinLatinAmerica.The
changesinthisrecordedliabilityarerelatedtonewacquisitions,interestandpenaltyaccruals,changesintaxlaws,expirationsofstatutes
oflimitations,settlementsandchangesinforeigncurrencyexchangerates.Thetermsofthestatutesoflimitationsonthesecontingencies
varybutcanbeupto10years.ThisliabilityisincludedinOtherlongtermliabilitiesontheConsolidatedBalanceSheets.Wehavealso
recordedcurrentliabilitiesfortaxesotherthanincometaxof$4,217and$2,362,respectively,asofDecember31,2015and2014,inOther
currentliabilitiesontheConsolidatedBalanceSheets.Weestimateourliabilitiesfortaxesotherthanincometaxthathaveareasonable
possibilityoflosstobeintherangeof$0toapproximately$1,000,asofDecember31,2015,andwehavenotaccruedforsuchpotential
losses.Therecordedvalueofcontingentliabilitiesisreducedwhentheyareextinguishedortherelatedstatutesoflimitationsexpire.
Changesintherecordedvaluesofnonincometaxcontingenciesandtherelatedindemnificationassetsimpactoperatingincome.The
(decrease)increasetooperatingincomeforadjustmentstononincometaxcontingenciesandindemnificationassetswereapproximately
$(5,600),$4,600and$7,200fortheyearsendedDecember31,2015,2014and2013,respectively.
Inaddition,asofDecember31,2015and2014,Laureatehasrecordedcumulativeliabilitiesforincometaxcontingenciesof$139,160
and$126,466,respectively.
Inmostcases,Laureatehasreceivedindemnificationsfromtheformerownersand/ornoncontrollinginterestholdersoftheacquired
businessesforcontingencies,andtherefore,wedonotbelievewewillsustainaneconomiclossevenifwearerequiredtopaythese
additionalamounts.AsofDecember31,2015and2014,indemnificationassetsprimarilyrelatedtoacquisitioncontingencieswere
$123,904and$184,916,respectively.Theseindemnificationassetscoveredcontingenciesforincometaxesandtaxesotherthanincome
taxes.
IncometaxcontingenciesaredisclosedanddiscussedfurtherinNote15,IncomeTaxes.
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Laureatehasaccruedliabilitiesforcertaincivilactionsagainstourinstitutionsthatexistedpriortoouracquisitionoftheseentities.
AsofDecember31,2015and2014,approximately$14,000and$13,000,respectively,ofpreacquisitionlosscontingencieswere
includedinOtherlongtermliabilitiesandOthercurrentliabilitiesontheConsolidatedBalanceSheets.Laureateintendstovigorously
defendagainsttheselawsuits.
UNABChileSettlement
TheplannedMarch2013openingofanewcampusbuildingatUNABChileinourLatAmsegmentwasdelayed,resultingintheneed
torelocatestudentstotemporaryfacilitieswhilethebuildingwascompleted.Thisalsocausedaseveralweekdelaytothestartofthe2013
academiccalendaryearforthesestudents.Asaconcessionfortheinconvenienceexperiencedbythestudentswhowereaffected,Laureate
agreedtoaonetimesettlementintheformofdiscountsonthosestudents'tuition.Thissettlementwasrecognizedinthefirstquarterof
2013asareductionofRevenue,inaccordancewithASC60550452,"CustomerPaymentsandIncentives."Fortheyearended
December31,2013,thetotalreductionofRevenueforthissettlementwasapproximately$10,100.
SettlementofInsuranceClaims
InFebruary2010andApril2010,earthquakesstrucknearConcepcin,ChileandintheBajaCaliforniaregionofMexico,
respectively,resultingindamagetoanumberofourlocationsinthoseareas.Allsignificantrepairworkhassincebeencompleted,andwe
filedclaimswithourinsurancecarriersforbothpropertydamageandbusinessinterruptionlosses.Wenegotiatedingoodfaithwithour
insurancecarriersregardingdisputedamountsofdeductiblesappliedandlossescoveredhoweverwewereunabletoresolvethesematters
throughnegotiations.Asaresult,onOctober12,2011,wefiledsuitagainsttherelevantinsurancecarrierintheU.S.DistrictCourtforthe
SouthernDistrictofNewYork(LaureateEducation,Inc.v.InsuranceCompanyoftheStateofPennsylvania,CaseNo.11CIV7175),
seekingmoneydamagesinexcessof$11,000,adeclaratoryjudgmentthatthecarrierwasobligatedtoindemnifyusforourlosses,andour
costs,expensesandattorneys'fees.Discoveryinthisproceedingwascompletedandthepartiesbothfiledmotionsforsummaryjudgment.
OnApril3,2014,thecourtgrantedsummaryjudgmentforthecarrierwithrespecttothe$5,000inpropertydamageclaims,granted
summaryjudgmentforusforapproximately$900withrespecttooneofthebusinessinterruptionclaims,anddeterminedthatatrialwould
berequiredfortheremainingclaims,whichtotaledapproximately$4,800,includingprejudgmentinterest.OnJune24,2014,Laureate
settledtheseremainingclaimswiththeinsurancecarrierfor$3,350.ThesettlementproceedswerereceivedbyLaureateonJune30,2014
andrecordedasareductionofGeneralandadministrativeexpensesduringthesecondquarterof2014.InDecember2014,wereacheda
finalsettlementagreementwithanotherpartyforoneofthepropertydamageclaimsdiscussedabove.Thesettlementamountwas$1,475,
andwasrecordedasareductionofGeneralandadministrativeexpensesduringthefourthquarterof2014.
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MaterialGuaranteesStudentFinancing
Chile
TheaccreditedChileaninstitutionsintheLaureatenetworkalsoparticipateinagovernmentsponsoredstudentfinancingprogram
knownasCrditoconAvaldelEstado(theCAEProgram).TheCAEProgramwasformallyimplementedbytheChileangovernmentin
2006topromotehighereducationinChileforlowersocioeconomiclevelstudentsingoodacademicstanding.TheCAEProgram
involvestuitionfinancingandguaranteesthatareprovidedbyourinstitutionsandthegovernment.AspartoftheCAEProgram,these
institutionsprovideguaranteeswhichresultincontingentliabilitiestothirdpartyfinancinginstitutions,beginningat90%ofthetuition
loansmadedirectlytoqualifiedstudentsenrolledthroughtheCAEProgramanddecliningto60%overtime.Theguaranteesbythese
institutionsareineffectduringtheperiodinwhichthestudentisenrolled,andtheguaranteesareassumedentirelybythegovernment
uponthestudent'sgraduation.WhenastudentleavesoneofLaureate'sinstitutionsandenrollsinanotherCAEqualifiedinstitution,the
Laureateinstitutionwillremainguarantorofthetuitionloansthathavebeengranteduptothedateoftransfer,anduntilthestudent's
graduationfromaCAEqualifiedinstitution.Themaximumpotentialamountofpaymentsourinstitutionscouldberequiredtomake
undertheCAEProgramwasapproximately$428,000and$432,000atDecember31,2015and2014,respectively.Thismaximum
potentialamountassumesthatallstudentsintheCAEProgramdonotgraduate,sothatourguaranteewouldnotbeassignedtothe
government,andthatallstudentsdefaultonthefullamountoftheCAEqualifiedloanbalances.AsofDecember31,2015and2014,we
recorded$18,829and$19,918,respectively,asestimatedlongtermguaranteeliabilitiesfortheseobligations.
OnOctober4,2012,theChileanCongressapprovedLawNo.20.634whichamendedLawNo.20.027,introducinganinterestrate
reductionfrom6%to2%onCAEloans.CurrentstudentscouldbenefitfromthereductionstartinginMarch2013iftheywerecurrenton
theirpayments.TheLawalsoprovidesthatCAEloanscannotexceedthereferencepriceestablishedbythegovernmentfortheprogramin
whichthestudentisenrolled,thatthestudentbeginstomakepayments18monthsaftergraduation,andthatmonthlypaymentsmaynot
exceed10%oftheparticipant'sincomeifrequestedbythestudent.ThepriorgovernmentinChilehadproposedotherchangestothe
studentloanprogram.However,inthesecondquarterof2014thenewgovernmentthatwasinauguratedonMarch11,2014announcedthe
withdrawalofalloftheprioradministration'shighereducationproposalsanditsintenttosubmitnewbillstotheChileanCongress.We
cannotpredicttheextentoroutcomeofanychangestothestudentloansystemthatmaybeimplementedinChileorwhetheranysuch
changesmayhaveamaterialimpactonourConsolidatedFinancialStatements.SeeNote2,SignificantAccountingPolicies.
MaterialGuaranteesOther
InconjunctionwiththepurchaseofUNP,Laureatepledgedalloftheacquiredsharesasaguaranteeofourpaymentsofrentsasthey
becomedue.Intheeventthatwedefaultonanypayment,thepledgeagreementprovidesforaforfeitureoftherelevantpledgedshares.In
theeventofforfeiture,LaureatemayberequiredtotransferthebooksandmanagementofUNPtotheformerowners.
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AsdiscussedinNote4,Acquisitions,Laureateacquiredtheremaining49%ownershipinterestinUAMBrazilinApril2013.Aspartof
theagreementtopurchasethe49%ownershipinterest,Laureatepledged49%ofitstotalsharesinUAMBrazilasaguaranteeofour
paymentobligationsunderthepurchaseagreement.Intheeventthatwedefaultonanypayment,theagreementprovidesforaforfeitureof
thepledgedshares.
InconnectionwiththepurchaseofFMUonSeptember12,2014,asdescribedinNote4,Acquisitions,Laureatepledged75%ofthe
acquiredsharestothirdpartylendersasaguaranteeofourpaymentobligationsundertheloansthatfinancedaportionofthepurchase
price.SeeNote9,Debt,forfurtherdescriptionoftheloans.Laureatepledgedtheremaining25%oftheacquiredsharestothesellersasa
guaranteeofourpaymentobligationsunderthepurchaseagreementforthesellernotesdescribedinNote5,DuetoShareholdersof
AcquiredCompanies.Intheeventthatwedefaultonanypaymentoftheloansorsellernotes,thepurchaseagreementprovidesfora
forfeitureoftherelevantpledgedshares.UponmaturityandpaymentofthesellernotesinSeptember2017,thesharespledgedtothe
sellerswillbepledgedtothethirdpartylendersuntilfullpaymentoftheloans,whichmatureinApril2021.
AsofDecember31,2015and2014,Laureatehadoutstandinglettersofcredit(LOCs)of$126,677and$107,377,respectively,which
primarilyconsistedoftheitemsdiscussedbelow.
AsofDecember31,2015and2014,wehad$86,599and$89,322,respectively,postedasLOCsinfavoroftheDOE.TheseLOCswere
requiredtoallowWalden,Kendall,NewSchool,St.AugustineandNHULLCtocontinueparticipatingintheDOETitleIVprogram.These
LOCsarefullycollateralizedwithcashequivalentsandcertificatesofdeposit,whichareclassifiedasRestrictedcashandinvestmentson
ourDecember31,2015ConsolidatedBalanceSheet.
AsofDecember31,2015and2014,wehad$36,527and$14,447,respectively,postedascashcollateralizedLOCsrelatedtothe
SpainTaxAudits.SeeNote15,IncomeTaxes,forfurtherdetail.ThecashcollateralfortheseLOCswasclassifiedasRestrictedcashand
investmentsonourDecember31,2015and2014ConsolidatedBalanceSheets.
SuretyBondsandOtherCommitments
December31,2015and2014,thetotalfaceamountofthesesuretybondswas$3,366and$7,314,respectively.Thesebondsarefully
collateralizedwithcash,whichisclassifiedasRestrictedcashandinvestmentsonourDecember31,2015ConsolidatedBalanceSheet.
Note12.FinancingReceivables
Laureate'sfinancingreceivablesconsistprimarilyoftradereceivablesrelatedtostudenttuitionfinancingprogramswithaninitial
terminexcessofoneyear.Wehaveofferedlongtermfinancingthroughexecutionofnotereceivableagreementswithstudentsatsomeof
ourinstitutions.The
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Note12.FinancingReceivables(Continued)
repaymenttermsonthesetuitionfinancingprogramsvaryandrangefromthreeto18years.Ourdisclosuresincludefinancingreceivables
thatareclassifiedinourConsolidatedBalanceSheetsasbothcurrentandlongterm,reportedinaccordancewithASC310,"Receivables."
Laureate'sfinancingreceivablesbalanceswereasfollows:
December31,
2015
2014
Financingreceivables
Financingreceivables,netofallowances
$ 32,802 $ 41,404
(10,576) (15,240)
$ 22,226 $ 26,164
Wedonotpurchasefinancingreceivablesintheordinarycourseofourbusiness.Wemaysellcertainreceivablesthataresignificantly
pastdue.Nomaterialamountsoffinancingreceivablesweresoldduringtheperiodsreportedherein.
Delinquencyistheprimaryindicatorofcreditqualityforourfinancingreceivables.Receivablebalancesareconsidereddelinquent
whencontractualpaymentsontheloanbecomepastdue.Delinquentfinancingreceivablesareplacedonnonaccrualstatusforinterest
income.Theaccrualofinterestisresumedwhenthefinancingreceivablebecomescontractuallycurrentandwhencollectionofall
remainingamountsdueisreasonablyassured.WerecordanAllowancefordoubtfulaccountstoreduceourfinancingreceivablestotheir
netrealizablevalue.TheAllowancefordoubtfulaccountsisbasedontheageofthereceivables,thestatusofpastdueamounts,historical
collectiontrends,currenteconomicconditions,andstudentenrollmentstatus.Eachofourinstitutionsevaluatesitsbalancesforpotential
impairment.Weconsiderimpairedloanstobethosethatarepastdueoneyearorgreater,andthosethataremodifiedasatroubleddebt
restructuring(TDR).Theagingoffinancingreceivablesgroupedbycountryportfoliowasasfollows:
AsofDecember31,2015
Amountspastduelessthanoneyear
Amountspastdueoneyearorgreater
Totalpastdue(onnonaccrualstatus)
Notpastdue
Totalfinancingreceivables
AsofDecember31,2014
Notpastdue
Chile
Other
10,404
4,048
14,452
11,159
25,611
12,390
5,254
17,644
13,520
31,164
Total
$ 1,166
606
1,772
5,419
$ 7,191
$ 2,217
542
2,759
7,481
$ 10,240
11,570
4,654
16,224
16,578
32,802
14,607
5,796
20,403
21,001
41,404
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ThefollowingisarollforwardoftheAllowancefordoubtfulaccountsrelatedtofinancingreceivablesfromDecember31,2012
throughDecember31,2015,groupedbycountryportfolio:
Chargeoffs
Recoveries
Reclassifications
Provision
Currencyadjustments
Chargeoffs
Recoveries
Reclassifications
Provision
Currencyadjustments
Chargeoffs
Recoveries
Reclassifications
Provision
Currencyadjustments
$ (28,385) $ (2,977) $ (31,362)
8,718
582
9,300
149
21
170

(471)
(471)
(407) (2,039) (2,446)
2,090
435
2,525
(17,835) (4,449) (22,284)
6,800
782
7,582

(274)
(274)
(2,345)
(586) (2,931)
2,317
350
2,667
(11,063) (4,177) (15,240)
3,648
232
3,880

4
4

(16)
(16)
(1,105)
(46) (1,151)
1,280
667
1,947
$ (7,240) $ (3,336) $ (10,576)
Chile
Other
Total
RestructuredReceivables
ATDRisafinancingreceivableinwhichtheborrowerisexperiencingfinancialdifficultyandLaureatehasgrantedaneconomic
concessiontothestudentdebtorthatwewouldnototherwiseconsider.WhenwemodifyfinancingreceivablesinaTDR,Laureate
typicallyoffersthestudentdebtoranextensionoftheloanmaturityand/orareductionintheaccruedinterestbalance.Incertain
situations,wemayoffertorestructureafinancingreceivableinamannerthatultimatelyresultsintheforgivenessofcontractually
specifiedprincipalbalances.OuronlyTDRsareinChile.
ThenumberoffinancingreceivableaccountsandthepreandpostmodificationaccountbalancesmodifiedunderthetermsofaTDR
duringtheyearsendedDecember31,2015,2014and2013wereasfollows:
2015
2014
2013
NumberofFinancing
ReceivableAccounts
PreModification
BalanceOutstanding
1,044 $
1,070 $
1,167 $
PostModification
BalanceOutstanding
5,251 $
7,002 $
9,604 $
4,796
6,452
9,210
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TheprecedingtablerepresentsaccountsmodifiedunderthetermsofaTDRduringtheyearendedDecember31,2015,whereasthe
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followingtablerepresentsaccountsmodifiedasaTDRbetweenJanuary1,2014andDecember31,2015thatsubsequentlydefaulted
duringtheyearendedDecember31,2015:
Total
NumberofFinancing
ReceivableAccounts
BalanceatDefault
705 $
2,864
ThefollowingtablerepresentsaccountsmodifiedasaTDRbetweenJanuary1,2013andDecember31,2014thatsubsequently
defaultedduringtheyearendedDecember31,2014:
Total
NumberofFinancing
ReceivableAccounts
BalanceatDefault
726 $
4,376
ThefollowingtablerepresentsaccountsmodifiedasaTDRbetweenJanuary1,2012andDecember31,2013thatsubsequently
defaultedduringtheyearendedDecember31,2013:
Total
NumberofFinancing
ReceivableAccounts
BalanceatDefault
533 $
4,652
Note13.SharebasedCompensation
Sharebasedcompensationexpensewasasfollows:
2015
Stockcompensationfordirectors'fees
Stockoptions,netofestimatedforfeitures
Restrictedstockawards
Executiveprofitsinterestplan
Totalnoncashstockcompensation
Deferredcompensationarrangement
Stockoptionsliability
Total
2014
827
23,120
10,173
34,120
4,901
39,021
2013
825
25,772
13,981
115
40,693
7,653
844
49,190
$
300
36,284
3,821
735
41,140
8,372
$ 49,512
SharebasedDeferredCompensationArrangement
ImmediatelypriortoAugust17,2007(theMergerDate),Laureate'sChiefExecutiveOfficerandanotherthenmemberoftheBoardof
DirectorsheldvestedequitybasedawardswhichtheyexchangedontheMergerDateforunfunded,nonqualifiedsharebaseddeferred
compensationarrangementshavinganaggregatefairvalueatthattimeof$126,739.Priortotheoccurrenceofaninitialpublicoffering,
eachdeferredcompensationarrangementallowstheparticipantthepotentialtoearnanamount(atanytime,aPlanBalance)equaltothe
productof(A)thenumberof"phantomshares"
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creditedtotheparticipant'saccount,and(B)thelesserof(i)thefairmarketvalueper"phantomshare"ontheMergerDateplusa5%
compoundedannualreturnthereon,and(ii)thefairmarketvalueper"phantomshare"ontheearlierofSeptember17,2014(the
DistributionDate)orachangeofcontrol.Onandaftertheoccurrenceofaninitialpublicoffering,eachdeferredcompensation
arrangementallowstheparticipantthepotentialtoearnaPlanBalanceequaltotheproductof(A)thenumberof"phantomshares"
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arrangementallowstheparticipantthepotentialtoearnaPlanBalanceequaltotheproductof(A)thenumberof"phantomshares"
creditedtotheparticipant'saccountasoftheinitialpublicofferingand(B)thefairmarketvalueper"phantomshare"ontheDistribution
Dateorachangeofcontrol,asapplicable.Underthesedeferredcompensationarrangements$81,000waspaidoutontheDistribution
Date.ThispaymentwasincludedinAccountspayableandaccruedexpenseswithintheoperatingactivitiessectionoftheConsolidated
StatementofCashFlowsfortheyearendedDecember31,2014.ThePlanBalancesremainingaftertheDistributionDateaccrueinterestat
acompoundannualinterestrateof5%.Underthetermsoftheplan,thenext$81,000plusaccruedinterestonthePlanBalancesremaining
aftertheDistributionDatewouldbepaidoutonthefirstanniversaryoftheDistributionDate.TheremainingPlanBalanceafterthefirst
anniversarydistributionwouldbepaidoutonthesecondanniversaryfromtheDistributionDate.
IfLaureatehasnotconsummatedaninitialpublicofferingpriortothefirstorsecondanniversaryoftheDistributionDate,as
applicable,thescheduleddistributionwillbemadeincash.DistributionsmadeafterLaureatehasconsummatedaninitialpublicoffering
wouldgenerallybemadeinsharesofLaureatecommonstock,thenumberofwhichwilldependonthevalueofthesharesonthedateof
distribution.Notwithstandingtheforegoing,immediatelyuponachangeofcontrol,thearrangementswillbeterminatedandliquidated
andthePlanBalanceswillbedistributedinalumpsum.Achangeofcontrolwouldgenerallyoccurifallorsubstantiallyalloftheassets
ofLaureateormorethan50%ofourequityinterestsaresold.PriortotheDistributionDate,werecognizethedeferredcompensation
arrangementexpenseratablybasedonthe5%compoundedannualrateofreturn,whichcanbereducedbasedontheestimatedfairvalue
ofLaureate'scommonstockifthecompoundedannualrateofreturnofLaureate'scommonstockislessthana5%compoundedannual
growthrate.AftertheDistributionDate,werecognizethedeferredcompensationarrangementexpenseratablybasedonthe5%
compoundedannualinterestrate.
FortheyearsendedDecember31,2015,2014and2013,Laureaterecordedsharebasedcompensationexpenseforthisdeferred
compensationarrangementof$4,901,$7,653and$8,372,respectively.AsofDecember31,2014,thetotalliabilityrecordedforthe
deferredcompensationarrangementwas$99,679,ofwhich$82,165waspayableonSeptember17,2015,thefirstanniversaryofthe
DistributionDate,andwasthereforerecordedasacurrentliabilityinDeferredcompensationonthe2014ConsolidatedBalanceSheet.The
remainingnoncurrentportionoftheliabilityof$17,514wasrecordedinDeferredcompensationasanoncurrentliability.Theparticipants
agreedtoextendthepaymentdueonSeptember17,2015(the2015Obligation),thefirstanniversaryoftheDistributionDate,until
December31,2015,inordertoagreewiththeCompanyonaformofpaymentthatwebelievemorecloselyalignswiththelongterm
interestsoftheCompanyandoursecurityholders.
OnDecember29,2015(the2015ExecutiveDCPClosingDate),wesatisfiedthe2015Obligationbypayingtheparticipantsatotal
amountof$87,117,including$6,117ininterestfromtheDistributionDatetothe2015ExecutiveDCPClosingDate.Thepayment
consistedof$37,071incashand$50,046inaggregateprincipalamountofSeniorNotesdue2019.Theparticipantsagreednottoofferor
sell
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theirSeniorNotesdue2019,otherthantotheCompany,until12monthsafterthe2015ExecutiveDCPClosingDate.SeealsoNote9,
DebtandNote17,RelatedPartyTransactions.
AsofDecember31,2015,thetotalliabilityrecordedforthedeferredcompensationarrangementwas$17,463,whichispayableon
September17,2016,thesecondanniversaryoftheDistributionDate,andwasthereforerecordedasacurrentliabilityinDeferred
compensationonthe2015ConsolidatedBalanceSheet.
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compensationonthe2015ConsolidatedBalanceSheet.
2007StockIncentivePlan
InAugust2007,theBoardofDirectorsapprovedtheLaureateEducation,Inc.2007StockIncentivePlan(2007Plan).Thetotalshares
authorizedunderthe2007Planwere9,232.Sharesthatareforfeited,terminated,canceled,allowedtoexpireunexercised,withheldto
satisfytaxwithholding,orrepurchasedareavailableforreissuance.Anyawardsthathavenotvesteduponterminationofemploymentfor
anyreasonareforfeited.FollowingtheOctober2,2013modificationdiscussedfurtherbelow,uponvoluntaryorinvoluntarytermination
withoutcause(includingdeathordisability),thegrantee(ortheestate)hasaperiodoftimeafterterminationtoexerciseoptionsvested
priortotermination.The2007Plan'srestrictedstockawardshaveaclawbackfeaturewherebyallvestedshares,orthegrossproceedsfrom
thesaleofthoseshares,mustbereturnedtoLaureatefornoconsiderationiftheemployeedoesnotabidebytheagreeduponrestrictive
covenantssuchascovenantsnottocompeteandcovenantsnottosolicit.
StockOptionsUnder2007Plan
Stockoptionawardsunderthe2007Planhaveacontractuallifeof10yearsandweregrantedwithanexercisepriceequaltothefair
marketvalueofLaureate'sstockatthedateofgrant.Ouroptionagreementsgenerallydivideeachoptiongrantequallyintooptionsthat
aresubjecttotimebasedvesting(TimeOptions)andoptionsthatareeligibleforvestingbasedonachievingpredeterminedperformance
targets(PerformanceOptions).PriortotheOctober2013modification,discussedbelow,underthe2007Plantheseperformancetargets
wereProrataEBITDAearningstargets.TheTimeOptionsgenerallyvestratablyonthefirstthroughfifthgrantdateanniversary.The
PerformanceOptionsaredividedintotranches.EachtrancheiseligibletovestannuallyupontheBoardofDirectors'determinationthat
Laureatehasattainedfiscalyearearnings(ProrataEBITDA,asdefinedintheagreement)thatequaltheperformancetargets(Prorata
EBITDAtargets).Theseperformancetargetsaresetatthetimeoftheaward'sissuanceand,foroptionsoutstandingatthetime,were
amendedinAugust2010andOctober2013.Ouroptionagreementsprovidethatifourfiscalyearearningsareatleast95%,atleast90%,
orbelow90%,oftheapplicableearningstargetthen75%,50%,or0%,respectively,oftheapplicablePerformanceOptiontranchewill
vest.ThePlanincludesa"catchup"provisionsuchthat,intheeventthatwedonotachieve100%oftheperformancetargetinaparticular
fiscalyear,thePerformanceOptionTranchemayvestinanysubsequentyear,withineightyearsfromthedateofthegrant,ifandtothe
extentagreaterpercentageofasubsequentyear'searningstargetisachieved.CertainPerformanceOptionawardsgrantedpriorto
February2,2008alsoincludedaseparatetranche,equalto30%ofthetotalperformanceaward,thatvestedupontheBoardofDirectors'
determinationthatLaureatehadattainedahigherearningstargetpriortoAugust17,2017(Special30%PerformanceVesting).During
2013,webelieveditwasprobablethatwewould
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attainthepredeterminedhigherearningstargetfortheSpecial30%PerformanceVestingtranchein2014accordingly,weaccrued$4,499
additionalperformanceoptionexpenserelatedtothisspecialtranchein2013.ThisSpecial30%PerformanceVestingtranchewasfully
vestedasofDecember31,2014.
Stockoptionsandrestrictedstockawardsgrantedunderthe2007Planhaveprovisionsforacceleratedvestingifthereisachangein
controlofLaureate.Asdefinedinthe2007Plan,achangeincontrolwouldoccurifsubstantiallyalloftheassetsofLaureateormorethan
50%ofourequityinterestsaresold.Ifachangeincontrolshouldoccur,alloftheoutstandingTimeOptionsandunvestedrestrictedstock
heldbytheemployeeswouldbecomefullyvestedandimmediatelyexercisable.ThePerformanceOptionswillbecomeimmediately
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heldbytheemployeeswouldbecomefullyvestedandimmediatelyexercisable.ThePerformanceOptionswillbecomeimmediately
exercisableintheeventofachangeincontrolonlyif,andtotheextent,theBoardofDirectors,initsdiscretion,electstovestthem.
Compensationexpenseisrecognizedovertheperiodduringwhichanemployeeisrequiredtoprovideserviceinexchangeforthe
award,whichisusuallythevestingperiod.ForTimeOptions,expenseisrecognizedratablyoverthefiveyearvestingperiod.For
PerformanceOptions,expenseisrecognizedunderagradedexpenseattributionmethod,totheextentthatitisprobablethatthestated
annualperformancetargetwillbeachievedandoptionswillvestforanyyear.Weassesstheprobabilityofeachoptiontranchevesting
throughoutthelifeofeachgrant.
2007PlanStockOptionModifications
OnOctober2,2013,theCompensationCommitteeofLaureate'sBoardofDirectorsmodifiedthe2007Plan.Themodification
i)changedtheperformancemetricsandtargetsforallunvestedPerformanceOptionstomatchthetargetsofthe2013Planbeginningwith
the2013targetii)modifiedthepostterminationexerciseprovisionsforresignation,goodleaving,deathanddisability,andretirementto
matchtheterminationprovisionunderthe2013Plan,whichisapostterminationexerciseperiodof:90daysforresignation,twoyearsfor
terminationduetodeathordisabilityor,afteraninitialpublicofferingofourcommonstock,goodleaving,andfiveyearsforretirement
iii)reallocatedtheoutstandingunvested2012performancetranchetovestintheremainingperformanceyearsofthegrantonaprorata
basisforonlythoseemployeeswhoreceivedstockoptionsawardsforfirsttimein2012andiv)forfeitallotheroutstandingunvested
2012performanceoptions,disallowingtheabilitytocatchuponthevesting,astheperformancetargetwasnotmet.Asaresultofthis
modification,werecognized$5,547ofadditionalPerformanceOptionexpensein2013.
2013LongTermIncentivePlan
OnJune13,2013,Laureate'sBoardofDirectorsapprovedtheLaureateEducation,Inc.2013LongTermIncentivePlan(2013Plan),as
asuccessorplantoLaureate's2007Plan.The2013PlanbecameeffectiveinJune2013,followingapprovalbythestockholdersof
Laureate.Nofurtherawardswillbemadeunderthe2007Plannowthatthe2013Planiseffective.Underthe2013Plan,theCompanymay
grantstockoptions,stockappreciationrights,unrestrictedcommonstockorrestrictedstock(collectively,"stockawards"),unrestricted
stockunitsorrestrictedstockunits,andotherstockbasedawards,toeligibleindividualsonthetermsandsubjecttotheconditionsset
forthinthe2013Plan.Asoftheeffectivedate,thetotalnumberofsharesofcommonstockissuableunderthe2013Planwere7,521,which
isequaltothesumof(i)7,074sharesplus(ii)447sharesofcommonstockthat
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werestillavailableforissuanceunderLaureate's2007Plan.InSeptember2015,theBoardofDirectorsapprovedanamendmenttoincrease
thetotalnumberofsharesofcommonstockissuableunderthe2013Planby1,219.Sharesthatareforfeited,terminated,canceled,allowed
toexpireunexercised,withheldtosatisfytaxwithholding,orrepurchasedareavailableforreissuance.Anyawardsthathavenotvested
uponterminationofemploymentforanyreasonareforfeited.Holdersofrestrictedstockshallhavealloftherightsofastockholderof
commonstockincluding,withoutlimitation,therighttovoteandtherighttoreceivedividends.However,dividendsdeclaredpayableon
performancebasedrestrictedstockshallbesubjectedtoforfeitureatleastuntilachievementoftheapplicableperformancetargetrelatedto
suchsharesofrestrictedstock.Anyaccruedbutunpaiddividendsonunvestedrestrictedstockshallbeforfeiteduponterminationof
employment.Holdersofstockunitsdonothaveanyrightsofastockholderofcommonstockandarenotentitledtoreceivedividends.All
awardsoutstandingunderthe2013Planterminateupontheliquidation,dissolutionorwindingupofLaureate.The2013Planwillremain
ineffectuntiltheearlierof(a)theearliestdateasofwhichallawardsgrantedunderthePlanhavebeensatisfiedinfullorterminatedand
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ineffectuntiltheearlierof(a)theearliestdateasofwhichallawardsgrantedunderthePlanhavebeensatisfiedinfullorterminatedand
nosharesofcommonstockareavailabletobegrantedor(b)June12,2023.
Stockoptions,stockappreciationrightsandrestrictedstockunitsgrantedunderthe2013Planhaveprovisionsforacceleratedvesting
ifthereisachangeincontrolofLaureate.Asdefinedinthe2013Plan,achangeincontrolmeansthefirstofthefollowingtooccur:i)a
changeinownershipofLaureateorWengenorii)achangeintheownershipofassetsofLaureate.AchangeinownershipofLaureateor
Wengenshalloccuronthedatethatmorethan50%ofthetotalvotingpowerofthecapitalstockofLaureateissoldormorethan50%of
thepartnershipinterestsofWengenissoldinasingleoraseriesofrelatedtransactions.AchangeintheownershipofassetsofLaureate
wouldoccurif80%ormoreofthetotalgrossfairmarketvalueofalloftheassetsofLaureatearesoldduringa12monthperiod.Thegross
fairmarketvalueofLaureateisdeterminedwithoutregardtoanyliabilitiesassociatedwithsuchassets.Uponconsummationofthechange
incontrolandanemployee's"qualifyingtermination"(asdefinedintheemployee'sawardagreement):a)thosetimebasedstockoptions
andstockappreciationrightsthatwouldhavevestedandbecomeexercisableonorpriortothethirdanniversaryoftheeffectivetimeof
changeincontrolwouldbecomefullyvestedandimmediatelyexercisableb)thoseperformancebasedstockoptionsandstock
appreciationrightsthatwouldhavevestedandbecomeexercisablehadLaureateachievedtheperformancetargetsinthethreefiscalyears
endingcoincidentwithorimmediatelysubsequenttotheeffectivetimeofsuchchangeincontrol,excludingtheportionofawardsthat
wouldhavevestedonlypursuanttoanycatchupprovisions,wouldbecomefullyvestedandimmediatelyexercisablec)thosetimebased
restrictedstockawardsthatwouldhavebecomevestedandfreeofforfeitureriskandlapserestrictiononorpriortothethirdanniversaryof
theeffectivetimeofsuchchangeincontrolwouldbecomefullyvestedandimmediatelyexercisabled)thoseperformancebasedrestricted
stockawardsthatwouldhavevestedandbecomefreeofforfeitureriskandlapserestrictionshadLaureateachievedthetargetperformance
inthethreefiscalyearsendingcoincidentwithorimmediatelysubsequenttotheeffectivetimeofsuchchangeincontrolwouldbecome
fullyvestedandimmediatelyexercisablee)thosetimebasedrestrictedstockunitsthatwouldhavebecomevestedorearnedonorpriorto
thethirdanniversaryoftheeffectivetimeofsuchchangeincontrolwouldbecomevestedandearnedandbesettledincashorsharesof
commonstockaspromptlyaspracticableandf)thoseperformancebasedrestrictedstockunits,performancesharesandperformanceunits
thatwouldhavebecomevestedorearnedhadLaureateachievedthetarget
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performanceinthethreefiscalyearsendingcoincidentwithorimmediatelysubsequenttotheeffectivetimeofsuchchangeincontrol
wouldbecomevestedandearnedandbesettledincashorsharesofcommonstockaspromptlyaspracticable.Aftergivingeffecttothe
foregoingchangeincontrolacceleration,anyremainingunvestedtimebasedandperformancebasedstockoptions,stockappreciation
rights,restrictedstock,restrictedstockunits,performancesharesandperformanceshareunitsshallbeforfeitedfornoconsideration.
StockOptionsUnder2013Plan
Stockoptionawardsunderthe2013Planhaveacontractualtermof10yearsandaregrantedwithanexercisepriceequaltothefair
marketvalueofLaureate'sstockatthedateofgrant.During2015,2014and2013,wegrantedvariousemployeesstockoptionsfor1,447,
386and4,344sharesrespectively.Theseoptionsvestoveraperiodoffiveyears.Oftheoptionsgrantedin2015,2014and2013,1,073,
353and3,369,respectively,areTimeOptionsandtheremainderarePerformanceOptions.ThePerformanceOptionsgrantedunderthe
2013PlanareeligibleforvestingbasedonachievingannualpredeterminedEquityValueperformancetargets,asdefinedintheplan,and
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2013PlanareeligibleforvestingbasedonachievingannualpredeterminedEquityValueperformancetargets,asdefinedintheplan,and
thecontinuedserviceoftheemployee.Theperformancebasedawardsincludeacatchupprovision,allowingthegranteetovestinany
yearinwhichatargetismissedifafollowingyear'stargetisachievedaslongasthefollowingyeariswithineightyearsfromthegrant
date.
Compensationexpenseisrecognizedovertheperiodduringwhichanemployeeisrequiredtoprovideserviceinexchangeforthe
award,whichisusuallythevestingperiod.ForTimeOptions,expenseisrecognizedratablyoverthefiveyearvestingperiod.For
PerformanceOptions,expenseisrecognizedunderagradedexpenseattributionmethod,totheextentthatitisprobablethatthestated
annualearningstargetwillbeachievedandoptionswillvestforanyyear.Weassesstheprobabilityofeachoptiontranchevesting
throughoutthelifeofeachgrant.
EquityAwardModifications
EquityRestructuringModification
InDecember2013,thecombinationofentitiesundercommoncontrolcausedanequityrestructuringandthereforeresultedina
modificationofsharebasedawardsgrantedtoemployeesunderASC71810356"StockCompensation."Theamountofthestock
compensationchargeresultingfromthismodificationwasdeterminedbasedontheestimatedfairvalueofLaureateAsiaatthedateitwas
transferredtoLaureate.
InconnectionwiththecombinationofLaureateAsiaintoLaureate,Wengenandanotherinstitutionalinvestorgroupthatisaminority
shareholderofLaureateenteredintoasharetransferagreement,pursuanttowhichtheminorityshareholderagreedtotransfertoWengena
portionofitsLaureatesharesbasedupontheoutcomeofcertainevents.Underthetermsofthesharetransferagreement,theminority
shareholderwillberequiredtotransferaportionofitsLaureatesharestoWengen.Thissharetransferwillhavetheeffectofreducingthe
institutionalinvestorgroup'sownershipinLaureate,butwillnotreducetheCompany'semployeeshareholders'ownershipinLaureate.
Therefore,Wengen'srecapitalizationofLaureatethroughacontributionofLaureateAsiaresultedinamodificationofallsharebased
awardsgrantedtoemployees.Asaresultofthismodification,we
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recognized$6,455ofadditionalexpensein2013forvestedPerformanceOptions,vestedTimeOptionsandsharesheldbycurrentand
formeremployees.
ModificationofaFormerExecutive'sAward
In2014,theCompanyissuedanotepayabletoaformerexecutivefor$3,771inexchangeforvestedsharebasedcompensation.We
accountedforthisasanequitytoliabilityawardmodification.Thenotehasaninterestrateof5%andispayableupontheearlierof:1)the
occurrenceofcertaincontingenteventsor2)July31,2019.
StockOptionActivityfor2007and2013Plans
Thefollowingtablessummarizethestockoptionactivityandtheassumptionsusedtorecordtherelatedsharebasedcompensation
expensefortheyearsendedDecember31,2015,2014and2013:
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2015
2014
2013
Weighted
Weighted
Weighted
Average
Aggregate
Average
Aggregate
Average
Exercise
Intrinsic
Exercise
Intrinsic
Exercise
Price
Value
Price
Value
Price
Options
Options
Options
Outstandingat
January1 10,919
Granted
1,447
Exercised
(460)
Forfeitedor
expired
(479)
Outstandingat
December31 11,427
Exercisableat
December31 8,293
Vestedand
expectedto
vest
11,110
Aggregate
Intrinsic
Value
$ 25.84 $ 48,851 12,102 $ 25.40 $ 57,094 8,459 $ 20.40 $ 119,604

$ 26.72

386 $ 27.76
4,344 $ 34.52
$ 18.76 3,365 (841) $ 19.36 11,046 (226) $ 19.08

3,503
$ 28.52
(728) $ 27.04
(475) $ 22.36
$ 26.12 $ 20,339 10,919 $ 25.84 $ 48,851 12,102 $ 25.40 $ 57,094

$ 24.32 $ 20,328 7,600 $ 22.88 $ 47,812 6,839 $ 21.32 $ 48,159
$ 26.08 $ 20,339 10,499 $ 25.56 $ 48,833 10,666 $ 24.60 $ 55,289

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OptionsOutstanding
Weighted
Average
Number
Remaining
of
Contractual
Shares Terms(Years)
ExercisePrices
YearEnded
December31,
2015

OptionsExercisable
Weighted
Average
Number
Remaining
of
Contractual
Shares Terms(Years)
$18.36
$19.56
3,790
1.8 3,790
$20.16
$21.28
2.7
353
353

AssumptionRange*
Risk
Free
Interest
Rate
Expected
Terms
inYears
Expected
Volatility
0.32%
26.85%
1.8 4.20% 1.906.95 52.47%

0.42%
33.24%
2.7 3.60% 2.116.52 52.47%

0.68%
38.16%
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$21.48
$21.52
516
4.8
512
4.8
$21.68
$22.32
344
4.1
344
4.1
$22.88
$31.92
2,634
8.2 1,108
7.1
$34.52
3,788
YearEnded
December31,
2014

7.8 2,184
7.8
$18.36
$19.56
4,308
2.8 4,308
2.8
$20.16
$21.28
376
3.7
376
3.7
$21.48
$21.52
550
5.8
470
5.8
$21.68
$22.32
354
5.1
317
5.1
$22.88
$31.92
1,322
7.7
590
7.2
8.8 1,537
8.8
$34.52
4,008
YearEnded
December31,
2013
$18.36
$19.56
5,178
3.7 4,459
3.7
$20.16
$21.28
563
3.5
560
3.1
$21.48
$21.52
608
6.8
399
6.8
$21.68
$22.32
401
6.1
273
6.1
$22.88
$31.92
1,005
8.0
325
7.8
$34.52
4,344
9.8
821
9.8
0.68%
2.63%
0.57%
3.03%
0.73%
2.86%
1.76%
2.07%

0.32%
4.20%
0.42%
3.60%
0.68%
2.63%
0.57%
3.03%
0.73%
2.86%
1.76%
2.07%

0.32%
4.20%
0.42%
3.60%
0.68%
2.63%
0.57%
3.03%
0.73%
2.86%
1.76%
2.07%
3.386.58
2.186.52
4.006.52
6.027.12
1.906.95
2.116.52
3.386.58
2.186.52
4.006.52
6.027.12
1.906.55
2.116.52
3.386.58
2.186.52
4.006.52
6.027.12
38.16%
52.47%
36.78%
52.47%
39.03%
58.84%
51.51%
53.51%
26.85%
52.47%
33.24%
52.47%
38.16%
52.47%
36.78%
52.47%
39.03%
58.84%
51.51%
53.51%
26.85%
52.47%
33.24%
52.47%
38.16%
52.47%
36.78%
52.47%
39.03%
53.80%
51.51%
53.51%
Theexpecteddividendyieldiszeroforalloptionsinallyears.
Theweightedaverageestimatedfairvalueofstockoptionsgrantedwas$13.80,$15.68and$17.96persharefortheyearsended
December31,2015,2014and2013,respectively.
AsofDecember31,2015,Laureatehad$44,148ofunrecognizedsharebasedcompensationcostsrelatedtostockoptions
outstanding.Ofthetotalunrecognizedcost,$37,316relatestoTimeOptionsand$6,832relatestoPerformanceOptions.The
unrecognizedTimeOptionsexpenseisexpectedtoberecognizedoveraweightedaverageexpenseperiodof2.7years.
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NonVestedRestrictedStockandRestrictedStockUnits
ThefollowingtablesummarizesthenonvestedrestrictedstockandrestrictedstockunitsactivityfortheyearsendedDecember31,
2015,2014and2013:
NonvestedatJanuary1
Granted
Vested
Forfeited
NonvestedatDecember31
2015
Weighted
Average
GrantDate
FairValue
Shares
694 $
449 $
(215) $
(63) $
865 $
2014
Weighted
Average
GrantDate
FairValue
Shares
32.48
26.28
31.48
31.08
29.60
931 $
159 $
(337) $
(59) $
694 $
2013
Weighted
Average
GrantDate
FairValue
Shares
33.76
28.00
33.56
34.24
32.48
148
869
(66)
(20)
931
$
$
$
$
$
23.52
34.52
24.52
21.52
33.76
Restrictedstockunitsgrantedunderthe2013Planconsistoftimebasedrestrictedstockunitsandperformancebasedrestrictedstock
unitswithvariousvestingperiodsoverthenextfiveyears.Performancebasedrestrictedstockunitsareeligibletovestannuallyuponthe
BoardofDirectors'determinationthattheannualperformancetargetsaremet.TheperformancetargetsarethesameasforPerformance
Options,asdefinedinthe2013Plan.Theperformancebasedrestrictedstockunitsincludeacatchupprovision,allowingthegranteeto
vestinanyyearinwhichatargetismissedifafollowingyear'stargetisobtainedaslongasthefollowingyeariswithineightyearsfrom
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thegrantdate.
Restrictedstockgrantedunderthe2007Planconsistsoftimebasedrestrictedstockwithvestingperiodsoffiveyears.
ThefairvalueofthenonvestedrestrictedstockawardsinthetableaboveismeasuredusingthefairvalueofLaureate'scommonstock
onthedateofgrantorthemostrecentmodificationdatewhicheverislater.
AsofDecember31,2015,unrecognizedsharebasedcompensationexpenserelatedtononvestedrestrictedstockandrestrictedstock
unitsawardswas$15,543.Ofthetotalunrecognizedcost,$5,843relatestotimebasedrestrictedstockandrestrictedstockunitsand
$9,700relatestoperformancebasedrestrictedstockunits.Thisunrecognizedexpensefortimebasedrestrictedstockandrestrictedstock
unitswillberecognizedoveraweightedaverageexpenseperiodof2.3years.
CommonSharesIssuedorDeferredforDirectors'Fees
In2015,2014and2013,certaindirectorselectedtoreceivetheirannualBoardofDirectorscompensationinsharesofcommonstock.
FortheyearsendedDecember31,2015,2014and2013,respectively,Boardcompensationpaidinshareswas$209,$275and$300,and
weissued8,10and8sharesofcommonstockatpersharefairvaluesof$25.76,$27.48and$34.52.Inaddition,fortheyearsended
December31,2015and2014,werecognizedadditionalcompensationexpenseof$618and$550,respectively,forrestrictedstockgranted
todirectors.Certaindirectorshaveelectedtodefertheirannualcompensationinaccordancewiththeprovisionsofourdirectors'Deferred
CompensationPlan.
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In2013andagainin2014,amemberofourBoardofDirectorselectedtoreceive1sharesthathadbeenpreviouslydeferred.Accordingly,
theshareswereissuedanddistributed.AsofbothDecember31,2015and2014,thenumberofsharesofcommonstockthatremained
reservedforfutureissuancetodirectorswas7.
ExecutiveProfitsInterests
OnbehalfofLaureate,WengengrantedtoourCEOtheExecutiveProfitsInterestsaward(EPI).TheEPIcontainedatimebasedportion
thatvestedoverafiveyearscheduleandaperformancebasedportionthatvestedtotheextentthattheCompanyachievedpredetermined
earningstargetssimilartoperformanceoptionsoverafiveyearperiod.ThisawardwasfullyvestedbyDecember31,2014.
Note14.DerivativeInstruments
mayseektocontrolaportionoftheserisksthroughariskmanagementprogramthatincludestheuseofderivativeinstruments.
makedebtpaymentsissubjecttofluctuationsinthevalueoftheUSDagainstforeigncurrencies,sinceamajorityofouroperatingcash
usedtomakethesepaymentsisgeneratedbysubsidiarieswithfunctionalcurrenciesotherthanUSD.Aspartofouroverallrisk
managementpolicies,Laureatehasenteredintoaforeigncurrencyswapcontractandfloatingtofixedinterestrateswapcontracts.In
addition,weoccasionallyenterintoforeignexchangeforwardcontractstoreducetheearningsimpactofothernonfunctionalcurrency
denominatedreceivablesandpayables.
Wedonotenterintospeculativeorleveragedtransactions,nordoweholdorissuederivativesfortradingpurposes.Wegenerally
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intendtoholdourderivativesuntilmaturity.
Laureatereportsallderivativesatfairvalue.Thesecontractsarerecognizedaseitherassetsorliabilities,dependinguponthe
derivative'sfairvalue.GainsorlossesassociatedwiththechangeinthefairvalueoftheseswapsarerecognizedinourConsolidated
StatementsofOperationsonacurrentbasisoverthetermofthecontracts,unlessdesignatedandeffectiveasahedge.Forswapsthatare
designatedandeffectiveascashflowhedges,gainsorlossesassociatedwiththechangeinfairvalueoftheswapsarerecognizedinour
ConsolidatedBalanceSheetsasacomponentofAccumulatedOtherComprehensiveIncome(AOCI)andamortizedintoearningsasa
componentofInterestexpenseoverthetermoftherelatedhedgeditems.
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Note14.DerivativeInstruments(Continued)
Thereportedfairvalueofourderivatives,whichareprimarilyclassifiedinDerivativeinstrumentsonourConsolidatedBalance
Sheets,wereasfollows:
December31,
2015
2014
Derivativesdesignatedashedginginstruments:
Longtermliabilities:
Interestrateswaps
Derivativesnotdesignatedashedginginstruments:
Currentassets:
Crosscurrencyandinterestrateswaps
Currentliabilities:
Interestrateswaps
Totalderivativeinstrumentassets
Totalderivativeinstrumentliabilities
$ 13,250 $ 18,879
238
688
5,662 4,755
414
621
$
238 $
$ 20,014 $ 24,255
DerivativesDesignatedasHedgingInstruments
InterestRateSwaps
InSeptember2011,Laureateenteredintotwoforwardinterestrateswapagreementswithnotionalamountsof$450,000and$300,000,
respectively.Wehavedesignatedthesederivativesascashflowhedges.Theswapswereassociatedwithexistingdebt,andeffectivelyfix
interestratesonexistingvariablerateborrowingsinordertomanageourexposuretofutureinterestratevolatility.Bothswapshavean
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effectivedateofJune30,2014andmatureonJune30,2017.ThetermsoftheswapsrequireLaureatetopayinterestonthebasisoffixed
ratesof2.61%onthe$450,000notionalamountswapand2.71%onthe$300,000notionalamountswap,andreceiveinterestforboth
swapsonthebasisofthreemonthLIBOR,withafloorof1.25%.ThegainorlossontheseswapsisdeferredinAOCIandwillbe
reclassifiedintoearningsasacomponentofInterestexpenseinthesameperiodduringwhichthehedgedforecastedtransactionswillaffect
earnings.Laureatedeterminestheeffectivenessoftheseswapsusingthehypotheticalderivativemethod.Duringtheyearsended
December31,2015,2014and2013,theamountofgainorlossrecognizedinincomeontheineffectiveportionofderivativeinstruments
designatedashedginginstrumentswas$0,astheswapswere100%effective.Duringthenext12months,approximately$9,900is
expectedtobereclassifiedfromAOCIintoincome.AsofDecember31,2015and2014,theseinterestrateswapshadanestimatedfair
valueof$13,250and$18,879,respectively.
Thetablebelowshowsthetotalrecordedunrealizedgain(loss)oftheseswapsinComprehensiveincome(loss).Theimpactof
derivativeinstrumentsdesignatedashedginginstrumentson
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Comprehensiveincome(loss),InterestexpenseandAOCIfortheyearsendedDecember31,2015,2014and2013wereasfollows:
Interestrateswaps
Gain(Loss)
Recognized
inComprehensive
Income(Loss)
(EffectivePortion)
2015
2014
2013
Income
Statement
Location

LossReclassified
fromAOCI
toIncome
(EffectivePortion)
2015
2014
2013
$ 5,629 $ (733) $ 2,667 Interestexpense $ (10,660) $ (5,374) $
DerivativesNotDesignatedasHedgingInstruments
USDtoSwissFranc(CHF)ForeignCurrencyForwardSwaps
InNovember2015,LaureateenteredintoaUSDtoCHFforeignexchangeforwardswapagreement.Weexecutedaninitialconversion
ofCHF14,000toUS$14,113.TheswaphadanoriginalmaturityofMarch9,2016thatwasextendedtoJune8,2016,atafixedexchange
rateof$0.9920.Foraccountingpurposes,theswapwasnotdesignatedasahedginginstrument.AsofDecember31,2015,theswaphadan
estimatedfairvalueof$238,andwasincludedinPrepaidexpensesandothercurrentassetsontheConsolidatedBalanceSheet.
InMay2015,LaureateenteredintotwoUSDtoCHFforeignexchangeforwardswapagreements.Theseswapswereintendedtohedge
thecurrencyeffectsofthestrengtheningUSDforanticipatedcashoutlaysinCHFoverthesevenmonthssubsequenttotheexecutiondate
forataxpayment,alongwithexpectedworkingcapitalrequirements.WeexecutedaninitialconversionofCHF18,700toUS$19,840
usingtwoswaps.ThefirstswaphadanotionalamountofCHF9,000andmaturedonSeptember1,2015atafixedexchangerateof
$0.9459.ThesecondswaphadanotionalamountofCHF9,700andmaturedonJanuary5,2016atafixedexchangerateof$0.9394.For
accountingpurposes,theswapswerenotdesignatedashedginginstruments.AsofDecember31,2015,theremainingswaphadan
estimatedfairvalueof$624,andwasincludedinDerivativeinstrumentsasacurrentliabilityontheConsolidatedBalanceSheet.
InDecember2015,LaureateenteredintotwoUSDtoCHFforeignexchangeforwardswapagreements.Weexecutedaninitial
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InDecember2015,LaureateenteredintotwoUSDtoCHFforeignexchangeforwardswapagreements.Weexecutedaninitial
conversionofCHF16,000toUS$16,470usingtwoswaps.ThefirstswaphadanotionalamountofCHF9,000andhadanoriginal
maturityofMarch14,2016thatwasextendedtoJune10,2016,atafixedexchangerateof$0.9796.Thesecondswaphasanotional
amountofCHF7,000withanoriginalmaturityofFebruary5,2016thatwasextendedtoNovember10,2016atafixedexchangerateof
$0.9612.Foraccountingpurposes,theswapswerenotdesignatedashedginginstruments.AsofDecember31,2015,theseswapshadan
estimatedfairvalueof$64,andwereincludedinDerivativeinstrumentsasacurrentliabilityontheConsolidatedBalanceSheet.
CLPtoUnidaddeFomento(UF)CrossCurrencyandInterestRateSwaps
Thecrosscurrencyandinterestrateswapagreementsareintendedtoprovideabettercorrelationbetweenourdebtobligationsand
operatingcurrencies.In2010,oneofoursubsidiariesinChileenteredintofourcrosscurrencyandinterestrateswapagreements.Oneof
theswapsmatureson
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December1,2024,andtheremainingthreematureonJuly1,2025(theCLPtoUFcrosscurrencyandinterestrateswaps).TheUFisa
Chileaninflationadjustedunitofaccount.Thefourswapshaveanaggregatenotionalamountofapproximately$31,000,andconvert
CLPdenominated,floatingratedebttofixedrateUFdenominateddebt.TheCLPtoUFcrosscurrencyandinterestrateswapswerenot
designatedashedgesforaccountingpurposes.AsofDecember31,2015and2014,theseswapshadanestimatedfairvalueof$5,662and
$4,755,respectively.
THINKInterestRateSwaps
LaureateacquiredTHINKonDecember20,2013,andfinancedaportionofthepurchasepricebyborrowingAUD45,000(US$32,702
atDecember31,2015)underasyndicatedfacilityagreementintheformoftwotermloansofAUD22,500each.Thetermsofthe
syndicatedfacilityagreementrequiredTHINKtoenterintoaninterestrateswapwithin45daysfromtheagreement'sDecember20,2013
effectivedate,inordertoconvertatleast50%oftheAUD45,000oftermloandebtfromavariableinterestratebasedontheBBSYbid
rate,anAustraliabankrate,toafixedinterestrate.Accordingly,onJanuary31,2014,THINKexecutedaninterestrateswapagreement
withanoriginalnotionalamountofAUD22,500tosatisfythisrequirementandconvertedAUD22,500(US$16,351atDecember31,
2015)ofthevariableratecomponentofthetermloandebttoafixedinterestrateof3.86%.Thenotionalamountoftheswapdecreases
quarterlybasedonthetermsoftheagreement,andtheswapmaturesonDecember20,2018.Thisinterestrateswapwasnotdesignatedasa
hedgeforaccountingpurposes,andhadanestimatedfairvalueof$414and$621atDecember31,2015and2014,respectively,whichwas
recordedinDerivativeinstrumentsasalongtermliability.
Componentsofthereported(Loss)gainonderivativesnotdesignatedashedginginstrumentsintheConsolidatedStatementsof
Operationswereasfollows:
Unrealized(Loss)Gain
Interestrateswaps
Realized(Loss)Gain
2015
2014
2013
$ (2,133) $ 25,725
145
4,076
(1,988) 29,801
(407) (27,788)
$ 38,008
6,200
44,208
(30,519)
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Interestrateswaps
Total(Loss)Gain
Interestrateswaps
(Loss)gainonderivatives,net
(407) (27,788) (30,519)
(212) (5,114) (7,058)
(619) (32,902) (37,577)
(2,540) (2,063)
7,489
(67) (1,038)
(858)
$ (2,607) $ (3,101) $ 6,631
CreditRiskandCreditRiskRelatedContingentFeatures
Laureate'sderivativesexposeustocreditrisktotheextentthatthecounterpartymaypossiblyfailtoperformitscontractual
obligation.Theamountofourcreditriskexposureisequaltothefairvalue
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ofthederivativewhenanyofthederivativesareinanetgainposition.AsofDecember31,2015,thefairvalueofderivativesinagain
positionwereimmaterial.AsofDecember31,2014,noneofourderivativeswereinagainposition.
AtDecember31,2015and2014,oneinstitution,whichwasratedA1,oneinstitutionwhichwasratedA2,twoinstitutionswhichwere
ratedAa2,andoneinstitutionwhichwasratedBaa3bytheglobalratingagencyofMoody'sInvestorsService,accountedforallof
Laureate'sderivativecreditriskexposure.
Laureate'sagreementswithitsderivativecounterpartiescontainaprovisionunderwhichwecouldbedeclaredindefaultonour
derivativeobligationsifrepaymentoftheunderlyingindebtednessisacceleratedbythelenderduetoadefaultontheindebtedness.Asof
December31,2015and2014,wehadnotbreachedanydefaultprovisionsandhadnotpostedanycollateralrelatedtotheseagreements.If
wehadbreachedanyoftheseprovisions,wecouldhavebeenrequiredtosettletheobligationsunderthederivativeagreementsforan
amountthatwebelievewouldapproximatetheirestimatedfairvalueof$20,014asofDecember31,2015and$24,255asofDecember31,
2014.
Note15.IncomeTaxes
SignificantcomponentsoftheIncometax(expense)benefitonearningsfromcontinuingoperationswereasfollows:
Current:
UnitedStates
Foreign
State
Totalcurrent
Deferred:
UnitedStates
Foreign
State
Totaldeferred
Totalincometax(expense)benefit
2015
2014
2013
$
(6,304) $
(4,749) $
(6,328)
(126,597) (119,190) (101,068)
(392)
(258)
(57)
(133,293) (124,197) (107,453)
(4,629)
(99)
8
19,319 164,426
15,701
873
(1,070)
498
15,563 163,257
16,207
$ (117,730) $ 39,060 $ (91,246)
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FortheyearsendedDecember31,2015,2014and2013,foreignincomefromcontinuingoperationsbeforeincometaxeswas
$105,919,$83,760and$154,391,respectively.FortheyearsendedDecember31,2015,2014and2013,domesticlossfromcontinuing
operationsbeforeincometaxeswas$306,528,$285,431and$152,462,respectively.
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Note15.IncomeTaxes(Continued)
Significantcomponentsofdeferredtaxassetsandliabilitiesarisingfromcontinuingoperationswereasfollows:
December31,
Deferredtaxassets:
Netoperatinglosscarryforwards
Depreciation
Deferredrevenue
Unrealizedloss
Nondeductiblereserves
Interest
Other
Totaldeferredtaxassets
Deferredtaxliabilities:
Investmentinsubsidiaries
Amortizationofintangibleassets
Other
Totaldeferredtaxliabilities
Netdeferredtaxassets
Valuationallowancefornetdeferredtaxassets
Netdeferredtaxliabilities
2015
2014
$
900,778 $ 817,380
54,083
31,097
48,669
46,259
24,005
30,016
66,971
95,562
83,368
54,581
30,486
33,085
26,195
13,678

850
1,234,555 1,122,508
111,761
112,457
376,639
424,373
1,342
489,742
536,830
744,813
585,678
(1,092,951) (994,434)
$ (348,138) $ (408,756)
AtDecember31,2015and2014,undistributedearningsfromforeignsubsidiariestotaled$1,153,953and$1,152,824,respectively.
Wehavenotrecognizeddeferredtaxliabilitiesfortheseundistributedearningsbecausewebelievethattheywillbeindefinitely
reinvestedoutsideoftheUnitedStates.Theseearningscouldbecomesubjecttoadditionaltaxesiftheyareremittedasdividends,loaned
tousortooneofourUnitedStatesaffiliates,orifwesoldourinterestsinthesubsidiaries.Itisnotpracticableforustodeterminethe
amountofadditionaltaxesthatmightbepayableontheunremittedearnings.
Approximately76%(66%federaland10%states)ofourworldwidenetoperatinglosscarryforwards(NOLs)asofDecember31,2015
originatedintheUnitedStates,derivedfrombothfederalandvariousstatejurisdictions.TheU.S.federalNOLswillbegintoexpirein
2025.
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ThevaluationallowancerelatestotheuncertaintysurroundingtherealizationoftaxbenefitsprimarilyattributabletoNOLsofthe
parentcompanyandofcertainforeignsubsidiaries,andfuturedeductibletemporarydifferencesthatareavailableonlytooffsetfuture
taxableincomeofsubsidiariesincertainjurisdictions.
TheCompanyassessestherealizabilityofdeferredtaxassetsbyexaminingallavailableevidence,bothpositiveandnegative.A
valuationallowanceisrecordedifnegativeevidenceoutweighspositiveevidence.Acompany'sthreeyearcumulativelosspositionis
significantnegativeevidencein
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consideringwhetherdeferredtaxassetsarerealizable.AccountingguidancerestrictstheamountofreliancetheCompanycanplaceon
projectedtaxableincometosupporttherecoveryofthedeferredtaxassets.In2014,valuationallowanceswerereleasedatentitiesinChile
andMexicoofapproximately$22,000and$66,000,respectively,duetothechangefromathreeyearcumulativelosspositiontoathree
yearcumulativeincomeposition,aswellasotherpositivefactorsincludingprojectionsoffutureprofitability.
During2015,objectiveandverifiablenegativeevidence,suchascontinuedU.S.operatinglosses,continuedtooutweighpositive
evidence.TheCompanyrecordedaFederalandStateNetOperatingLossdeferredtaxassetofapproximately$112,619anda
correspondingincreaseinthevaluationallowanceofthesameamount,asaresultofthenegativeevidencecitedabove.Recordingthe
valuationallowancedoesnotrestricttheCompany'sabilitytoutilizethefuturedeductionsandnetoperatinglossesassociatedwiththe
deferredtaxassetsiftaxableincomeisgeneratedinfutureperiods.ThemostsignificantU.S.deferredtaxassetsarefederalnetoperating
losses,totaling$588,126,thatbegintoexpirein2025.
ThereconciliationsofthereportedIncometaxexpensetotheamountthatwouldresultbyapplyingtheUnitedStatesfederalstatutory
taxrateof35%toincomefromcontinuingoperationsbeforeincometaxeswereasfollows:
2015
2014
2013
TaxbenefitattheUnitedStatesstatutoryrate
Permanentdifferences
Stateincometaxbenefit(expense),netoffederaltaxeffect
Taxeffectofforeignincometaxedatlowerrate
Changeinvaluationallowance
Settlementswithtaxingauthorities
Investmentinsubsidiaries
Effectoftaxcontingencies
Taxcredits
Withholdingtaxes
Other
Totalincometax(expense)benefit
$ 70,213 $ 70,585 $
(675)
(24,970) (16,560) (47,475)
312 (1,238)
461
31,856 37,370 73,534

(151,501) (31,502) (55,908)
(3,456)
(319)

(538) (25,216)
(34,572) (5,704) (9,048)
25,557 25,968 16,000

(35,332) (35,865) (42,600)
707

$ (117,730) $ 39,060 $ (91,246)
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Thereconciliationsofthebeginningandendingamountofunrecognizedtaxbenefitswereasfollows:
2015
2014
2013
Beginningoftheperiod
Additionsfortaxpositionsrelatedtoprioryears
Decreasesfortaxpositionsrelatedtoprioryears
Additionsfortaxpositionsrelatedtocurrentyear
Decreasesforunrecognizedtaxbenefitsasaresultofalapseinthe
statuteoflimitations
Settlementsfortaxpositionsrelatedtoprioryears
Endoftheperiod
$ 67,804 $ 57,404 $ 66,972

32,388 28,613
126
(12,640) (17,131) (7,251)
233
4,732 6,073
(4,919) (4,245) (8,049)

(344) (1,569)
(467)
$ 82,522 $ 67,804 $ 57,404
LaureaterecordsinterestandpenaltiesrelatedtouncertaintaxpositionsasacomponentofIncometaxexpense.Duringtheyears
endedDecember31,2015,2014and2013,Laureaterecognizedinterestandpenaltiesrelatedtoincometaxesof$16,270,$11,225and
$11,029,respectively.Laureatehad$60,186and$62,210ofaccruedinterestandpenaltiesatDecember31,2015and2014,respectively.
DuringtheyearsendedDecember31,2015,2014and2013,Laureatederecognized$8,090,$5,116and$8,795,respectively,ofpreviously
accruedinterestandpenalties.Approximately$79,000ofunrecognizedtaxbenefits,ifrecognized,willaffecttheeffectiveincometaxrate.
ItisreasonablypossiblethatLaureate'sunrecognizedtaxbenefitsmaydecreasewithinthenext12monthsbyuptoapproximately
$21,000asaresultofthelapseofstatutesoflimitationsandasaresultofthefinalsettlementandresolutionofoutstandingtaxmattersin
variousjurisdictions.
LaureateandvarioussubsidiariesfileincometaxreturnsintheUnitedStatesfederaljurisdiction,andinvariousstatesandforeign
jurisdictions.Withfewexceptions,LaureateisnolongersubjecttoUnitedStatesfederal,stateandlocal,orforeignincometax
examinationsbytaxauthoritiesforyearsbefore2009.UnitedStatesfederalandstatestatutesaregenerallyopenbackto2012however,
theInternalRevenueService(theIRS)hastheabilitytochallenge2005through2011netoperatinglosscarryforwards.Statutesofother
majorjurisdictions,suchasBrazil,ChileandSpainareopenbackto2011,andMexicoisopenbackto2006.
During2010and2013,LaureatewasnotifiedbytheSpainTaxAuthorities(STA)thattwotaxauditsofourSpanishsubsidiarieswere
beinginitiatedfor2006through2007,andfor2008through2010,respectively.OnJune29,2012,theSTAissuedafinalassessmentto
IniciativasCulturalesdeEspaa,S.L.(ICE),ourSpanishholdingcompany,forEUR11,051(US$12,128atDecember31,2015),including
interest,forthe2006through2007period.Laureatehasappealedthisfinalassessmentrelatedtothe2006through2007period,andissued
acashcollateralizedletterofcreditinJuly2012,inordertocontinuetheappealprocess.InOctober2015,theSTAissuedafinal
assessmenttoICEforthe2008through2010periodforapproximatelyEUR17,187(approximatelyUS$18,862atDecember31,2015),
includinginterest,forthosethreeyears.Inordertocontinuetheappealsprocess,wehaveissuedcashcollateralizedlettersofcreditforthe
2008to2010periodassessmentamount,plusinterestandsurcharges.Intotal,asofDecember31,2015wehaveissuedcashcollateralized
lettersofcreditfortheICEtaxauditmattersofEUR33,282(US$36,527atDecember31,2015),asalsodescribedinNote11,
CommitmentsandContingencies.
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DuringthequarterendedJune30,2015,theCompanyreassesseditspositionregardingtheICEtaxauditmattersasaresultofrecent
adversedecisionsfromtheSpanishSupremeCourtandtheSpanishNationalCourtoncasesfortaxpayerswithsimilarfacts,and
determinedthatitcouldnolongersupportamorelikelythannotposition.Asaresult,during2015,theCompanyhasrecordeda
provisiontotalingEUR37,610(approximatelyUS$42,100)fortheperiodJanuary1,2006throughDecember31,2015.TheCompany
planstocontinuetheappealsprocessfortheperiodsalreadyauditedandassessed.
ChileTaxReform
OnSeptember29,2014,Chileenactedmajorincometaxlawchanges.ThesignificantchangeimpactingtheCompanyistheincrease
inincometaxrates,whichareretroactivetoJanuary2014.Thetaxratesareincreasingfrom21%to22.5%in2015,24%in2016,25.5%in
2017and27%in2018andbeyond.Deferredtaxeswererevaluedandabenefitofapproximately$2,700and$6,100wasrecordedin2015
and2014,respectively.Priorto2015,thelawalsoincludedtwoalternativemethodsforcomputingshareholderlevelincometaxation.
During2015,thelawchangedtoincludeonemethodforcomputingshareholderlevelincometaxation.
SpanishTaxReform
During2014,Spainenactedmajorincometaxlawchanges.Onechangedecreasedthecorporateincometaxratefrom30%to28%in
2015andto25%beginningin2016.Theimpactoftheratechangeswasabenefittoincometaxexpenseofapproximately$600and
$6,700in2015and2014,respectively.
MexicanFiscalReform
InDecember2013,Mexicoenactedthe2014FiscalReform(FiscalReform).ThechangesintheFiscalReform,whicharegenerally
effectivefortaxyearsbeginningonorafterJanuary1,2014,includetheeliminationoftheflattaxregimethatpreviouslyappliedtomost
ofLaureate'sMexicoentities.Theseentitieswillnowbesubjecttothecorporateincometax.OtherchangesresultingfromtheFiscal
ReformincludeadjustmentstotheValueAddedTax(VAT)rateincertainlocationsandlimitationsonthedeductibilityofcertaintax
exemptpaymentsmadetoemployees.Sincethislawwasenactedin2013,wehaverecalculatedourdeferredtaxassetsandliabilitiesthat
aresubjecttotheTaxReformusingthenewtaxratesintheFiscalReform.AsdescribedfurtherinNote18,BenefitPlans,because
Laureate'sMexicoentitiesarenowsubjecttocorporateincometax,theCompanyisrequiredtocomplywithprofitsharinglegislation,
whereby10%ofthetaxableincomeatLaureate'sMexicanoperationswillbesetasideasemployeecompensation.
Note16.Earnings(Loss)PerShare
Laureatecomputesbasicearningspershare(EPS)bydividingincomeavailabletocommonshareholdersbytheweightedaverage
numberofcommonsharesoutstandingforthereportingperiod.DilutedEPSreflectsthepotentialdilutionthatwouldoccurifsharebased
compensationawards/arrangementsorcontingentlyissuableshareswereexercisedorconvertedintocommonstock.Tocalculatethe
dilutedEPS,thebasicweightedaveragenumberofsharesisincreasedbythedilutive
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Note16.Earnings(Loss)PerShare(Continued)
effectofstockoptions,restrictedstock,andothersharebasedcompensationarrangementsdeterminedusingthetreasurystockmethod.
Thefollowingtablesummarizesthecomputationsofbasicanddilutedearningspershare:
2015
Numeratorusedinbasicanddilutedearnings(loss)percommon
share:
Education,Inc.
Accretionofredemptionvalueofredeemablenoncontrolling
interestsandequity
Adjustedfor:accretionrelatedtononcontrollinginterestsand
equityredeemableatfairvalue
Distributedandundistributedearningstoparticipatingsecurities
Lossfromcontinuingoperationsavailabletocommonstockholders
Incomefromdiscontinuedoperations
Allocationofdiscontinuedoperationstoparticipatingsecurities
Netlossavailabletocommonstockholders
2014
2013
$ (316,248) $ (158,291) $ (74,824)
(13,041)
(9,187)
6,879
743
(11)
(3)
(322,421) (166,738)
$ (322,421) $ (166,738)
Denominatorusedinbasicanddilutedearnings(loss)per
commonshare:
Basicanddilutedweightedaveragesharesoutstanding
(9,797)
286
(22)
(84,357)
5,146
(5)
$ (79,216)
Education,Inc.
IncomefromdiscontinuedoperationsattributabletoLaureate
Education,Inc.
Basicanddilutednetlosspershareattributabletocommon
stockholders

132,950
(2.44) $
(1.24) $
(0.64)
0.04
132,616 131,983
(2.44) $
(1.24) $
(0.60)
Thefollowingtablesummarizesthenumberofstockoptionsandsharesofrestrictedstockoutstandingfortheyearsended
December31,2015,2014and2013,whichwereexcludedfromthedilutedEPScalculationsbecausetheeffectwouldhavebeen
antidilutive,duetonetlossesfortheperiodspresented:
Stockoptions
Restrictedstock
2015
2014
2013
10,743 10,263 7,881

430
464 141
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Note17.RelatedPartyTransactions
Corporate
TransactionsbetweenLaureateandSantaFeUniversityofArtsandDesign(SFUAD)
During2014,LaureateenteredintoanewsharedservicesagreementwithSFUADthatreplacedthesharedservicesagreement
previouslyenteredintoin2009.LaureateprovidesSFUADwithcertainmanagementconsulting,legal,tax,finance,accounting,treasury,
humanresources,andnetworkentryservices.Thesharedservicesagreementhasatermoffiveyearsandautomaticallyrenewsfortwoyear
periodsthereafter,unlessterminatedbyeitherparty.FortheyearsendedDecember31,2015,2014and2013,totalcostsandexpenses
chargedtoSFUADwere$14,205,$13,477and$12,174,respectively.AsofDecember31,2015and2014,LaureaterecordedaRelated
partyreceivablefromSFUADof$658and$4,186,respectively.SubstantiallyalloftheDecember31,2015receivablebalancewas
collectedsubsequenttoyearend.
Duringthethirdquarterof2013,fourteenLaureateinstitutionsenteredintopartnershipagreementswithSFUAD(theGlobal
Partnershipagreements).TheseGlobalPartnershipagreementshaveaninitialtermoffiveyearsandprovideLaureatestudentswith
educationalopportunitiestostudycertainacademicprogramsatSFUAD.Underthetermsoftheseagreements,thepartneringLaureate
institutionscommittopaySFUADanannualamounteachcalendaryear,whichSFUADthenbillstotheLaureateinstitutionsona
quarterlybasis.TheGlobalPartnershipagreementscanbeunilaterallycanceledbyeitherSFUADortheLaureateinstitutionswithatleast
sixmonths'priorwrittennoticehoweveranyremainingunpaidcommitmentamountforthatcalendaryearisstillcontractuallyowedto
SFUAD.FortheyearsendedDecember31,2015,2014and2013,thetotalamountspaidundertheGlobalPartnershipagreementswere
$3,556,$4,571and$2,974,respectively.AsofDecember31,2015and2014,LaureaterecordedarelatedpartypayabletoSFUADof$193
and$359,respectively.
TransactionsbetweenLaureateandHSM
AsdiscussedinNote4,Acquisitions,onMarch5,2015,LaureatecompletedthesaleofitsinterestinHSM.Thetotalpurchaseprice
wasapproximately$9,500,lessHSM'sbankdebtandotheradjustments.UponclosingofthesaleonMarch5,2015,Laureatereceived
cashproceedsofapproximately$5,000,whichareincludedinProceedsfrom(investmentsin)affiliatesonthe2015Consolidated
StatementofCashFlows.Asrequiredbytheagreement,Laureate'sloansreceivablefromHSM,alongwithallunpaidinterest,tookfirst
priorityintheallocationofthesaleproceeds.Aftercollectionoftheloansreceivableandaccruedinterest,whichtotaledapproximately
$2,300,andpaymentofcertaincostsrelatedtothesale,Laureaterecognizedanetgainofapproximately$2,000inEquityinnetincome
(loss)ofaffiliates,netoftax,ontheConsolidatedStatementofOperationsfortheyearendedDecember31,2015.
TransactionsbetweenLaureateandEntitiesAffiliatedwithExecutiveOfficers,DirectorsandWengen
FortheyearsendedDecember31,2015,2014and2013,weincurredcostsof$313,$184and$409,respectively,forthebusinessuse
ofaprivateairplanethatisownedinpartbyourCEO.
WehaveagreementsinplacewithI/ODataCenters,LLC(I/O)pursuanttowhichI/Oprovidesmodulardatacentersolutionstothe
Company.OneofourdirectorsisalsoadirectorofI/O.Additionally,thisdirector,ourCEO,andSterlingPartners(aprivateequityfirmco
foundedbythe
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Note17.RelatedPartyTransactions(Continued)
director,ourCEO,andothers)maintainanownershipinterestinI/O.DuringtheyearsendedDecember31,2015,2014and2013,we
incurredcostsfortheseagreementsofapproximately$500,$500and$400,respectively.
DuringtheyearendedDecember31,2015,2014and2013,wemadepaymentsofapproximately$700,$0and$700,respectively,to
anentityaffiliatedwithoneoftheWengeninvestorsforservicesrenderedinconnectionwiththeCompany'srefinancingofitsdebtand
newdebtissuances.
DuringtheyearsendedDecember31,2015and2014,wemadepaymentsofapproximately$196and$400toaconsultingfirmthat
workswithoneoftheWengeninvestorsanditsportfoliocompanies,forconsultingservicesprovidedinconnectionwithourEiP
initiative.
AsdiscussedinNote9,Debt,andNote13,SharebasedCompensation,onDecember29,2015weissued$50,046aggregateprincipal
amountofSeniorNotesdue2019totheparticipantsofthenonqualifiedsharebaseddeferredcompensationarrangement,whoare
Laureate'sChiefExecutiveOfficerandaformermemberofourBoardofDirectors.TheissuanceoftheSeniorNotesdue2019,alongwitha
cashpaymentof$37,071,satisfiedthe2015Obligationtotheparticipants.
OnDecember16,2015,Laureateenteredintoatermloanagreementwithitsparent,Wengen,forapproximately$11,000.Thenote
payableaccruesinterestatanannualrateofLIBORplus4.25%,witha1.25%floorontheLIBOR,andinterestispayablequarterly.The
termoftheloanisthreeyears,withmaturityonDecember31,2018.Principalpaymentsin2016arescheduledforJuneandDecember,in
theamountsof$3,500and$2,500,respectively.Accordingly,$6,000ofthis$11,000relatedpartyloanwasclassifiedasCurrentportionof
longtermdebt,andtheremainderwasclassifiedasLongtermdebt,lesscurrentportionontheConsolidatedBalanceSheet.
LatAm
TransactionsbetweenLaureateandEntitiesAffiliatedwithaFormerExecutive
FortheyearsendedDecember31,2015,2014and2013,Laureatemadepaymentsof$158,$11and$120,respectively,forconsulting
andmarketresearchand$497,$545and$820,respectively,forclinicalstudiestocompaniesthatareaffiliatedwithanindividualwho
servedasoneofourexecutivesuntilthethirdquarterof2014.
Ecuador
TransactionsbetweenLaureateandaVIEformerlyconsolidated
Inthesecondhalfof2010,EcuadoradoptedanewHigherEducationLaw(theNewLaw)that,ifimplemented,wouldrequireLaureate
tomodifythegovernancestructureofourinstitutioninthatcountry,UDLAEcuador,toimplementasystemofcogovernancethatwould
causeustolosetheabilitytocontrolthatinstitution.Inthefourthquarterof2012,theConsejodeEducacinSuperior(CES),therelevant
regulatorybody,commencedreviewingandissuingcommentsonbylawssubmittedbyotherEcuadorianhighereducationinstitutions,
implementingandenforcingthecogovernanceprovisionsoftheNewLaw.InaccordancewithASC810101510,theCompanybelieved
thatcontrolnolongerresidedwithLaureategiventhegovernmentallyimposeduncertainties.Asaresult,UDLAEcuadorwas
deconsolidatedinthefourthquarterof2012.
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CertainforprofitentitiesofLaureatecontinuetoprovideservicesand/orintellectualpropertytoUDLAEcuadorthroughcontractual
arrangementsatmarketrates.However,onlyearningsthatarerealizedthroughthesevariouscontractualarrangementsarebeing
recognizedbytheCompany.DuringtheyearsendedDecember31,2015,2014and2013,thetotalamountsrecognizedthroughthese
contractualarrangements,primarilyasotherrevenues,were$13,879,$18,132and$15,623,respectively.AsofDecember31,2015and
2014,wehadpayablestoUDLAEcuadorof$11,119and$7,263,respectively,andreceivablesfromUDLAEcuadorof$4,141and$2,066,
respectively.Also,duringtheyearendedDecember31,2013,UDLAEcuadormadecapitalcontributionsof$9,106,respectively,toan
educationrelatedrealestatesubsidiaryofLaureateinChile.Thesecapitalcontributionsarerecordedin(Distributionsto)andcapital
contributionsfromnoncontrollinginterestholdersinthe2013ConsolidatedStatementofCashFlows.AsofDecember31,2015and2014,
UDLAEcuador'sinvestmentinthisChileanrealestatesubsidiarywasapproximately$21,000and$25,000,respectively.Duringtheyears
endedDecember31,2015and2014,theChileanrealestatesubsidiarymadedividendpaymentstoUDLAEcuadorof$1,047and$811,
respectively,relatedtothisinvestment.
Europe
Morocco
TransactionsbetweenLaureateandNoncontrollingInterestHolderofLaureateSomedEducationHoldingSA(LSEH)
DuringtheyearsendedDecember31,2015,2014and2013,thenoncontrollinginterestholdermadeloanstoLSEHtotalingMAD
27,200(US$2,772),MAD28,000(US$4,754)andMAD20,000(US$2,393),respectively.Theseloanseachbearinterestat4.5%per
annumandhavevaryingmaturitydatesthroughApril2017.Theproceedsfromtheseloanshavebeenincludedinthefinancingactivities
sectionoftheConsolidatedStatementofCashFlowsasNoncontrollinginterestholder'sloantosubsidiaries.Asthe60%majorityowner,
LaureatehasalsomadeloanstoLSEHfor60%ofthetotalamountborrowed,whicheliminatesinconsolidation.
During2014,thematuritydateofaloanmadebythenoncontrollinginterestholderin2012wasextendedfromJune2014toJune
2016.TheoutstandingbalanceofthisloanatthetimeoftheextensionwasMAD36,377(US$3,677atDecember31,2015).Thisloan
alsobearsinterestatarateof4.5%perannum.
During2013,thenoncontrollinginterestholderconvertedatotalofMAD17,934(approximatelyUS$2,151atconversion)oftheir
loansandaccruedinteresttocapital.Laureatealsoconvertedtocapitalaprorataportionoftheloansthatithadmadeasthe60%majority
ownerofLSEH,resultinginnochangeinourownershippercentage.
AtDecember31,2015,wehadtotalrelatedpartypayablesof$13,354tothenoncontrollinginterestholderfortheoutstanding
balanceofandaccruedinterestontheloansdescribedabove,ofwhich$9,305and$4,049wererecordedascurrentandnoncurrent,
respectively.AtDecember31,2014,wehadtotalrelatedpartypayablesof$10,881tothenoncontrollinginterestholder,ofwhich$5,281
and$5,600wererecordedascurrentandnoncurrent,respectively.
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AMEA
China
TransactionsbetweenChinabusinessesandNoncontrollingInterestHolders
HIEUhasenteredintovariouscostsharingagreementsandotherrelatedpartytransactionswithentitiesownedbyanoncontrolling
interestholderofHIEU.AsofDecember31,2015and2014,theamountspayabletothisrelatedpartywere$2,501and$2,113,
respectively,andtheamountsreceivablefromthisrelatedpartywere$1,490and$1,428,respectively.
InJune2010,HIEUenteredintoanentrustmentloanagreementwithHunanNewLieyingEducationTechnologiesLtd.(HNLET),
whichhadabalanceof$3,059and$3,196asofDecember31,2015and2014,respectively.TheChairmanoftheBoardofDirectorsof
HIEUisanownerofHNLET.Theloanhadaninterestrateof7.5%anditsoriginalmaturitydateofJune2012wasextendedseveraltimes
untilJune2014.TheentrustmentloanreceivablewasfullysecuredbytheamountduetothenoncontrollinginterestholdersofHIEU
howeverLaureatewascontractuallyreleasedfromthatsellernotepayableduring2014andremovedtheliability,asdiscussedinNote5,
DuetoShareholdersofAcquiredCompanies.During2014,Laureateconcludedthatcollectionoftheentrustmentloanwasnotreasonably
assuredandplacedafullallowanceonthisrelatedpartyreceivable.Accordingly,asofDecember31,2015,thebalanceofthisloan
receivablefromHNLETwasfullyoffsetbyareserverecordedinAllowancefordoubtfulaccounts,resultinginanetcarryingvalueof$0.
AportionofrealpropertythatHIEUhaspaidfor,includinglandandbuildings,ismortgagedascollateralforcorporateloansthatthe
entitycontrolledbycertainnoncontrollinginterestholdersofHIEUhasenteredintowiththirdpartybanks.Thebalancesowedbysuch
entityonthesecorporateloanstotaledapproximately$20,000.InDecember2013,thenoncontrollinginterestholdersofHIEUsignedan
agreementwithLaureateandcommittedto:(1)removeallencumbrancesonHIEU'srealpropertynolaterthanSeptember30,2014and
(2)causetheentitytocompletethetransferoftitlerelatingtotheencumberedrealpropertytoHIEUnolaterthanDecember31,2014.
Underthetermsofthisagreement,thenoncontrollinginterestholdersalsoagreedtopayanyandalltransfertaxes,feesandothercoststhat
arerequiredinconnectionwiththeremovaloftheencumbrancesandthetransferoftitles,whichareestimatedtobeapproximately$2,000.
Ascollateralfortheirperformanceundertheagreement,thenoncontrollinginterestholderspledgedtoLaureatetheir30%equityinterest
inthesponsoringentityofHIEU.ThenoncontrollinginterestholdersofHIEUhavenotcompletedtheircommitmenttoremovethe
encumbrancesovertherealpropertyorcompletedthetransferoftherealproperty.Underthetermsoftheagreement,Laureatehastheright
toreceivethesaleproceedsofthenoncontrollinginterestholders'30%equityinterest,uptotheamountowingtoitundertheequity
pledge,inprioritytoothercreditorsofthenoncontrollinginterestholders.OnFebruary22,2016,oneofthecreditorsofthe
noncontrollinginterestholdersinitiatedanenforcementprocessagainstthenoncontrollinginterestholders.Ifthenoncontrollinginterest
holdersfailtorepaythedebtsowedtosuchcreditorin75days,thecreditormayfurtherrequestthecourttoauctionaportionoftheequity
interestofthenoncontrollinginterestholdersacourtauctionmaytakeplacewithinapproximatelythreemonths.Astheregistered
pledgee,Laureatehastherighttoreceivethesaleproceedsofthenoncontrollinginterestholders'30%equityinterest,uptotheamount
owingtoitundertheequitypledge,inprioritytoothercreditorsofthenoncontrollinginterestholders.Managementiscurrently
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evaluatingitsoptionsinthismatter.AsofDecember31,2015and2014,Laureate'snetcarryingvalueoftheencumberedrealpropertywas
approximately$13,700and$14,300,respectively.
InadditiontotheperformanceobligationsintheDecember2013agreementfortheencumberedpropertyasdescribedabove,the
noncontrollinginterestholdersarerequiredunderthe2009HIEUpurchaseagreement(PA)toobtainthetitlesofcertainotherbuildingsfor
HIEU.Thenoncontrollinginterestholdersarealsoobligatedtopayanyandallgovernmentfeesandothercosts,whichareestimatedtobe
approximately$4,200,requiredinconnectionwithobtainingthetitlesforthesebuildings.ThesebuildingsarenotencumberedandHIEU
hastitletotheland.ThenoncontrollinginterestholdersalsooccupyandconductothernonHIEUbusinessinfivebuildingsthatwehave
titleto,anddonotpayrenttoHIEUfortheuseofthesefacilities.
Additionally,during2014,HIEUrecordedanapproximately$4,350losstowriteoffthecarryingvalueofseveralparcelsoflandfor
whichitnolongerhaslanduserights.ThelossoflanduserightswasabreachofthePAandwedeterminedourclaimtobeuncollectible
in2014.
EffectiveJanuary1,2008,weenteredintoaconsultingarrangementwithanindividualrelatedtotheCompany'soperationsinChina.
Undertheagreement,wecommittedtoannualpaymentsforthehigherof$500or1%ofannualproratarevenueoftheCompany'sentities
inChina,inreturnforbusinessconsultingservices.Werecognizedtotalexpenseof$607underthiscontractfortheyearended
December31,2013.Aspermittedunderthetermsoftheagreement,weterminatedthisagreementeffectiveDecember31,2013.
Dubai
TransactionsbetweenLaureateandLaureateObeikanLtd.
AsofDecember31,2015and2014,wehadrecordedarelatedpartyreceivablesof$93and$1,034,respectively,fromthe
noncontrollinginterestholderofLaureateObeikanLtd.,ajointventureinDubaithatis50%ownedbyLaureateandconsolidated.During
2015,thereceivableamountoutstandingasofDecember31,2014wassettled.
Also,duringtheyearendedDecember31,2013,LaureateandthenoncontrollinginterestholderofLaureateObeikanLtd.made
capitalcontributionstoLaureateObeikanLtd.totaling$940inconnectionwithasharecapitalincrease.Thenoncontrollinginterest
holder's50%shareofthetotalcapitalcontribution,whichequaled$470,hasbeenincludedwithin(Distributionsto)andcapital
contributionsfromnoncontrollinginterestholdersinthefinancingactivitiessectionoftheConsolidatedStatementofCashFlowsforthe
yearendedDecember31,2013.
Malaysia
TransactionsbetweenMalaysianBusinessesandNoncontrollingInterestHolders
ExeterStreetHoldingsSdnBhd(ExeterMalaysia),oneofLaureate'ssubsidiaries,extendedaloantooneofitsnoncontrollinginterest
holderstoassistinthefinancingoftheirapproximately16.5%initialinvestmentinINTI.Theoriginalmaturitydateofthisloanwas
December31,2013,butitwasnotpaidbyDecember31,2013andremainsoutstanding.Theloaniscollateralizedbyapledgeofthe
noncontrollinginterestholder'sINTIshareshavingavalueof150%oftheoutstandingamountofthe
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loan,orattheCompany'soption,otherformsofcollateralacceptabletoit,equalto100%oftheoutstandingamountoftheloan.
Dividendsoroptionproceedsshallbeappliedfirsttoanyunpaidinterestandthentoreduceallprincipalamountsundertheloanfacility.
TheloanisdenominatedinMYRandaccruesinterestatarateof7%perannum.AsofDecember31,2013,theoutstandingprincipal
balancewas$3,966,andtheoutstandinginterestreceivablerelatedtothisloanwas$1,190,respectively.AsdiscussedinNote4,
Acquisitions,inthefourthquarterof2014Laureatesettledthisnotereceivableandtheaccruedinterestreceivableinconnectionwiththe
purchaseof6.4%ofthisminorityowner'snoncontrollinginterest.Asaresult,theloanisnolongeroutstandingasofDecember31,2014.
DividendstoNoncontrollingInterestHolders
DuringtheyearsendedDecember31,2015,2014and2013,INTImadecontractualdividendpaymentstoitsnoncontrollingholders
of$450,$444and$132,respectively,whichwereincludedwithinPaymentsofdividendsinthefinancingactivitiessectionofthe
ConsolidatedStatementsofCashFlows.
Singapore
LoanfromAffiliate
OnFebruary8,2013,Laureate'swhollyownedsubsidiary,LEISingaporeHoldingsPrivateLimited,whichistheSingaporebased
parententityofseveralofourAMEAsubsidiaries,borrowedEUR3,254(US$4,478atDecember31,2013)fromLEIInternational
HoldingsB.V.,aWengensubsidiarythatisanaffiliateofLaureate.TheloanhasamaturitydateofFebruary7,2022,andcarriesanannual
interestrateof7%.AsofDecember31,2013,thetotalprincipalandinterestpayablefortheloanwas$4,758,whichwasrecordedonthe
ConsolidatedBalanceSheetinLongtermdebt,lesscurrentportion.EffectiveMarch31,2014,theboardofLIHBVforgavethisloanto
LEISingaporeHoldingsPteLtd,whichwasrecognizedasacapitalcontributionof$4,821duringtheyearendedDecember31,2014.
SouthAfrica
TransactionsbetweenLaureateandNoncontrollingInterestHoldersofMSA
AsofDecember31,2015and2014,Laureatehadarelatedpartypayablerecordedof$1,897and$2,240,respectively,thatwasowed
tothenoncontrollinginterestholderofMSA.
GPS
UnitedStates
TransactionsbetweenLaureateandNoncontrollingInterestHolderofSt.Augustine
InDecember2013,subsequenttotheacquisitionofSt.AugustinediscussedinNote4,Acquisitions,a$10,000capitalcontribution
wasmadetoSt.Augustine,80%ofwhichwascontributedbyLaureateand20%bythenoncontrollinginterestholder.Laureateloaned
$2,000tothenoncontrollinginterestholderintheformofanoninterestbearingpromissorynoteforitsportionofthecapital
contribution,whichwasrecordedatitsdiscountedpresentvalueof$1,739inNotesreceivable,netontheDecember31,2013
ConsolidatedBalanceSheet.Thenotehadamaturitydateof
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November21,2018,andLaureatehadtherighttooffsetagainstthisreceivablethenoncontrollinginterestholder's20%shareofany
futuredistributionsthataremadebySt.Augustine.Duringthefourthquarterof2014,St.Augustinedeclaredandpaidadistributiontoits
ownersof$10,000,ofwhich$2,000waspaidtothe20%noncontrollinginterestholder.Thenoncontrollinginterestholderthenrepaidthe
relatedpartypromissorynotetoLaureate.
IntheConsolidatedStatementsofCashFlowsfortheyearsendedDecember31,2013and2014,Laureate'sloantotheminority
partnerin2013andtheloanrepaymentin2014wereincludedinPaymentsfrom(to)relatedpartiesintheinvestingactivitiessection,and
thenoncontrollinginterestholder's$2,000capitalcontributionin2013anddistributionin2014wereincludedin(Distributionsto)and
capitalcontributionsfromnoncontrollinginterestholdersinthefinancingactivitiessection.DuringtheyearendedDecember31,2015,
St.Augustinemadetaxdistributionstoits20%noncontrollinginterestholderof$3,952,asprovidedforinSt.Augustine'soperating
agreement.
TransactionsbetweenLaureateandNHUNFP
InconnectionwiththeacquisitionofNHULLCin2010,LaureateenteredintoaleasefortheSanJosecampusownedbyNHUNFP.
LaureatealsosubleasesaportionofthepremisestoNHUNFPforitscharterschool.FortheyearsendedDecember31,2014and2013,
Laureateincurredrentexpenseof$1,702and$1,666,respectively,andreceivedsubleaseincomeof$652and$374,respectively.At
June30,2015,LaureateceasedusingitsleasedpropertyatNHUandrecordedaliabilityforthepresentvalueoftheremainingleasecosts,
lessestimatedsubleaserentals,ofapproximately$3,100.DuringthesixmonthsendedJune30,2015,Laureateincurredrentexpenseof
$1,384andreceivedsubleaseincomeof$437.
Switzerland
AsofDecember31,2015and2014,wehaverecordedroyaltyreceivablesof$1,023and$925,respectively,fromLesRochesJin
Jiang,a50%equitymethodinvesteethatoperatesahospitalityandculinaryinstitutioninChina.Inaddition,wehaverecordedexchange
studentpayablesof$319toLesRochesJinJiangasofDecember31,2015.
Note18.BenefitPlans
DomesticDefinedContributionRetirementPlan
LaureatesponsorsadefinedcontributionretirementplanintheUnitedStatesundersection401(k)oftheInternalRevenueCode.The
planoffersemployeesatraditional"pretax"401(k)optionandan"aftertax"Roth401(k)option,providingtheemployeeswithchoices
andflexibilityfortheirretirementsavings.Allemployeesareeligibletoparticipateintheplanaftermeetingcertainservicerequirements.
Participantsmaycontributeuptoamaximumof80%oftheirannualcompensationand100%oftheirannualcashbonus,asdefinedand
subjecttocertainannuallimitations.Laureatemay,atitsdiscretion,makematchingcontributionsthatareallocatedtoeligible
participants.Thematchingonthe"aftertax"Rothcontributionsisthesameasthematchingonthetraditional"pretax"contributions.
Laureatemadediscretionarycontributionsincashtothisplanof$4,501,$4,174and$3,823fortheyearsendedDecember31,2015,2014
and2013,respectively.
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Note18.BenefitPlans(Continued)
NonUnitedStatesPensionBenefitPlans
Laureatehasdefinedbenefitpension(pension)plansatseveralnonUnitedStatesinstitutions.Theprojectedbenefitobligation(PBO)
isdeterminedastheactuarialpresentvalueasofthemeasurementdateofallbenefitscalculatedbythepensionbenefitformulafor
employeeservicerendered.Theamountofbenefitstobepaiddependsonanumberoffutureeventsincorporatedintothepensionbenefit
formula,includingestimatesoftheaveragelifeexpectancyofemployees/survivorsandaverageyearsofservicerendered.ThePBOis
measuredbasedonassumptionsconcerningfutureinterestratesandfutureemployeecompensationlevels.Theexpectednetperiodic
benefitcostforLaureateineachyearcanvaryfromthesubsequentyear'sactualnetperiodicbenefitcostduetotheacquisitionofentities
withplans,planamendments,andtheimpactsofforeigncurrencytranslation.Thecombinedunfundedstatusoftheseplansisreportedasa
componentofOtherlongtermliabilities.
ThefairvalueofplanassetsrelatestoinsurancecontractsforourSwitzerlandinstitutions'plans.Thefairvaluemeasurementswere
basedoninputsthatarenotobservabletoactivemarketsand,assuch,wouldbedeemeda"Level3"fairvaluemeasurementasdefinedin
Note20,FairValueMeasurement.
Thenetperiodicbenefitcostforthoseentitieswithpensionplanswasasfollows:
2015
Servicecost
Interest
Expectedreturnonassets
Amortizationofpriorservicecosts
Recognitionofactuarialitems
Curtailmentgain
Netperiodicbenefitcost
2014
2013
$ 5,658
1,585
(546)
428
239
(551)
$ 6,813
$ 6,021 $ 5,229
1,387 1,805
(400) (765)
903
278
(27)
173
$ 7,884 $ 6,720
TheestimatednetperiodicbenefitcostfortheyearendingDecember31,2016isapproximately$7,492.
Theweightedaverageassumptionswereasfollows:
Discountrateforobligations
Discountratefornetperiodicbenefitcosts
Rateofcompensationincreases
Expectedreturninplanassets
2015
2014
2013
0.7510.10% 1.009.75% 2.2510.50%

1.009.75% 2.2510.50% 1.759.75%
2.0013.00% 2.0014.00% 2.2511.75%
0.75%
1.00%
2.25%
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ThechangeinPBO,changeinplanassetsandfunded(unfunded)statusforthoseentitieswithpensionplanswereasfollows:
2015
ChangeinPBO:
PBOatbeginningofyear
Servicecost
Interest
Actuarialloss(gain)
Benefitspaidbyplan
Participantcontributions
Administrativeexpenses
Foreignexchange
PBOatendofyear
Changeinplanassets:
Fairvalueofassetsatbeginningofyear
Actualreturnonassets
Employercontributions
Participantcontributions
Benefitspaidbyplan
Administrativeexpenses
Foreignexchange
Fairvalueofassetsatendofyear
Unfundedstatus
Actuarialloss
Priorservicecost
AmountrecognizedinAOCI,pretax
Accumulatedbenefitobligation
$
$
$
$
$
2014
67,149
6,021
1,387
(173)
(3,200)
2,712
(917)
(2,562)
70,417
37,462
1,208
3,465
2,712
(2,025)
(917)
95
42,000
28,417
11,011
164
11,175
58,465
$
$
$
$
$
56,836
5,229
1,805
9,132
(1,648)
2,361
(806)
(5,760)
67,149
35,848
710
2,995
2,361
87
(806)
(3,733)
37,462
29,687
12,562
1,628
14,190
57,385
TheCompanyestimatesthatemployercontributionstoplanassetsduring2016willbeapproximatelythesameasduringtheyear
endedDecember31,2015.Theestimatedfuturebenefitpaymentsforthenext10fiscalyearsareasfollows:
FortheyearendingDecember31,
2016
2017
2018
2019
2020
2021through2025
$ 9,624
5,445
4,484
4,240
4,100
24,570
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LaureateEducation,Inc.DeferredCompensationPlan
LaureatemaintainsadeferredcompensationplantoprovidecertainexecutiveemployeesandmembersofourBoardofDirectorswith
theopportunitytodefertheirsalaries,bonuses,andBoardofDirectorsretainersandfeesinordertoaccumulatefundsforretirementona
pretaxbasis.Participantsare100%vestedintheirrespectivedeferralsandtheearningsthereon.Laureatedoesnotmakecontributionsto
theplanorguaranteereturnsontheinvestments.Althoughplaninvestmentsandparticipantdeferralsarekeptinaseparatetrustaccount,
theassetsremainLaureate'spropertyandaresubjecttoclaimsofgeneralcreditors.
Theplanassetsarerecordedatfairvaluewiththeearnings(losses)onthoseassetsrecordedinOtherincome(expense).Theplan
liabilitiesarerecordedatthecontractualvalue,withthechangesinvaluerecordedinoperatingexpenses.AsofDecember31,2015and
2014,planassetsincludedinOtherassetsinourConsolidatedBalanceSheetswere$10,139and$10,561,respectively.Asof
December31,2015and2014,theplanliabilitiesreportedinourConsolidatedBalanceSheetswere$14,995and$15,316,respectively,
whicharealmostentirelynoncurrentandrecordedinOtherlongtermliabilities.
SupplementalEmploymentRetentionAgreement
InNovember2007,LaureateestablishedaSupplementalEmploymentRetentionAgreement(SERA)foroneofitsexecutiveofficers.
SinceLaureateachievedcertainProrataEBITDAtargets,asdefinedintheSERA,from2007to2011andthisofficerremainedemployed
throughDecember31,2012,thisindividualreceivesanannualSERApaymentof$1,500.TheSERAprovidesannuitypaymentstothe
executiveoverthecourseofhislifetime,andannuitypaymentswouldbemadetohisspouseforthecourseofherlifeintheeventofthe
executive'sdeathonorpriortoDecember31,2026.TheSERAisadministeredthroughaRabbiTrust,anditsassetsaresubjecttothe
claimsofcreditors.LaureatepurchasesannuitiestoprovidefundsforourfutureSERAobligations.
AsofDecember31,2015and2014,thetotalSERAassetswere$10,336and$12,010,respectively,whichwererecordedinOther
assetsinourConsolidatedBalanceSheets.AsofDecember31,2015and2014,thetotalSERAliabilityrecordedinourConsolidated
BalanceSheetswas$16,380and$17,396,respectively,ofwhich$1,500and$1,500,respectively,wasrecordedinAccruedcompensation
andbenefits,and$14,880and$15,896,respectively,wasrecordedinDeferredcompensation.
MexicoProfitSharing
AsexplainedinNote15,IncomeTaxes,theFiscalReformthatwasenactedinMexicoinDecember2013subjectsLaureate'sMexico
entitiestocorporateincometaxandalsorequiresthemtocomplywithprofitsharinglegislation,whereby10%ofthetaxableincomeof
Laureate'sMexicanentitieswillbesetasideasemployeecompensation.AsaresultoftheFiscalReform,theCompanyrecordedanet
increaseinoperatingexpensefortheyearendedDecember31,2013of$8,389.Alsoin2013,theCompanyhadestablishedanassetfora
deferredbenefitrelatedtothismatter.During2014,theCompanyreviseditsestimateregardingtherealizabilityofthisassetand,
accordingly,recordedanetdecreaseinoperatingexpensefortheyearendedDecember31,2014of$22,755.During2015,theCompany
reviseditsestimateregardingtherealizabilityofthisassetand,accordingly,recordedanetincreaseinoperatingexpensefortheyear
endedDecember31,2015of$937.
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LaborUnions
CertainLaureateemployeesatUniversidadEuropeadeMadrid,Spain(UEM),UVMMexico,InstitutFranaisdeGestion(IFG)andall
oftheBrazilianinstitutionsarecoveredbylaboragreements.
TheUEMagreementwasnegotiatedbetweenanationalunionandanemployerassociationcommitteerepresentingalloftheprivate,
forprofitinstitutionsinthecountry.ThatagreementremainedlegallyapplicableuntilFebruary2010,whennegotiationsfortherenewal
oftheUEMagreementwerecompleted.WearecurrentlyoperatingundertheFebruary2010agreement.
SubstantiallyallofthefacultymembersatUVMMexicoarerepresentedbyaunion.Thelaboragreementgovernssalaries,benefits
andworkingconditionsforallunionmembersatUVMMexico.
TheIFGagreementgovernscertainlaborconditions,suchasvacationandsalarylevels.Theagreementhasnodefinedexpirationdate,
butcanbenullifiedbyeitherparty.
AsrequiredbyBrazilianLaborLaw,allofBrazil'semployeesarerepresentedbyaunionandtheinstitutionsarepartofanemployers'
union.ThesetwogroupsnegotiatestandardcityorregionalcontractsanditistheresponsibilityofourBrazilinstitutionstocomplywith
theseagreements.Insomecaseswhere,forexample,thereisnocitywideorregionallaboruniontoconductthenegotiation,the
institutionsandlaborunionhaveagreedtopermitthelocalinstitutiontonegotiatedirectlywiththerespectiveunion.Suchunion
agreementstypicallyhaveadurationofoneyear.
Laureateconsidersitselftobeingoodstandingwiththeseunionsandwithallofitsemployees.
Note19.LegalandRegulatoryMatters
Laureateissubjecttolegalproceedingsarisingintheordinarycourseofbusiness.Inmanagement'sopinion,wehaveadequatelegal
defenses,insurancecoverage,and/oraccruedliabilitieswithrespecttotheeventualityoftheseactions.Managementbelievesthatany
settlementwouldnothaveamaterialimpactonLaureate'sfinancialposition,resultsofoperations,orcashflows.
UnitedStatesPostsecondaryEducationRegulation
TheCompany,throughitsGPSsegment,operatesfivepostsecondaryeducationalinstitutionsintheUnitedStates(U.S.Institutions).
TheU.S.Institutionsaresubjecttoextensiveregulationbyfederalandstategovernmentalentitiesaswellasaccreditingbodies.The
HigherEducationAct(HEA),andtheregulationspromulgatedthereunderbytheDOE,subjecttheU.S.Institutionstoongoingregulatory
reviewandscrutiny.TheU.S.InstitutionsmustalsocomplywithamyriadofrequirementsinordertoparticipateinTitleIVfederal
financialaidprogramsundertheHEA(TitleIVprograms).
Inparticular,toparticipateintheTitleIVprogramsundercurrentlyeffectiveDOEregulations,aninstitutionmustbeauthorizedto
offeritseducationalprogramsbytherelevantstateagenciesinthestatesinwhichitislocated,accreditedbyanaccreditingagencythatis
recognizedbytheDOE,andalsocertifiedbytheDOE.Indeterminingwhethertocertifyaninstitution,theDOEcloselyexaminesan
institution'sadministrativeandfinancialcapabilitytoadministerTitleIVprogramfunds.
PursuanttoDOErequirements,theU.S.InstitutionsconductperiodicreviewsandauditsoftheircompliancewiththeTitleIVprogram
requirements.NoneoftheU.S.Institutionshavebeennotified
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Note19.LegalandRegulatoryMatters(Continued)
ofanysignificantnoncompliancethatmightresultinlossofitscertificationtoparticipateintheTitleIVprograms.Managementbelieves
thattherearenomattersofregulatorynoncompliancethatcouldhaveamaterialeffectontheaccompanyingConsolidatedFinancial
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thattherearenomattersofregulatorynoncompliancethatcouldhaveamaterialeffectontheaccompanyingConsolidatedFinancial
Statements.
Changesinornewinterpretationsofapplicablelaws,DOErules,orregulationscouldhaveamaterialadverseeffectontheU.S.
Institutions'eligibilitytoparticipateintheTitleIVprograms.OnOctober29,2010,theDOEpublishedaFinalRuleamendingits
regulationsinanumberofareasrelatedtoaninstitution'seligibilitytoparticipateintheTitleIVprograms.Mostoftheseregulatory
changesbecameeffectiveJuly1,2011,withothersbecomingeffectiveasofJuly1,2012.OnOctober30,2014,theDOEissuedafinalrule
establishingspecificstandardsforpurposesoftheHEArequirementthat,tobeeligibleforTitleIVprogramfunds,certainprogramsof
studypreparestudentsfor"gainfulemploymentinarecognizedoccupation,"whichbecameeffectiveJuly1,2015.TheCompanyis
currentlyevaluatingthisruleanddeterminingitsimpactonouroperations.
BetweenFebruaryandMay2014,theDOEconvenedanegotiatedrulemakingcommitteetoprepareproposedregulationstoaddress
programintegrityandimprovementissuesfortheTitleIVprograms("ProgramIntegrityRulemaking")includingbutnotlimitedto
updatingeligibilitystandardsforstudentandparentborrowersunderthefederalDirectPLUSloanprogram,cashmanagementofTitleIV
funds,stateauthorizationforprogramsofferedthroughdistanceeducationandstateauthorizationforforeignlocationsofinstitutions.As
thisnegotiatedrulemakingcommitteedidnotreachconsensusonalloftheissuesbeforeit,onAugust8,2014,theDOEpublisheda
proposedruleforpubliccommentregardingfederalDirectPLUSloanprogrameligibility,followingwhichafinalrulewasissuedon
October23,2014andthattookeffectJuly1,2015.OnOctober30,2015,theDOEpublishedfinalprogramintegrityregulationsregarding
cashmanagementofTitleIVfunds,theeligibilityofrepeatedcourseworkforpurposesofastudent'senrollmentstatusandreceiptofTitle
IVfunds,andthemeasurementofprogramsincredithoursversusclockhoursforTitleIVpurposes.Amajorityoftheprovisionsofthe
regulationswilltakeeffectonJuly1,2016,andotherswilltakeeffectonlaterdatesin2016and2017.Thefinalregulationsconcerning
cashmanagementrequire,amongotherthings,thatinstitutionssubjecttoheightenedcashmonitoringproceduresfordisbursementsof
TitleIVfundsmust,effectiveJuly1,2016,paytostudentsanyapplicableTitleIVcreditbalancesbeforerequestingsuchfundsfromthe
DOE.
DuringaseparatenegotiatedrulemakingcommitteeprocessthatoccurredbetweenJanuaryandApril2014,theDOEproposeddraft
regulatorylanguagetoimplementchangestotheJeanneCleryDisclosureofCampusSecurityPolicyandCampusCrimeStatisticsAct
("CleryAct")requiredbyMarch2013amendmentstotheViolenceAgainstWomenAct.Atthefinalmeetingofthenegotiatedrulemaking
committeeonApril1,2014,thecommitteereachedconsensusontheDepartment'sproposedregulations,whichweresubsequently
publishedfora30daypubliccommentperiodonJune20,2014.OnOctober20,2014,theDOEpublishedthefinalruleamendingits
CleryActregulations,whichiseffectiveJuly1,2015.BetweenFebruaryandApril2015,theDOEconvenedanothernegotiated
rulemakingcommitteetoprepareregulationstoestablishanewPayasYouEarnrepaymentplanforthosenotcoveredbytheexistingPay
asYouEarnRepaymentPlanintheFederalDirectLoanProgram,andalsotoestablishproceduresforFederalFamilyEducationLoan
ProgramloanholderstousetoidentifyU.S.militaryservicememberswhomaybeeligibleforalowerinterestrateontheirfederalstudent
loansundertheServicemembersCivilReliefAct.Thecommitteereached
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consensusduringitsfinalsessiononasetofproposedregulations.TheDOEpublishedproposedregulationsforcommentonJuly9,2015,
andonOctober30,2015,issuedfinalregulations.ThePayasYouEarnRepaymentPlanprovisionswilltakeeffectinDecember2015and
amajorityoftheremainingprovisionsoftheregulationswilltakeeffectonJuly1,2016.Also,onAugust20,2015,theDOEpublished
noticeofanewnegotiatedrulemakingprocesstoclarifyhowdirectloanborrowerswhobelievetheyweredefraudedbytheirinstitutions
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noticeofanewnegotiatedrulemakingprocesstoclarifyhowdirectloanborrowerswhobelievetheyweredefraudedbytheirinstitutions
canseekreliefandtostrengthenprovisionstoholdinstitutionsaccountablefortheirwrongdoingthatresultsinloandischarges.This
negotiatedrulemakingcommitteehelditsfirstsessionJanuary1214,2016,withadditionalnegotiatingsessionsscheduledtooccur
February1719,2016andMarch1618,2016.InSeptember2015,PresidentObamaannouncedtheDOE'slaunchofarevised"College
Scorecard"websitethatprovidesaccesstonationaldataoncollegecosts,graduationrates,debtandpostcollegeearnings,includingdata
regardingourU.S.Institutions.Inaddition,inNovember2015,theDOEissuedcomparativedataregardingDOErecognizedaccreditation
agenciesandtheinstitutionstheyaccredit,whichincludemediandebt,repaymentrates,completionratesandmedianearnings.Tothe
extentsuchdatagivesrisetonegativeperceptionsofourU.S.Institutionsorofproprietaryeducationalinstitutionsgenerally,our
reputationandbusinesscouldbemateriallyadverselyaffected.
WeareunabletopredictwhatadditionalactionstheDOEmaytake,ortheeffectofitsrulemakingprocessesonourbusiness.
Additionally,theUnitedStatesCongresshasinitiatedaseriesofhearingsregardingitsprospectivereauthorizationoftheHEAand
potentialchangestotheTitleIVprograms.AnyneworchangedregulationsfromtheDOE,orchangestotheHEAandTitleIVprograms,
couldreduceenrollments,impacttuitionprices,increasethecostofdoingbusinessandotherwisehaveadditionalmaterialadverseeffects
onthefinancialcondition,cashflowsandoperationsofsomeoralloftheU.S.Institutions.
enforcementactions.InOctober2014,theDOEannouncedthatitwillbeleadinganinteragencytaskforcecomposedoftheDOE,theU.S.
FederalTradeCommission(theFTC),theU.S.DepartmentsofJustice,TreasuryandVeteransAffairs,theConsumerFinancialProtection
Bureau(CFPB),theSecuritiesandExchangeCommission(SEC),andnumerousstateattorneysgeneral.TheFTChasalsorecentlyissued
civilinvestigativedemandstoseveralotherU.S.proprietaryeducationalinstitutions,whichrequiretheinstitutionstoprovidedocuments
andinformationrelatedtotheadvertising,marketing,orsaleofsecondaryorpostsecondaryeducationalproductsorservices,or
educationalaccreditationproductsorservices.TheCFPBhasalsoinitiatedaseriesofinvestigationsagainstotherU.S.proprietary
educationalinstitutionsallegingthatcertaininstitutions'lendingpracticesviolatevariousconsumerfinancelaws.Inaddition,attorneys
generalinseveralstateshavebecomemoreactiveinenforcingconsumerprotectionlaws,especiallyrelatedtorecruitingpracticesandthe
financingofeducationatproprietaryeducationalinstitutions.Inaddition,severalstateattorneysgeneralhaverecentlypartneredwiththe
CFPBtoreviewindustrypractices.Ifourpastorcurrentbusinesspracticesarefoundtoviolateapplicableconsumerprotectionlaws,orif
wearefoundtohavemademisrepresentationstoourcurrentorprospectivestudentsaboutoureducationalprograms,wecouldbesubject
tomonetaryfinesorpenaltiesandpossiblelimitationsonthemannerinwhichweconductourbusiness.
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BrazilianRegulation
ThroughourLatAmsegment,weoperate13postsecondaryeducationinstitutionsinBrazil.Theresponsibilityofthefederal
governmentinregulating,monitoringandevaluatinghighereducationinstitutionsandundergraduateprogramsisexercisedbythe
BrazilianMinistryofEducation(theMEC),alongwithanumberofrelatedfederalagenciesandoffices.TheMECisthehighestauthority
ofthehighereducationsysteminBrazilandhasthepowerto:regulateandmonitorthefederalsystemofhighereducationintermsofits
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qualityandstandards,confirmdecisionsregardingtheaccreditationandreaccreditationofinstitutionsofhighereducationconfirm
evaluationcriteriaconfirmregulatoryproposalsandissueandimplementrulesthatgovernthedeliveryofhighereducationservices,
includingaspectslikeadherencebyhighereducationinstitutionstotherulesforfederaleducationsubsidyprogramslikePronatec,Prouni
andtheFIESprogram,throughoneormoreofwhichallofourinstitutionsenrollstudents.Additionally,Brazilianlawrequiresthatalmost
allchangeofcontroltransactionsbyLaureatereceivethepriorapprovaloftheBrazilianantitrustauthority,theCADE.
Asnotedabove,Laureate'sinstitutionsinBrazilparticipateintheFIESprogram,whichtargetsstudentsfromlowsocioeconomic
backgroundsenrolledatprivatepostsecondaryinstitutions.Eligiblestudentsreceiveloanswithbelowmarketinterestratesthatare
requiredtoberepaidafteran18monthgraceperiodupongraduation.FIESpaysparticipatingeducationalinstitutionstaxcreditswhich
canbeusedtopaycertainfederaltaxesandsocialcontributions.FIESalsorepurchasesexcesscreditsforcash.AspartoftheFIESprogram,
ourinstitutionsareobligatedtopayupto15%ofanystudentdefault.Thedefaultobligationincreasestoupto30%ofanystudentdefault
iftheinstitutionisnotcurrentwithitsfederaltaxes.FIESwithholdsbetween1%and3%oftuitionpaidtotheinstitutionstocoverany
potentialstudentdefaults("holdback").Ifthestudentpays100%oftheirloan,thewithheldamountswillbepaidtotheparticipating
educationinstitutions.
SinceFebruary2014,allnewstudentswhoparticipateinFIESmustalsoenrollintheFundodeGarantiadeOperaesdeCrdito
Educativo(FGEDUC).FGEDUCisagovernmentmandated,privateguaranteefundadministeredbytheBankofBrazilthatallows
FIESprogram.Thecostoftheprogramis5.63%ofastudent'sfulltuition.SimilartoFIES,theadministratorwithholds5.63%ofastudent's
fulltuitiontofundtheguaranteebyFGEDUC.
AsofDecember31,2015,approximately21%ofourtotalstudentsinBrazilparticipateinFIES,representingapproximately26%of
our2015Brazilrevenues.
totheFIESprogrambeginningin2015.Thesechangeslimitthenumberofnewparticipantsandtheannualbudgetoftheprogram,and
delaypaymentstopostsecondaryinstitutionswithmorethantwentythousandFIESstudentsthatwouldotherwisehavebeenduein2015.
Thefirstchangeimplementsaminimumscoreonthehighschoolachievementexaminordertoenrollintheprogram.Thesecondchange
altersthescheduleforthepaymentandrepurchaseofcreditsaswellaslimitstheopportunitiesforpostsecondaryinstitutionstosellany
unusedcreditssuchthatthereisasignificantdelaybetweenthetimethepostsecondaryinstitutionprovidestheeducationalservicesto
thestudentsandthetimeitreceivespaymentfromthegovernmentfor2015.Inadditiontotheserulechanges,FNDEimplementeda
policyforcurrentstudents'loan
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renewalsfor2015,whichprovidesthatreturningstudentsmaynotfinanceanamountthatincreasesbymorethan6.41%,whichwaslater
increasedto8.5%,fromtheamountfinancedintheprevioussemester,regardlessofanyincreasesintuitionorinthenumberofcoursesin
whichthestudentisenrolled,apolicythatwebelieveviolatestheapplicablelaw.For2016,MECannouncedthattherewillbeno
limitationtothetuitionincrease.Moreover,inthefirstandsecondintakesof2015,theonlineenrollmentandreenrollmentsystemthatall
postsecondaryinstitutionsandstudentsmustusetoaccesstheprogramhasexperiencednumeroustechnicalandprogrammingfaultsthat
havealsointerferedwiththeenrollmentandreenrollmentprocess.Numerouschallengestothesechangesandrequestsforjudicialrelief
fromthesystem'sfaultshavebeenfiledintheBraziliancourts,mostofwhicharepending.The2016enrollmentandreenrollment
schedulehasbeenreleasedand,sofar,thesystemhasnotpresentedanymajorissues.
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schedulehasbeenreleasedand,sofar,thesystemhasnotpresentedanymajorissues.
InOctober2015,FNDEinitiatednegotiationswiththeBrazilianAssociationofPostSecondaryInstitutions(ABRAES)aimingat
amountdueinthreeannualinstallmentstobepaidonefourthin2016,onefourthin2017andhalfin2018.Thepartiesalsoagreedthat
theyearlyinstallmentswillbepaidinJuneofeachyear,andtheamountswillbeadjustedtoreflectaninflationindex(theIPCA)fromthe
dateoftherespectivematurityuntiltheeffectivepayment.FNDEalsoagreednottotakeanydiscriminatorymeasuresinthefuturerelated
tothepaymentduetothepostsecondaryinstitutions,andnottoimposeanylimitationontheissuanceofcertificatesandrepurchaseof
creditsduetothepostsecondaryinstitutions,whichbasicallymeansthatallcertificateswillbeissuedandrepurchasedintheirrespective
fiscalyears,exceptforthoseintendedtobeissuedandrepurchasedinDecember,whichwillbepaidinJanuaryofthefollowingyear.The
partiesexecutedthesettlementagreementonJanuary28,2016anditwasapprovedbytheofficeoftheAttorneyGeneralofBrazilon
February3,2016.OurpostsecondaryinstitutionsinBrazilareassociatedwithABRAESandsignedthesettlementagreementtherefore,it
willapplytous.ThelongtermportionoftheFIESreceivablesarerecordedinNotesreceivable,netasofDecember31,2015.
MECreleasednewFIESregulationsinJuly2015,whichsupplementandamendrulesthatwerepreviouslyreleased.Amongother
changes,theseregulationsrevisedtherulesforstudenteligibilityandclassification,highereducationinstitutionparticipationand
selectionofthevacanciesthatwillbeofferedtothestudents.
OnDecember11,2015,MECissuednewFIESregulations(NormativeOrdinanceNo.13),whichsupersedeinallsignificantaspects
therulesreleasedinJuly2015.NormativeOrdinanceNo.13definedandclarifiedsomerulesforstudenteligibilityandclassification,
highereducationinstitutionparticipationandselectionofthevacanciesthatwillbeofferedtothestudentsinthefirstintakeof2016.
Therulesforstudenteligibilityaretohaveagrosshouseholdincomeofnotmorethan2.5timestheminimumwagepercapitaandto
havetakentheNationalHighSchoolProficiencyExamatleast
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oncesince2010,withaminimumscoreof450points,andhaveascoregreaterthanzerointhetestofwriting.
selectionprocess.Also,onlycourseswithscoresof3,4or5intheNationalHigherEducationEvaluationSystem(SINAES)evaluationare
eligibletoreceiveFIESstudents.
AllofourBrazilHigherEducationInstitutions(HEI)adheretoProuni.Prouniisafederalprogramoftaxbenefitsdesignedtoincrease
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AllofourBrazilHigherEducationInstitutions(HEI)adheretoProuni.Prouniisafederalprogramoftaxbenefitsdesignedtoincrease
highereducationparticipationratesbymakingcollegemoreaffordable.
HEImayjoinProunibysigningatermofmembershipvalidfortenyearsandrenewableforthesameperiod.Thistermofmembership
shallincludethenumberofscholarshipstobeofferedineachprogram,unitandclass,andapercentageofscholarshipsfordegree
programstobegiventoindigenousandAfroBrazilians.TojoinProuni,aneducationalinstitutionmustmaintainacertainrelationship
betweenthenumberofscholarshipsgrantedtoregularpayingstudents.Therelationshipbetweenthenumberofscholarshipsandregular
payingstudentsistestedannually.Ifthisrelationshipisnotobservedduringagivenacademicyearduetothedepartureofstudents,the
institutionmustadjustthenumberofscholarshipsinaproportionalmannerthefollowingacademicyear.
ProuniprovidesprivateHEIwithanexemptionfromcertainfederaltaxesinexchangeforgrantingpartialandfullscholarshipstolow
incomestudentsenrolledintraditionalandtechnologyundergraduateprograms.FortheyearsendedDecember31,2015,2014and2013,
ourHEIgrantedProunischolarshipsthatresultedintaxcreditsofapproximately$55,000,$49,400and$34,300,respectively.
Note20.FairValueMeasurement
Fairvalueisdefinedasthepricethatwouldbereceivedtosellanassetorpaidtosettlealiabilityinanorderlytransactionbetween
marketparticipantsatthemeasurementdate.Accountingstandardsutilizeafairvaluehierarchythatprioritizestheinputstovaluation
techniquesusedtomeasurefairvalueintothreelevels,whicharedescribedbelow:
Level1Quotedprices(unadjusted)foridenticalassetsorliabilitiesinactivemarkets
Level2Observableinputsotherthanquotedpricesthatareeitherdirectlyorindirectlyobservablefortheassetor
liability
Level3Unobservableinputsthataresupportedbylittleornomarketactivity.
Theselevelsarenotnecessarilyanindicationoftheriskofliquidityassociatedwiththefinancialassetsorliabilitiesdisclosed.Assets
andliabilitiesareclassifiedintheirentiretybasedonthelowestlevelofinputthatissignificanttothefairvaluemeasurement,asrequired
underASC82010.
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Note20.FairValueMeasurement(Continued)
Laureate'sdeferredcompensationplanassets,contingentconsiderationandderivativeinstrumentsareitsonlyassetsandliabilities
thatareadjustedtofairvalueeachreportingperiod.
DeferredcompensationplanassetsLaureatehasadeferredcompensationplanthatisofferedtocertainexecutiveemployeesand
membersofourBoardofDirectors.Theplanassetsprimarilyconsistofvariableuniversallifeinsurancecontracts.Theseinsurance
contractsarerecordedattheirestimatedfairvaluebasedonthetrustadministrator'sdeterminationoftheinsurancecontracts'totalunit
value,whichisbasedonunadjustedthirdpartyNetAssetValue(NAV)pricinginformationfromtheunderlyingfundsinwhichthe
insurancepremiumsareinvested.Laureatehasconcludedthatthefairvaluesoftheseassetsarebasedonunobservableinputs,orLevel3
assumptions.
ContingentconsiderationCertainacquisitionsrequirethepaymentofcontingentpurchaseconsiderationdependingonwhether
specifiedfutureeventsoccurorconditionsaremetinperiodssubsequenttotheacquisitiondate.Laureaterecordssuchcontingent
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considerationatfairvalueontheacquisitiondatewithsubsequentadjustmentsrecognizedinoperations.Thecontingentconsideration
liabilityrecordedatDecember31,2013isrelatedtothe2010acquisitionofNHULLC.Aspartofthatacquisition,Laureateagreedthat
thenoncontrollinginterestholder's20%interestinNHULLCwillnotbedilutedasaresultofanyadditionalequitycapitalweinvestin
NHULLC,uptoalimitof$5,000.Werecordedaliabilityforthiscontingentarrangementaswedeemeditprobablethatwewouldmake
anadditionalcapitalcontribution.DuringtheyearendedDecember31,2014,Laureatesettledthisliabilityasacapitalcontribution.
DerivativeinstrumentsLaureateusesderivativeinstrumentsaseconomichedgesforbankdebtandinterestraterisk.Theirvalues
arederivedusingvaluationmodelscommonlyusedforderivatives.Thesevaluationmodelsrequireavarietyofinputs,including
contractualterms,marketprices,forwardpriceyieldcurves,notionalquantities,measuresofvolatilityandcorrelationsofsuchinputs.Our
valuationmodelsalsoreflectmeasurementsforcreditrisk.Laureateconcludedthatthefairvaluesofourderivativesarebasedon
unobservableinputs,orLevel3assumptions.ThesignificantunobservableinputusedinthefairvaluemeasurementoftheCompany's
derivativeinstrumentsisourowncreditrisk.Holdingotherinputsconstant,asignificantincrease(decrease)inourowncreditriskwould
resultinasignificantlylower(higher)fairvaluemeasurementfortheCompany'sderivativeinstruments.
Laureate'sfinancialassetsandliabilitiesthataremeasuredatfairvalueonarecurringbasisasofDecember31,2015wereasfollows:
Assets
Deferredcompensationplanassets
Totalassets
Liabilities

$ 10,139 $
238
$ 10,377 $

$ 20,014 $
Total
Level1
Level2
$ 10,139
238
$ 10,377
$ 20,014
Level3
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Assets
Deferredcompensationplanassets
Liabilities

$ 10,561 $

$ 24,255 $
Total
Level1
Level2
Level3
$ 10,561
$ 24,255
ThechangesinourLevel3instrumentsmeasuredatfairvalueonarecurringbasisfortheyearendedDecember31,2015wereas
follows:
BalanceDecember31,2014
Deferred
Compensation
PlanAssets
Derivative
Instruments
10,561 $
TotalLevel3
Assets
(Liabilities)
(24,255) $
(13,694)
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Lossesincludedinearnings:
Unrealizedlosses,net
Realizedlosses,net
Includedinothercomprehensiveincome
Purchasesandsettlements:
Purchases
Settlements
Currencytranslationadjustment
Unrealizedlosses,netrelatingtoassetsandliabilitiesheldat
December31,2015
10,561
(91)
104
(435)
10,139
(24,255)
(1,988)
(619)
5,629
619
838
(19,776)
(91) $
(1,988) $
(13,694)
(2,079)
(619)
5,629
104
184
838
(9,637)
(2,079)
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ThechangesinourLevel3instrumentsmeasuredatfairvalueonarecurringbasisfortheyearendedDecember31,2014wereas
follows:
Gains(losses)includedinearnings:
Unrealizedgains,net
Realizedlosses,net
Purchasesandsettlements:
Purchases
Settlements
Unrealizedgains,netrelatingtoassetsand
Deferred
Compensation
PlanAssets
Contingent
Consideration
10,227
570
170
(406)
10,561
Derivative
Instruments
(1,000)
1,000
TotalLevel3
Assets
(Liabilities)
(53,845)
29,801
(32,902)
(733)
32,902
522
(24,255)
(44,618)
30,371
(32,902)
(733)
170
33,496
522
(13,694)
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liabilitiesheldatDecember31,2014
570 $
29,801 $
30,371
Thefollowingtablepresentsquantitativeinformationregardingthesignificantunobservableinputsutilizedinthefairvalue
measurementsoftheCompany'sassetsandliabilitiesclassifiedasLevel3fortheyearendedDecember31,2015:
Derivativeinstrumentscross
currencyandinterestrateswaps $
FairValueat
December31,
2015
Valuation
Technique
Unobservable
Input
Range/Input
Value
19,776 DiscountedCashFlow Owncreditrisk
12.56%
Note21.RestructuringCosts
Duringthefourthquarterof2015,Laureateapprovedaplanofrestructuring,whichprimarilyincludedworkforcereductionsinorder
toreduceoperatingcostsinresponsetoovercapacityatcertainlocations.TheCompanyrecordedtheestimatedcostoftherestructuringof
$15,476,whichconsistedofemployeeseverance,inDirectcostsinthe2015ConsolidatedStatementofOperations.Ofthetotal
restructuringliabilityrecordedduring2015,$10,912representedonetimeemployeeterminationbenefitsrecognizedinaccordancewith
ASC420,"ExitorDisposalCostObligations"and$4,564representedcontractualemployeeterminationcostsrecognizedinaccordance
withASC712,"CompensationNonretirementPostemploymentBenefits."Wepaid$5,810duringthefourthquarterof2015,andwe
expectthattheremainingliabilityof$10,233atDecember31,2015,aftercurrencyadjustmentsof$567,willbepaidduringthefirsthalf
of2016.therestructuringliabilityisincludedinAccruedexpensesinourDecember31,2015ConsolidatedBalanceSheet.
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Note21.RestructuringCosts(Continued)
ThefollowingisasummaryoftherestructuringcostsbyreportablesegmentfortheyearendedDecember31,2015:
Employeeseveranceonetime
termination
Employeeseverancecontractual
termination
Totalseverancecosts
LatAm
Europe
GPS
AMEA
Corporate
Total
$ 3,170 $ 1,944 $ 3,154 $ 2,360 $
284 $ 10,912
2,273 2,190

101
$ 5,443 $ 4,134 $ 3,154 $ 2,461 $
4,564
284 $ 15,476
ThefollowingisarollforwardoftherestructuringliabilityfromDecember31,2014throughDecember31,2015:
termination
termination
Total
Balanceat
December31,
2014
Expense
Recognized
Cash
Payments
Currency
Adjustments
Balanceat
December31,
2015
10,912 $ (5,049) $
396 $
6,259
4,564
(761)
15,476 $ (5,810) $
171
567 $
3,974
10,233
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Note22.QuarterlyFinancialData(Unaudited)
Thefollowingquarterlyfinancialinformationreflectsallnormalrecurringadjustmentsthatare,intheopinionofmanagement,
necessaryforafairstatementoftheresultsoftheinterimperiods.Earningspersharearecomputedindependentlyforeachofthequarters
presented.Pershareamountsmaynotsumduetorounding.Summarizedquarterlyoperatingdatawereasfollows:
Pershareamountsinwholedollars
Revenues
Operatingcostsandexpenses
(Loss)incomefromcontinuingoperations
Net(income)lossattributabletononcontrolling
interests
Net(loss)incomeattributabletoLaureate
Education,Inc.
Earnings(loss)pershare:
Basicanddilutednet(loss)incomepershare
December31
2015QuartersEnded
September30
June30
$ 1,150,503 $
1,025,572
124,931
(16,140)
(527)
985,395
952,076
33,319
(130,397)
$ 1,270,177 $ 885,584
1,037,537 939,517
232,640 (53,933)
56,932 (226,240)
1,785
(16,667)

(128,612)

(0.16) $
(0.96) $
(1,871)
March31
210
55,061 (226,030)

0.40 $
(1.72)
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Note22.QuarterlyFinancialData(Unaudited)(Continued)
Pershareamountsinwholedollars
Revenues
Operatingcostsandexpenses
Income(loss)fromcontinuingoperations
Net(income)lossattributabletononcontrolling
interests
Education,Inc.
Earnings(loss)pershare:
Basicanddilutednetincome(loss)pershare
December31
March31
$ 1,329,209 $ 968,859 $ 1,238,530 $ 878,084

1,208,313 1,004,490 1,001,014 901,365
120,896
(35,631)
237,516 (23,281)
47,632 (195,700)
109,049 (123,434)
2014QuartersEnded
September30
June30
(670)
2,270
46,962
(193,430)
0.36 $
(1.48) $
(840)
3,402
108,209 (120,032)
0.80 $
(0.92)
Note23.OtherFinancialInformation
AccumulatedOtherComprehensiveIncome
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AOCIinourConsolidatedBalanceSheetsincludestheaccumulatedtranslationadjustmentsarisingfromtranslationofforeign
subsidiaries'financialstatements,theunrealizedlossesonderivativesdesignatedascashflowhedges,andtheaccumulatednetgainsor
lossesthatarenotrecognizedascomponentsofnetperiodicbenefitcostforourminimumpensionliability.Thecomponentsofthese
balanceswereasfollows:
Laureate
Education,Inc.
December31,
Foreigncurrency
translation
(loss)gain
Unrealizedlosses
onderivatives
Minimum
pension
liability
adjustment
Accumulated
other
comprehensive
(loss)income
2015
Noncontrolling
Interests
2014
Noncontrolling
Interests
Laureate
Education,Inc.
Total
(928,421) $
(13,251)
(13,251)
(18,880)
(18,880)
(11,005)
(11,005)
(13,971)
(13,971)
(952,677) $
(546,190) $
Total
(2,420) $ (930,841) $
(2,420) $ (955,097) $
(579,041) $
1,659 $ (544,531)
1,659 $ (577,382)
LaureatereportschangesinAOCIinourConsolidatedStatementsofStockholders'Equity.SeealsoNote14,DerivativeInstruments,
andNote18,BenefitPlans,fortheeffectsofreclassificationsoutofAOCIintonetincome.
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Note23.OtherFinancialInformation(Continued)
ForeignCurrencyExchangeofCertainIntercompanyLoans
Laureateperiodicallyreviewsitsinvestmentandcashrepatriationstrategiestoensurethatwemeetourliquidityrequirementsinthe
UnitedStates.InSeptember2009,wemadeasignificantchangetoourcashrepatriationstrategyinvolvingtheuseofcertainintercompany
loanstorepatriatecash.Asaresult,wecouldnolongerdesignateasindefinitelyinvested$1,728,710and$1,562,111ofintercompany
loansasofDecember31,2015and2014,respectively.Followingthechangeindesignation,Laureaterecognizedcurrencyexchange
adjustmentsattributabletotheseintercompanyloansasForeigncurrencyexchangeloss,net,of$(119,473),$(96,617)and$(8,417)inthe
ConsolidatedStatementsofOperationsfortheyearsendedDecember31,2015,2014and2013,respectively.
SupplementalScheduleforTransactionswithNoncontrollingInterestHolders
TransactionswithnoncontrollinginterestholdershadthefollowingeffectsontheequityattributabletoLaureate:
2015
2014
2013
$ (316,248) $ (158,291) $ (69,678)
Decreaseinequityforpurchasesofnoncontrollinginterests

(1,554)
(4,498) (87,970)
ChangefromnetlossattributabletoLaureateEducation,Inc.and
nettransferstothenoncontrollinginterests
$ (317,802) $ (162,789) $ (157,648)
WriteOffofAccountsandNotesReceivable
DuringtheyearsendedDecember31,2015,2014and2013,Laureatewroteoffapproximately$83,000,$94,000and$85,000,
respectively,offullyreservedaccountsandnotesreceivablethatweredeemeduncollectible.
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respectively,offullyreservedaccountsandnotesreceivablethatweredeemeduncollectible.
TurkeyDonation
Duringthefourthquarterof2014,werecordedanoperatingexpenseof$18,000foradonationtoafoundationforaninitiative
supportedbytheTurkishgovernment.ThisdonationwasmadebyournetworkinstitutioninTurkeytosupportourongoingoperations.
Note24.SupplementalCashFlowInformation
Cashinterestpaymentswere$351,430,$321,015and$292,766fortheyearsendedDecember31,2015,2014and2013,respectively.
Netincometaxcashpaymentswere$108,295,$68,676and$95,767fortheyearsendedDecember31,2015,2014and2013,respectively.
OnNovember6,2015,Laureate'sBoardofDirectorsdeclaredacashdistributiontotaling$18,975,whichrepresentedapproximately
$0.14264pershareofcommonstock.Thecashdistributionwaspaidfromcapitalinexcessofparvalue,followingshareholders'approval.
OnDecember12,2014,Laureate'sBoardofDirectorsauthorizedthedeclarationandpaymentofacashdistributiontotaling$5,271,
whichrepresentedapproximately$0.04pershareofcommonstock,
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Note24.SupplementalCashFlowInformation(Continued)
subjecttoshareholderapprovalasrequiredbyourbylaws.Thecashdistributionwaspaidfromcapitalinexcessofparvalueon
December31,2014,followingshareholders'approval.
TotalcashdividendspaidduringtheyearendedDecember31,2013were$22,872.InFebruary2013,Laureate'sBoardofDirectors
authorizedthedeclarationandpaymentofacashdistributiontotaling$12,133,whichrepresentedapproximately$0.092pershareof
commonstock,subjecttoshareholderapprovalasrequiredbyourbylaws.Thecashdistributionwaspaidfromcapitalinexcessofpar
valueonFebruary27,2013,followingshareholders'approval.InAugust2013,Laureate'sBoardofDirectorsauthorizedthedeclaration
andpaymentofacashdistributiontotaling$5,265,whichrepresentedapproximately$0.04pershareofcommonstock,subjectto
shareholderapprovalasrequiredbyourbylaws.ThecashdistributionwaspaidfromcapitalinexcessofparvalueonAugust29,2013,
followingshareholders'approval.InDecember2013,Laureate'sBoardofDirectorsauthorizedthedeclarationandpaymentofacash
distributiontotaling$5,474,whichrepresentedapproximately$0.04pershareofcommonstock,subjecttoshareholderapprovalas
requiredbyourbylaws.ThecashdistributionwaspaidfromcapitalinexcessofparvalueonDecember30,2013,followingshareholders'
approval.
InNovember2012,wereceived$29,138ofinterestpaidbythelendersonissuanceoftheSeniorNotesdue2019,inordertomatch
thetimingofthesemiannualinterestpaymentdatesoftheSeniorNotesdue2019.Thisamountwasdisbursedtothelendersattheinterest
paymentdateofMarch1,2013.
Note25.SubsequentEvents
WehaveevaluatedeventsoccurringsubsequenttoourbalancesheetdatethroughMarch25,2016,whichisthedatethatthese
ConsolidatedFinancialStatementswereissued.CertainsubsequenteventsarediscussedelsewhereintheConsolidatedFinancial
Statementswhererelevant.
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OnMarch15,2016,wesignedanagreementwithEurazeo,apubliclytradedFrenchinvestmentcompany,underwhichEurazeo
acquiredGlionandLesRochesfromtheCompanyforatotaltransactionvalueofCHF380,000(approximately$385,000atthesigning
date),subjecttocertainadjustments.ThesalewillincludetheoperationsofGlioninSwitzerlandandtheUnitedKingdom,andthe
operationsofLesRochesinSwitzerlandandtheUnitedStates,aswellasLRGinSwitzerland,LesRochesJinJianginChina,RACAin
JordanandLesRochesMarbellainSpain.Closingofthetransactionissubjecttoregulatoryapprovals,includingbytheNewEngland
AssociationofSchoolsandColleges,andothercustomaryconditionsandprovisions.Followingtheclosing,Laureatewillcontinueto
providecertainbackofficeservicestoGlionandLesRoches,andprogramsofthoseschoolswillcontinueonvariouscampusesof
Laureatethroughouttheworld.
Inconnectionwiththetransactiondescribedabove,onMarch15,2016wealsoenteredintoaCHFtoUSDdealcontingentforeign
exchangeforwardcontract,inordertolockintheamountofUSDproceedsthatwewillreceiveuponclosingofthetransaction.The
notionalamountoftheforwardcontractwasCHF320,000.ThecontractmaturesonNovember30,2016andallowsforsettlementat
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Note25.SubsequentEvents(Continued)
anypointuntilthatdateattheexchangeratesstatedinthecontract.Foraccountingpurposes,thisderivativewasnotdesignatedasa
hedginginstrument.
UDLAChileReaccreditation
OnMarch16,2016,UDLAChilewasnotifiedthatithadbeenreaccreditedforthreeyears,fromMarch2016toMarch2019.
ExerciseofPutOption
OnMarch24,2016,thenoncontrollinginterestholdersofSt.AugustinenotifiedLaureateoftheirelectiontoexercisetheirput
option,whichwillrequireLaureatetopurchasetheremainingnoncontrollinginterestof20%.Theexerciseofthisputoptionisnot
expectedtohaveamaterialnetimpactonourfinancialstatementsorourliquidity.SeeNote11,CommitmentsandContingencies,for
furtherdescriptionoftheputoption.
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ConsolidatedStatementsofOperations
INTHOUSANDS
FortheninemonthsendedSeptember30,
2016
(Unaudited)
Revenues
Costsandexpenses:
Directcosts
Operatingincome
Interestincome
Interestexpense
Lossonderivatives
Foreigncurrencyexchangegain(loss),net
Gainonsalesofsubsidiaries,net
Income(loss)fromcontinuingoperationsbeforeincometaxesandequityin
netincomeofaffiliates
Incometaxexpense
Netincome(loss)
Netlossattributabletononcontrollinginterests
Basicearnings(loss)pershare
Dilutedearnings(loss)pershare
$ 3,068,299 $ 3,141,156
2,697,820 2,795,027
158,566
134,103
211,913
212,026
13,305
9,924
(314,383) (300,145)
(17,363)
(1,263)
(8,235)
(2,618)
(964)
1,268
80,263 (139,416)
398,412
$
$
2015
(Unaudited)
362,948
(35,246)
20
327,722
2,817
330,539
2.52
2.48
(220,224)
(81,587)
2,106
(299,705)
124
$ (299,581)
$
(2.28)
$
(2.28)
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ConsolidatedStatementsofComprehensiveIncome
INTHOUSANDS
2016
(Unaudited)
Netincome(loss)
Othercomprehensive(loss)income:
Foreigncurrencytranslationadjustment,netoftaxof$0forbothperiods
Unrealizedgainonderivativeinstruments,netoftaxof$0forbothperiods
Minimumpensionliabilityadjustment,netoftaxof$1,900and$0,
respectively
Totalothercomprehensiveloss
Comprehensiveincome(loss)
Netcomprehensivelossattributabletononcontrollinginterests
Comprehensiveincome(loss)attributabletoLaureateEducation,Inc.
327,722
(45,005)
5,509
8,948
(30,548)
297,174
1,817
298,991
2015
(Unaudited)
$ (299,705)
(363,250)
2,850
198
(360,202)
(659,907)
3,428
$ (656,479)
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ConsolidatedBalanceSheets
September30,
2016
(Unaudited)
Assets
Currentassets:
Cashandcashequivalents(includesVIEamountsof$164,922and
$120,944,seeNote2)
Restrictedcashandinvestments
Receivables:
Otherreceivables
Relatedpartyreceivables
Receivables,net
Deferredincometaxes
Incometaxreceivable
Totalcurrentassets(includesVIEamountsof$455,857and$307,043,see
Note2)
Notesreceivable,net
Land
Buildings
Constructioninprogress
Landuserights,net
Goodwill
Otherintangibleassets:
Tradenames
Deferredcosts,net
Deferredincometaxes

481,471
176,235
769,495
24,298
8,134
(192,301)
609,626
92,291
22,892
112,011
1,494,526
63,239
409,601
1,257,077
1,163,650
402,938
82,254
(1,137,924)
2,177,596
47,831
2,009,278
1,325,613
51,084
56,522
63,653
December31,
2015
458,673
160,585
441,051
35,788
7,336
(158,006)
326,169
87,895
17,048
85,314
1,135,684
59,272
419,977
1,294,263
1,142,176
384,655
93,260
(1,043,431)
2,290,900
50,336
2,115,897
1,361,125
52,197
58,169
80,754
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Otherassets
Totalassets(includesVIEamountsof$1,469,249and$1,346,908,see
Note2)
219,115
234,782
$ 7,508,457 $ 7,439,116
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ConsolidatedBalanceSheets(Continued)
Liabilitiesandstockholders'equity
Currentliabilities:
Accountspayable
Accruedexpenses
Currentportionofduetoshareholdersofacquiredcompanies
Incometaxespayable
Deferredincometaxes
Totalcurrentliabilities(includesVIEamountsof$478,620and$305,067,
seeNote2)
Duetoshareholdersofacquiredcompanies,lesscurrentportion
Incometaxespayable
Deferredincometaxes
Totalliabilities(includesVIEamountsof$620,512and$455,373,see
Note2)
Stockholders'equity:
Preferredstock,parvalue$0.001pershareauthorized50,000shares,no
sharesissuedandoutstandingasofSeptember30,2016and
December31,2015
Commonstock,parvalue$0.004pershareauthorized175,000shares,
September30,2016andDecember31,2015,respectively
Accumulateddeficit
September30,
2016
(Unaudited)
86,866
363,327
249,589
813,322
168,689
127,591
17,978
24,120
5,055
7,740
52,379
1,916,656
3,852,824
93,151
13,826
154,620
486,319
8,486
280,986
December31,
2015
111,749
371,621
237,659
482,723
192,354
21,050
17,463
48,369
9,310
688
55,197
1,548,183
4,318,934
165,669
14,880
169,951
507,477
19,326
287,524
6,806,868
21,365

7,031,944
51,746
533
533
2,714,231 2,686,451
(1,079,009) (1,409,548)
(984,225)
(952,677)
651,530
324,759
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Totalliabilitiesandstockholders'equity
651,530
28,694
680,224
$ 7,508,457
324,759
30,667
355,426
$ 7,439,116
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ConsolidatedStatementsofCashFlows
INTHOUSANDS
Netincome(loss)
Adjustmentstoreconcilenetincome(loss)tonetcashprovidedbyoperating
activities:
Gainonsaleofsubsidiaryanddisposalofpropertyandequipment
Lossonderivativeinstruments
Noncashsharebasedcompensationexpense
Baddebtexpense
Deferredincometaxes
Unrealizedforeigncurrencyexchange(gain)loss
Noncashloss(gain)fromnonincometaxcontingencies
Other,net
Changesinoperatingassetsandliabilities:
Restrictedcash
Receivables
Prepaidexpensesandotherassets
Incometaxreceivable/payable,net
Deferredrevenueandotherliabilities
Netcashprovidedbyoperatingactivities
Purchaseofpropertyandequipmentandlanduserights
Expendituresfordeferredcosts
Receiptsfromsaleofsubsidiariesandpropertyandequipment,netofcashsold
Settlementofderivativesrelatedtosaleofsubsidiaries
Propertyinsurancerecoveries
Businessacquisitions,netofcashacquired
Proceedsfromaffiliates
Paymentsfrom(to)relatedparties
Changeinrestrictedcashandinvestments
Proceedsfromsaleormaturityofavailableforsalesecurities,net
Netcashprovidedby(usedin)investingactivities
Proceedsfromissuanceoflongtermdebt
2016
(Unaudited)
2015
(Unaudited)
327,722 $ (299,705)
202,735
(398,499)
7,211
17,363
36,892
28,939
76,141
(12,309)
(73,641)
6,016
1,574
(6,826)
(350,078)
(28,236)
(10,655)
(23,550)
395,171
195,970
(132,904)
(13,996)
553,860
(5,663)
1,431
1,634
(12,032)
392,330
513,014
(1,037,591)
209,390
(2,771)
2,125
331
45,427
27,222
78,552
(45,198)
120,991
(192)
(2,895)
(4,153)
(360,572)
(25,015)
7,205
39,273
430,280
220,295
(217,796)
(14,530)
188,944
2,198
(6,705)
5,003
(1,139)
1,315
1,386
(41,324)
336,431
(283,016)
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Paymentsofdeferredpurchasepriceforacquisitions
Paymentstopurchasenoncontrollinginterests
Paymentofdividendstononcontrollinginterestholders
Proceedsfromexerciseofstockoptions
Withholdingofsharestosatisfyminimumemployeetaxwithholdingforvested
stockawardsandexercisedstockoptions
Paymentsofdebtissuancecostsandmodificationfees
Noncontrollinginterestholder'sloantosubsidiaries
Distributionstononcontrollinginterestholders
Capitalcontributionfromnoncontrollinginterest
Netcash(usedin)providedbyfinancingactivities
(1,037,591)
(9,574)
(25,665)
(550)
252
(283,016)
(20,439)
(5,351)
(450)
204
(3,367)
(12,139)
1,730
(2,016)
469
12,056
(34,221)
156,806
458,673
481,471 $
461,584
618,390
(1,346)
(10,593)
816
(1,447)
(572,684)
7,182
22,798
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LaureateEducation,Inc.andsubsidiaries(hereinafterLaureate,we,us,our,ortheCompany)providehighereducationprogramsand
servicestostudentsthroughaninternationalnetworkoflicenseduniversitiesandhighereducationinstitutions(institutions).Wearea
subsidiaryofWengenAlberta,LimitedPartnership(Wengen),anAlbertalimitedpartnership,whichacquiredLaureateonAugust17,2007
throughamergerusingleveragedbuyoutfinancing(theLBO).OnOctober1,2015,weredomiciledinDelawareasapublicbenefit
corporationasademonstrationofourlongtermcommitmenttoourmissiontobenefitourstudentsandsociety.
Laureate'sprogramsareprovidedthroughinstitutionsthatarecampusbasedandinternetbased,orthroughelectronicallydistributed
educationalprograms(online).Oureducationalofferingsaredeliveredthroughfouroperatingsegments:LatinAmerica(LatAm),Europe
(Europe),Asia,MiddleEast&Africa(AMEA),andGlobalProductsandServices(GPS).LatAmhaslocationsinBrazil,Chile,CostaRica,
Honduras,Mexico,PanamaandPeruandhascontractualrelationshipswithalicensedinstitutioninEcuador.Europehaslocationsin
Cyprus,Germany,Italy,Morocco,Portugal,SpainandTurkey.TheAMEAsegmentconsistsofcampusbasedinstitutionswithoperations
inAustralia,China,India,Malaysia,NewZealand,SouthAfricaandThailand.AMEAalsomanagesninelicensedinstitutionsinthe
KingdomofSaudiArabiaandmanagesoneadditionalinstitutioninChinathroughajointventurearrangement.TheGPSsegment
includesfullyonlinedegreeprogramsintheUnitedStatesofferedthroughWaldenUniversity,LLC,whichisaU.S.basedaccredited
institution,andthroughtheUniversityofLiverpoolandtheUniversityofRoehamptonintheUnitedKingdom.GPSalsoincludescampus
basedinstitutionslocatedintheUnitedStates.AsdiscussedfurtherinNote3,Dispositions,duringthesecondquarterof2016wesold
certainoperationsinourGPSsegmentandduringthethirdquarterof2016wesoldourFrenchoperationsintheEuropesegment.
TheaccompanyingunauditedConsolidatedFinancialStatementshavebeenpreparedinaccordancewithaccountingprinciples
generallyacceptedintheUnitedStates(GAAP)forinterimfinancialinformation.Inouropinion,thesefinancialstatementsincludeall
adjustmentsconsiderednecessarytopresentafairstatementofourconsolidatedresultsofoperations,financialpositionandcashflows.
Operatingresultsforanyinterimperiodarenotnecessarilyindicativeoftheresultsthatmaybeexpectedforthefullyear.Preparationof
theCompany'sfinancialstatementsinconformitywithGAAPrequiresmanagementtomakeestimatesandassumptionsthataffectthe
reportedamountsinthefinancialstatementsandfootnotes.Actualresultscoulddifferfromthoseestimates.Theseunauditedconsolidated
financialstatementsshouldbereadinconjunctionwithLaureate'sauditedConsolidatedFinancialStatementsforthefiscalyearended
December31,2015.
Thesefinancialstatementsreflecta4to1reversestocksplitofourcommonstockthatweintendtoeffectpriortotheeffectivenessof
ourregistrationstatementonFormS1.
TheVariableInterestEntity(VIE)Arrangements
countriesandtheyareoperatedin
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compliancewiththeirrespectivenotforprofitlegalregimes,webelievetheydonotmeetthedefinitionofanotforprofitentityunder
GAAP,andwetreatthemas"forprofit"entitiesforaccountingpurposes.Theseentitiesgenerallycannotdeclaredividendsordistribute
theirnetassetstotheentitiesthatcontrolthem.Webelievethatwefullycomplywithalllocallawsandregulations.
UnderASCTopic81010,"Consolidation,"wehavedeterminedthattheseinstitutionsareVIEsandthatLaureateistheprimary
beneficiaryoftheseVIEsbecausewehave,asfurtherdescribedherein:(1)thepowertodirecttheactivitiesoftheVIEsthatmost
significantlyaffecttheireducationalandeconomicperformance,and(2)therighttoreceiveeconomicbenefitsfromcontractualandother
arrangementswiththeVIEsthatcouldpotentiallybesignificanttotheVIEs.WeaccountfortheacquisitionoftherighttocontrolaVIEin
accordancewithASC805,"BusinessCombinations."
SelectedConsolidatedStatementsofOperationsinformationfortheseVIEswasasfollows:
Fortheninemonths
endedSeptember30,
2016
2015
Revenues,bysegment:
LatAm
Europe
AMEA
Revenues
LatAm
Europe
AMEA
Operatingloss
Netincome(loss)
$ 301,382 $ 307,250
85,166 81,064
102,321 96,191
488,869 484,505
39,190 40,190
(29,936) (20,487)
(833)
(2,270)
5,879
4,966
(24,890) (17,791)
(18,517) (16,999)
(18,474) (16,611)
ThefollowingtablereconcilestheNetincome(loss)attributabletoLaureateEducation,Inc.aspresentedinthetableabove,tothe
amountsinourConsolidatedStatementsofOperations:
Fortheninemonths
endedSeptember30,
2016
2015
Netincome(loss)attributabletoLaureateEducation,Inc.:
Otheroperations
(18,474)
386,177
(37,164)
330,539
$ (16,611)
24,140
(307,110)
$ (299,581)
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ThefollowingtablepresentsselectedassetsandliabilitiesoftheconsolidatedVIEs.ExceptforGoodwill,theassetsinthetablebelow
creditorsoftheVIEsdonothaverecoursetothegeneralcreditofLaureate.
SelectedConsolidatedBalanceSheetamountsfortheseVIEswereasfollows:
BalanceSheetsdata:
Othercurrentassets
Totalcurrentassets
Goodwill
Tradenames
Otherlongtermassets
Totalassets
Totalliabilities
Totalstockholders'equityattributableto
September30,2016
VIE
Consolidated
December31,2015
VIE
Consolidated
$ 164,922 $ 481,471 $ 120,944 $ 458,673
290,935 1,013,055
186,099
677,011
455,857 1,494,526
307,043 1,135,684
187,067 2,009,278
196,869 2,115,897
107,351 1,325,613
104,952 1,361,125

51,084
25
52,197
718,974 2,627,956
738,019 2,774,213
1,469,249 7,508,457 1,346,908 7,439,116
478,620 1,808,625
305,067 1,548,183
141,892 4,998,243
150,306 5,483,761
620,512 6,806,868
455,373 7,031,944
848,737
680,224
891,535
355,426
832,325
651,530
874,610
324,759
AsdiscussedfurtherinNote3,Dispositions,wecompletedthesaleofourFrenchoperationsinJuly2016.Thoseoperationsincluded
twoinstitutionsthatwereVIE's.
RecentlyIssuedAccountingStandards
AccountingStandardsUpdate(ASU)No.201616(ASU201616),IncomeTaxes(Topic740):IntraEntityTransfersofAssetsOtherThan
Inventory
InOctober2016,theFinancialAccountingStandardsBoard(FASB)issuedASU201616inordertoimprovetheaccountingfor
incometaxconsequencesforintraentitytransfersofassetsotherthaninventory.UndercurrentGAAP,therecognitionofcurrentand
deferredincometaxesforanintraentitytransferisprohibiteduntiltheassethasbeensoldtoathirdparty.TheamendmentsinthisASU
statethatanentityshouldrecognizeincometaxconsequencesofanintraentitytransferwhenthetransferoccurs.Thisalignsthe
recognitionofincometaxconsequencesforintraentitytransfersofassetswithInternationalFinancingReportingStandards(IFRS).This
ASUiseffectiveforLaureatebeginningonJanuary1,2018andearlyadoptionispermitted.TheamendmentsinthisASUshouldbe
appliedonamodifiedretrospectivebasisthroughacumulativeeffectadjustmentdirectlytoretainedearningsasofthebeginningofthe
periodofadoption.WearecurrentlyevaluatingtheimpactofASU201616onourConsolidatedFinancialStatements.
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AccountingStandardsUpdate(ASU)No.201615(ASU201615),StatementofCashFlows(Topic230):ClassificationofCertainCash
ReceiptsandCashPayments
InAugust2016,theFASBissuedASU201615inordertoreducediversityaroundhowcertaincashreceiptsandcashpaymentsare
presentedandclassifiedontheStatementofCashFlows.ThisASUprovidesguidanceonthefollowingareas,forwhichcurrentGAAPis
eitherunclearordoesnotincludespecificguidance:
1.
Debtprepaymentordebtextinguishmentcosts
2.
Settlementofzerocoupondebtinstrumentsorotherdebtinstrumentswithcouponratesthatareinsignificantinrelationto
theeffectiveinterestrateoftheborrowing
3.
Contingentconsiderationpaymentsmadeafterabusinesscombination
4.
Proceedsfromthesettlementofinsuranceclaims
5.
Proceedsfromthesettlementofcorporateownedlifeinsurancepolicies
6.
Distributionsreceivedfromequitymethodinvestees
7.
Beneficialinterestsinsecuritizationtransactionsand
8.
Separatelyidentifiablecashflowsandapplicationofthepredominanceprinciple.
ThisASUiseffectiveforLaureatebeginningonJanuary1,2018andearlyadoptionispermittedhowever,ifearlyadoptioniselected,
alloftheamendmentstotheareasabovemustbeadoptedatthesametime.TheamendmentsinthisASUshouldbeapplied
retrospectively.WearecurrentlyevaluatingtheimpactofASU201615onourConsolidatedFinancialStatements.
ASUNo.201612(ASU201612),RevenuefromContractswithCustomers(Topic606):Narrowscopeimprovementsandpractical
expedients
InMay2016,theFASBissuedASU201612toaddresscertainareasofimprovementaroundTopic606,RevenuefromContractswith
Customers.TheamendmentsinthisUpdatedonotchangethecoreprinciplesofTopic606,butdoaddressclarificationaroundthe
followingareas:
1.
Assessingthecollectibilitycriterionandaccountingforcontractsthatdonotmeetthecriteria
2.
Presentationofsalestaxesandothersimilartaxescollectedfromcustomers
3.
Noncashconsideration
4.
Contractmodificationsattransition
5.
Completedcontractsattransitionand
6.
Technicalcorrectionaroundretrospectiveapplication.
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allowseitherafullretrospectiveadoptiontoallperiodspresentedoramodifiedretrospectiveadoptionapproachwiththe
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cumulativeeffectofinitialapplicationoftherevisedguidancerecognizedatthedateoftheinitialapplication.Wearecurrently
evaluatingtheimpactofASU201612andASU201409onourConsolidatedFinancialStatements.
ASUNo.201610(ASU201610),RevenuefromContractswithCustomers(Topic606):IdentifyingPerformanceObligationsand
Licensing
InApril2016,theFASBissuedASU201610inresponsetoanissuecommunicatedbytheTransitionResourceGroupforRevenue
Recognition(theTRG),agroupwhichwasformedbytheFASBandtheInternationalAccountingStandardsBoard(IASB),(collectively,
theBoards),whoseobjectiveistoinformtheBoardsofanyissuesthatcouldarisewiththeimplementationofaconvergedstandardon
recognitionofrevenuefromcontractswithcustomers.ASU201610doesnotchangethecoreprincipaloftheguidanceinTopic606,but
addsclarificationaroundidentifyingperformanceobligationsandlicensing.
ofASU201610andASU201409onourConsolidatedFinancialStatements.
ASUNo.201609(ASU201609),CompensationStockcompensation(Topic718):ImprovementstoEmployeeSharebasedPayment
Accounting
OnMarch30,2016,theFASBissuedASU201609aspartofitsinitiativetoreducecomplexityinaccountingstandards.Theareasfor
simplificationinthisASUinvolveseveralaspectsoftheaccountingforemployeesharebasedpaymenttransactions,includingtheincome
taxconsequences,classificationofawardsaseitherequityorliabilities,andclassificationonthestatementofcashflows.Theguidanceis
effectiveforLaureatebeginningJanuary1,2017.Earlyadoptionispermittedinanyannualorinterimperiodforwhichfinancial
statementshavenotbeenissuedormadeavailableforissuance,butalloftheguidancemustbeadoptedinthesameperiod.Ifanentity
earlyadoptstheguidanceinaninterimperiod,anyadjustmentsmustbereflectedasofthebeginningofthefiscalyearthatincludesthat
interimperiod.WeareevaluatingtheimpactofASU201609onourConsolidatedFinancialStatements.
ASUNo.201608(ASU201608),RevenuefromContractswithCustomers(Topic606):PrincipalversusAgentConsiderations(Reporting
RevenueGrossversusNet)
InMarch2016,theFASBissuedASU201608inresponsetoanissuecommunicatedbytheTRGregardingthedeterminationof
whethertheentityactsastheprincipaloranagentincertaintransactionswhereanotherparty,alongwiththeentity,isinvolvedin
providingagoodorservicetoacustomer.Theamendmentsinthisupdatedonotchangethecoreprincipleoftheexistingimplementation
guidanceinTopic606onprincipalversusagentconsiderations,butdoclarifyhowanentityshoulddeterminewhetheritisaprincipalor
anagentbyprovidingindicatorsthatassistinthe
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assessmentofcontrol.Suchindicatorsmaybemoreorlessrelevanttothecontrolassessmentandoneormoreindicatorsmaybemoreor
lesspersuasivetothecontrolassessment,dependingonthefactsandcircumstances.
ofASU201608andASU201409onourConsolidatedFinancialStatements.
Note3.Dispositions
OnMarch15,2016,wesignedanagreementwithEurazeo,apubliclytradedFrenchinvestmentcompany,tosellGlionInstituteof
HigherEducation(Glion)andLesRochesInternationalSchoolofHotelManagement(LesRoches)foratotaltransactionvalueof
approximatelyCHF380,000(approximately$385,000atthesigningdate),subjecttocertainadjustments.Thesaleincludedthe
operationsofGlioninSwitzerlandandtheUnitedKingdom,theoperationsofLesRochesinSwitzerlandandtheUnitedStates,Haute
colespcialiseLesRochesGruyreSA(LRG)inSwitzerland,LesRochesJinJianginChina,RoyalAcademyofCulinaryArts(RACA)
inJordanandLesRochesMarbellainSpain.Closingofthetransactionwassubjecttoregulatoryapprovals,includingbytheNew
EnglandAssociationofSchoolsandColleges,andothercustomaryconditionsandprovisions.ThetransactionclosedonJune14,2016
andwereceivedtotalnetproceedsofapproximately$332,800,netofcashsoldof$14,500,andafteradjustmentsforliabilitiesassumedby
thebuyerandtransactionrelatedcosts.InSeptember2016,Laureatereceivedadditionalproceedsfromthebuyerofapproximately$5,800
afterfinalizationoftheworkingcapitaladjustmentrequiredbythepurchaseagreement,resultinginatotalnontaxablegainonsaleof
approximately$249,000.Inaddition,ontheJune14,2016closingdate,wesettledthedealcontingentforwardexchangeswapagreement
forapaymentof$10,297seeNote12,DerivativeInstruments,forfurtherdescriptionofthisswap.Wearecontinuingtoprovidecertain
backofficeservicestoGlionandLesRochesforaperiodoftime,andprogramsofthoseinstitutionswillcontinueonvariouscampusesin
theLaureateInternationalUniversitiesnetworkthroughouttheworld.
SaleofInstitutionsinFrance
OnApril19,2016,LaureateannouncedthatithadsignedanagreementforthetransferofcontrolofLIUFSAS(LIUF),theFrench
holdingentity,toApaxPartners,aleadingprivateequityfirminFrenchspeakingEuropeancountries.Bpifrance,theinvestmentvehicle
oftheFrenchstate,willcoinvestalongsideApaxPartnersandholdaround10%oftheentity.Managementobtainedapprovalforthis
transactiononApril6,2016.TheFrenchantitrustauthorityalsoapprovedthetransaction,and
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Note3.Dispositions(Continued)
closingtookplaceonJuly20,2016.LIUFcomprisedfiveinstitutionswithatotalstudentpopulationofapproximately7,500:
coleSuprieureduCommerceExtrieur(ESCE)
InstitutFranaisdeGestion(IFG)
EuropeanBusinessSchool(EBS)
coleCentraled'Electronique(ECE)and
Centred'tudesPolitiquesetdelaCommunication(CEPC).
ThevalueofthetransactionwasEUR201,000(approximately$228,000atthesigningdate),subjecttocertainadjustments.At
closingonJuly20,2016,wereceivedtotalnetproceedsofapproximately$207,000,netofcashsoldof$3,400,andafteradjustmentsfor
liabilitiesassumedbythebuyerandtransactionrelatedcosts,resultinginanontaxablegainonsaleofapproximately$149,000.In
addition,inJulywesettledtheforwardexchangeswapagreementsrelatedtothissale,resultingintotalproceedsof$4,634.SeeNote12,
DerivativeInstruments,forfurtherdescriptionoftheseswapagreements.
Note4.DuetoShareholdersofAcquiredCompanies
TheamountsduetoshareholdersofacquiredcompaniesgenerallyariseinconnectionwithLaureate'sacquisitionofamajorityorall
oftheownershipinterestofcertainsubsidiaries.Promissorynotespayabletothesellersofacquiredcompanies,referredtoas"sellernotes,"
arecommonlyusedasameansofpaymentforbusinessacquisitions.SellernotepaymentsaregenerallyclassifiedasPaymentsofdeferred
purchasepriceforacquisitionswithinfinancingactivitiesinourConsolidatedStatementof
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CashFlows.Theamountsduetoshareholdersofacquiredcompanies,currencies,andinterestratesappliedwereasfollows:
FaculdadesMetropolitanasUnidasEducacionais
(FMU)
MonashSouthAfrica(MSA)
(St.Augustine)
CHHoldingNetherlandsB.V.(CHHolding)
UniversidadTecnologicaCentroamericana(UNITEC
Honduras)
IADEGroup
CentrodeDesenvolvimentoPessoale
EmpresarialLtda.(CEDEPE)
UniversidadAutonomadeVeracruz,S.C.(Veracruz)
Totalduetoshareholdersofacquiredcompanies
Less:Currentportionofduetoshareholdersof
acquiredcompanies
Duetoshareholdersofacquiredcompanies,less
currentportion
September30,
2016
December31,
2015
Nominal
Currency
InterestRate
%
97,609 $
60,549
29,606
70,512 BRL
48,172 BRL
26,662 AUD
CDI
CDI+2%
n/a,6.75%
11,550
8,387
11,550 USD
12,745 USD
7%
n/a
IIBC
3%
IGPM
3%
CDI
CETES
5,621
2,958
2,807
1,655

220,742
127,591
HNL
EUR
BRL
EUR
464 BRL
2,225 MXN
186,719
21,050
93,151 $
6,764
3,994
2,090
1,541
165,669
AUD:AustralianDollar
BRL:BrazilianReal
EUR:EuropeanEuro
HNL:HonduranLempira
MXN:MexicanPeso
USD:UnitedStatesDollar
CDI:CertificadosdeDepsitosInterbancrios(Brazil)
CETES:28dayCertificadosdelaTesoreriadelaFederacin(Mexico)
IIBC:ndicedeInflacindelBancoCentral(Honduras)
IGPM:GeneralIndexofMarketPrices(Brazil)
Veracruz
Duringthefirstquarterof2016,LaureatesettledthenotespayablewiththeformerownersofVeracruzintheamountofMXN38,437
(US$2,054atdateofpayment).
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CEDEPE
DuringthequarterendedSeptember30,2016,LaureatesettledtheremainingliabilitywiththeformerownersofCEDEPEinthe
amountofBRL1,387(US$417atpaymentdate).
IADEGroup
DuringthequarterendedSeptember30,2016,LaureatemadethefirstpaymentofEUR975(US$1,095atdateofpayment).Thereare
twoEUR1,000tranchesremainingtobepaid36monthsand60monthsfromthedateofacquisition.Theremainingbalanceoutstanding
relatestoaworkingcapitalsettlementaccruedintheyearendedDecember31,2015.
Note5.BusinessandGeographicSegmentInformation
Laureate'seducationalservicesareofferedthroughfouroperatingsegments:LatAm,Europe,AMEA,andGPS.Laureatedeterminesits
operatingsegmentsbasedoninformationutilizedbythechiefoperatingdecisionmakertoallocateresourcesandassessperformance.
institutioninItaly,NuovaAccademiadiBelleArtiMilano(NABA),includingDomusAcademy,movedfromourGPSsegmentintoour
Europesegment.MediaDesignSchool(MDS),locatedinNewZealand,movedfromourGPSsegmentintoourAMEAsegment.OurGPS
segmentwillnowfocusonitscampusbasedinstitutionsintheUnitedStatesandonLaureate'sfullyonlineinstitutionsoperatingglobally.
Thischangehasbeenreflectedinthequarterlyandyeartodatesegmentinformationbeginninginthesecondquarterof2016,theperiod
inwhichthechangeoccurred.Asrequired,the2015segmentinformationthatispresentedforcomparativepurposeshasalsobeenrevised
toreflectthissegmentchange.
TheLatAmsegmentconsistsofcampusbasedinstitutionsandhasoperationsinBrazil,Chile,CostaRica,Honduras,Mexico,Panama
andPeruandhascontractualrelationshipswithalicensedinstitutioninEcuador.Theinstitutionsprovideaneducationthatemphasizes
professionalorientedfieldsofstudywithundergraduateandgraduatedegreeprogramsinawiderangeofdisciplines.Theprogramsat
theseinstitutionsaremainlycampusbasedandareprimarilyfocusedonlocalstudents.Inaddition,theinstitutionsinourLatAmsegment
havebegunintroducingonlineandhybrid(acombinationofonlineandinclassroom)coursesandprogramstotheircurriculum.Brazil
andChilehavegovernmentsponsoredstudentfinancingprograms,whileinothercountriesstudentsgenerallyfinancetheirown
education.
TheEuropesegmentconsistsofcampusbasedinstitutionswithoperationsinCyprus,Germany,Italy,Morocco,Portugal,Spainand
Turkey.Theinstitutionsgeneraterevenuesbyprovidingprofessionalorientedundergraduateandgraduatedegreeprograms.Several
institutionshavebeguntointroduceonlineandhybridprograms.StudentsintheEuropesegmentgenerallyfinancetheirowneducation.
AsdiscussedinNote3,Dispositions,inJuly2016wecompletedthesaleofourinstitutionsinFrance.
AfricaandThailand.AMEAalsomanagesninelicensed
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institutionsintheKingdomofSaudiArabiaandmanagesoneadditionalinstitutioninChinathroughajointventurearrangement.The
institutionsgeneraterevenuesbyprovidingprofessionalorientedundergraduateandgraduatedegreeprograms.StudentsintheAMEA
segmentgenerallyfinancetheirowneducation.
TheGPSsegmentconsistsofaccreditedonlineinstitutions,whichservestudentsglobally,andcampusbasedinstitutionsserving
studentsintheUnitedStates.Theonlineinstitutionsprimarilyserveworkingadultswithundergraduateandgraduatedegreeprograms.
Thecampusbasedinstitutionsprimarilyservetraditionalstudentsseekingundergraduateandgraduatedegrees.IntheUnitedStates,
studentshaveaccesstogovernmentsupportedfinancingprograms.AsdiscussedinNote3,Dispositions,inJune2016,wecompletedthe
saleofseveraloperationsintheGPSsegment.
Intersegmenttransactionsareaccountedforinasimilarmannerasthirdpartytransactionsandareeliminatedinconsolidation.The
"Corporate"amountspresentedinthefollowingtablesincludescorporatechargesthatwerenotallocatedtoourreportablesegmentsand
adjustmentstoeliminateintersegmentitems.
WeevaluatesegmentperformancebasedonAdjustedEBITDA,whichisanonGAAPprofitmeasuredefinedasIncome(loss)from
continuingoperationsbeforeincometaxesandequityinnetincomeofaffiliates,addingbackthefollowingitems:Gainonsalesof
subsidiaries,net,Foreigncurrencyexchangegain(loss),net,Otherincome,net,Gain(loss)onderivatives,Lossondebtextinguishment,
Interestexpense,Interestincome,Depreciationandamortizationexpense,Impairmentchargesonlonglivedassets,Sharebased
compensationexpenseand,beginningin2014,expensesrelatedtoourExcellenceinProcess(EiP)initiative.EiPisanenterprisewide
initiativetooptimizeandstandardizeLaureate'sprocesses,creatingverticalintegrationofprocurement,informationtechnology,finance,
accountingandhumanresources.Itincludestheestablishmentofregionalsharedservicesorganizationsaroundtheworld,aswellas
improvementstotheCompany'ssystemofinternalcontrolsoverfinancialreporting.
WhenwereviewAdjustedEBITDAonasegmentbasis,weexcludeintercompanyrevenuesandexpenses,relatedtonetworkfeesand
royaltiesbetweenoursegments,thateliminateinconsolidation.Weusetotalassetsasthemeasureofassetsforreportablesegments.
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Thefollowingtablesprovidefinancialinformationforourreportablesegments,includingareconciliationofAdjustedEBITDAto
Income(loss)fromcontinuingoperationsbeforeincometaxesandequityinnetincomeofaffiliates,asreportedintheConsolidated
StatementsofOperations:
Fortheninemonthsended
September30,
2016
2015
Revenues
LatAm
Europe
AMEA
GPS
Corporate
Revenues
AdjustedEBITDAofreportablesegments
LatAm
Europe
AMEA
GPS
TotalAdjustedEBITDAofreportablesegments
Reconcilingitems:
Corporate
Sharebasedcompensationexpense
EiPexpenses
Operatingincome
Interestincome
Interestexpense
Gain(loss)onderivatives
Otherincome(loss),net
Foreigncurrencyexchangegain(loss),net
Gainonsalesofsubsidiaries,net
Income(loss)fromcontinuingoperationsbeforeincometaxes
andequityinnetincomeofaffiliates
1,738,315
331,754
309,874
697,872
(9,516)
3,068,299
329,440
25,735
36,346
189,496
581,017
(100,255)
(202,735)
(28,939)
(37,175)
211,913
13,305
(314,383)
(17,363)
(8,235)
(964)
80,263
398,412
1,775,287
321,081
312,928
737,914
(6,054)
3,141,156
323,143
23,630
37,823
175,150
559,746
(83,881)
(209,390)
(27,222)
(27,227)
212,026
9,924
(300,145)
(1,263)
(2,618)
1,268
(139,416)
362,948 $ (220,224)
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Assets
LatAm
Europe
AMEA
GPS
Corporate
Totalassets
September30,
2016
$ 4,239,442 $ 3,823,859
626,836
690,514
861,963
782,613
1,405,166 1,768,009
375,050
374,121
$ 7,508,457 $ 7,439,116
December31,
2015
Note6.Goodwill
ThechangeinthenetcarryingamountofGoodwillfromDecember31,2015throughSeptember30,2016wascomposedofthe
followingitems:
Goodwill
Accumulatedimpairmentloss
Acquisitions
Dispositions
Reallocationofgoodwillforsegment
change
Impairments
BalanceatSeptember30,2016
LatAm
Europe
AMEA
GPS
Total
$ 1,319,757 $ 99,396
(77,094)
1,242,663 99,396
(26,312)
$ 166,910 $ 666,264
(39,676) (19,660)
127,234 646,604
(121,952)
31,205
$ 1,273,868
5,517
1,335
$ 79,936
2,715
7,219
$ 137,168
(8,232)
1,886
$ 518,306
41,645
$ 2,009,278
2,252,327
(136,430)
2,115,897
(148,264)
AsdiscussedinNote5,BusinessandGeographicSegmentInformation,theCompanyannouncedachangeinitsoperatingsegments
inthesecondquarterof2016.Accordingly,goodwillwasreallocatedamongtheoperatingsegmentsbasedontherelativefairvalueofthe
affectedreportingunitsatthetimeofthesegmentchange.
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Note7.Debt
Outstandinglongtermdebtwasasfollows:
Seniorlongtermdebt:
September30,
2016
December31,
2015
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Seniorlongtermdebt:
SeniorSecuredCreditFacility(statedmaturitydatesJune
2018,June2019andMarch2021),netofdiscount
SeniorNotesdue2019(statedmaturitydateSeptember
2019),netofdiscount
Totalseniorlongtermdebt
Otherdebt:
Linesofcredit
Notespayableandotherdebt
Capitalleaseobligationsandsaleleasebackfinancings
Totallongtermdebt
Less:totalunamortizeddeferredfinancingcosts
Less:currentportionoflongtermdebt
$ 1,661,673 $ 2,084,093
1,376,757
3,038,430
64,724
706,584
3,809,738
259,669
4,069,407
47,894
168,689
3,852,824
1,436,214
3,520,307
74,335
738,684
4,333,326
247,256
4,580,582
69,294
192,354
4,318,934
issuancecoststobepresentedasadeductionfromthecorrespondingdebtliability.Thismakesthepresentationofdebtissuancecosts
consistentwiththepresentationofdebtdiscountsorpremiums.Therecognitionandmeasurementguidancefordebtissuancecostsisnot
affected,thereforethesecostswillcontinuetobeamortizedasinterestexpense.Atadoption,thenewguidancewasappliedretrospectively
toallpriorperiodspresented.TheimpacttoourDecember31,2015ConsolidatedBalanceSheetwasareductiontoDeferredcosts,netand
Longtermdebtof$69,294.
AsdescribedfurtherinNote19,SubsequentEvents,onDecember4,2016,wesignedasubscriptionagreementwithinvestorsunder
whichweagreedtoissueandsellanaggregateof400sharesofanewseriesofourconvertibleredeemablepreferredstockinaprivate
offeringfortotalnetproceedsofapproximately$383,000.
EstimatedFairValueofDebt
SeniorSecuredCreditFacilityandtheSeniorNotesdue2019,aretradedinabrokeredmarket.Thefairvalueofourremainingdebt
instrumentsapproximatescarryingvaluebasedontheirterms.AsofSeptember30,2016andDecember31,2015,ourlongterm
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debtwasclassifiedasLevel2withinthefairvaluehierarchy,basedonthefrequencyandvolumeoftradinginthebrokeredmarket.The
estimatedfairvalueofourdebtwasasfollows:
September30,2016
Carrying
Estimated
amount
fairvalue
December31,2015
Carrying
Estimated
amount
fairvalue
$ 3,809,738 $ 3,727,216 $ 4,333,326 $ 3,482,417
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$ 3,809,738 $ 3,727,216 $ 4,333,326 $ 3,482,417
SeniorNotesdue2019NoteExchangeTransaction
OnApril15,2016,Laureateenteredintoseparate,privatelynegotiatednoteexchangeagreements(theNoteExchangeAgreements)
withcertainexistingholders(theExistingHolders)ofouroutstanding9.250%SeniorNotesdue2019(theSeniorNotes)pursuantto
whichwewillexchange$250,000inaggregateprincipalamountofSeniorNotesforsharesofCompanycommonstock.Weexpectthe
exchangetobecompletedwithinoneyearaftertheconsummationofaninitialpublicofferingofourcommonstockthatgeneratesgross
proceedsofatleast$400,000or10%oftheequityvalueoftheCompany(aQualifiedPublicOffering).Thenumberofsharesofcommon
stockissuablewillequal104.625%oftheaggregateprincipalamountofSeniorNotestobeexchanged,or$261,600,dividedbytheinitial
publicofferingpricepershareofcommonstockintheQualifiedPublicOffering,andthesharesshallbeidenticaltothesharesissuedto
unaffiliatedinvestorsintheQualifiedPublicOffering.FollowingtheQualifiedPublicOffering,butpriortotheexchange,theSeniorNotes
subjecttotheexchangewillcontinuetoreceiveinterestatthesamerateastheSeniorNotesthatarenotsubjecttotheexchange.
PursuanttotheNoteExchangeAgreements,onJune15,2016,LaureatealsorepurchasedfromtheExistingHolders$62,500aggregate
principalamountofSeniorNotesatparvalue,plusaccruedandunpaidinterestandspecialinterest.Inconnectionwiththisrepaymentwe
recordedaLossondebtextinguishmentof$1,681duringthesecondquarterrelatedtothewriteoffofunamortizeddeferredfinancing
costsanddiscount.Within60daysaftertheconsummationofaQualifiedPublicOffering,attheoptionoftheExistingHoldersortheir
transferees,wewillrepurchaseuptoanadditional$62,500aggregateprincipalamountofSeniorNotesattheredemptionpricesetforthin
Section3.07oftheindenturegoverningtheSeniorNotesthatisapplicableasofthedateofpricingoftheQualifiedPublicOffering,plus
accruedandunpaidinterestandspecialinterest(theSubsequentRepurchase).
TheNoteExchangeAgreementswillterminateifaQualifiedPublicOfferingisnotconsummatedonorbeforeAugust15,2017,and
theexchangeof$250,000inaggregateprincipalamountofSeniorNotesforsharesofcommonstockandtheSubsequentRepurchasewill
notoccur.Uponconsummationofallofthetransactionsdescribedabove,wewillretireupto$375,000inaggregateprincipalamountof
SeniorNotes.TheNoteExchangeAgreementswereaccountedforasadebtmodification.
SeniorSecuredCreditFacilityAmendmentstoCreditAgreement
OnJune3,2016,weenteredintoanamendment(theFifthAmendment)toouramendedandrestatedSeniorSecuredCreditFacility
agreement(theAmendedandRestatedCreditAgreement)inorderto,amongotherthings,extendmaturitydatesonapproximately
$1,526,000oftheapproximately
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$1,810,100ofoutstandingtermloansfromJune2018toMarch17,2021.EffectivenessoftheFifthAmendmentwassubjecttothe
satisfactionofcertainconditionsincluding,(i)theclosingofthesaleoftheGlionandLesRocheshospitalitymanagementschoolsand
ouroperationsinFrance,(ii)theprepaymentof$300,000totheholdersofthetermloanswhohaveagreedtoextendtheirmaturity,and
(iii)thefurtheramendmentoftheAmendedandRestatedCreditAgreementpursuanttowhichcertainofthelendersthereunderholding
revolvingcreditcommitmentswouldhaveagreedtoextendthematuritydateoftherevolvinglineofcreditfacilitytoadateonorafter
March8,2019.TheseconditionshavebeensatisfiedandtheFifthAmendmentbecameeffectiveonJuly29,2016.Inconnectionwiththis
amendmentwerecordedaLossondebtextinguishmentof$15,682duringthethirdquarterrelatedtothewriteoffofunamortizeddeferred
financingcosts.
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Theapproximately$1,226,000ofremainingtermloanswithamaturitydateofMarch17,2021willbereferredtoasthe2021
ExtendedTermLoan,andtheapproximately$284,100oftermloanswithamaturitydateofJune2018willcontinuetobereferredtoas
the2018ExtendedTermLoan.The2021ExtendedTermLoanhasaninitialinterestrateequaltoLIBOR+7.50%,orifborrowedasABR
loans,ABR+6.50%.Themarginsshallbeincreasedby0.50%eachquarter,commencingwiththefiscalquarterendingSeptember30,
2016providedthatinnoeventshalltheLIBORmarginexceed8.50%ortheABRmarginexceed7.50%.Upontheconsummationofa
qualifiedequityofferingoraqualifiedpublicofferingoracombinationthereof,theLIBORmarginwillbeimmediatelyreducedto7.50%
andtheABRmarginwillbeimmediatelyreducedto6.50%.TherewillbenoflooronLIBORorABR(otherthantheFederalFundsRate
maynotbelessthanzero)forthe2021ExtendedTermLoan.AsofSeptember30,2016,forthe2021ExtendedTermLoan,themarginfor
LIBORloanswas8.00%andthemarginforABRloanswas7.00%.
TheFifthAmendmentalsoprovidesthatifaqualifiedequityofferingoraqualifiedpublicofferingorcombinationthereof,ofthe
CompanydoesnotoccuronorbeforeAugust15,2017,theCompanywillberequiredtomake,onAugust16,2017,anadditional
scheduledpaymentofprincipalonthe2021ExtendedTermLoanintheamountof$62,500.
OnJuly7,2016,weexecutedanamendment(theSixthAmendment)totheAmendedandRestatedCreditAgreementwithour
revolvingcreditlendersto,amongotherthings,extendthematuritydateoftherevolvinglineofcreditfacilitytoJune7,2019,subjectto
theclosingoftheFifthAmendmentandotherconditionsneedingtobesatisfied.TheSixthAmendmentalsoreducedtheborrowing
capacityoftherevolvinglineofcreditfacilityfrom$350,000to$325,000.TheconditionsfortheeffectivenessoftheSixthAmendment
weresatisfiedandtheSixthAmendmentbecameeffectiveonJuly29,2016.Therevolvinglineofcreditfacilityhasaninitialinterestrate
equalthesameratethatwasineffectatJune30,2016,LIBOR+3.75%,orifborrowedasABRloans,ABR+2.75%.Themarginsshallbe
increasedby0.50%eachquarter,commencingwiththefiscalquarterendingSeptember30,2016providedthatinnoeventshallthe
LIBORmarginexceed4.75%ortheABRmarginexceed3.75%.Upontheconsummationofaqualifiedequityofferingoraqualified
publicofferingorcombinationthereof,theLIBORmarginwillbeimmediatelyreducedto3.75%andtheABRmarginwillbeimmediately
reducedto2.75%.AsofSeptember30,2016,theLIBORmarginis4.25%andtheABRmarginis3.25%.
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ConditionsforAcceleratedMaturityof2021ExtendedTermLoan
Ifonthedatethatis91dayspriortoSeptember1,2019morethan$250,000oftheprincipalamountoftheSeniorNotesis
outstanding,thenthe2021ExtendedTermLoanmaturitydateshallbethedatethatis91dayspriortoSeptember1,2019.
ConditionsforAcceleratedMaturityofRevolvingLineofCreditFacility
Asdescribedabove,thelendershaveagreedtoextendthematuritydateoftherevolvinglineofcreditfacilitytoJune7,2019
provided,however,thatifonthedatethatis91dayspriortoSeptember1,2019morethan$250,000oftheprincipalamountoftheSenior
Notesisoutstanding,thenthematuritydateoftherevolvinglineofcreditfacilityshallbethedatethatis91dayspriortoSeptember1,
2019.Further,ifonthedatethatis91dayspriortothematuritydateofthe2018ExtendedTermLoanmorethan$250,000oftheprincipal
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2019.Further,ifonthedatethatis91dayspriortothematuritydateofthe2018ExtendedTermLoanmorethan$250,000oftheprincipal
amountofthe2018ExtendedTermLoanisoutstanding,thenthematuritydateoftherevolvinglineofcreditfacilityshallbethedatethat
is91dayspriortothe2018ExtendedTermLoanmaturitydate.
RegistrationofSeniorNotes
Laureateanditsguarantorsagreedto(1)filearegistrationstatementwiththeSECwithrespecttoaregisteredoffertoexchangethe
SeniorNotesfornewnoteshavingtermssubstantiallyidenticalinallmaterialrespectstotheoutstandingnotes(exceptthatthenewnotes
willnotcontaintransferrestrictionsorprovideforspecialinterest)or(2)fileashelfregistrationfortheresaleofthenotes.Wewere
SincetheregistrationstatementwasnotdeclaredeffectivebyJuly25,2014,wehaveincurredspecialinterestatarateequalto0.25%per
annumforthefirst90dayperiodoftheoutstandingindentureindebtednessontheoutstandingnotes,0.50%perannumforthenext90
dayperiod,and0.75%thereafter,asliquidateddamagesuntiltheregistrationstatementisdeclaredeffectiveandtheexchangeofferis
completed.
TherequirementtoregistertheSeniorNotesqualifiesasa"registrationpaymentarrangement"underASC82520,"Financial
InstrumentsRegistrationPaymentArrangements."ASC82520requiresustorecordaliabilityifwedeterminethatitisprobablethat
consideration,suchasspecialinterest,willbepaidtothecounterpartyundertheregistrationpaymentarrangement,andifthat
considerationcanbereasonablyestimated.Accordingly,wehaverecordedaliabilityfortheamountofspecialinterestontheSeniorNotes
thatwehavedeterminedtobeprobableandestimablebasedonourexpectedtimingofregistrationasofeachbalancesheetdate.Asof
September30,2016andDecember31,2015,wehadatotalcontingentliabilityforspecialinterestontheSeniorNotesofapproximately
$7,000and$8,100,respectively,recordedinAccruedexpensesinourConsolidatedBalanceSheets,throughacorrespondingadjustment
toInterestexpenseinourConsolidatedStatementofOperations.
CertainCovenants
(2)limitationsondividends(3)limitationsonassetsales,
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includingthesaleofownershipinterestsinsubsidiariesandsaleleasebacktransactionsand(4)limitationsonliens,guarantees,loansor
investments.InconnectionwiththeextensionofourrevolvinglineofcreditfacilityinJuly2015,wearenowsubjecttoaConsolidated
SeniorSecuredDebttoConsolidatedEBITDAfinancialmaintenancecovenant,asdefinedintheAmendedandRestatedCredit
Agreement,beginninginthethirdquarterof2015.Themaximumratio,asdefined,is5.30x,4.50xand3.50xatDecember31,2015,2016
and2017,respectively.TheratiosasofSeptember30,2016andDecember31,2015were3.44xand3.91x,respectively.Inaddition,notes
payableatsomeofourlocationscontainfinancialmaintenancecovenants.Weareincompliancewithourdebtcovenantsandexpecttobe
incomplianceforthenext12months.
OtherDebt
NotesPayable
OnMay12,2016,twoofUVMMexico'soutstandingloansthatoriginatedin2007and2012andwerebothscheduledtomaturein
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OnMay12,2016,twoofUVMMexico'soutstandingloansthatoriginatedin2007and2012andwerebothscheduledtomaturein
May2021wererefinancedandcombinedintooneloan.ThematuritydateofthecombinedloanwasextendedtoMay15,2023.Principal
repaymentsweresuspendeduntilMay15,2018.Thenewrefinancedloancarriesavariableinterestratebasedonthe28dayMexican
InterbankingOfferRate(TIIE),plustheapplicablemargin.Theapplicablemarginfortheinterestcalculationisestablishedbasedonthe
ratioofdebttoEBITDA,asdefinedintheagreement.InterestispaidmonthlycommencingonMay15,2016.Theoutstandingbalanceof
theloanonMay12,2016wasMXN2,224,600(US$120,527atthatdate).AsofSeptember30,2016,theinterestrateontheloanwas
7.71%andtheoutstandingbalanceontheloanwas$114,081.AsofDecember31,2015,thecombinedoutstandingbalanceontheseloans
wasapproximately$128,800.
OnDecember20,2013,LaureateacquiredTHINKandfinancedaportionofthepurchasepricebyborrowingAUD45,000(US
$34,524atSeptember30,2016)underasyndicatedfacilityagreementintheformoftwotermloansofAUD22,500each.Thesyndicated
facilityagreementalsoprovidedforadditionalborrowingsofuptoAUD20,000(US$15,344atSeptember30,2016)underacapital
expenditurefacilityandaworkingcapitalfacility.Thefirsttermloan(FacilityA)hadatermoffiveyearsandprincipalwaspayablein
quarterlyinstallmentsofAUD1,125(US$863atSeptember30,2016)beginningonMarch31,2014.Thesecondtermloan(Facility
B)hadatermoffiveyearsandthetotalprincipalbalanceofAUD22,500waspayableatitsmaturitydateofDecember20,2018.InJune
2016,theseloanfacilitieswereamendedandrestated.AsaresultofthisamendmentandarepaymentofAUD11,000(approximately
$8,100atthedateofpayment),FacilityAhasbeenamendedtobeatermloanofAUD10,000($7,672atSeptember30,2016),and
principalisrepayableinquarterlyinstallmentsofAUD833($639atSeptember30,2016)beginningonSeptember30,2016.FacilityA
bearsinterestatavariablerateplusamarginof2.50%,andthefinalbalanceispayableatitsmaturitydateofDecember20,2018.Facility
BhasbeenamendedtobearevolvingfacilityofuptoAUD15,000($11,508atSeptember30,2016)andanybalanceoutstandingis
repayableatitsmaturitydateofDecember20,2018.FacilityBbearsinterestatavariablerateplusamarginof2.75%.Thecapital
expenditurefacilityandworkingcapitalfacilitynowprovidefortotaladditionalborrowingsofuptoAUD15,000(US$11,508at
September30,2016).AsofSeptember30,2016andDecember31,2015,$14,705and$25,696,respectively,oftotalborrowingswere
outstandingundertheseloanfacilities.
Inthesecondquarterof2016,theCompanyborrowedPeruvianNuevoSols(PEN)54,000(approximatelyUS$16,000atthattime)to
financetheconstructionofanewcampusatoneofourinstitutionsinPeru,UniversidadPrivadadelNorte(UPN).Thisloanhasafixed
interestrateof8.70%andmaturesin2024.AsofSeptember30,2016,thisloanhasabalanceof$15,989.
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Note8.CommitmentsandContingencies
NoncontrollingInterestHolderPutArrangementsandCompanyCallArrangements
Thefollowingsectionprovidesasummarytableanddescriptionofthevariousnoncontrollinginterestholderputarrangementsthat
LaureatehadoutstandingasofSeptember30,2016.Laureatehaselectedtoaccretechangesinthearrangements'redemptionvaluesover
theperiodfromthedateofissuancetotheearliestredemptiondate.Theredeemablenoncontrollinginterestsarerecordedatthegreaterof
theaccretedredemptionvalueorthetraditionalnoncontrollinginterest.Untilthefirstexercisedate,theputinstruments'reportedvalues
maybelowerthanthefinalamountsthatwillberequiredtosettletheminorityputarrangements.AsofSeptember30,2016,thecarrying
valueofallnoncontrollinginterestholderputarrangementswas$12,969,whichincludesaccretedincrementalvalueof$8,668inexcess
oftraditionalnoncontrollinginterests.
IftheminorityputarrangementswereallexercisableatSeptember30,2016,Laureatewouldbeobligatedtopaythenoncontrolling
interestholdersanestimatedamountof$13,572,assummarizedinthefollowingtable:
Nominal
First
Exercisable
EstimatedValueasof
September30,2016
redeemablewithin
Reported
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Nominal
Exercisable
Date
Currency
Noncontrollinginterestholderputarrangements

INTIEducationHoldingsSdnBhd(INTI)10% MYR Current $
PearlRetailSolutionsPrivateLimitedandCreative
ArtsEducationSociety(Pearl)45%
INR 6/30/2017
StamfordInternationalUniversity(STIU)
PuttablepreferredstockofTEDCO
THB Current
Totalnoncontrollinginterestholderput
arrangements

Puttablecommonstockcurrentlyredeemable USD Current
Puttablecommonstocknotcurrently
redeemable
USD
*

Totalredeemablenoncontrollinginterestsand
equity
redeemablewithin
12months:
Reported
Value

6,856 $
6,856
6,658
6,055
58
58
13,572 12,969
6
6

8,390
13,578 $ 21,365
Contingentlyredeemable
MYR:MalaysianRinggit
INR:IndianRupee
THB:ThaiBaht
Laureate'snoncontrollinginterestputarrangementsarespecifiedinagreementswitheachnoncontrollinginterestholder.Thetermsof
theseagreementsdeterminethemeasurementoftheredemptionvalueoftheputoptionsbasedonanonGAAPmeasureofearningsbefore
interest,taxes,depreciationandamortization(EBITDA,orrecurringEBITDA),thedefinitionofwhichvariesforeachparticularcontract.
Commitmentsandcontingenciesaregenerallydenominatedinforeigncurrencies.
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Pearl
AspartoftheacquisitionofPearl,theminorityownershaveaputoptiontorequireLaureatetopurchasetheremaining45%
noncontrollinginterest,andLaureatehasacalloptiontorequiretheminorityownerstoselltoLaureateupto35%ofthetotalequityof
Pearlthatisstillownedbythenoncontrollinginterestholders(i.e.approximately78%oftheremaining45%noncontrollinginterest).The
putoptionwaspreviouslyexercisablebeginningin2015andthecalloptionwaspreviouslyexercisablebeginningin2016.However,on
March29,2016,Laureateandtheminorityownersamendedtheputandcalloptionagreements.
Aspartofthisamendment,Laureateandtheminorityownersagreedtonotexercisetheirputorcalloptionsanytimepriortothedate
thatPearl'sauditedstatutoryfinancialstatementsforthefiscalyearendingMarch31,2017arepresentedtoPearl'sboard,whichis
estimatedtobeapproximatelyJune30,2017.Theputoptionistheninitiallyexercisableforaperiodof15days.
Theamendedputoptionallowstheminorityownerstosellaportionoralloftheir45%equityinterest.Iftheminorityownerssell
morethana35%equityinterestduringthisinitialexerciseperiod,theputoptionpriceisequalto6.5timesEBITDAforthefirst35%,and
6.0timesEBITDAfortheremainingpercentageupto10%,lesslongtermliabilitiesandplusnetcurrentassetsfortheimmediately
precedingfiscalyearendingonMarch31,multipliedbytheminorityinterestpercentagebeingacquired.Priortothischange,theEBITDA
multiplewas6.0timesEBITDAfortheentire45%equityinterest.
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multiplewas6.0timesEBITDAfortheentire45%equityinterest.
TheamendedcalloptionallowstheCompanytoacquireupto35%oftheequityinterestfromtheminorityownersatthesame
purchasepriceasthatoftheminorityowners'putoptionforthefirst35%equityinterest.Theexerciseperiodofthecalloptionstartsfrom
thedateonwhichPearl'sauditedstatutoryfinancialstatementsforthefiscalyearendingMarch31,2017arepresentedtoPearl'sboard,
andends15daysfromthedateonwhichPearl'sauditedstatutoryfinancialstatementsforthefiscalyearendingMarch31,2018are
presentedtoPearl'sboard.
Intheeventanyequitysharescontinuetobeheldbytheminorityownersaftertheexerciseofaboveputandcalloptions,theminority
ownershaveasecondputoptiontoselltoLaureatetheirremainingequityinterest,upto10%,atapriceof6.5timesEBITDAlesslong
termliabilitiesandplusnetcurrentassetsforthecalendaryearendingDecember31,2020,multipliedbytheminorityinterestpercentage
beingacquired.TheexerciseperiodforthesecondputoptionstartsfromthedateonwhichPearl'sauditedstatutoryfinancialstatements
forthecalendaryearendingDecember31,2020arepresentedtoPearl'sboard,andends15daysfromthedateonwhichPearl'saudited
statutoryfinancialstatementsforthecalendaryearendingDecember31,2021arepresentedtoPearl'sboard.
Afteralloftheabove,intheeventanyequitysharescontinuetobeheldbytheminorityowners,Laureatethenhasacalloptionto
purchasealloftheremainingsharesheldbytheminorityownersatapriceof6.5timesEBITDA,lesslongtermliabilitiesandplusnet
currentassetsfortheimmediatelyprecedingcalendaryearendingonDecember31,2022,multipliedbythenoncontrollinginterest
percentagebeingsold.Thecalloptionexerciseperiodis15daysfromthedatePearl'sauditedstatutoryfinancialstatementsforthe
calendaryearendingonDecember31,2022arepresentedtoPearl'sboard.
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Inanyevent,theputoptionandcalloptionpricesaresubjecttoafloorandaceiling,asprescribedintheagreement.Theputfloorand
ceilingareapplicablethrough2017,andthecallfloorandceilingareapplicablethrough2018.
St.Augustine
OnMarch24,2016,thenoncontrollinginterestholdersofSt.AugustinenotifiedLaureateoftheirelectiontoexercisetheirput
option,whichrequiredLaureatetopurchasetheremainingnoncontrollinginterestof20%.Accordingly,thisnoncontrollinginterest
becameamandatorilyredeemablefinancialinstrumentontheputoptionexercisedateandwasrecognizedasaliabilityatitsestimated
redemptionvalueinaccordancewithASC480,"DistinguishingLiabilitiesfromEquity."Underthetermsoftheagreement,theputoption
purchasepriceisbasedon7.0timesAdjustedEBITDAofSt.Augustine,asdefinedintheagreement,forthetwelvemonthsendedasofthe
lastdayofthefiscalquartermostrecentlyendedpriortothedateonwhichnoticeofexerciseisgivenmultipliedbythepercentage
interestbeingacquired.InJune2016,weacquiredtheremaining20%noncontrollinginterestinSt.Augustineforapurchasepriceof
$24,997.ThispaymentwasincludedinPaymentstopurchasenoncontrollinginterestsintheConsolidatedStatementofCashFlows.
UniIBMR
In2015,weenteredintoacommitmenttopurchasetheremaining10%minorityinterestinUniIBMRforapurchasepriceof
BRL2,500.TheagreementclosedonMarch10,2016andwepaidBRL2,500(US$668atthepaymentdate),whichwasincludedin
PaymentstopurchasenoncontrollinginterestsintheConsolidatedStatementofCashFlows.Additionalpurchasepricecouldbepaidpost
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PaymentstopurchasenoncontrollinginterestsintheConsolidatedStatementofCashFlows.Additionalpurchasepricecouldbepaidpost
closingifcertaincontingentsaleconditionsaremet.
Laureateissubjecttolegalactionsarisingintheordinarycourseofitsbusiness.Inmanagement'sopinion,wehaveadequatelegal
defenses,insurancecoverageand/oraccruedliabilitieswithrespecttotheeventualityofsuchactions.Wedonotbelievethatany
settlementwouldhaveamaterialimpactonourConsolidatedFinancialStatements.RefertoNote16,LegalandRegulatoryMatters,fora
discussionofcertainmatters.
ContingentLiabilitiesforTaxes
AsofSeptember30,2016andDecember31,2015,Laureatehasrecordedcumulativeliabilitiestotaling$70,303and$73,775,
respectively,fortaxesotherthanincometax,principallypayrolltaxrelateduncertaintiesduetoacquisitionsofcompaniesprimarilyin
LatinAmerica.Thechangesinthisrecordedliabilityarerelatedtonewacquisitions,interestandpenaltyaccruals,changesintaxlaws,
expirationsofstatutesoflimitations,settlementsandchangesinforeigncurrencyexchangerates.Thetermsofthestatutesoflimitations
onthesecontingenciesvarybutcanbeupto10years.ThisliabilityisincludedinOtherlongtermliabilitiesontheConsolidatedBalance
Sheets.Wehavealsorecordedcurrentliabilitiesfortaxesotherthanincometaxof$1,379and$4,217,respectively,asofSeptember30,
2016andDecember31,2015,inOthercurrentliabilitiesontheConsolidatedBalance
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Sheets.Therecordedvalueofcontingentliabilitiesisreducedwhentheyareextinguishedortherelatedstatutesoflimitationsexpire.
Laureatehasaccruedliabilitiesforcertaincivilactionsagainstourinstitutionsthatexistedpriortoouracquisitionoftheseentities.
AsofSeptember30,2016andDecember31,2015,approximately$19,000and$14,000,respectively,ofpreacquisitionloss
contingencieswereincludedinOtherlongtermliabilitiesandOthercurrentliabilitiesontheConsolidatedBalanceSheets.Laureate
intendstovigorouslydefendagainsttheselawsuits.
MaterialGuaranteesStudentFinancing
Chile
TheaccreditedChileaninstitutionsintheLaureatenetworkalsoparticipateinagovernmentsponsoredstudentfinancingprogram
knownasCrditoconAvaldelEstado(theCAEProgram).TheCAEProgramwasformallyimplementedbytheChileangovernmentin
2006topromotehighereducationinChileforlowersocioeconomiclevelstudentsingoodacademicstanding.TheCAEProgram
involvestuitionfinancingandguaranteesthatareprovidedbyourinstitutionsandthegovernment.AspartoftheCAEProgram,these
institutionsprovideguaranteeswhichresultincontingentliabilitiestothirdpartyfinancinginstitutions,beginningat90%ofthetuition
loansmadedirectlytoqualifiedstudentsenrolledthroughtheCAEProgramanddecliningto60%overtime.Theguaranteesbythese
institutionsareineffectduringtheperiodinwhichthestudentisenrolled,andtheguaranteesareassumedentirelybythegovernment
uponthestudent'sgraduation.WhenastudentleavesoneofLaureate'sinstitutionsandenrollsinanotherCAEqualifiedinstitution,the
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Laureateinstitutionwillremainguarantorofthetuitionloansthathavebeengranteduptothedateoftransfer,anduntilthestudent's
graduationfromaCAEqualifiedinstitution.Themaximumpotentialamountofpaymentsourinstitutionscouldberequiredtomake
undertheCAEProgramwasapproximately$484,000and$428,000atSeptember30,2016andDecember31,2015,respectively.This
maximumpotentialamountassumesthatallstudentsintheCAEProgramdonotgraduate,sothatourguaranteewouldnotbeassignedto
thegovernment,andthatallstudentsdefaultonthefullamountoftheCAEqualifiedloanbalances.AsofSeptember30,2016and
December31,2015,werecorded$23,721and$18,829,respectively,asestimatedlongtermguaranteeliabilitiesfortheseobligations.
OnOctober4,2012,theChileanCongressapprovedLawNo.20.634whichamendedLawNo.20.027,introducinganinterestrate
reductionfrom6%to2%onCAEloans.CurrentstudentscouldbenefitfromthereductionstartinginMarch2013iftheywerecurrenton
theirpayments.TheLawalsoprovidesthatCAEloanscannotexceedthereferencepriceestablishedbythegovernmentfortheprogramin
whichthestudentisenrolled,thatthestudentbeginstomakepayments18monthsaftergraduation,andthatmonthlypaymentsmaynot
exceed10%oftheparticipant'sincomeifrequestedbythestudent.ThepriorgovernmentinChilehadproposedotherchangestothe
studentloanprogramhowever,inthesecondquarterof2014thenewgovernmentthatwasinauguratedonMarch11,2014announcedthe
withdrawalofalloftheprioradministration'shighereducationproposalsanditsintenttosubmitnewbillstotheChileanCongress.We
cannotpredicttheextentor
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outcomeofanychangestothestudentloansystemthatmaybeimplementedinChileorwhetheranysuchchangesmayhaveamaterial
impactonourConsolidatedFinancialStatements.
MaterialGuaranteesOther
InconjunctionwiththepurchaseofUNP,Laureatepledgedalloftheacquiredsharesasaguaranteeofourpaymentsofrentsasthey
becomedue.Intheeventthatwedefaultonanypayment,thepledgeagreementprovidesforaforfeitureoftherelevantpledgedshares.In
theeventofforfeiture,LaureatemayberequiredtotransferthebooksandmanagementofUNPtotheformerowners.
Laureateacquiredtheremaining49%ownershipinterestinUAMBrazilinApril2013.Aspartoftheagreementtopurchasethe49%
ownershipinterest,Laureatepledged49%ofitstotalsharesinUAMBrazilasaguaranteeofourpaymentobligationsunderthepurchase
agreement.Intheeventthatwedefaultonanypayment,theagreementprovidesforaforfeitureofthepledgedshares.
InconnectionwiththepurchaseofFMUonSeptember12,2014,Laureatepledged75%oftheacquiredsharestothirdpartylendersas
aguaranteeofourpaymentobligationsundertheloansthatfinancedaportionofthepurchaseprice.Laureatepledgedtheremaining25%
oftheacquiredsharestothesellersasaguaranteeofourpaymentobligationsunderthepurchaseagreementforthesellernotes.Inthe
eventthatwedefaultonanypaymentoftheloansorsellernotes,thepurchaseagreementprovidesforaforfeitureoftherelevantpledged
shares.UponmaturityandpaymentofthesellernotesinSeptember2017,thesharespledgedtothesellerswillbepledgedtothethird
partylendersuntilfullpaymentoftheloans,whichmatureinApril2021.
AsofSeptember30,2016andDecember31,2015,Laureatehadoutstandinglettersofcredit(LOCs)of$129,696and$126,677,
respectively,whichprimarilyconsistedoftheitemsdiscussedbelow.
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respectively,whichprimarilyconsistedoftheitemsdiscussedbelow.
AsofSeptember30,2016andDecember31,2015,wehad$90,509and$86,599,respectively,postedasLOCsinfavoroftheUnited
StatesDepartmentofEducation(DOE).TheseLOCswererequiredtoallowWalden,Kendall,NewSchool,andSt.Augustinetocontinue
participatingintheDOETitleIVprogram.TheseLOCsarefullycollateralizedwithcashequivalentsandcertificatesofdeposit,whichare
classifiedasRestrictedcashandinvestmentsonourSeptember30,2016ConsolidatedBalanceSheet.
AsofSeptember30,2016andDecember31,2015,wehad$37,309and$36,527,respectively,postedascashcollateralizedLOCs
relatedtotheSpainTaxAudits.ThecashcollateralfortheseLOCswasclassifiedasRestrictedcashandinvestmentsonourSeptember30,
2016ConsolidatedBalanceSheet.
SuretyBondsandOtherCommitments
September30,2016and
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December31,2015,thetotalfaceamountofthesesuretybondswas$12,569and$3,366,respectively.Thesebondsarefullycollateralized
withcash,whichisclassifiedasRestrictedcashandinvestmentsonourSeptember30,2016ConsolidatedBalanceSheet.
Note9.FinancingReceivables
Laureate'sfinancingreceivablesconsistprimarilyoftradereceivablesrelatedtostudenttuitionfinancingprogramswithaninitial
terminexcessofoneyear.Wehaveofferedlongtermfinancingthroughtheexecutionofnotereceivableagreementswithstudentsatsome
ofourinstitutions.OurdisclosuresincludefinancingreceivablesthatareclassifiedinourConsolidatedBalanceSheetsasbothcurrentand
longterm,reportedinaccordancewithASC310,"Receivables."
Laureate'sfinancingreceivablesbalanceswereasfollows:
Financingreceivables
Financingreceivables,netofallowances
September30,
2016
$

$
December31,
2015
37,667 $
(9,254)
28,413 $
32,802
(10,576)
22,226
Wedonotpurchasefinancingreceivablesintheordinarycourseofourbusiness.Wemaysellcertainreceivablesthataresignificantly
pastdue.Nomaterialamountsoffinancingreceivablesweresoldduringtheperiodsreportedherein.
Delinquencyistheprimaryindicatorofcreditqualityforourfinancingreceivables.Receivablebalancesareconsidereddelinquent
whencontractualpaymentsontheloanbecomepastdue.Delinquentfinancingreceivablesareplacedonnonaccrualstatusforinterest
income.Theaccrualofinterestisresumedwhenthefinancingreceivablebecomescontractuallycurrentandwhencollectionofall
remainingamountsdueisreasonablyassured.WerecordanAllowancefordoubtfulaccountstoreduceourfinancingreceivablestotheir
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collectiontrends,currenteconomicconditions,andstudentenrollmentstatus.Eachofourinstitutionsevaluatesitsbalancesforpotential
impairment.Weconsiderimpairedloanstobethosethatarepastdueoneyearorgreater,
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andthosethataremodifiedasatroubleddebtrestructuring(TDR).Theagingoffinancingreceivablesgroupedbycountryportfoliowasas
follows:
Notpastdue
AsofDecember31,2015
Notpastdue
Chile
Other
10,489
4,570
15,059
16,214
31,273
10,404
4,048
14,452
11,159
25,611
Total
1,031
642
1,673
4,721
6,394
1,166
606
1,772
5,419
7,191
11,520
5,212
16,732
20,935
37,667
11,570
4,654
16,224
16,578
32,802
ThefollowingisarollforwardoftheAllowancefordoubtfulaccountsrelatedtofinancingreceivablesfortheninemonthsended
September30,2016and2015,groupedbycountryportfolio:
Chargeoffs
Recoveries
Reclassifications
Provision
Currencyadjustments
Chile
(7,240)
3,525
(2,152)
(387)
Other
Total
$ (3,336) $ (10,576)
104
3,629
(46)
(46)
181 (1,971)
97
(290)
525/620
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Currencyadjustments
Chargeoffs
Recoveries
Reclassifications
Provision
Currencyadjustments
(387)
97
$ (6,254) $ (3,000)
$ (11,063) $ (4,177)
2,977
333
(21)
(25)
(714)
228
1,309
234
$ (7,512) $ (3,407)
(290)
$ (9,254)
$ (15,240)
3,310
(46)
(486)
1,543
$ (10,919)
RestructuredReceivables
ATDRisafinancingreceivableinwhichtheborrowerisexperiencingfinancialdifficultyandLaureatehasgrantedaneconomic
concessiontothestudentdebtorthatwewouldnototherwiseconsider.WhenwemodifyfinancingreceivablesinaTDR,Laureate
typicallyoffersthestudentdebtor
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anextensionoftheloanmaturityand/orareductionintheaccruedinterestbalance.Incertainsituations,wemayoffertorestructurea
financingreceivableinamannerthatultimatelyresultsintheforgivenessofcontractuallyspecifiedprincipalbalances.OuronlyTDRsare
inChile.
ThenumberoffinancingreceivableaccountsandthepreandpostmodificationaccountbalancesmodifiedunderthetermsofaTDR
duringtheninemonthsendedSeptember30,2016and2015wereasfollows:
2016
2015
NumberofFinancing
ReceivableAccounts
PreModification
BalanceOutstanding
559 $
880 $
PostModification
BalanceOutstanding
8,615 $
3,943 $
5,986
3,625
TheprecedingtablerepresentsaccountsmodifiedunderthetermsofaTDRduringtheninemonthsendedSeptember30,2016,
whereasthefollowingtablerepresentsaccountsmodifiedasaTDRbetweenJanuary1,2015andSeptember30,2016thatsubsequently
defaultedduringtheninemonthsendedSeptember30,2016:
Total
NumberofFinancing
ReceivableAccounts
355 $
BalanceatDefault
1,089
ThefollowingtablerepresentsaccountsmodifiedasaTDRbetweenJanuary1,2014andSeptember30,2015thatsubsequently
defaultedduringtheninemonthsendedSeptember30,2015:
Total
NumberofFinancing
ReceivableAccounts
535 $
BalanceatDefault
2,346
Note10.SharebasedCompensation
Sharebasedcompensationexpensewasasfollows:
Fortheninemonths
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Fortheninemonths
endedSeptember30,
2016
2015
Stockoptions,netofestimatedforfeitures
Restrictedstockawards
Totalnoncashstockcompensation
Deferredcompensationarrangement
Total
$ 21,527 $ 16,719
6,897 6,811
28,424 23,530
515 3,692
$ 28,939 $ 27,222
SharebasedDeferredCompensationArrangement
FortheninemonthsendedSeptember30,2016and2015,Laureaterecordedsharebasedcompensationexpenseforthedeferred
compensationarrangementof$515and$3,692,respectively.As
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ofSeptember30,2016andDecember31,2015,thetotalliabilityrecordedforthedeferredcompensationarrangementwas$17,978and
$17,463,respectively,andwasrecordedasacurrentliabilityinDeferredcompensationontheConsolidatedBalanceSheets.Thisliability
wasoriginallypayableonSeptember17,2016however,theparticipantsagreedtoextendtheduedateofthepaymentuntilDecember30,
2016,asdiscussedinNote19,SubsequentEvents.
AnnualEquityAwardGrant
OnMay2,2016,wegranted174and136timebasedrestrictedstockunitsandperformanceshareunits,respectively,withvesting
periodsoverthenextthreeyears.Theperformanceshareunitsvestbasedonachievingapredeterminedannualperformancetarget.In
addition,wealsogranted132TimeOptionswithanexercisepriceequaltothefairmarketvalueofLaureate'sstockatthedateofgrant.
Theseoptionsvestoverathreeyearperiodandhaveacontractualtermof10years.Thetotalgrantdatefairvalueoftheseawardswas
approximately$8,800.
EquityAwardModification
InJune2016,wemodifiedalloutstandingstockoptionsthatweregrantedunderthe2013Plan,exceptforstockoptionsthatwere
grantedduring2016.Theexercisepriceofthemodifiedoptionswasadjustedto$23.20,theestimatedfairmarketvalueofourstockatthe
dateofmodification.Asaresult,wemodifiedtheexercisepriceofapproximately5,338stockoptionsthatweregrantedunderthe2013
Plan.Thismodificationresultedinincrementalstockcompensationexpenseduringthesecondquarterofapproximately$6,000for
optionsthatwerevestedatthemodificationdate.Additionally,approximately$5,000ofincrementalstockcompensationexpenserelated
tooptionsthatwerenotyetvestedatthemodificationdatewillberecognizedovertheremainingvestingperiod.
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Note11.Stockholders'Equity
Thecomponentsofnetchangesinstockholders'equitywereasfollows:
Balanceat
December31,
2015
Noncashstock
compensation
Exerciseofstock
options
Vestingof
restrictedstock
andexerciseof
stockoptions,
netofshares
withheldto
satisfy
minimum
employeetax
withholding
Changesin
noncontrolling
interests
Dividendsto
noncontrolling
interests
Distributionsto
noncontrolling
interestholders
Accretionof
redeemable
noncontrolling
interestsand
equity
Reclassificationof
comprehensive
incometo
redeemable
noncontrolling
interestsand
equity
Netincome(loss)
Foreigncurrency
translation
LaureateEducation,Inc.Stockholders
Sharesof
(Accumulated
common
Additional
deficit)
stock
Common
paidin
retained
stock
capital
earnings
outstanding
133,255 $
533 $ 2,686,451 $
13
Accumulated
other
Total
comprehensive
Noncontrolling
stockholders'
(loss)income
interests
equity
(1,409,548) $
(952,677) $
30,667 $
355,426
28,424
28,424
253
253
26
(1,346)
(1,346)
(2,221)
2,101
(120)
(868)
(868)
(1,447)
(1,447)
3,538
3,538

330,539
(810)
(2,817)
(810)
327,722
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translation
adjustment,net
oftaxof$0
Unrealizedgain
onderivatives,
netoftaxof$0
Minimum
pension
liability
adjustment,net
oftaxof
$1,900
Balanceat
September30,
2016
(46,005)
1,000
(45,005)
5,509
5,509
8,948
8,948
133,301 $
533 $ 2,714,231 $
(1,079,009) $
(984,225) $
28,694 $
680,224
AccumulatedOtherComprehensiveIncome(Loss)
Accumulatedothercomprehensiveincome(AOCI)inourConsolidatedBalanceSheetsincludestheaccumulatedtranslation
adjustmentsarisingfromtranslationofforeignsubsidiaries'financialstatements,theunrealizedlossesonderivativesdesignatedascash
flowhedges,andtheaccumulated
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Note11.Stockholders'Equity(Continued)
netgainsorlossesthatarenotrecognizedascomponentsofnetperiodicbenefitcostforourminimumpensionliability.Thecomponents
ofthesebalanceswereasfollows:
September30,2016
Laureate
Noncontrolling
Interests
Education,Inc.
Foreigncurrency
translationloss
Unrealizedlosses
onderivatives
Minimum
pension
liability
adjustment
Accumulated
other
comprehensive
loss
Total
December31,2015
Noncontrolling
Interests
Laureate
Education,Inc.
(974,426) $
(7,740)
(7,740)
(13,250)
(13,250)
(2,059)
(2,059)
(11,006)
(11,006)
(984,225) $
(1,420) $ (985,645) $
(928,421) $
Total
(1,420) $ (975,846) $
(952,677) $
(2,420) $ (930,841)
(2,420) $ (955,097)
Note12.DerivativeInstruments
mayseektocontrolaportionoftheserisksthroughariskmanagementprogramthatincludestheuseofderivativeinstruments.
makedebtpaymentsissubjecttofluctuationsinthevalueoftheUSDagainstforeigncurrencies,sinceamajorityofouroperatingcash
usedtomakethesepaymentsisgeneratedbysubsidiarieswithfunctionalcurrenciesotherthanUSD.Aspartofouroverallrisk
managementpolicies,Laureatehasattimesenteredintoforeigncurrencyswapcontractsandfloatingtofixedinterestrateswapcontracts.
Inaddition,weoccasionallyenterintoforeignexchangeforwardcontractstoreducetheearningsimpactofothernonfunctionalcurrency
denominatedreceivablesandpayables.
intendtoholdourderivativesuntilmaturity.
Laureatereportsallderivativesatfairvalue.Thesecontractsarerecognizedaseitherassetsorliabilities,dependinguponthe
derivative'sfairvalue.GainsorlossesassociatedwiththechangeinthefairvalueoftheseswapsarerecognizedinourConsolidated
StatementsofOperationsonacurrentbasisoverthetermofthecontracts,unlessdesignatedandeffectiveasahedge.Forswapsthatare
designatedandeffectiveascashflowhedges,gainsorlossesassociatedwiththechangeinfairvalueoftheswapsarerecognizedinour
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componentofInterestexpenseoverthetermoftherelatedhedgeditems.
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Thereportedfairvalueofourderivatives,whichareclassifiedinDerivativeinstrumentsonourConsolidatedBalanceSheets,wereas
follows:
Derivativesdesignatedashedginginstruments:
Currentliabilities:
Interestrateswaps
Interestrateswaps
Derivativesnotdesignatedashedginginstruments:
Currentassets:
Currentliabilities:
Interestrateswaps
Totalderivativeinstrumentassets
Totalderivativeinstrumentliabilities
September30,
2016
$
$
December31,
2015
7,740
8,012
474
16,226
$
$
13,250
238
688
5,662
414
238
20,014
DerivativesDesignatedasHedgingInstruments
InterestRateSwaps
InSeptember2011,Laureateenteredintotwoforwardinterestrateswapagreementswithnotionalamountsof$450,000and$300,000,
respectively.Wehavedesignatedthesederivativesascashflowhedges.Theswapswereassociatedwithexistingdebt,andeffectivelyfix
effectivedateofJune30,2014andmatureonJune30,2017.ThetermsoftheswapsrequireLaureatetopayinterestonthebasisoffixed
ratesof2.61%onthe$450,000notionalamountswapand2.71%onthe$300,000notionalamountswap,andreceiveinterestforboth
swapsonthebasisofthreemonthLIBOR,withafloorof1.25%.ThegainorlossontheseswapsisdeferredinAOCIandwillbe
reclassifiedintoearningsasacomponentofInterestexpenseinthesameperiodduringwhichthehedgedforecastedtransactionswillaffect
earnings.Laureatedeterminestheeffectivenessoftheseswapsusingthehypotheticalderivativemethod.Duringboththeninemonths
endedSeptember30,2016and2015,theamountofgainorlossrecognizedinincomeontheineffectiveportionofderivativeinstruments
designatedashedginginstrumentswas$0,astheswapswere100%effective.Duringthenext12months,approximately$7,700is
expectedtobereclassifiedfromAOCIintoincome.AsofSeptember30,2016andDecember31,2015,theseinterestrateswapshadan
estimatedfairvalueof$7,740and$13,250,respectively.
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Thetablebelowshowsthetotalrecordedunrealizedgain(loss)oftheseswapsinComprehensiveincome(loss).Theimpactof
derivativeinstrumentsdesignatedashedginginstrumentsonComprehensiveincome(loss),InterestexpenseandAOCIwereasfollows:
FortheninemonthsendedSeptember30:
Interestrateswaps
GainRecognizedin
Comprehensive
Income(Loss)
(EffectivePortion)
2016
2015
$ 5,509 $ 2,850
IncomeStatement
Location
LossReclassified
fromAOCIto
Income(Loss)(Effective
Portion)
2016
2015
Interestexpense $ (8,002) $ (7,973)
DerivativesNotDesignatedasHedgingInstruments
USDtoSwissFranc(CHF)ForeignCurrencyForwardSwaps
InMarch2016,LaureateenteredintoaCHFtoUSDdealcontingentforwardexchangeswapagreementwithanotionalamountof
CHF320,000.ThepurposeoftheswapwastomitigateriskofforeigncurrencyexposurerelatedtothesaleofGlionandLesRoches
HospitalityManagementSchools,asdiscussedinNote3,Dispositions.TheforwardcontractmaturedonJune14,2016,theclosingdateof
thesale,resultinginarealizedlossof$10,297.Thedealcontingentforwardexchangeswapwasnotdesignatedasahedgeforaccounting
purposes.
InNovember2015,LaureateenteredintoaUSDtoCHFforeignexchangeforwardswapagreement.Weexecutedaninitialconversion
ofCHF14,000toUS$14,113.InDecember2015,LaureateenteredintotwoUSDtoCHFforeignexchangeforwardswapagreements.We
executedaninitialconversionofCHF16,000toUS$16,470usingtwoswaps.Foraccountingpurposes,theswapswerenotdesignatedas
hedginginstruments.Theseswapsweresettledduringthesecondquarterof2016foranetrealizedlossofapproximately$100.
InMay2015,LaureateenteredintoaUSDtoCHFforeignexchangeforwardswapagreement.Theswapwasintendedtohedgethe
currencyeffectsofthestrengtheningUSDforanticipatedcashoutlaysinCHFoverthesevenmonthssubsequenttotheexecutiondatefor
ataxpayment,alongwithexpectedworkingcapitalrequirements.WeexecutedaninitialconversionofCHF9,700toUS$10,325.The
swapmaturedduringthefirstquarterof2016forarealizedlossof$635.Foraccountingpurposes,theswapwasnotdesignatedasa
hedginginstrument.
USDtoEuroForeignCurrencyForwardSwaps
InconnectionwiththesaleoftheinstitutionsinFrancethatisdiscussedinNote3,Dispositions,LaureateenteredintoEURtoUSD
foreignexchangeforwardcontracts,inordertolockintheamountofUSDproceedsthatwewillreceiveuponclosingofthetransaction.
ThetotalforwardcontractswereEUR200,000,ofwhichEUR100,000wasdealcontingentandEUR100,000wasnotcontingentonthe
dealclosing.ThecontractsdiscussedabovematuredandweresettledbyJuly20,2016,theclosingdateofthesale,resultinginatotal
realizedgainonderivativesof$4,634.
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CLPtoUnidaddeFomento(UF)CrossCurrencyandInterestRateSwaps
Thecrosscurrencyandinterestrateswapagreementsareintendedtoprovideabettercorrelationbetweenourdebtobligationsand
operatingcurrencies.In2010,oneofoursubsidiariesinChileenteredintofourcrosscurrencyandinterestrateswapagreements.Oneof
theswapsmaturesonDecember1,2024,andtheremainingthreematureonJuly1,2025(theCLPtoUFcrosscurrencyandinterestrate
swaps).TheUFisaChileaninflationadjustedunitofaccount.Thefourswapshaveanaggregatenotionalamountofapproximately
$31,000,andconvertCLPdenominated,floatingratedebttofixedrateUFdenominateddebt.TheCLPtoUFcrosscurrencyandinterest
rateswapswerenotdesignatedashedgesforaccountingpurposes.AsofSeptember30,2016andDecember31,2015,theseswapshadan
estimatedfairvalueof$8,012and$5,662,respectively.
THINKInterestRateSwaps
LaureateacquiredTHINKonDecember20,2013,andfinancedaportionofthepurchasepricebyborrowingAUD45,000(US$34,524
atSeptember30,2016)underasyndicatedfacilityagreementintheformoftwotermloansofAUD22,500each.Thetermsofthe
syndicatedfacilityagreementrequiredTHINKtoenterintoaninterestrateswapwithin45daysfromtheagreement'sDecember20,2013
effectivedate,inordertoconvertatleast50%oftheAUD45,000oftermloandebtfromavariableinterestratebasedontheBBSYbid
rate,anAustraliabankrate,toafixedinterestrate.Accordingly,onJanuary31,2014,THINKexecutedaninterestrateswapagreement
withanoriginalnotionalamountofAUD22,500tosatisfythisrequirementandconvertedAUD22,500(US$17,262atSeptember30,
2016)ofthevariableratecomponentofthetermloandebttoafixedinterestrateof3.86%.Thenotionalamountoftheswapdecreases
quarterlybasedonthetermsoftheagreement,andtheswapmaturesonDecember20,2018.Thisinterestrateswapwasnotdesignatedasa
hedgeforaccountingpurposes,andhadanestimatedfairvalueof$474and$414atSeptember30,2016andDecember31,2015,
respectively,whichwasrecordedinDerivativeinstrumentsasalongtermliability.AsdiscussedinNote7,Debt,theTHINKloanfacilities
wereamendedandrestatedinJune2016.Theinterestrateswapagreementsdiscussedabovewerenotchanged.
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ComponentsofthereportedGain(loss)onderivativesnotdesignatedashedginginstrumentsintheConsolidatedStatementsof
Operationswereasfollows:
Fortheninemonths
endedSeptember30,
2016
2015
Unrealized(Loss)Gain
Interestrateswaps
RealizedGain(Loss)
Interestrateswaps
TotalGain(Loss)
Interestrateswaps
Gain(loss)onderivatives,net
(1,514)
(34)
(1,548)
(6,530)
(157)
(6,687)
(8,044)
(191)
(8,235)
(2,072)
(53)
(2,125)
(336)
(157)
(493)
(2,408)
(210)
(2,618)
CreditRiskandCreditRiskRelatedContingentFeatures
Laureate'sderivativesexposeustocreditrisktotheextentthatthecounterpartymaypossiblyfailtoperformitscontractual
obligation.Theamountofourcreditriskexposureisequaltothefairvalueofthederivativewhenanyofthederivativesareinanetgain
position.AsofSeptember30,2016,noneofourderivativeswereinagainposition.
Laureatehaslimiteditscreditriskbyonlyenteringintoderivativetransactionswithhighlyratedmajorfinancialinstitutions.Wehave
notenteredintocollateralagreementswithourderivatives'counterparties.AtSeptember30,2016,oneinstitutionwhichwasratedAa2,
oneinstitutionwhichwasratedA1,oneinstitutionwhichwasratedA2andoneinstitutionwhichwasratedA3bytheglobalratingagency
ofMoody'sInvestorsService,accountedforallofLaureate'sderivativecreditriskexposure.
Laureate'sagreementswithitsderivativecounterpartiescontainaprovisionunderwhichwecouldbedeclaredindefaultonour
derivativeobligationsifrepaymentoftheunderlyingindebtednessisacceleratedbythelenderduetoadefaultontheindebtedness.Asof
September30,2016andDecember31,2015,wehadnotbreachedanydefaultprovisionsandhadnotpostedanycollateralrelatedtothese
agreements.Ifwehadbreachedanyoftheseprovisions,wecouldhavebeenrequiredtosettletheobligationsunderthederivative
agreementsforanamountthatwebelievewouldapproximatetheirestimatedfairvalueof$16,226asofSeptember30,2016and$20,014
asofDecember31,2015.
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Note13.IncomeTaxes
Laureateusestheliabilitymethodtoaccountforincometaxes.Deferredincometaxesreflectthenettaxeffectsoftemporary
differencesbetweenthecarryingamountofassetsandliabilitiesforfinancialreportingpurposesandtheamountsusedforincometax
purposes.Forinterimpurposes,wealsoapplyASC740270,"IncomeTaxesInterimReporting."
Laureate'sincometaxprovisionsforallperiodsconsistoffederal,stateandforeignincometaxes.Thetaxprovisionsforthenine
monthsendedSeptember30,2016and2015werebasedonestimatedfullyeareffectivetaxrates,aftergivingeffecttosignificantitems
relatedspecificallytotheinterimperiods,includingthemixofincomefortheperiodbetweenhighertaxedandlowertaxedjurisdictions.
Laureatehasoperationsinmultiplecountries,manyofwhichhavestatutorytaxrateslowerthantheUnitedStatesoraretaxexempt
entities,andotheroperationsthatarelossmakingentitiesforwhichitisnotmorelikelythannotthatataxbenefitwillberealizedonthe
loss.Generally,lowertaxratesintheseforeignjurisdictionsalongwithLaureate'sintentandabilitytoindefinitelyreinvestforeign
earningsoutsideoftheUnitedStatesresultsinaneffectivetaxratesignificantlylowerthanthestatutoryrateintheUnitedStates.
IncometaxexpensefortheninemonthsendedSeptember30,2016and2015was$35,246and$81,587,respectively.Beforethe
impactofdiscreteitems,theincometaxexpensefortheninemonthsendedSeptember30,2016and2015was$58,717and$35,134,
respectively.AsignificantdriverofthelowertaxexpenseascomparedtopretaxincomefortheninemonthsendedSeptember30,2016is
thenontaxablegainonthesaleofcertainoperationsinEuropethatisincludedinpretaxincome.Discreteitemsrecordedinthe2016and
2015periodsalsoaffectedtheCompany'sincometaxexpense.In2015,theCompanyrecognizedacontingentliabilityofapproximately
$42,100relatedtotheSpanishtaxaudits.Inaddition,in2016theCompanyrecognizedadiscretebenefitofapproximately$7,900related
tothedeferredtaxesincludedwithintheaccountingforthesaleofthehospitalitymanagementschools,andareleaseofanincometax
contingencyrelatedtoPeruofapproximately$21,200.
Note14.Earnings(Loss)PerShare
Laureatecomputesbasicearningspershare(EPS)bydividingincomeavailabletocommonshareholdersbytheweightedaverage
numberofcommonsharesoutstandingforthereportingperiod.DilutedEPSreflectsthepotentialdilutionthatwouldoccurifsharebased
compensationawards/arrangementsorcontingentlyissuableshareswereexercisedorconvertedintocommonstock.Tocalculatethe
dilutedEPS,thebasicweightedaveragenumberofsharesisincreasedbythedilutiveeffectofstockoptions,restrictedstock,andother
sharebasedcompensationarrangementsdeterminedusingthetreasurystockmethod.
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Note14.Earnings(Loss)PerShare(Continued)
Thefollowingtablessummarizethecomputationsofbasicanddilutedearningspershare:
2016
2015
Numeratorusedinbasicanddilutedearnings(loss)percommonshare:
Income(loss)fromcontinuingoperationsattributabletoLaureateEducation,Inc.
Accretionofredemptionvalueofredeemablenoncontrollinginterestsandequity
Adjustedfor:accretionrelatedtononcontrollinginterestsandequityredeemable
atfairvalue
Distributedandundistributedearningstoparticipatingsecurities
Netincome(loss)availabletocommonstockholders
Denominatorusedinbasicanddilutedearnings(loss)percommonshare:
Basicweightedaveragesharesoutstanding
Effectofdilutivestockoptions
Effectofdilutiverestrictedstockunits
Dilutiveweightedaveragesharesoutstanding
$ 330,539 $ (299,581)
3,538
(9,602)
Basicearnings(loss)pershare
Dilutedearnings(loss)pershare
(201)
6,637
(104)
$ 333,772 $ (302,546)
133,291 132,941
858
68
134,217 132,941
$
2.52 $
(2.28)
$
2.48 $
(2.28)
ThefollowingtablesummarizesthenumberofstockoptionsandsharesofrestrictedstockthatwereexcludedfromthedilutedEPS
calculationsbecausetheeffectwouldhavebeenantidilutive:
Forthenine
monthsended
September30,
2016
2015
Stockoptions
Restrictedstock
2,931 10,323
131
229
Corporate
TransactionsbetweenLaureateandSantaFeUniversityofArtsandDesign(SFUAD)
During2014,LaureateenteredintoanewsharedservicesagreementwithSFUADthatreplacedthesharedservicesagreement
previouslyenteredintoin2009.LaureateprovidesSFUADwithcertainmanagementconsulting,legal,tax,finance,accounting,treasury,
humanresources,andnetworkentryservices.Thesharedservicesagreementhadatermoffiveyears.AsofSeptember30,2016,Laureate
recordedaRelatedpartyreceivablefromSFUADof$211pursuanttothesharedservicesagreement.AsofDecember31,2015,Laureate
hadrecordedareceivablefromSFUADof$658relatedtothesharedservicesagreement,whichwassubsequentlycollected.
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Duringthethirdquarterof2013,fourteenLaureateinstitutionsenteredintopartnershipagreementswithSFUAD(theGlobal
Partnershipagreements).TheseGlobalPartnershipagreementshaveaninitialtermoffiveyearsandprovideLaureatestudentswith
educationalopportunitiestostudycertainacademicprogramsatSFUAD.Underthetermsoftheseagreements,thepartneringLaureate
institutionscommittopaySFUADanannualamounteachcalendaryear,whichSFUADthenbillstotheLaureateinstitutionsona
quarterlybasis.TheGlobalPartnershipagreementscanbeunilaterallycanceledbyeitherSFUADortheLaureateinstitutionswithatleast
sixmonths'priorwrittennoticehoweveranyremainingunpaidcommitmentamountforthatcalendaryearisstillcontractuallyowedto
SFUAD.AsofSeptember30,2016andDecember31,2015,LaureaterecordedarelatedpartypayabletoSFUADof$490and$193,
respectively,forunpaidcommitmentsthatweareobligatedtopaytoSFUADundertheGlobalPartnershipagreements.OnMay18,2016,
SFUADannouncedthatitisbeingacquiredbyaprivateeducationproviderwithaglobalnetworkofcollegesanduniversitieswithafocus
onartanddesigneducation.Thetransactionisexpectedtocloseattheendof2016.Untilthesaleiscompleted,SFUADwillremaina
relatedpartyofLaureatesincebothentitiesarecommonlyownedbyWengen.
TransactionsbetweenLaureateandEntitiesAffiliatedwithExecutiveOfficers,DirectorsandWengen
OnDecember16,2015,Laureateenteredintoatermloanagreementwithitsparent,Wengen,forapproximately$11,000.InJune
2016,wemadeascheduledprincipalpaymentof$3,500.Inthethirdquarterof2016,Laureatemadeanadditionalprepaymentonthis
loanofapproximately$5,000.AsofSeptember30,2016andDecember31,2015,theprincipalbalanceoutstandingwasapproximately
$2,500and$11,000,respectively.
WehaveagreementsinplacewithI/ODataCenters,LLC(I/O)pursuanttowhichI/Oprovidesmodulardatacentersolutionstothe
Company.OneofourdirectorsisalsoadirectorofI/O.Additionally,thisdirector,ourCEO,andSterlingPartners(aprivateequityfirmco
foundedbythedirector,ourCEO,andothers)maintainanownershipinterestinI/O.Duringeachoftheninemonthperiodsended
September30,2016andSeptember30,2015,weincurredcostsfortheseagreementsofapproximately$700and$400,respectively.
Europe
Morocco
TransactionsbetweenLaureateandNoncontrollingInterestHolderofLaureateSomedEducationHoldingSA(LSEH)
LSEHis60%ownedandconsolidatedbyLaureateandistheentitythatoperatesUniversitInternationaledeCasablanca,our
institutioninMorocco.The40%noncontrollinginterestholderofLSEHhasmadeloanstoLSEH,andasofDecember31,2015,wehada
relatedpartypayableof$13,354tothenoncontrollinginterestholderfortheoutstandingbalanceofandaccruedinterestontheseloans,of
which$9,305and$4,049wererecordedascurrentandnoncurrent,respectively.
During2016,thematuritydateofaloanmadebythenoncontrollinginterestholderin2014wasextendedfromOctober2015toApril
2017.Theoutstandingbalanceofthisloan,includingaccrued
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interest,atthetimeoftheextensionwasMoroccanDirhams(MAD)45,028(US$4,613atSeptember30,2016).Thisloanbearsaninterest
rateof4.5%perannum.
Duringthesecondquarterof2016,thenoncontrollinginterestholdermadeanadditionalloantoLSEHforMAD4,800(US$492at
theloandate),whichmaturesinDecember2017andbearsinterestat4.5%perannum.DuringthequarterendedSeptember30,2016,the
noncontrollinginterestholdermadeanadditionalloantoLSEHforMAD3,200(US$324attheloandate),whichalsomaturesin
December2017andbearsinterestat4.5%perannum.Theproceedsfromtheseloanshavebeenincludedinthefinancingactivitiessection
oftheConsolidatedStatementofCashFlowsasNoncontrollinginterestholder'sloantosubsidiaries.Asthe60%majorityowner,Laureate
hasalsomadeloanstoLSEHfor60%ofthetotalamountborrowed,whicheliminateinconsolidation.
AsofSeptember30,2016,wehadtotalrelatedpartypayablesof$14,621tothenoncontrollinginterestholderofLSEHforthe
outstandingbalanceontheseloansplusaccruedinterest,ofwhich$13,797and$824wasrecordedascurrentandnoncurrent,respectively.
AMEA
China
TransactionsbetweenChinabusinessesandNoncontrollingInterestHoldersofHunanInternationalEconomicsUniversity(HIEU)
AportionofrealpropertythatHIEUhaspaidfor,includinglandandbuildings,ismortgagedascollateralforcorporateloansthatthe
entitycontrolledbycertainnoncontrollinginterestholdersofHIEUhasenteredintowiththirdpartybanks.InDecember2013,the
noncontrollinginterestholdersofHIEUsignedanagreementwithLaureateandcommittedto:(1)removeallencumbrancesonHIEU'sreal
propertynolaterthanSeptember30,2014and(2)causetheentitytocompletethetransferoftitlerelatingtotheencumberedrealproperty
toHIEUnolaterthanDecember31,2014.Underthetermsofthisagreement,thenoncontrollinginterestholdersalsoagreedtopayany
andalltransfertaxes,feesandothercoststhatarerequiredinconnectionwiththeremovaloftheencumbrancesandthetransferoftitles,
whichareestimatedtobeapproximately$2,000.Ascollateralfortheirperformanceundertheagreement,thenoncontrollinginterest
holderspledgedtoLaureatetheir30%equityinterestinthesponsoringentityofHIEU.ThenoncontrollinginterestholdersofHIEUhave
notcompletedtheircommitmenttoremovetheencumbrancesovertherealpropertyorcompletedthetransferoftherealproperty.Under
thetermsoftheagreement,Laureatehastherighttoreceivethesaleproceedsofthenoncontrollinginterestholders'30%equityinterest,
uptotheamountowingtoitundertheequitypledge,inprioritytoothercreditorsofthenoncontrollinginterestholders.OnFebruary22,
2016,certaincreditorsofthenoncontrollinginterestholdersinitiatedanenforcementprocessagainstthenoncontrollinginterestholders.
Thecreditorshaverequestedthecourttoauctionaportionoftheequityinterestofthenoncontrollinginterestholders.Thecourthas
appointedanappraisertoperformavaluationoftheequityinterest,andacourtauctionmaytakeplaceduring2016.Astheregistered
pledgee,Laureatehastherighttoreceivethesaleproceedsofthenoncontrollinginterestholders'equityinterest,uptotheamountowing
toitundertheequitypledge,inprioritytoothercreditorsofthenoncontrollinginterestholders.Managementiscurrentlyevaluating
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itsoptionsinthismatter.AsofSeptember30,2016andDecember31,2015,Laureate'snetcarryingvalueoftheencumberedrealproperty
wasapproximately$12,700and$13,700,respectively.
InadditiontotheperformanceobligationsintheDecember2013agreementfortheencumberedpropertyasdescribedabove,the
noncontrollinginterestholdersarerequiredunderthe2009HIEUpurchaseagreement(PA)toobtainthetitlesofcertainotherbuildingsfor
HIEU.Thenoncontrollinginterestholdersarealsoobligatedtopayanyandallgovernmentfeesandothercosts,whichareestimatedtobe
approximately$4,200,requiredinconnectionwithobtainingthetitlesforthesebuildings.ThesebuildingsarenotencumberedandHIEU
hastitletotheland.ThenoncontrollinginterestholdersalsooccupyandconductothernonHIEUbusinessinfivebuildingsthatwehave
titleto,anddonotpayrenttoHIEUfortheuseofthesefacilities.
Dubai
TransactionsbetweenLaureateandLaureateObeikanLtd.
LaureateObeikanLtd.isaconsolidatedjointventureinDubaithatis50%ownedbyLaureate.Duringthefirstquarterof2016,we
enteredintoanagreementfortheassignmentofamountsduetoLaureateObeikanLtd.fromHigherInstituteforPaperandIndustrial
Technologies(HIPIT),athirdparty,toObeikanPaperIndustries(OPI),arelatedpartysubsidiaryofthenoncontrollinginterestholderof
LaureateObeikanLtd.,intheamountofSAR14,279(US$3,806atSeptember30,2016)assettlementofamountsowedfromOPItoan
affiliateofHIPIT.PaymentisdueinfiveinstallmentsofSAR2,856(US$761atSeptember30,2016)beginninginMarch2016through
July2016.AsofSeptember30,2016,theamountreceivablewas$3,040.InstallmentstotalingSAR2,400(US$640atSeptember30,
2016)werepaidduring2016.Thesereceivablesarefullyreserved.
Note16.LegalandRegulatoryMatters
Laureateissubjecttolegalproceedingsarisingintheordinarycourseofbusiness.Inmanagement'sopinion,wehaveadequatelegal
defenses,insurancecoverage,and/oraccruedliabilitieswithrespecttotheeventualityoftheseactions.Managementbelievesthatany
settlementwouldnothaveamaterialimpactonLaureate'sfinancialposition,resultsofoperations,orcashflows.
UnitedStatesPostsecondaryEducationRegulation
TheCompany,throughitsGPSsegment,operatesfourpostsecondaryeducationalinstitutionsintheUnitedStatesandprovides
contractualservicestoanother(U.S.Institutions).TheU.S.Institutionsaresubjecttoextensiveregulationbyfederalandstate
governmentalentitiesaswellasaccreditingbodies.TheHigherEducationAct(HEA),andtheregulationspromulgatedthereunderbythe
DOE,subjecttheU.S.Institutionstoongoingregulatoryreviewandscrutiny.TheU.S.Institutionsmustalsocomplywithamyriadof
requirementsinordertoparticipateinTitleIVfederalfinancialaidprogramsundertheHEA(TitleIVprograms).
Inparticular,toparticipateintheTitleIVprogramsundercurrentlyeffectiveDOEregulations,aninstitutionmustbeauthorizedto
offeritseducationalprogramsbytherelevantstateagenciesinthestatesinwhichitislocated,accreditedbyanaccreditingagencythatis
recognizedbytheDOE,andalsocertifiedbytheDOE.Indeterminingwhethertocertifyaninstitution,theDOEcloselyexamines
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aninstitution'sadministrativeandfinancialcapabilitytoadministerTitleIVprogramfunds.InMarch2016,inconnectionwithitsreview
ofourfinancialstatementsfollowingourconversiontoaDelawarepublicbenefitcorporation,theDOEsentusaletterrequiringusto
increaseourexistingletterofcredittotheamountof$90,509forKendallCollege,St.Augustine,WaldenUniversityandNewSchoolof
ArchitectureandDesign,whichisequaltoapproximately10%oftheTitleIVprogramfundsthattheseschoolsreceivedduringthemost
recentlycompletedfiscalyear.Intheletter,theDOEalsohasrequiredustocontinuetocomplywithadditionalnotificationandreporting
requirements.Wehaveprovidedtheincreasedletterofcreditandarecomplyingwiththeadditionalnotificationandreporting
requirements.
Laureate'sfailuretomeetstandardsoffinancialresponsibilityforthefiscalyearendedDecember31,2015,wearerequiredto
either:(1)increaseourletterofcredittoanamountequalto50%oftheTitleIV,HEAfundsreceivedbyLaureateinthefiscalyearended
December31,2015(calculatedbytheDOEtobe$351,995)andqualifyasafinanciallyresponsibleinstitutionor(2)increaseourletterof
credittoanamountequalto15%(calculatedbytheDOEtobe$105,599)oftheTitleIV,HEAfundsreceivedbyLaureateinthefiscalyear
endedDecember31,2015andremainprovisionallycertifiedforaperiodofuptothreecompleteawardyears.Intheletter,theDOEalso
hasrequiredustocontinuetocomplywithadditionalnotificationandreportingrequirements.Wehavechosentoincreaseourletterof
creditto$105,599andtoremainprovisionallycertifiedforaperiodofuptothreecompleteawardyearsandhaveobtainedreplacement
lettersofcreditforsuchamount.SeeNote8,CommitmentsandContingencies,forfurtherdescriptionoftheoutstandingDOElettersof
creditasofSeptember30,2016andDecember31,2015.
PursuanttoDOErequirements,theU.S.InstitutionsconductperiodicreviewsandauditsoftheircompliancewiththeTitleIVprogram
requirements.NoneoftheU.S.Institutionshavebeennotifiedofanysignificantnoncompliancethatmightresultinlossofitscertification
toparticipateintheTitleIVprograms.Managementbelievesthattherearenomattersofregulatorynoncompliancethatcouldhavea
materialeffectontheaccompanyingConsolidatedFinancialStatements.
Changesinornewinterpretationsofapplicablelaws,DOErules,orregulationscouldhaveamaterialadverseeffectontheU.S.
Institutions'eligibilitytoparticipateintheTitleIVprograms.OnOctober29,2010,theDOEpublishedaFinalRuleamendingits
regulationsinanumberofareasrelatedtoaninstitution'seligibilitytoparticipateintheTitleIVprograms.Mostoftheseregulatory
changesbecameeffectiveJuly1,2011,withothersbecomingeffectiveasofJuly1,2012.OnOctober30,2014,theDOEissuedafinalrule
establishingspecificstandardsforpurposesoftheHEArequirementthat,tobeeligibleforTitleIVprogramfunds,certainprogramsof
studypreparestudentsfor"gainfulemploymentinarecognizedoccupation,"whichbecameeffectiveJuly1,2015.Thefinalregulations
definethisconceptusingtworatios,onebasedonannualdebttoannualearnings("DTE")andanotherbasedonannualdebtto
discretionaryincome("DTI")ratio.Underthefinalregulations,aneducationalprogramwithaDTEratioatorbelow8%oraDTIratioator
below20%isconsidered"passing."AneducationalprogramwithaDTEratiogreaterthan8%butlessthanorequalto12%oraDTIratio
greaterthan20%butlessthanorequalto30%isconsideredtobe"inthezone."AneducationalprogramwithaDTEratiogreaterthan
12%andaDTIratiogreaterthan30%isconsidered"failing."Aneducationalprogramwillceasetobeeligibleforstudentstoreceive
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TitleIVprogramfundsifitsDTEandDTIratiosarefailingintwooutofanythreeconsecutiveawardyearsorifbothofthoseratesare
failingorinthezoneforfourconsecutiveawardyears.InJanuary2017,theDOEissuedtoinstitutionsfinalDTErates.AmongWalden
University,KendallCollegeandNewSchoolofArchitectureandDesign,wehadoneprogramfailandfiveinthezone.St.Augustinehad
noprogramsthatfailedorwereinthezone.Wearecurrentlyexaminingandimplementingoptionsforeachoftheseprogramsandtheir
students.
BetweenFebruaryandMay2014,theDOEconvenedanegotiatedrulemakingcommitteetoprepareproposedregulationstoaddress
programintegrityandimprovementissuesfortheTitleIVprograms("ProgramIntegrityRulemaking")includingbutnotlimitedto
updatingeligibilitystandardsforstudentandparentborrowersunderthefederalDirectPLUSloanprogram,cashmanagementofTitleIV
funds,stateauthorizationforprogramsofferedthroughdistanceeducationandstateauthorizationforforeignlocationsofinstitutions.As
thisnegotiatedrulemakingcommitteedidnotreachconsensusonalloftheissuesbeforeit,onAugust8,2014,theDOEpublisheda
proposedruleforpubliccommentregardingfederalDirectPLUSloanprogrameligibility,followingwhichafinalrulewasissuedon
October23,2014andthattookeffectJuly1,2015.OnOctober30,2015,theDOEpublishedfinalprogramintegrityregulationsregarding
cashmanagementofTitleIVfunds,theeligibilityofrepeatedcourseworkforpurposesofastudent'senrollmentstatusandreceiptofTitle
IVfunds,andthemeasurementofprogramsincredithoursversusclockhoursforTitleIVpurposes.Amajorityoftheprovisionsofthe
regulationstookeffectonJuly1,2016,andotherswilltakeeffectonlaterdatesin2016and2017.Thefinalregulationsconcerningcash
managementrequire,amongotherthings,thatinstitutionssubjecttoheightenedcashmonitoringproceduresfordisbursementsofTitleIV
fundsmust,effectiveJuly1,2016,paytostudentsanyapplicableTitleIVcreditbalancesbeforerequestingsuchfundsfromtheDOE.On
December19,2016,theDOEpublishedfinalregulationsregardingstateauthorizationforprogramsofferedthroughdistanceeducation
andstateauthorizationforforeignlocationsofinstitutions.Amongotherprovisions,thesefinalregulationsrequirethataninstitution
participatingintheTitleIVfederalstudentaidprogramsandofferingpostsecondaryeducationthroughdistanceeducationbeauthorized
byeachstateinwhichtheinstitutionenrollsstudents,ifsuchauthorizationisrequiredbythestate.TheDOEwouldrecognize
authorizationthroughparticipationinastateauthorizationreciprocityagreement,iftheagreementdoesnotpreventastatefromenforcing
itsownlaws.Thefinalregulationsalsorequirethatforeignadditionallocationsandbranchcampusesbeauthorizedbytheappropriate
foreigngovernmentagencyandifatleast50%ofaprogramcanbecompletedatthelocation/branch,beapprovedbytheinstitution's
accreditingagencyandbereportedtothestatewherethemaincampusislocated.Thefinalregulationswouldalsorequireinstitutionsto:
documentthestateprocessforresolvingcomplaintsfromstudentsenrolledinprogramsofferedthroughdistanceeducationor
correspondencecoursesandmakecertainpublicandindividualizeddisclosurestoenrolledandprospectivestudentsabouttheirdistance
educationprograms.ThesefinalregulationsareeffectiveJuly1,2018.
DuringaseparatenegotiatedrulemakingcommitteeprocessthatoccurredbetweenJanuaryandApril2014,theDOEproposeddraft
regulatorylanguagetoimplementchangestotheJeanneCleryDisclosureofCampusSecurityPolicyandCampusCrimeStatisticsAct
("CleryAct")requiredbyMarch2013amendmentstotheViolenceAgainstWomenAct.Atthefinalmeetingofthenegotiatedrulemaking
committeeonApril1,2014,thecommitteereachedconsensusontheDepartment'sproposedregulations,whichweresubsequently
publishedfora30daypubliccommentperiodon
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June20,2014.OnOctober20,2014,theDOEpublishedthefinalruleamendingitsCleryActregulations,whichwaseffectiveJuly1,
2015.BetweenFebruaryandApril2015,theDOEconvenedanothernegotiatedrulemakingcommitteetoprepareregulationstoestablish
anewPayasYouEarnrepaymentplanforthosenotcoveredbytheexistingPayasYouEarnRepaymentPlanintheFederalDirectLoan
Program,andalsotoestablishproceduresforFederalFamilyEducationLoanProgramloanholderstousetoidentifyU.S.military
servicememberswhomaybeeligibleforalowerinterestrateontheirfederalstudentloansundertheServicemembersCivilReliefAct.The
committeereachedconsensusduringitsfinalsessiononasetofproposedregulations.TheDOEpublishedproposedregulationsfor
commentonJuly9,2015,andonOctober30,2015,issuedfinalregulations.ThePayasYouEarnRepaymentPlanprovisionstookeffect
inDecember2015andamajorityoftheremainingprovisionsoftheregulationstookeffectonJuly1,2016.InSeptember2015,President
ObamaannouncedtheDOE'slaunchofarevised"CollegeScorecard"websitethatprovidesaccesstonationaldataoncollegecosts,
graduationrates,debtandpostcollegeearnings,includingdataregardingourU.S.Institutions.ThisdatawasupdatedinSeptember2016.
Inaddition,inNovember2015,theDOEissuedcomparativedataregardingDOErecognizedaccreditationagenciesandtheinstitutions
theyaccredit,whichincludemediandebt,repaymentrates,completionratesandmedianearnings.Totheextentsuchdatagivesriseto
negativeperceptionsofourU.S.Institutionsorofproprietaryeducationalinstitutionsgenerally,ourreputationandbusinesscouldbe
materiallyadverselyaffected.
OnJune16,2016,theDOEpublishedaproposedruleforpubliccommentthat,amongotherprovisions,establishesnewstandardsand
processesfordeterminingwhetheraDirectLoanProgramborrowerhasadefensetorepayment(DTR)onaloanduetoactsoromissionsby
theinstitutionatwhichtheloanwasusedbytheborrowerforeducationalexpenses.Theproposedrule,amongothertopics,addresses
(i)thestandardsforthepurposeofdeterminingwhetheraborrowercanestablishaDTRbasedonanactoromissionofaninstitution,
(ii)thetimeperiodsforavailabilityofDTRclaims(iii)theregulatoryframeworkbywhichtheDOEwillreceive,reviewanddeterminethe
veracityofDTRclaims,andunderwhichtheDOEmayrecoverfrominstitutionsanylossesincurredfromsuccessfulDTRclaims.The
proposedrulealsowouldrevisetheDOE'sgeneralstandardsoffinancialresponsibilitytoincludevariousactionsandeventsthatwould
requireinstitutionstoprovidetheDOEwithirrevocablelettersofcreditorequivalentcashdeposits,incertaincasesautomaticallyand
othersatthediscretionoftheDOE.Sucheventsandactionsincludebutarenotlimitedto(i)DTRclaims,oraudits,investigationsor
claimsbygovernmentalauthoritiesexceedingcertainfinancialthresholds(ii)certaintypesoflawsuitsagainstaninstitution(iii)the
institutionbeingplacedbyitsaccreditingagencyonprobationorissuedashowcauseorder,orplacedonanaccreditationstatusthat
posesanequivalentorgreaterrisktoitsaccreditation(iv)theinstitution'sviolationofaloanagreementorothercreditobligations(v)the
institutionderivingmorethan90%ofitsrevenuesforanysinglefiscalyearfromTitleIVprogramfunds(vi)apubliclytradedinstitution
beingwarnedbytheSECthattradingonitsstockmaybesuspended,orthestockisinvoluntarilydelisted(vii)apubliclytraded
institutiondisclosingorbeingrequiredtodiscloseinaSECreportcertainjudicialoradministrativeproceedings(viii)apubliclytraded
institutiondisclosingorbeingrequiredtodiscloseinareportfiledwiththeSECajudicialoradministrativeproceedingstemmingfroma
complaintfiledbyapersonorentitythatisnotpartofaStateorFederalaction(unlesstheinstitutionsatisfactorydemonstratestotheDOE
whythedisclosedmatterdoesnotconstituteamaterialevent)(ix)apubliclytradedinstitutionfailingtofiletimelyarequiredannualor
quarterlyreportwiththeSEC(x)theexchangeon
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whichthestockofapubliclytradedinstitutionistradednotifiestheinstitutionthatitisnotincompliancewithexchangerequirements
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whichthestockofapubliclytradedinstitutionistradednotifiestheinstitutionthatitisnotincompliancewithexchangerequirements
(xi)theperformanceofaninstitution'seducationalprogramsundertheDOE's"gainfulemployment"regulation(xii)foraninstitution
whosecompositescoreoffinancialresponsibilityislessthan1.5,anywithdrawalofequityfromtheinstitutionbyanymeans,including
bydeclaringadividend(xiii)subjecttolimitedexceptions,aninstitutionhaving,asitstwomostrecentofficialcohortdefaultrates,arate
of30percentorhigher(xiv)significantfluctuationsinDirectLoanProgramorPellGrantamountsreceivedbytheinstitution
(xv)citationsbyaStatelicensingorauthorizingagencyregardingtheinstitutionfailingStateoragencyrequirements(xvi)theinstitution
failingtomeetafinancialstresstesttobedevelopedoradoptedbytheDOE(xvii)theinstitutionoritscorporateparenthasanon
investmentgradebondorcreditrating(xviii)ascalculatedbytheDOE,theinstitutionhavinghighannualdropoutratesand(xix)any
adverseeventreportedbytheinstitutiononaForm8KfiledwiththeSEC.Aninstitutionrequiredtopostaletterofcreditalsowouldbe
requiredtodisclosethatfacttoallstudentsandprospectivestudents.Theproposedrulealsowouldimplementanewloanrepaymentrate
methodologyforonlyproprietaryinstitutions,whichifequaltoorlessthanzeropercentwouldrequireaproprietaryinstitutiontodisclose
suchratesalongwithawarningonitswebsite,inalladvertisingandpromotionalmaterialsandtoprospectiveandenrolledstudents.
CommentstotheproposedruleweredueonorbeforeAugust1,2016.OnNovember1,2016,theDOEpublishedthefinalregulations,
whichwilltakeeffectJuly1,2017.IfwearerequiredtorepaytheDOEforanysuccessfulDTRclaimsbystudentswhoattendedourU.S.
Institutions,orwearerequiredtoobtainadditionallettersofcreditorincreaseourcurrentletterofcredit,itcouldmateriallyaffectour
business,financialconditionsandresultsofoperations.WearecurrentlyassessingtheimpactofthesefinalregulationsonourU.S.
Institutions.
OnDecember3,2014,theDOEpublishedproposedregulationsontheteacherpreparationprogramaccountabilitysystemunderthe
HEA,andadditionallyproposedamendmentsonteacherpreparationprogrameligibilityforTEACHGrantparticipation.InOctober2016,
theDOEpublisheditsfinalregulationsregardingteacherpreparationprogramsandTEACHGranteligibility.Wearecurrentlyassessing
theeligibilityofWaldenUniversitytocontinuetoaccessTEACHGrantfundsunderthenewregulations.
WeareunabletopredictwhatadditionalactionstheDOEmaytake,ortheeffectofitsrulemakingprocessesonourbusiness.
Additionally,theUnitedStatesCongresshasinitiatedaseriesofhearingsregardingitsprospectivereauthorizationoftheHEAand
potentialchangestotheTitleIVprograms.AnyneworchangedregulationsfromtheDOE,orchangestotheHEAandTitleIVprograms,
couldreduceenrollments,impacttuitionprices,increasethecostofdoingbusinessandotherwisehaveadditionalmaterialadverseeffects
onthefinancialcondition,cashflowsandoperationsofsomeoralloftheU.S.Institutions.
enforcementactions.InOctober2014,theDOEannouncedthatitwillbeleadinganinteragencytaskforcecomposedoftheDOE,theU.S.
FederalTradeCommission(theFTC),theU.S.DepartmentsofJustice,TreasuryandVeteransAffairs,theConsumerFinancialProtection
Bureau(CFPB),theSecuritiesandExchangeCommission(SEC),andnumerousstateattorneysgeneral.TheFTChasalsorecentlyissued
civilinvestigativedemandstoseveralotherU.S.proprietaryeducationalinstitutions,whichrequiretheinstitutionstoprovidedocuments
and
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informationrelatedtotheadvertising,marketing,orsaleofsecondaryorpostsecondaryeducationalproductsorservices,oreducational
accreditationproductsorservices.TheCFPBhasalsoinitiatedaseriesofinvestigationsagainstotherU.S.proprietaryeducational
institutionsallegingthatcertaininstitutions'lendingpracticesviolatevariousconsumerfinancelaws.Inaddition,attorneysgeneralin
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institutionsallegingthatcertaininstitutions'lendingpracticesviolatevariousconsumerfinancelaws.Inaddition,attorneysgeneralin
severalstateshavebecomemoreactiveinenforcingconsumerprotectionlaws,especiallyrelatedtorecruitingpracticesandthefinancing
ofeducationatproprietaryeducationalinstitutions.Inaddition,severalstateattorneysgeneralhaverecentlypartneredwiththeCFPBto
reviewindustrypractices.Ifourpastorcurrentbusinesspracticesarefoundtoviolateapplicableconsumerprotectionlaws,orifweare
foundtohavemademisrepresentationstoourcurrentorprospectivestudentsaboutoureducationalprograms,wecouldbesubjectto
monetaryfinesorpenaltiesandpossiblelimitationsonthemannerinwhichweconductourbusiness.
StateHigherEducationAuthorizationandProgramReviewforWaldenUniversity
Stateauthorizationregulationsgenerallyrequirethatpostsecondaryeducationinstitutionsthatofferonlineprogramstostudents
withintheirstateobtainapproval,anexemptionorotherrequiredstatusbytheappropriatestatehighereducationagencyinordertooffer
thoseprograms.Inrecentyears,morethan30stateshavevoluntarilyenteredintoStateAuthorizationReciprocityAgreements(SARA)that
establishstandardsforinterstateofferingofpostsecondarydistanceeducationcoursesandprograms.Ifaninstitution'shomestate
participatesinSARAandauthorizestheinstitutiontoprovidedistanceeducationinaccordancewithSARAstandards,thentheinstitution
neednotobtainadditionalauthorizationsfordistanceeducationfromanyotherSARAmemberstate.TheSARAparticipation
requirementsandprocessareadministeredbythefourregionalhighereducationcompactsintheUnitedStates,includingtheMidwestern
HigherEducationCompact(theMHEC),whichadministersSARAfortheregionthatincludesMinnesota,whereWaldenUniversityis
domiciled.WaldenUniversitysubmittedanapplicationtoparticipateinSARAtotheMinnesotaOfficeofHigherEducation(MOHE),a
memberofMHEC.AsofJune2015,WaldenUniversitywasapprovedtoparticipateinSARA,effectivethroughJune2,2016.
OnApril8,2016,theMOHEnotifiedWaldenUniversitythatitsrenewalapplicationtoparticipateinSARAhadbeendeniedbecause
WaldenUniversitydoesnothaveaninstitutionalfederalfinancialcompositescorecomputedbytheU.S.DepartmentofEducationin
connectionwithWaldenUniversity'sparticipationinfederalTitleIVfinancingprogramsof1.5orhigher,althoughtheinstitutional
financialcompositescorecalculationmadebyWaldenUniversityinaccordancewiththeU.S.DepartmentofEducation'spublished
formulaandbasedonWaldenUniversity's2015auditedfinancialstatementsis3.0.Intheabsenceofaninstitutionlevelfinancial
compositescorecalculatedbytheU.S.DepartmentofEducation,MOHEhasviewedLaureate'sfinancialcompositescorecalculatedbased
onitsglobaloperations,whichdoesnotexceed1.5,asattributabletoWaldenUniversity.
participatesinordertoseektoenrollnewstudentswhoresideinthosestates.Asofthedateofissuanceofthesefinancialstatements,
WaldenUniversityhasregainedauthorization,
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exemptionorotherrequiredstatusinallofthe31SARAstatesinwhichithasbeenaSARAparticipant.
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Minnesota,MOHEisinitiatingafullreviewofdoctoralprogramsforinstitutionsregisteredinMinnesota.
BrazilianRegulation
ThroughourLatAmsegment,weoperate13postsecondaryeducationinstitutionsinBrazil.Theresponsibilityofthefederal
governmentinregulating,monitoringandevaluatinghighereducationinstitutionsandundergraduateprogramsisexercisedbythe
BrazilianMinistryofEducation(theMEC),alongwithanumberofrelatedfederalagenciesandoffices.TheMECisthehighestauthority
qualityandstandards,confirmdecisionsregardingtheaccreditationandreaccreditationofinstitutionsofhighereducationconfirm
evaluationcriteriaconfirmregulatoryproposalsandissueandimplementrulesthatgovernthedeliveryofhighereducationservices,
includingaspectslikeadherencebyhighereducationinstitutionstotherulesforfederaleducationsubsidyprogramslikePronatec,Prouni
andtheFundodeFinanciamentoaoEstudantedoEnsinoSuperior(theFIESprogram,orFIES),throughoneormoreofwhichallofour
institutionsenrollstudents.Additionally,BrazilianlawrequiresthatalmostallchangeofcontroltransactionsbyLaureatereceivethe
priorapprovaloftheBrazilianantitrustauthority,theConselhoAdministrativodeDefesaEconmica(CADE).
Asnotedabove,Laureate'sinstitutionsinBrazilparticipateintheFIESprogram,whichtargetsstudentsfromlowsocioeconomic
backgroundsenrolledatprivatepostsecondaryinstitutions.Eligiblestudentsreceiveloanswithbelowmarketinterestratesthatare
requiredtoberepaidafteran18monthgraceperiodupongraduation.FIESpaysparticipatingeducationalinstitutionstaxcreditswhich
canbeusedtopaycertainfederaltaxesandsocialcontributions.FIESalsorepurchasesexcesscreditsforcash.AspartoftheFIESprogram,
ourinstitutionsareobligatedtopayupto15%ofanystudentdefault.Thedefaultobligationincreasestoupto30%ofanystudentdefault
iftheinstitutionisnotcurrentwithitsfederaltaxes.FIESwithholdsbetween1%and3%oftuitionpaidtotheinstitutionstocoverany
potentialstudentdefaults("holdback").Ifthestudentpays100%oftheirloan,thewithheldamountswillbepaidtotheparticipating
educationinstitutions.
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SinceFebruary2014,allnewstudentswhoparticipateinFIESmustalsoenrollintheFundodeGarantiadeOperaesdeCrdito
Educativo(FGEDUC).FGEDUCisagovernmentmandated,privateguaranteefundadministeredbytheBankofBrazilthatallows
FIESprogram.Thecostoftheprogramis5.63%ofastudent'sfulltuition.SimilartoFIES,theadministratorwithholds5.63%ofastudent's
fulltuitiontofundtheguaranteebyFGEDUC.
AsofDecember31,2015,approximately21%ofourtotalstudentsinBrazilparticipatedinFIES,representingapproximately26%of
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AsofDecember31,2015,approximately21%ofourtotalstudentsinBrazilparticipatedinFIES,representingapproximately26%of
our2015Brazilrevenues.
totheFIESprogrambeginningin2015.Thesechangeslimitthenumberofnewparticipantsandtheannualbudgetoftheprogram,and
delaypaymentstopostsecondaryinstitutionswithmorethantwentythousandFIESstudentsthatwouldotherwisehavebeenduein2015.
Thefirstchangeimplementsaminimumscoreonthehighschoolachievementexaminordertoenrollintheprogram.Thesecondchange
altersthescheduleforthepaymentandrepurchaseofcreditsaswellaslimitstheopportunitiesforpostsecondaryinstitutionstosellany
unusedcreditssuchthatthereisasignificantdelaybetweenthetimethepostsecondaryinstitutionprovidestheeducationalservicesto
thestudentsandthetimeitreceivespaymentfromthegovernmentfor2015.Inadditiontotheserulechanges,FNDEimplementeda
policyforcurrentstudents'loanrenewalsfor2015,whichprovidesthatreturningstudentsmaynotfinanceanamountthatincreasesby
morethan6.41%,whichwaslaterincreasedto8.5%,fromtheamountfinancedintheprevioussemester,regardlessofanyincreasesin
tuitionorinthenumberofcoursesinwhichthestudentisenrolled,apolicythatwebelieveviolatestheapplicablelaw.For2016,MEC
announcedthattherewillbenolimitationtothetuitionincrease.Moreover,inthefirstandsecondintakesof2015,theonlineenrollment
andreenrollmentsystemthatallpostsecondaryinstitutionsandstudentsmustusetoaccesstheprogramhasexperiencednumerous
technicalandprogrammingfaultsthathavealsointerferedwiththeenrollmentandreenrollmentprocess.Numerouschallengestothese
changesandrequestsforjudicialrelieffromthesystem'sfaultshavebeenfiledintheBraziliancourts,mostofwhicharepending.The
2016enrollmentandreenrollmentschedulehasbeenreleasedand,sofar,thesystemhasnotpresentedanymajorissues.
InOctober2015,FNDEinitiatednegotiationswiththeBrazilianAssociationofPostSecondaryInstitutions(ABRAES)aimingat
amountdueinthreeannualinstallmentstobepaidonefourthin2016,onefourthin2017andhalfin2018.Thepartiesalsoagreedthat
theyearlyinstallmentswillbepaidinJuneofeachyear,andtheamountswillbeadjustedtoreflectaninflationindex(theIPCA)fromthe
dateoftherespectivematurityuntiltheeffectivepayment.FNDEalsoagreednottotakeanydiscriminatorymeasuresinthefuturerelated
tothepaymentduetothepostsecondaryinstitutions,andnottoimposeanylimitationontheissuanceofcertificatesandrepurchaseof
creditsduetothepostsecondaryinstitutions,whichbasicallymeansthatallcertificateswillbeissuedandrepurchasedintheirrespective
fiscalyears,exceptforthoseintendedtobeissuedandrepurchasedinDecember,whichwillbepaidinJanuaryofthefollowingyear.The
partiesexecutedthesettlementagreementonJanuary28,2016anditwasapprovedbytheofficeoftheAttorneyGeneralofBrazilon
February3,2016.TheFederalCourtofBrasiliaratifiedthesettlement
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agreementonMarch17,2016.WereceivedthefirstFIESinstallmentpaymentinJune2016.OurpostsecondaryinstitutionsinBrazilare
associatedwithABRAESandsignedthesettlementagreementtherefore,itwillapplytous.ThelongtermportionoftheFIESreceivables
arerecordedinNotesreceivable,netasofSeptember30,2016.
MECreleasednewFIESregulationsinJuly2015,whichsupplementandamendrulesthatwerepreviouslyreleased.Amongother
changes,theseregulationsrevisedtherulesforstudenteligibilityandclassification,highereducationinstitutionparticipationand
selectionofthevacanciesthatwillbeofferedtothestudents.
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therulesreleasedinJuly2015.NormativeOrdinanceNo.13definedandclarifiedsomerulesforstudenteligibilityandclassification,
highereducationinstitutionparticipationandselectionofthevacanciesthatwillbeofferedtothestudentsinthefirstintakeof2016.
wasraisedbytheMECto3.0timesonJune17,2016)andtohavetakentheNationalHighSchoolProficiencyExamatleastoncesince
2010,withaminimumscoreof450points,andhaveascoregreaterthanzerointhetestofwriting.
selectionprocess.Also,onlycourseswithscoresof3,4or5intheNationalHigherEducationEvaluationSystem(SINAES)evaluationare
eligibletoreceiveFIESstudents.
TheBraziliangovernment'schangestotheFIESprogramresultedinasubstantialincreaseinthetotalnumberofnewFIEScontractsin
thatcountryin2014,anelectionyear,andthenareductionin
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thetotalnumberofnewFIEScontracts,fromover700,000in2014toapproximately300,000in2015.Asaresult,Laureate'snew
enrollmentsofstudentsintheFIESprogramalsodecreasedsimilarlyin2015however,thisdidnothaveamaterialimpactonour2015
resultsofoperationssincetotalenrollmentsforallstudentsincreasedin2015.Anypotentialimpactontotalenrollmentwouldnotoccur
untiltheFIESstudentsfromtheexpansionoftheprogramhavegraduated,andwoulddependontheBraziliangovernment'scommitment
totheFIESprogram.Inaddition,asdiscussedabove,theBraziliangovernmentreducedthefrequencyofpaymentstoparticipating
institutionsduring2015.
ProposedChileanLegislation
OnJuly4,2016,theChileanPresidentsubmittedtotheChileanCongressabill(theHigherEducationBill)that,ifapproved,would
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legislation,includingrepealingthecurrentlawsgoverninguniversities,professionalinstitutesandtechnicaltrainingcenters.Thechanges
contemplatedintheHigherEducationBillthataremostrelevanttousare:
1.
ThecreationofanUndersecretaryofHigherEducation,whichwouldreplaceandbethelegalsuccessortothecurrent
HigherEducationDivisionoftheMINEDUCandwhosefunctionswouldbe:(i)toproposetotheMINEDUCpolicieson
highereducation,includingpoliciesonaccess,inclusion,retentionandgraduationofhighereducationstudents,onthe
promotion,development,supportandcontinuousimprovementofthequalityofhighereducationinstitutionsandtheir
relationshipwiththeneedsofthecountry,andontheallocationofpublicfunds(ii)tomanagetheproceduresrelatingto
thegrantingandrevocationoftheofficialrecognitionofhighereducationinstitutions(iii)totakecustodyoftheacademic
recordsofhighereducationinstitutionsthathavelosttheirofficialrecognition(iv)tomanagetheCommonAccessSystem
forHigherEducationInstitutions(v)tomanagetheNationalHigherEducationInformationSystem(vi)tocoordinatethe
variouspublicinstitutionsandservicesthathaveauthorityonhighereducationmatters(vii)toestablishcoordination
mechanismsforthemembersoftheboardsofdirectorsofstateowneduniversitieswhoareappointedbythePresident
(viii)togenerateandcoordinatewithregionalandlocalgovernmentsinstancesofparticipationanddialoguewithand
amonghighereducationinstitutionsaswellasthecollaborationandtransferofbestpracticesamongthem,andbetween
suchinstitutionsandsecondaryschools(ix)todevelopstudiesonthehighereducationsystem(x)tomaintainaregistryof
highereducationinstitutionswithaccesstopublicfundingand(xi)andtohaveanyotherfunctionthatthelawmayassign
toit.
2.
ThecreationofanewCommonAccessSystemforHigherEducationInstitutions,tobemanagedbytheUndersecretaryof
HigherEducation,whichwouldestablishtheprocessandmechanismsfortheapplication,admissionandselectionof
undergraduatestudents,andwhichwouldbemandatoryatallhighereducationinstitutionsthatreceivepublicfunding
throughtheMINEDUC.
3.
ThecreationofaNationalHigherEducationInformationSystem,tobemanagedbytheUndersecretaryofHigher
Education,whichwouldinclude,amongotherthings,informationaboutstudents,enrollment,faculty,resources,
infrastructureandresultsoftheacademicprocessathighereducationinstitutionsaboutthenatureofthehighereducation
institutions,
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theirmembersandindividualsthatarepartoftheiradministrativebodiesaboutthefinancialconditionandsolvencyof
highereducationinstitutions,includingtheirannualauditedfinancialstatementsandinformationaboutrelatedparty
transactions.BoththeSuperintendentofHigherEducationandtheHigherEducationQualityCouncilwouldprovideall
informationtheyreceivefromhighereducationinstitutionstotheUndersecretaryofHigherEducationtobeincludedinthe
NationalHigherEducationInformationSystem.
4.
ThecreationofanewNationalSystemofQualityAssuranceofHigherEducation,tobeestablishedbytheMINEDUC
throughtheUndersecretaryofHigherEducation,theNationalEducationCouncil,theHigherEducationQualityCouncil
andtheSuperintendentofHigherEducation,thefunctionsofwhich,amongothers,wouldbeto:(i)developpoliciesto
promotequality,suitability,articulation,inclusionandequalityintheexecutionofthedutiesofhighereducation
institutions(ii)licensenewhighereducationinstitutions(iii)providetheinstitutionalaccreditationofautonomoushigher
educationinstitutionsand(iv)enforcethecomplianceofhighereducationinstitutionswiththerulesapplicabletohigher
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academiccommitmentstostudents.
TheHigherEducationQualityCouncil,whosepurposewouldbetoevaluate,accreditandpromotethequalityof
autonomoushighereducationinstitutionsandofthecareersandstudyprogramstheyoffer,andwhichwouldberesponsible
forexecutingtheinstitutionalaccreditationprocessesandundergraduateandgraduatecareerandstudyprograms
accreditationprocesses,wouldbecomposedof11directors,nineofwhichwouldbeappointedbythePresidentofthe
Republic.ThefunctionsoftheHigherEducationQualityCouncilwouldinclude:(i)managingandresolvingthe
accreditationprocesses(ii)proposingthequalitycriteriaandstandardsforinstitutionalaccreditationandaccreditationof
undergraduateandgraduatecareersandstudyprogramstotheMINEDUC(iii)maintainingpublicinformationsystemsthat
containrelevantdecisionsregardingthedifferentaccreditationprocesses(iv)executingandpromotingactionsfor
continuousimprovementofthequalityofhighereducationinstitutions(v)keepingaregistryofpeerreviewerswhoare
partoftheaccreditationprocess(vi)trainingpeerreviewersand(vii)submittingdatatotheNationalHigherEducation
InformationSystem.
UndertheNationalSystemofQualityAssuranceofHigherEducation,institutionalaccreditationwouldbemandatoryfor
allautonomoushighereducationinstitutionsandwouldconsistoftheevaluationandverificationofcompliancewith
qualitystandards,aswellastheanalysisofinternalmechanismsforqualityassurance,consideringboththeirexistenceand
theirapplicationandresults,andtheiralignmentwiththemissionandpurposeofhighereducationinstitutions.All
institutionalaccreditationswouldlastforeightyears.Theaccreditationprocesswouldincludetheevaluation,forall
campusesandfortheundergraduatecareersandprogramsselectedbytheboardoftheHigherEducationQualityCouncil,of
themanagementandinstitutionalresources,internalqualityassurance,teachingandresultsoftheeducationprocess,
generationofknowledge,creationandinnovation,andassociationwiththeenvironment,oftherespectivehigher
educationalinstitutions.Accreditedinstitutionswouldbeclassifiedunderoneofthreedifferentcategories.CategoryC
institutions
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wouldneedtoobtainpriorapprovaloftheHigherEducationQualityCounciltoopennewcampusesorprograms,while
CategoryBinstitutionswouldneedtoobtainsuchapprovalonlytoopencareersorprogramsinafieldofknowledgenot
regularlyofferedbytheinstitutionorwhichhasnotbeenofferedinthelasttwoyears,andCategoryAinstitutionswould
notneedtoobtainanyapprovaltoopennewcampuses,careersorprograms.
Thebillalsoprovidesthatcertaincareersandstudyprograms,i.e.,medicalandeducationprograms,aswellasdoctorate
levelprogramsbemandatorilyaccredited.
AccreditationdecisionswouldnotbeappealablealthoughreconsiderationcouldbesoughtbeforetheHigherEducation
QualityCouncilnotlaterthan15daysafterthenotificationofdecision.
5.
ThecreationofaSuperintendencyofHigherEducation,whosepurposeistoenforceandmonitorcompliancewiththelegal
andregulatoryprovisionsthatgovernhighereducation,aswellasthelegalityoftheuseofresourcesbyhighereducation
institutionsandtosupervisetheirfinancialfeasibility.Itsfunctionsandpowerswouldbe,amongothers,to:(i)enforce
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owners,founders,legalrepresentativesandboardmembers(ii)ensurethattherequirementsorconditionsthatresultedin
officialrecognitionofthehighereducationinstitutionsaremaintained(iii)supervisethefinancialfeasibilityofhigher
educationinstitutions(iv)ensurethelegalityoftheuseofresourcesofhighereducationinstitutions(v)ensurethathigher
educationinstitutionscomplywiththeterms,conditions,andmodalitiesoftheacademiccommitmentsundertakenwith
establishmentsandofficesofhighereducationinstitutionsandoftheinstitutions'organizersthatarerelatedtothe
managementoftherespectiveinstitutioninordertocarryoutthefunctionsassignedtotheSuperintendency,accessingany
documents,booksorinformationrequiredforthepurposesofenforcement,andreviewingallthetransactions,assets,books,
accounts,filesand,ingeneral,anydocumentsorinformationitdeemsnecessaryforthesupervisionoftheindividualsor
institutionsinspectedandofthethirdpartieswithwhichtheyinteract(viii)requirepertinentinformationneededforitto
fulfillitsdutiestobeprovidedtoitbyinspectorsandinspectinginstitutionsandrelatedthirdparties,andbyanyrelevant
governmententities(ix)summonorganizers,controllers,members,associates,partners,owners,founders,legal
representatives,boardmembersoremployeesoftheinspectedinstitutions,orofthosewhoexercisethosepositionsat
relatedinstitutions,andanyotherpersonwhohasenteredintoanagreementsofanykindwiththeabove,totestifybeforeit,
andsummonwitnessestoprovideanyinformationitdeemsnecessarytofulfillitsduties(x)respondtoinquiriessubmitted
toitwithinthescopeofitspowers,receiveandresolveclaims,andmediateclaims,whenapplicable(xi)investigateand
resolvecomplaintsthatarise(xii)bringcharges,processthem,adoptprovisionalmeasures,andresolvetheproceedings
underwayregardinganyinfractionthatcomestoitsattention(xiii)applypenaltiesinaccordancewiththelaw(xiv)apply
andprovideadministrativeinterpretationsoftheapplicablelaw,andissuegeneralinstructionstothesectorsubjecttoits
enforcement(xv)sendinformationbroughttoitsattentionintheexerciseofitsdutiesandpowerstothe
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HigherEducationQualityCouncilwhensuchinformationindicatesviolationswithinthescopeofthemattersitregulates
(xvi)remitinformationbroughttoitsattentionintheexerciseofitsdutiestothePublicProsecutorwhensuchinformation
indicatesthatacrimehasbeencommitted(xvii)managetheinformationitcompilesintheexerciseofitsduties,ina
coordinatedeffortwiththeUndersecretaryofHigherEducation,foradequatedevelopmentoftheNationalHigher
EducationInformationSystem(xviii)reachagreementswithotherpublicservicesregardingelectronictransfersof
informationtofacilitateexecutionoftheirfunctions(xix)generateindexes,statisticsandstudieswiththeinformation
deliveredbytheinstitutionsitinspects,andproducepublicationswithinthescopeofitspowersand(xx)providetechnical
advisoryservicestotheMINEDUCandotherentitieswithinthescopeofitspowers.
SanctionsimposedbytheSuperintendencyofHigherEducationwouldbeappealabletothecourts.
HighereducationinstitutionswouldberequiredtoprovidetotheSuperintendencyofHigherEducationthefollowing
information:(i)theirauditedconsolidatedannualfinancialstatementsandanyinformationaboutanyfactthatmay
significantlyaffectitsfinancialcondition(ii)alistoftheirpartnersormembers,andofanyindividualsexercising
executivefunctions(iii)informationaboutrelatedpartytransactions(iv)informationabouttaxexemptdonationsand
(v)alistofentitiesinwhichtheinstitutionholdsaninterestofmorethan10%andofnotforprofitentitiesinwhichitis
entitledtoappointatleastoneboardmember.
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6.
Newregulationsapplicabletonotforprofiteducationalinstitutions(includinguniversities)thatwould:(i)providethat
theircontrollersandmemberscanonlybeindividuals,othernotforprofitsorstateownedentities(ii)createtheobligation
tousetheirresourcesandreinvesttheirsurplusorprofitsinthepursuitoftheirobjectivesandinenhancingthequalityof
theeducationtheyprovide(iii)createtheobligationtohaveaboardofdirectors,whichcannotdelegateitsfunctions,and
whosememberscannotberemovedunlessapprovedbythemajorityoftheboardandforseriousreasonsand(iv)prohibit
relatedpartytransactionswiththeirfounders,controllers,membersoftheboard,rectorandtheirrelativesorrelatedentities,
unlessthecounterpartytothetransactionisanothernotforprofitentity,andestablishregulationsforotherrelatedparty
transactionswhichincludetheneedforthemtobeundermarketconditionsandapprovedbytheboard.
7.
Underthenewsystem,alllicensedhighereducationinstitutionswouldbeeligibletoreceivepublic"institutionalfunding
forgratuity"aslongastheycompliedwiththefollowingrequirements:(i)accreditation(ii)notforprofitorstateowned
(iii)bepartoftheCommonAccessSystemforHigherEducationInstitutionsand(iv)applypoliciesapprovedbythe
UndersecretaryofHigherEducationthatpermitfairstudentaccessandimplementvulnerablestudentsupportprogramsthat
promotetheirretention,providingthatatleast20%ofthetotaladmissionsoftheuniversityaregrantedtostudentsfrom
homeswithinthecountry'sfourlowestincomedeciles.Theinstitutionsthatwouldbepartofthepublicfundingsystem
wouldbesubjecttoregulationoffeeschargedwhichwouldbesetbytheUndersecretaryofHigherEducation.
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proposedHigherEducationBillwillbeadoptedinthisform,orifanyhighereducationlegislationwillbeadoptedthatwouldaffectthe
institutionsintheLaureateInternationalUniversitiesnetwork.However,ifanysuchlegislationisadopted,itcouldhaveamaterial
TurkishRegulationandInternalInvestigation
ThroughourEuropeansegment,weoperateIstanbulBilgiUniversity,anetworkinstitutionlocatedinTurkeythatconsolidatesunder
thevariableinterestentitymodel.IstanbulBilgiUniversityisestablishedasa"FoundationHighEducationInstitution"(a"Foundation
University")undertheTurkishhighereducationlaw,sponsoredbyaneducationalfoundation(the"BilgiFoundation").Assuch,itis
subjecttoregulation,supervisionandinspectionbytheTurkishHigherEducationCouncil(the"YK").In2014,theTurkishparliament
amendedthehighereducationlawtoprovideexpandedauthoritytotheYKwithrespecttoFoundationUniversities,including
authorizingadditionalremediesforviolationsofthehighereducationlawandofregulationsadoptedbytheYK.OnNovember19,
2015,theYKpromulgatedan"OrdinanceConcernedwithAmendmenttoFoundationHighEducationInstitutions"(the"Ordinance")the
principaleffectsofwhichrelatetothesupervisionandinspectionofFoundationUniversitiesbytheYK.UndertheOrdinance,theYK
hasexpandedauthoritytoinspectaccounts,transactions,activitiesandassetsofFoundationUniversities,aswellastheiracademicunits,
programs,projectsandsubjects.TheOrdinanceestablishesaprogressiveseriesoffiveremediesthattheYKcantakeintheeventitfinds
aviolationoftheOrdinance,rangingfrom(1)awarningandrequestforcorrectionto(2)thesuspensionoftheFoundationUniversity's
abilitytoestablishnewacademicunitsorprogramsto(3)limitingthenumberofstudentstheFoundationUniversitycanadmit,including
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abilitytoestablishnewacademicunitsorprogramsto(3)limitingthenumberofstudentstheFoundationUniversitycanadmit,including
ceasingnewadmissions,to(4)provisionalsuspensionoftheFoundationUniversity'slicenseto(5)cancellationoftheFoundation
University'slicense.SincethepromulgationoftheOrdinance,theYKhascancelledthelicensesof15FoundationUniversities.
andstudentservicesandcertainintellectualpropertyatfairmarketrates.IftheYKweretodeterminethatanyofthesecontractsorthe
paymentsmadebyIstanbulBilgiUniversitytothisLaureatesubsidiary,oranyotheractivitiesofIstanbulBilgiUniversity,including,as
furtherdescribedbelow,thedonationof40,000TurkishLirasmadebytheuniversitytoacharitablefoundationthatwassubsequently
reimbursedtotheuniversitybycertainLaureateownedentities,violatetheOrdinanceorotherapplicablelaw,theYKcouldtakeactions
againstIstanbulBilgiUniversityuptoandincludingcancellationofitslicense.Further,iftheYKweretodeterminethatany
administratorsofIstanbulBilgiUniversityhavedirectlytakenanyactionsorsupportedanyactivitiesthatareintendedtoharmthe
integrityofthestate,thelicenseoftheuniversitycouldbecancelled.InJuly2016,acoupattempt
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increasedpoliticalinstabilityinTurkey,andtheuncertaintiesarisingfromthefailedcoupinTurkeycouldleadtochangesinlaws
affectingIstanbulBilgiUniversityorresultinmodificationstothecurrentinterpretationsandenforcementoftheOrdinanceorotherlaws
andregulationsbytheYK.
Duringthefourthquarterof2014,werecordedanoperatingexpenseof$18,000(thevalueof40,000TurkishLirasatthedateof
donation)foradonationbyournetworkinstitutioninTurkeytoacharitablefoundation.Webelievedthedonationwasencouragedbythe
Turkishgovernmenttofurtherapublicprojectsupportedbythegovernmentandexpectedthatitwouldenhancethepositionandongoing
operationsofourinstitutioninTurkey.TheCompanyhaslearnedthatthecharitablefoundationwhichreceivedthedonationdisbursed
thefundsatthedirectionofaformerseniorexecutiveatournetworkinstitutioninTurkeyandotherexternalindividualstoathirdparty
withoutourknowledgeorapproval.
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foundationthatcontrolsournetworkinstitutioninTurkeyhavecontributedanamountofapproximately$13,000(thevalueof40,000
TurkishLirasonNovember4,2016,thedateofcontribution)toournetworkinstitutioninTurkeytoreimburseitforthedonation.
InSeptember2016,wevoluntarilydisclosedtheinvestigationtotheU.S.DepartmentofJustice(the"DOJ")andtheSEC.The
Companyintendstofullycooperatewiththeseagenciesandanyotherapplicableauthoritiesinanyinvestigationthatmaybeconducted
inthismatter.TheCompanyhasinternalcontrolsandcompliancepoliciesandproceduresthataredesignedtopreventmisconductofthis
natureandsupportcompliancewithlawsandbestpracticesthroughoutitsglobaloperations.TheCompanyistakingstepstoenhance
theseinternalcontrolsandcompliancepoliciesandprocedures.Theinvestigationisongoing,andwecannotpredicttheoutcomeatthis
time,ortheimpact,ifany,to
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theCompany'sconsolidatedfinancialstatementsorpredicthowtheresultingconsequences,ifany,mayimpactourinternalcontrolsand
compliancepoliciesandprocedures,business,abilityorrighttooperateinTurkey,resultsofoperationsorfinancialposition.Ifweare
foundtohaveviolatedtheFCPAorotherlawsgoverningtheconductofouroperations,wemaybesubjecttocriminalandcivilpenalties
andotherremedialmeasures,whichcouldmateriallyadverselyaffectourbusiness,financialcondition,resultsofoperationsandliquidity.
Note17.FairValueMeasurement
Fairvalueisdefinedasthepricethatwouldbereceivedtosellanassetorpaidtosettlealiabilityinanorderlytransactionbetween
marketparticipantsatthemeasurementdate.Accountingstandardsutilizeafairvaluehierarchythatprioritizestheinputstovaluation
techniquesusedtomeasurefairvalueintothreelevels,whicharedescribedbelow:
Level1Quotedprices(unadjusted)foridenticalassetsorliabilitiesinactivemarkets
Level2Observableinputsotherthanquotedpricesthatareeitherdirectlyorindirectlyobservablefortheassetor
liability
Level3Unobservableinputsthataresupportedbylittleornomarketactivity.
underASC82010,"FairValueMeasurement".EffectiveJanuary1,2016,weadoptedASU201507.UnderASU201507,assetsforwhich
fairvalueismeasuredatnetassetvaluepershareusingthepracticalexpedient,suchastheCompany'sdeferredcompensationplanassets,
shouldnotbecategorizedinthefairvaluehierarchy.
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DerivativeinstrumentsLaureateusesderivativeinstrumentsaseconomichedgesforbankdebtandinterestraterisk.Theirvalues
arederivedusingvaluationmodelscommonlyusedforderivatives.Thesevaluationmodelsrequireavarietyofinputs,including
contractualterms,marketprices,forwardpriceyieldcurves,notionalquantities,measuresofvolatilityandcorrelationsofsuchinputs.Our
valuationmodelsalsoreflectmeasurementsforcreditrisk.Laureateconcludedthatthefairvaluesofourderivativesarebasedon
unobservableinputs,orLevel3assumptions.ThesignificantunobservableinputusedinthefairvaluemeasurementoftheCompany's
derivativeinstrumentsisourowncreditrisk.Holdingotherinputsconstant,asignificantincrease(decrease)inourowncreditriskwould
resultinasignificantlylower(higher)fairvaluemeasurementfortheCompany'sderivativeinstruments.
Laureate'sfinancialassetsandliabilitiesthataremeasuredatfairvalueonarecurringbasisasofSeptember30,2016wereasfollows:
Assets
Liabilities
Total
Level1
$ 16,226
Level2
Level3
$ 16,226
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Assets
Liabilities
Total
Level1
$
238
$ 20,014
Level2
Level3
$
238
$ 20,014
ThechangesinourLevel3Derivativeinstrumentsmeasuredatfairvalueonarecurringbasisfortheninemonthsended
September30,2016wereasfollows:
TotalAssets
(Liabilities)
Lossesincludedinearnings:
Unrealizedlosses,net
Realizedlosses,net
Settlements
BalanceSeptember30,2016
Unrealizedloss,netrelatingtoliabilitiesheldatSeptember30,2016
$
$
(19,776)
(1,548)
(6,687)
5,509
6,687
(411)
(16,226)
(1,548)
Thefollowingtablepresentsquantitativeinformationregardingthesignificantunobservableinputsutilizedinthefairvalue
measurementsoftheCompany'sliabilitiesclassifiedasLevel3fortheninemonthsendedSeptember30,2016:
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crosscurrencyand
interestrateswaps
FairValueat
September30,2016
ValuationTechnique
Range/Input
Value
UnobservableInput
16,226 DiscountedCashFlow Owncreditrisk
4.32%
Note18.RestructuringCosts
Duringthefourthquarterof2015,Laureateapprovedaplanofrestructuring,whichprimarilyincludedworkforcereductionsinorder
toreduceoperatingcostsinresponsetoovercapacityatcertainlocations.TheCompanyrecordedtheestimatedcostoftherestructuringof
$15,476,whichconsistedofemployeeseverance,inDirectcostsinthe2015ConsolidatedStatementofOperations.Ofthetotal
restructuringliabilityrecordedduring2015,$10,912representedonetimeemployeeterminationbenefitsrecognizedinaccordancewith
ASC420,"ExitorDisposalCostObligations"and$4,564representedcontractualemployeeterminationcostsrecognizedinaccordance
withASC712,"CompensationNonretirementPostemploymentBenefits."Wepaid$5,810duringthefourthquarter
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Note18.RestructuringCosts(Continued)
of2015,andhadaremainingliabilityof$10,233atDecember31,2015,aftercurrencyadjustmentsof$567.Therestructuringliabilityis
includedinAccruedexpensesinourSeptember30,2016ConsolidatedBalanceSheet.
ThefollowingisarollforwardoftherestructuringliabilityfromDecember31,2015throughSeptember30,2016:
termination
termination
Total
Balanceat
December31,
2015
Expense
Recognized
Cash
Payments
Currency
Adjustments
Balanceat
September30,
2016
6,259 $
(427) $ (5,800) $
152 $
184
3,974
10,233 $
(85) (3,875)
(512) $ (9,675) $
101
253 $
115
299
WehaveevaluatedeventsoccurringsubsequenttoourbalancesheetdatethroughJanuary17,2017,whichisthedatethatthese
ConsolidatedFinancialStatementswereissued.CertainsubsequenteventsarediscussedelsewhereintheConsolidatedFinancial
Statementswhererelevant.
DeferredCompensationArrangementPaymentExtension
TheparticipantsinthedeferredcompensationarrangementdiscussedinNote10,SharebasedCompensation,haveagreedtoextend
thepaymentthatwasdueonSeptember17,2016(the"2016ExecutiveDCPObligation"),untilDecember30,2016.OnDecember30,
2016,wesatisfiedthe2016ExecutiveDCPObligationbypayingtheparticipantsatotalamountofapproximately$18,200.Thepayment
consistedofapproximately$7,700incashand$10,500aggregateprincipalamountofSeniorNotes.Followingthesatisfactionofthe
2016ExecutiveDCPObligation,theCompany'sobligationsundertheDCPsweresatisfiedinfull.
SpecialRetentionAwardtoExecutives
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SpecialRetentionAwardtoExecutives
OnOctober25,2016,wegranted221and71timebasedrestrictedstockunitsandperformanceshareunits,respectively,tocertain
executivesasaretentioninitiative.ThetimebasedrestrictedstockunitsvestinJune2018.TheperformanceshareunitsvestinJune2018
upontheachievementofpredeterminedperformancetargets.Inaddition,wegranted114TimeOptionsand47PerformanceOptionswith
anexercisepriceof$23.36,theestimatedfairmarketvalueofLaureate'sstockatthegrantdate.Theseoptionshaveacontractualtermof
10years.TheTimeOptionsvestinJune2018.ThePerformanceOptionsvestinJune2018upontheachievementofthesamepre
determinedperformancetargetsmentionedabove.Thetotalgrantdatefairvalueoftheseawardswasapproximately$8,800.
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Note19.SubsequentEvents(Continued)
SeriesAPreferredStockOffering
OnDecember4,2016,wesignedasubscriptionagreementwithsixinvestors,includingKKRandSnowPhipps,bothofwhichare
affiliatesofours,pursuanttowhichweagreedtoissueandselltothoseinvestorsanaggregateof400sharesofanewseriesofour
convertibleredeemablepreferredstock(the"SeriesAPreferredStock")inaprivateofferingfortotalnetproceedsofapproximately
$383,000.ClosingofthefirsttrancheoffundingforthistransactionoccurredonDecember20,2016andwereceivednetproceeds,after
issuancecosts,ofapproximately$328,000.Oneinvestorwillfundaportionofitspurchasepriceequalto$57,000(approximately$55,000
netofissuancecosts)priortoJanuary23,2017.TheproceedsfromtheSeriesAPreferredStockofferinghaveandwillbeusedto,among
otherthings,repayanyportionofouroutstandingdebt,includingourrevolvingcreditfacility,whichwillimproveourliquidity.We
believethatcashflowfromoperationsandavailablecashonhandwillbesufficienttomeetouroperatingrequirementsthrough
January31,2018.
ThesharesofSeriesAPreferredStockareredeemableatouroptionatanytimeandbytheholdersafterthefifthanniversaryofthe
issuedateataredemptionpricepershareequalto1.15multipliedbythesumoftheissueamountpershareplusanyaccruedandunpaid
dividends.IfwefailtoredeemthesharesofSeriesAPreferredStockwhenrequiredafterthefifthanniversaryoftheissuedate,theholders
oftheSeriesAPreferredStockareentitledtocertainremedies,includingtheabilitytotakecontrolofamajorityofourBoardofDirectors
andcauseasaleoftheCompanyand/orcauseustoraisedebtorequitycapitalinanamountsufficienttoredeemtheremaining
outstandingsharesofSeriesAPreferredStock.
ShareIncreasefor2013LongTermIncentivePlan(2013Plan)
InDecember2016,theBoardofDirectorsandShareholdersapprovedanamendmenttoincreasethetotalnumberofsharesofcommon
stockissuableunderthe2013Planby3,884.
CombinationofOperations
reflectourbeliefthatwewillbeabletooperatetheinstitutionsinthosesegmentsmoresuccessfullyandefficientlyundercommon
management.TheCompanyiscurrentlyevaluatingtheimpactofthiscombinationonitsoperatingsegments.
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TurkeyRegulatoryAudit
TheYKconductsannualauditsontheoperationsofIstanbulBilgiUniversityandcurrentlyisintheprocessofcompletingitsmost
recentaudit.Wecannotyetdeterminetheimpactofthisauditonourbusiness,financialconditionorresultsofoperations.
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FMUGROUP
CombinedFinancialStatements
fortheperiodfromJanuary1,2014throughSeptember12,2014
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Independentauditor'sreport
TotheManagementof
FMUGroup
WehaveauditedtheaccompanyingcombinedfinancialstatementsofFMUGroup,whichcomprisethecombinedbalancesheetasof
September12,2014andtherelatedcombinedstatementsofcomprehensiveincome,investedequityandcashflowsfortheperiodfrom
January1,2014throughSeptember12,2014.
Management'sresponsibilityforthecombinedfinancialstatements
Managementisresponsibleforthepreparationandfairpresentationofthecombinedfinancialstatementsinaccordancewith
accountingprinciplesgenerallyacceptedintheUnitedStatesofAmericathisincludesthedesign,implementation,andmaintenanceof
internalcontrolrelevanttothepreparationandfairpresentationofcombinedfinancialstatementsthatarefreefrommaterialmisstatement,
whetherduetofraudorerror.
Auditor'sresponsibility
Ourresponsibilityistoexpressanopiniononthecombinedfinancialstatementsbasedonouraudit.Weconductedourauditin
accordancewithauditingstandardsgenerallyacceptedintheUnitedStatesofAmerica.Thosestandardsrequirethatweplanandperform
theaudittoobtainreasonableassuranceaboutwhetherthecombinedfinancialstatementsarefreefrommaterialmisstatement.
Anauditinvolvesperformingprocedurestoobtainauditevidenceabouttheamountsanddisclosuresinthecombinedfinancial
statements.Theproceduresselecteddependonourjudgment,includingtheassessmentoftherisksofmaterialmisstatementofthe
combinedfinancialstatements,whetherduetofraudorerror.Inmakingthoseriskassessments,weconsiderinternalcontrolrelevanttothe
Company'spreparationandfairpresentationofthecombinedfinancialstatementsinordertodesignauditproceduresthatareappropriate
inthecircumstances,butnotforthepurposeofexpressinganopinionontheeffectivenessoftheCompany'sinternalcontrol.Accordingly,
weexpressnosuchopinion.Anauditalsoincludesevaluatingtheappropriatenessofaccountingpoliciesusedandthereasonablenessof
significantaccountingestimatesmadebymanagement,aswellasevaluatingtheoverallpresentationofthecombinedfinancial
statements.Webelievethattheauditevidencewehaveobtainedissufficientandappropriatetoprovideabasisforourauditopinion.
Opinion
Inouropinion,thecombinedfinancialstatementsreferredtoabovepresentfairly,inallmaterialrespects,thefinancialpositionof
FMUGroupasofSeptember12,2014andtheresultsofitsoperationsanditscashflowsfortheperiodfromJanuary1,2014through
September12,2014inaccordancewithaccountingprinciplesgenerallyacceptedintheUnitedStatesofAmerica.
/s/PricewaterhouseCoopersAuditoresIndependentes
PricewaterhouseCoopers
AuditoresIndependentes
SoPaulo,Brazil
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SoPaulo,Brazil
September23,2015
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FMUGROUP
COMBINEDSTATEMENTOFCOMPREHENSIVEINCOME
FortheperiodfromJanuary1,2014throughSeptember12,2014
(amountsinBrazilianReais)
Revenues
Costsandexpenses:
Directcosts
General&administrativeexpenses
Operatingloss
Interestincome
Interestexpense
Lossfromcontinuingoperationsbeforeincometaxes
Incometaxbenefit
Netloss
Othercomprehensive(loss)income
Totalothercomprehensive(loss)income
Comprehensiveloss
Periodfrom
January1,2014
through
September12,2014
308,455,312
(196,994,038)
(138,401,922)
(26,940,648)
865,429
(37,387,431)
(63,462,650)
27,183,462
(36,279,188)
(36,279,188)
Theaccompanyingnotesareanintegralpartofthesecombinedfinancialstatements.
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FMUGROUP
COMBINEDBALANCESHEET
September12,
2014
Assets
CurrentAssets:
Receivables:
Receivables,net
Incometaxreceivable
Deferredincometaxes
Totalcurrentassets
Furniture,computerequipmentandsoftware
Otherassets
Deferredincometaxes
Longtermassetsheldforsale
TotalAssets
LiabilitiesandInvestedEquity
CurrentLiabilities:
Accountspayable
Shorttermdebt
Incometaxespayable
Taxespayable,otherthanincome
Rentduetoowners
Deferredrevenue
Longtermdebt
Incometaxespayable
Taxespayable,otherthanincome
Othernoncurrentliabilities
TotalLiabilities
12,235,833
85,736,019
(30,634,297)
55,101,722
2,955,034
2,915,189
25,631,355
98,839,133
148,346,451
(115,117,982)
33,228,469
2,725,854
11,892,718
5,366,410
152,052,584
43,416,718
46,710,501
48,192,517
2,388,712
42,010,584
321,015
34,316,106
31,739,278
249,095,431
1,224,000
79,653,000
112,973,050
198,720,913
641,666,394
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TotalLiabilities
Investedequity:
Owner'snetinvestment
Accumulatedothercomprehensive(loss)income
TotalInvestedequity
TotalLiabilitiesandInvestedEquity
641,666,394
(489,613,810)
(489,613,810)
152,052,584
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FMUGROUP
COMBINEDSTATEMENTOFINVESTEDEQUITY
BalanceasofDecember31,2013
Capitalcontribution
Netlossfortheperiod
BalanceasofSeptember12,2014
Owner'snet
investment
Accumulated
other
comprehensive
income(loss)
$ (456,763,622)
3,429,000
(36,279,188)
$ (489,613,810) $
Totalinvested
Equity
$ (456,763,622)
3,429,000
(36,279,188)
$ (489,613,810)
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FMUGROUP
COMBINEDSTATEMENTOFCASHFLOWS
Netlossfortheperiod
Adjustmentstoreconcilenetlosstonetcashprovidedbyoperatingactivities:
Baddebtexpense
Deferredincometaxes
Noncashlossfromnonincometaxcontingencies(othernoncurrentliabilities)
Noncashlossfromincometaxespayables,noncurrent
Changeinoperatingassetsandliabilities:
Increaseinreceivables
Increaseinprepaidexpensesandotherassets
Increaseinnoncurrentotherassetsandlongtermassetsheldforsale
Increaseinaccountspayableandaccruedcompensationandbenefits
Decreaseinothernoncurrentliabilities
Decreaseinincometaxreceivable/payable,net
Decreaseintaxespayable,otherthanincome
Increaseindeferredrevenueandotherliabilities
Netcashprovidedbyoperatingactivitiesofcontinuingoperations
Purchaseofpropertyandequipment
Saleofpropertyandequipment
Proceedsfromdebt
Paymentsofdebt
Capitalcontributionfromshareholders
Netcashprovidedbyfinancingactivitiesofcontinuingoperations
Periodfrom
January1,2014
through
September12,
2014
(36,279,188)
3,871,234
19,004,438
17,587,839
(37,524,073)
23,432,696
7,616,905
(35,607,992)
(2,138,030)
(11,599)
45,433,553
(562,000)
(566,322)
(12,359,501)
17,102,688
9,000,648
(9,872,129)
2,000
(9,870,129)
153,168,341
(153,864,420)
3,429,000
2,732,921
1,863,440
10,372,393
12,235,833
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NotestoCombinedFinancialStatements
AmountsinBrazilianReais
TheFMUGroupisthecombinationofthefollowingentities:FaculdadesMetropolitanasUnidasEducacionaisLtda.("FMU"),
SociedadedeCulturaeEnsinoLtda.("ACE"),andUnioEducacionaldeSoPauloLtda.("UESP"),(collectively,"FMUGroup").The
entitiesareundercommoncontrol,operateinanintegratedmanner,andaremanagedunderthesameoperationalandstrategicapproach.
FMUGroupwasfoundedin1968asnonprofiteducationalassociationstoprovidehighereducationcourses,graduateandpost
graduateprogramstostudentsinSoPaulo,Brazil.Theentitieshavethefollowingprimaryactivities:
FMUthecreationandmaintenanceofschoolsatalllevelsoflearning,thetrainingofprofessionalexperts,technical,
scientificandculturalimprovements,andresearchanddevelopment.
ACEcontributestothedevelopmentofculture,scientificresearchandteaching,organizes,maintainsanddevelops
educationatalllevelsoflearningincludingpostgraduatecourses,entersintoagreementswithsimilarinstitutions,either
nationalorforeign,intheinterestofeducation,andresearchanddevelopment.
UESPdevelopsteaching,researchanddevelopmentinthesciences,philosophy,literature,artsandtechnologythrough
educationalinstitutions,createsandmanagesmediavehicles,editsanddistributeseducational,scientificandcultural
publications.
FMU,ACEandUESPwerenotforprofitentitiesuntil2014whentheyweretransformedintoforprofitentitiesbasedonthefollowing
eventsandinthefollowingdates:
FMUcontractualchangesmadeonFebruary22,2014
ACEcontractualchangesmadeonApril28,2014and
UESPcontractualchangesmadeonMay27,2014
ThetransformationofFMUGroupfromnonforprofittoforprofitentitieswasagreedtounderarticle221ofBrazilianLaw
No.6.404/76andwasapprovedunanimouslyinthelistedcontractamendmentsabove.
AccordingtoBrazilianLawNo.9,532/97andasamendedbyLaw9,718/98,theFMUGroupwassubjecttospecialtaxtreatmentsand
wasrequiredtopayonlycertaintaxesduringitsnotforprofitperiod.Afterthetransformationtoforprofitentities,theFMUGroupwas
subjecttoallapplicabletaxrequirements.Thesecombinedfinancialstatementsarepreparedbasedonstandardsapplicabletoforprofit
companies.
OnMay10,2013theRedeInternationaldeUniversidadesLaureateLtda.andtheBusinessSchoolSoPaulo(collectively"Laureate
Group")enteredintoapurchaseagreementofallthesharesofFMU,ACEandUESP.Thecompletionofthepurchasewasconditionalon:
i)approvalofthetransactionbytheAdministrativeCouncilforEconomicDefenseofBrazil("CADE")
ii)transformationoftheentitiestoforprofitcompaniesand
iii)theoperationalreorganizationandthetransitionofmanagementtotheLaureateGroup.Theacquisitionbecameeffective
onSeptember12,2014.
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NotestoCombinedFinancialStatements(Continued)
Note1.DescriptionofBusiness(Continued)
ThecombinedfinancialstatementshavebeenpreparedforthepurposeofcomplyingwithRule305ofRegulationSXofthe
SecuritiesandExchangeCommission.ThecombinedfinancialstatementsmaynotbeindicativeofFMUGroup'sfutureperformanceand
donotnecessarilyreflectwhatitscombinedbalancesheet,resultsofoperationsorcashflowswouldhavebeenhadFMUGroupoperated
asindependententitiesduringtheperiodspresented.
ThecombinedfinancialstatementsarepreparedunderthepresumptionthattheFMUGroupwillcontinueasagoingconcern.Asof
September12,2014,theFMUGrouppresentsanegativeworkingcapitalbalanceof$150,256,298whichisprimarilyduetotheimpactof
financialobligations(refertoNote8DebtandNote9Taxespayable,otherthanincome).Thefundsgeneratedbynormaloperations
areexpectedtobesufficienttomeetitsfinancialcommitmentsandFMUGroupalsohastheabilitytoaccesslinesofcreditsavailable,if
necessary.Inaddition,asexplainedinnote15,FMUGroupbecameasubsidiaryofLaureateEducations,Inc.onSeptember12,2014
whichintendstosupportFMUGrouptocontinueasgoingconcern.
ThepreparationoffinancialstatementsinconformitywithaccountingprinciplesgenerallyacceptedintheUnitedStates(USGAAP)
requiresmanagementtomakeestimatesandassumptionsthataffectthereportedamountsofassetsandliabilitiesandtodisclose
contingentassetsandliabilitiesatthedateofthecombinedfinancialstatements,andthereportedamountsofrevenuesandexpenses
duringthereportingperiod.Actualresultscoulddifferfromthoseestimates.Significantitemssubjecttosuchestimatesandassumptions
includetheallowancefordoubtfulaccounts,usefullivesoffixedassets,provisionsforcivilandlaborrisks,andtaxcontingencies.
2.1BasisofPreparation
(a)CombinedFinancialStatements
FMUGroup'scombinedfinancialstatementscomprisethecombinedfinancialstatementsofFMU,ACE,andUESP.Thesefinancial
statementsarepresentedonacombinedbasisasthethreeentitiesareundercommoncontrol,andmanagementdecisionsaretakentogether
asawhole.ThenetassetsoftheownershavebeenpresentedasOwner'snetinvestment.Thecombinedfinancialstatementshavebeen
preparedinordertopresentthefinancialinformationforFMU,ACE,andUESPasasingleentity.FMUGrouphasnoinvolvementwith
anyvariableinterestentities.
ThetotalnetinvestmentofthecombinedentitiesasonSeptember12,2014areasfollows:
FMU
ACE
UESP
TotalEliminations
Adjustedbalance
Assets
Liabilities
127,635,201
36,217,770
1,477,613
165,330,584
(13,278,000)
152,052,584
623,097,959
26,451,439
5,394,996
654,944,394
(13,278,000)
641,666,394
Net
investment
Resultsof
Period
$ (495,461,937) $ (39,730,645)
9,766,331
7,546,147
(3,918,204) (4,094,690)
(489,613,810) (36,279,188)
$ (489,613,810) $ (36,279,188)
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(b)EliminationsintheCombinedFinancialStatements
Balancesandintragrouptransactions,andanyunrealizedincomeandexpensesarisingfromintragrouptransactions,areeliminatedin
preparingthecombinedfinancialstatements.
2.2BasisofPresentation
(a)FunctionalCurrency
Thefunctionalcurrencyisthecurrencyoftheeconomicenvironmentinwhichacompanyprimarilydoesbusiness.TheBrazilianReal
isthefunctionalcurrencyofthecombinedfinancialstatementsarepresentedinitsfunctionalcurrency.
FMUGroupdoesnothaveanytransactionsincurrenciesdifferentfromitsfunctionalcurrency.
Unaudited
FiscalYearEnded
orEndingDec31,
2009
2010
2011
2012
2013
AtEndofPeriod
(R$perUS$1.00)
0.57
0.60
0.54
0.49
0.42
Average
(ofmonthendrates)
0.57
0.59
0.54
0.48
0.43
High
0.59
0.60
0.65
0.59
0.51
Low
0.41
0.53
0.53
0.47
0.41
(b)CashandCashEquivalents
FMUGroupconsidersallhighlyliquidinvestmentsthatarepurchasedwithanoriginalmaturityofthreemonthsorlesstobecash
equivalents.
(c)FinancialInstruments
FMUGroup'sfinancialinstrumentsconsistofcashandcashequivalents,accountsandnotesreceivable,accountspayables,debt,and
capitalleaseobligations.ThefairvalueofthesefinancialinstrumentsapproximatestheircarryingamountsreportedintheCombined
BalanceSheet.
FMUGroup'scashaccountsaremaintainedwithhighqualityfinancialinstitutionswithasignificantconcentrationintwo
institutions:BancoSantander(Brasil)S.A.andBancoSafraS.A.
(d)AccountsandNotesReceivable
FMUGrouprecognizesreceivableswhenanacademicsessionbegins,althoughstudentsgenerallyenrollincoursespriortothestartof
theacademicsession.Receivablesarerecognizedonlytotheextentthatamountsaredueandcollectionisreasonablyassured.
(e)AllowanceforDoubtfulAccounts
FMUGrouprecordsanallowancefordoubtfulaccountstoreduceitsreceivablestotheirnetrealizablevalue.FMUGroup'sallowance
methodologyisbasedontheageofthereceivables.Receivablesdeemedtobeuncollectiblearewrittenoffagainsttheallowancefor
doubtfulaccounts.
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(f)JudicialDeposits
FMUGroupissubjecttolegalactionsorlawsuitsarisingintheordinarycourseofbusinessrelatedtocivil,laborandtaxresulting
frompotentialactsandoperationsthatcouldbesubjecttoassessmentfromAuthorities.Becauseoftheselegalactions,bycourtorderor
decisionoftheAdministrationitself,cashisdepositedintoabankaccountandwehavenoaccessuntilresolutionofthelegalproceeding.
JudicialdepositsmeetthedefinitionoffinancialassetandarerecordedinnoncurrentOtherassets.Theyaremeasuredatamortized
cost.InterestsarerecordedintheCombinedStatementofOperationsasinterestincome.
(g)PropertyandEquipment,andLeasedAssets
Propertyandequipmentincludesleaseholdimprovements,furniture,vehicles,computerequipmentandsoftware.FMUGrouprecords
propertyandequipmentatcostlessaccumulateddepreciationandamortization.Repairsandmaintenancecostsareexpensedasincurred.
FMUGroupconductsasignificantportionofitsoperationsatleasedfacilities.FMUGroupanalyzeseachleaseagreemententeredto
determinewhetheritshouldbeclassifiedasacapitaloranoperatinglease.FMUGrouprecognizeoperatingleaserentexpenseona
straightlinebasisovertheexpectedterm,ofeachleaseandisrecordedingeneralandadministrativeexpenses.Forcapitalleases,FMU
Groupinitiallyrecordstheassetsattheloweroffairvalueorthepresentvalueofthefutureminimumleasepayments,excludingexecutory
costs.Iftheleaseagreementincludesalegalobligationthatrequirestheleasedpremisestobereturnedinapredeterminedcondition,FMU
Grouprecognizesanassetretirementobligationandacorrespondingdepreciatingassetwhensuchanassetexists.
Depreciationisrecordedonastraightlinebasisovertheestimatedusefullivesoftheassets.Leaseholdimprovements,including
structuralimprovements,areamortizedusingthestraightlinemethodoverthelesseroftheestimatedusefullifeoftheassetorthelease
term.TotaldepreciationandamortizationfortheperiodendedSeptember12,2014was$3,871,234,whichwasentirelyrecordedin
generalandadministrativeexpenses.
Installations
Telecommunicationsequipment
Machinery,appliancesandequipment
Librarybooks
Furnitureandcomputerequipment
Software
Vehicles
10years
10years
10years
10years
10years
7years
5years
(h)Assetsheldforsale
Longtermassetsthatareexpectedtoberecoveredprimarilythroughsaleratherthanthroughcontinuinguse,areclassifiedasheldfor
sale.Thoseassetsaremeasuredattheloweroftheircarryingamountandfairvaluelesscosttosell.
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(i)DirectCosts
DirectcostsreportedontheCombinedStatementofOperationsrepresentthecostofoperations,includinglaborcost,rentexpenses
andoutsourcingservices.
(j)LonglivedAssets
Longlivedassetsarereviewedforimpairmentwhenevereventsorchangesincircumstancesindicatethatthecarryingamountofan
assetorgroupofassetsmaynotbefullyrecoverable.Theseeventsorchangesincircumstancesmayinclude,butarenotlimitedto,a
significantdeteriorationofoperatingresults,achangeinregulatoryenvironment,changesinbusinessplans,oradversechangesin
anticipatedfuturecashflows.Ifanimpairmentindicatorispresent,FMUGroupevaluatesrecoverabilitybyacomparisonofthecarrying
amountoftheassetstofutureundiscountednetcashflowsexpectedtoresultfromtheuseandeventualdispositionoftheassets.Ifthe
assetsaredeterminedtobeimpaired,theimpairmentrecognizedistheexcessofthecarryingamountoverthefairvalueoftheassets.Fair
valueisgenerallydeterminedbythediscountcashflowsmethod.Thediscountrateusedinanyestimateofdiscountedcashflowsisthe
ratecommensuratewithasimilarinvestmentofsimilarrisk.
(k)RevenueRecognition
RevenueisrecognizedwhentheamountcanbereliablymeasuredandtheeconomicbenefitswillflowtoFMUGroup.FMUGroup's
revenuesprimarilyconsistoftuitionandeducationalservicerevenues.Revenuesarereportednetofdiscounts,waivers,grantsor
scholarshipsawarded,returns,andrelatedtaxes.Revenueswillnotberecognizediftherearesignificantuncertaintiesregarding
realization.Tuitionrevenuesarerecognizedratablyonastraightlinebasisovereachacademicsession.
DeferredrevenueandstudentdepositsontheCombinedBalanceSheetconsistoftuitionpaidpriortothestartofacademicsessions
andunearnedtuitionamountsrecordedasaccountsreceivableafteranacademicsessionbegins.Ifastudentwithdrawsfromaninstitution,
FMUGroup'sobligationtoissuearefunddependsontherefundpolicyatthatinstitutionandthetimingofthestudent'swithdrawal.
Generally,ourrefundobligationsarereducedoverthecourseoftheacademicterm.FMUGrouprecordsrefundsasareductionofdeferred
revenueandstudentdeposits,asapplicable.
Thefollowingtableshowsthecomponentsofrevenuefortheperiodpresented:
FromJanuary1to
September12,2014
Other
Grossrevenue
Less:Scholarships
Less:Discounts
Less:Taxesonservices
Total
365,561,704
659,345
366,221,049
(41,334,934)
(11,159,689)
(5,271,114)
308,455,312
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(l)FairValueMeasurements
FMUGrouputilizesvaluationtechniquesthatmaximizetheuseofobservableinputsandminimizetheuseofunobservableinputsto
theextentpossible.FMUGroupdeterminesfairvaluebasedonassumptionsthatmarketparticipantswoulduseinpricinganassetor
liabilityintheprincipalormostadvantageousmarket.Whenconsideringmarketparticipantassumptionsinfairvaluemeasurements,the
followingfairvaluehierarchydistinguishesbetweenobservableandunobservableinputs,whicharecategorizedinoneofthefollowing
levels:
Level1Inputs:Unadjustedquotedpricesinactivemarketsforidenticalassetsorliabilitiesaccessibletothereporting
entityatthemeasurementdate.
Level2Inputs:OtherthanquotedpricesincludedinLevel1inputsthatareobservablefortheassetorliability,either
directlyorindirectly,forsubstantiallythefulltermoftheassetorliability.
Level3Inputs:Unobservableinputsfortheassetorliabilityusedtomeasurefairvaluetotheextentthatobservableinputs
arenotavailable,therebyallowingforsituationsinwhichthereislittle,ifany,marketactivityfortheassetorliabilityat
measurementdate.
underASC82010.
Thecarryingamountsofcashandcashequivalents,accountsandnotesreceivable,accountspayable,debt,andcapitalleasesarea
reasonableestimateoftheirfairvaluesaspertheLevel1and2hierarchyduetoeithertheirshorttermnatureorthevariableinterestrate
appliestothedebt.TherearenootherfairvaluelevelsintheFMUGroup'scombinedfinancialstatements.
(m)Advertising
FMUGroupexpensesadvertisingcostsasincurred.Advertisingexpenseswere$2,922,022fortheperiodendedSeptember12,2014
andarerecordedingeneralandadministrativeexpensesintheStatementsofOperations.
(n)EmployeeBenefits
FMUGroupoffersshorttermemployeebenefitsthatarerecognizedasanexpenseastherelatedserviceisprovided.FMUGroupdoes
nothavepensionplansorotherpostretirementobligationsandrecognizesthecostofterminationasanexpense.
(o)IncomeTaxes
Asnotedabove,FMUGroupwasanotforprofitentityuntil2014,andconsequentlywassubjecttospecialtaxtreatmentsandwas
requiredtopayonlycertaintaxesduringitsnotforprofitperiod.Afterthetransformationtoforprofit,FMUGroupwassubjecttoall
applicabletaxrequirementsasdescribedbelow.
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FMUGrouprecordstheamountoftaxespayableorrefundableforthecurrentyear.Incometaxispreparedonaseparatereturnbasis.
DeferredincometaxassetsandliabilitiesarerecordedwithrespecttotemporarydifferencesintheaccountingtreatmentofitemsforGAAP
financialreportingpurposesandforincometaxpurposes.Deferredtaxassetsandliabilitiesaremeasuredusingenactedtaxratesineffect
fortheyearinwhichthosetemporarydifferencesareexpectedtoberecoveredorsettled.Theeffectondeferredtaxassetsandliabilitiesof
achangeintaxratesisrecognizedinearningsintheperiodinwhichthenewrateisenacted.Where,basedontheweightofallavailable
evidence,itismorelikelythannotthatsomeportionofrecordeddeferredtaxassetswillnotberealized,avaluationallowanceis
establishedfortheamountthat,inmanagement'sjudgment,issufficienttoreducethedeferredtaxassettoanamountthatismorelikely
thannottoberealized.
Foradditionalinformationregardingincometaxesandtaxassetsandliabilities,seeNote12IncomeTaxes.
(p)Contingencies
Liabilitiesforlosscontingenciesarisingfromclaims,assessments,litigation,fines,andpenaltiesandothersourcesarerecordedwhen
itisprobablethataliabilityhasbeenincurredandtheamountcanbereasonablyestimated.Legalcostsincurredinconnectionwithloss
contingenciesareexpensedasincurred.
Note3.SignificantRisksandUncertaintiesIncludingBusinessandCreditConcentrations
FMUGroupactivitiesexposeittomarket,credit,andliquidityrisks.
MarketRisk
Marketriskistheriskthatchangesinmarketprices,suchasinterestrates,willaffectFMUGroupCombinedStatementsof
ComprehensiveIncome.FMUGroupincursexpensesduetofluctuationsininterestratesthatincreasefinancialexpensesrelatedtoloans
andfinancingobtainedinthemarket.FMUGroupcontinuestomonitorinterestratesinordertoassesstheneedtoprotectagainsttherisk
ofvolatilityoftheserates.
CreditRisk
Creditriskisthepossibilitythatalossmayoccurfromthefailureofanotherpartytoperformaccordingtothetermsofacontract.
FMUGroupislegallypreventedfromperformingacreditanalysisoftheirstudents.ThefinancialstatementsatSeptember12,2014
includeaprovisiontocoverpossiblelossesontherealizationofaccountsreceivablefromstudents.
FMUGrouplimitsitsexposuretocreditriskassociatedwithbanksandfinancialinvestmentsbyinvestinginfinancialinstitutions
highlyrecognizedsolvency.
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Note3.SignificantRisksandUncertaintiesIncludingBusinessandCreditConcentrations(Continued)
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LiquidityRisk
LiquidityriskistheriskthatFMUGroupdoesnothavesufficientliquiditytomeetitsfinancialcommitmentsduetothemismatchof
termsorvolumebetweenreceiptsandpaymentsofnetproceeds.
OnSeptember12,2014,FMUGrouphadcashandcashequivalentsof$12,235,833which,inconjunctionwiththefundsgeneratedby
normaloperationsofFMUGroup,areexpectedtobesufficienttomeetitsfinancialcommitments.
Note4.AccountsandNotesReceivable
FortheperiodendedSeptember12,2014therewerenosalesofaccountsreceivableornotesreceivable.
FMUGroup'saccountsreceivablesconsistofreceivablesrelatedtostudenttuitionprogramandreceivablesrelatedtothe"Financing
forHigherEducationStudies"("FIES").TheFIESisaprogramoftheMinistryofEducationinBrazilwhosepurposeistofinancethe
postsecondaryeducationofstudentsenrolledinprivateinstitutions.Inaccordancewithcurrentlegislation,FMUGroupreceivesfromthe
BrazilianFundforEducationDevelopment("FNDE")theamountsfinancedbytheFIEStothestudents.
TheFIESProgramtargetsstudentsfromlowsocioeconomicbackgroundsenrolledatprivatepostsecondaryinstitutions.Eligible
studentsreceiveloanswithbelowmarketinterestratesthatarerequiredtoberepaidafteran18monthgraceperiodupongraduation.FIES
paystheCompanytaxcreditswhichcanbeusedtopaycertainfederaltaxesandsocialcontributions.FIESrepurchasesexcesscreditsfor
cash.AspartoftheFIESProgram,theCompanyisobligatedtopay15%ofanystudentdefault.Thedefaultobligationincreasesto30%of
anystudentdefaultiftheCompanyisnotcurrentwithitsfederaltaxes.FIESwithholdsbetween1%and3%oftuitionpaidtothe
Companytocoveranypotentialstudentdefaults("holdback").Ifthestudentpays100%oftheirloan,thewithheldamountswillbepaidto
theCompany.TheCompanyrecognizesrevenuesnetoftheamountswithheldbyFIES.FIESis12%ofrevenuesfortheperiodended
September12,2014.
BeginninginFebruary2014,allnewstudentsthatparticipateinFIESmustalsoenrollinFundodeGarantiadeOperaesdeCrdito
Educativo("FGEDUC").FGEDUCisagovernmentfundthatallowstheCompanytoinsurethemselvesfor90%(or13.5%of15%)oftheir
lossesrelatedtostudentdefaultsundertheFIESprogram.Thecostoftheprogramis5.63%ofastudent'sfulltuition.SimilartoFIES,the
administratorwithholds5.63%ofastudent'sfulltuitionasaguaranteebyFGEDUC.
InDecember2014,theBrazilianMinistryofEducation("MEC")alongwithFNDE,theagencythatdirectlyadministersFIESin
Brazil,announcedseveralsignificantrulechangestotheFIESprogrambeginningin2015.Thesechangeslimitthenumberofnew
participantsandtheamountspentontheprogram,anddelaypaymentsduetothepostsecondaryinstitutions.Thefirstchangeimplements
aminimumscoreonthehighschoolachievementexaminordertoenrollintheprogram.Thesecondchangealtersthescheduleforthe
paymentandrepurchaseofcreditsaswellaslimitstheopportunitiesforpostsecondaryinstitutionstosellanyunusedcreditssuchthat
thereisasignificantdelaybetweenthetimethepostsecondaryinstitutionprovidestheeducationalservicestothestudentsandthetimeit
receivespaymentfromthegovernmentfor2015.Inadditiontothesenewpermanentrulechanges,FNDEhasimplementedapolicyfor
students'loanrenewalsfor2015,thatprovidesthatstudentsmaynotfinanceanamountthatisgreaterthan6.41%oftheamountfinanced
intheprevioussemester,regardlessofanyincreasesintuitionorinthenumberofcoursesinwhichthestudentis
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Note4.AccountsandNotesReceivable(Continued)
enrolled.Moreover,theonlineenrollmentandreenrollmentsystemthatallpostsecondaryinstitutionsandstudentsmustusetoaccessthe
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enrolled.Moreover,theonlineenrollmentandreenrollmentsystemthatallpostsecondaryinstitutionsandstudentsmustusetoaccessthe
programhasexperiencednumeroustechnicalandprogrammingfaultsthathavealsointerferedwiththeenrollmentandreenrollment
process.NumerouschallengestothesechangesandrequestsforjudicialrelieffromthesystemfaultshavebeenfiledintheBrazilian
courts.Althoughtherearereasonablegroundsforthemtobeoverturnedinwholeorinpart,theprogramchangesandsystemicfaultsare
expectedtohaveanimpactin2015.
DelinquencyistheprimaryindicatorofcreditqualityforFMUGroup'sreceivables.Forreceivablesrelatedtotuitionprograms,FMU
Grouprecordsanallowancefordoubtfulaccountsbasedontheagingofthereceivable.
TheactivityintheallowancefordoubtfulaccountsfortheperiodendedSeptember12,2014isasfollows:
September12,
2014
Allowancefordoubtfulaccounts:
Beginningbalance
Reversals
WriteOffs
Provisions
Endingbalance
(29,060,198)
2,007,000
16,013,740
(19,594,839)
(30,634,297)
ThecombinedfinancialstatementsfortheperiodendedSeptember12,2014includeaprovisiontocoverexpectedlossesonaccounts
receivablefromstudents.Noindividualcustomeraccountedformorethan5%ofFMUGroup'srevenuesoraccountsreceivableforthe
periodendedSeptember12,2014.
Note5.PropertyandEquipment
AsofSeptember12,2014,thecompositionofpropertyandequipmentisshownbelow:
September12,2014
Accumulated
Depreciation
Cost
Computerequipment
Vehicles
Furnitureandequipment
Installations
Librarybooks
Software,brandsandpatents
Total
657,600
14,185,165
656,800
22,382,693
1,021,174
15,199,597
65,698,894
7,885,550
20,658,978
148,346,451
(11,585,940)
(496,215)
(14,037,044)
(793,864)
(11,390,622)
(53,063,125)
(5,968,534)
(17,782,638)
(115,117,982)
NetValue
$
657,600
2,599,225
160,585
8,345,649
227,310
3,808,975
12,635,769
1,917,016
2,876,340
$ 33,228,469
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Note5.PropertyandEquipment(Continued)
ThemovementinpropertyandequipmentduringtheperiodendedSeptember12,2014isshownbelow:
December31,
September12,
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Cost
December31,
2013
Computerequipment
Vehicles
Installations
Librarybooks
Total
Additions
657,600
12,572,165
656,800
18,774,693
1,021,174
15,199,597
62,428,894
7,327,550
19,837,848
138,476,321
Disposals
1,613,000
3,608,000
3,272,000
558,000
821,130
9,872,130
$
$
657,600
14,185,165

656,800
22,382,693

1,021,174
15,199,597
(2,000) 65,698,894

7,885,550
20,658,978
$ (2,000) $ 148,346,451
September12,
2014
AccumulatedDepreciation
December31,
2013
Computerequipment
Vehicles
Installations
Librarybooks
Total
Additions
(11,413,617)
(427,761)
(13,444,667)
(759,864)
(10,566,364)
(51,723,958)
(5,751,924)
(17,158,592)
(111,246,747)
Disposals
$ (172,323) $
(68,454)
(592,377)
(34,000)
(824,258)
(1,339,167)
(216,610)
(624,046)
$ (3,871,235) $
September12,
2014
(11,585,940)
(496,215)
(14,037,044)
(793,864)
(11,390,622)
(53,063,125)
(5,968,534)
(17,782,638)
(115,117,982)
AsofSeptember12,2014,therewasnoneedtorecordanyprovisionforimpairmentoffixedassets.
Note6.AssetsHeldforSale
InNovember2013withtheapprovalofowners,FMUGrouppledgedtosellsomebuildingslocatedinSaoPaulo.Management
expectsthesebuildingswillbesoldbytheendofthe2015fiscalyear.Thedelayinsalewasduetotherequiredlegaldocumentationnot
havingbeensubmittedtothepublicregister.Assetsclassifiedasheldforsaleamountto$5,366,410.
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Note7.AccruedCompensationandBenefits
Accruedcompensationandpayrollbenefitsconsistedofthefollowing:
Salariespayable
Accruedvacation
September12,
2014
$ 18,088,960
15,999,347
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Accruedvacation
Withholdingtaxes
Bonus
Other
Total
15,999,347
9,965,158
2,427,000
230,036
$ 46,710,501
Note8.Debt
Debtconsistedofthefollowing:
Localcurrency
Currentliabilities
Revolvinglineofcredit(a)
Workingcapitallineofcredit(b)
CreditAgreement(c)
Bankcreditnote
Capitalleaseobligations(d)
Others
TotalCurrentliabilities
Noncurrentliabilities
Capitalleaseobligations(d)
Total
(a)
(b)
(c)
(d)
September12,2014
Interest
Outstanding
Rate
Balance
22.53%p.a.
14.30%p.a.
3.5%to5%
14.72%p.a.
17.18%p.a.
17.18%p.a.
28,357,007
16,573,203
2,184,448
227,969
612,000
237,890
48,192,517
1,224,000
49,416,517
FMUGroupenteredintofourrevolvinglinesofcreditagreementswithBancoSafraS.A.forworkingcapital
purposes.TwolinesofcreditallowFMUGrouptoborrowupto$8,000,000respectively,theremainingtwolinesof
creditdonothaveamaximumprincipalamount.Principalamountsundertherevolvinglinesofcreditof$8,000,000
willbedueandpayablebetweenNovember2015andJanuary2016,andthetwolinesofcreditwithnomaximum
principalamountinSeptemberandOctober,2014.Thelinesofcreditcarryinterestratesof22.53%p.a..FMUGroup
doesnotpayanannualcommitmentfeeontheunusedportionofthefacility.Thelinesofcreditaresecuredbythe
assetsofFMUGroup.
FMUGroupalsohasshorttermworkingcapitallinesofcreditwithBancoSantander(Brasil)S.A.whichhavebeen
guaranteedbythedirectorsandallmaturewithinoneyear.Interestratesonthelinesofcreditare14.30%p.a.
ReferstoashorttermcreditagreementwithBancoSafraS.A.ThetermsoftheagreementindicateFMUGroupis
advancedcashbasedonthelevelofitsmonthlyreceivables,subjectedtointerestratesvaryingfrom3.5%to5%.
Capitalleases,primarilyrelatingtorealestateobligations,areincludedindebtandhavebeenrecordedusingan
interestrateof17.18%p.a..FMUGrouphasassetsundercapitalleasesof$183,445atSeptember12,2014,netof
accumulateddepreciation.Thedepreciationexpenseforcapitalleasesisrecordedingeneralandadministrative
expenses.
Debtisaccountedforatamortizedcostwhichapproximatesitsfairvalue.
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Themovementinthebalanceofdebtisshownbelow:
Beginningbalance
Funding
Accruedinterest
Amortization
Total
September12,
2014
$ 39,726,331
153,168,341
10,386,265
(153,864,420)
$ 49,416,517
575/620
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Note9.TaxesPayable,otherthanincome
TaxesPayable,otherthanincomeincludesamountsduefromFMUGrouptotheBraziliangovernmentwhichincludessocialsecurity
taxes,propertytaxesandwithholdingtaxesandconsistofthefollowing:
September12,
2014
TaxinstallmentsFederaltax(a)
TaxinstallmentsMunicipalitytax(IPTU)(b)
TaxinstallmentsSocialcontribution(INSS)(c)
Withholdingtaxes
Municipalitytax(IPTU)
Other
Total
Currentportion
Longtermportion
Total
$

$
(a)
(b)
(c)
95,857,973
30,333,546
10,169,561
10,537,072
5,429,104
2,656,378
154,983,634
42,010,584
112,973,050
154,983,634
Installmentpaymentsrelatedtotaxeswithheldfromthirdparties.Theseobligationswereenteredintothe
REFISIV,establishedbyLaw11,941/11.Installmentpaymentscanbemadeinupto160monthly
installments.AsofSeptember12,2014,therewere121installmentstobepaid.Thebalanceofinstallments
payableisadjustedmonthlybytheBrazilianCentralBank'sovernightinterestrate.
Theinstallmentofpropertytaxnotcollectedismadeupto120monthlyinstallments,andasofSeptember12,
2014,thereare84installmentstobepaid.Thebalanceofinstallmentspayableisadjustedmonthlybythe
BrazilianCentralBank'sovernightinterestrate.
ReferstoinstallmentsofsocialsecuritydebtsfromtheNationallnstituteofSocialSecurity,forthe
nonpaymentofINSSincidentsvaluesonpayroll.Theinstallmentpaymentismadeinupto60monthly
installments,remainingatSeptember12,2014,40installmentstobepaid.Thebalanceofinstallments
payableisadjustedmonthlybytheBrazilianCentralBank'sovernightinterestrate.
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Note10.Leases
FMUGroupconductsasignificantportionofitsoperationsfromleasedfacilities.Thesefacilitiesincludeourcorporateheadquarters,
otherofficelocations,andmanyofFMUGroup'shighereducationfacilities.Thetermsoftheseoperatingleasesvaryandgenerally
containseveralrenewaloptions.Someoftheoperatingleasesprovideforincreasingrentsoverthetermsoftheleases.FMUGroupalso
leasescertainequipmentundernoncancelableoperatingleaseswhicharetypicallyfortermsof60monthsorless.Totalrentexpenseunder
theseleasesisrecognizedratablyovertheinitialtermofeachlease.Anydifferencebetweentherentpaymentandthestraightlineexpense
isrecordedasanadjustmenttotheliabilityorasaprepaidasset.
Leasesinwhichasignificantportionoftherisksandrewardsofownershipareretainedbythelessorareclassifiedasoperatingleases.
Paymentsmadeunderoperatingleases(netofanyincentivesreceivedfromthelessor)arerecognizedintheCombinedStatementof
Operationsonastraightlinebasisovertheleaseterm.
ThefixedassetleasesinwhichFMUGroupretainssubstantiallyalltherisksandrewardsofownershipareclassifiedascapitalleases. 576/620
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ThefixedassetleasesinwhichFMUGroupretainssubstantiallyalltherisksandrewardsofownershipareclassifiedascapitalleases.
Capitalleasesarerecordedasafinancedpurchase,recognizingatthebeginning,afixedassetandafinancingliability(lease).Fixedassets
acquiredundercapitalleasesaredepreciatedattheratesdefinedinNote2(g).
AtSeptember12,2014,thegrossamountofequipmentandrelatedaccumulateddepreciationrecordedundercapitalleaseswereas
follows:
At
September12,
2014
Equipment
LessAccumulatedDepreciation
Total
$

$
440,267
(256,822)
183,445
FMUGrouphasseveraloperatingleasesforfacilitiesinwhichitoperatesitsbusiness.Theleasetermofoperatingleasesheldwith
thirdpartiesrangefromonetotenyears.Minimumrentpaymentsunderoperatingleasesarerecognizedonastraightlinebasisoverthe
termoftheleaseincludinganyperiodsoffreerent.Rentalexpenseforoperatingleases(exceptthosewithleasetermsofamonthorless
thatwerenotrenewed)asofSeptember12,2014consistedofthefollowing:
MinimumLeasePayments
At
September12,
2014
$ 45,297,676
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Note10.Leases(Continued)
Futureminimumleasepaymentsundernoncancelableoperatingleases(withinitialorremainingleasetermsinexcessofoneyear)as
ofSeptember12,2014are:
YearendingDecember31:
2014
2015
2016
2017
2018
2019
Lateryears,through2025
September12,
2014
Operating
Leases
23,887,931
76,776,000
76,548,000
64,748,000
54,883,000
52,548,000
188,116,000
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Lateryears,through2025
Totalminimumleasepayments
188,116,000
$ 537,506,931
AspartoftheacquisitionofFMUGroup(Note15),existingoperatingleaseswithrelatedpartieswererenegotiatedandnewlease
arrangementswereexecuted.TheleasetermscommencedonSeptember12,2014,withtermsof13yearsandrenewaloptionsoffouryears.
Asaresult,$466,176,400(theportionofleaseagreementswithrelatedparties)oftheabovefutureminimumleasepaymentswillnotbe
madeastheleaseagreementswillbeterminateduponacquisition,andtherevisedfutureminimumleasepaymentsrelatedtothenewlease
agreementswillbe$455,506,332asofDecember31,2014.
Note11.Contingencies
FMUGroupissubjecttolegalactionsarisingintheordinarycourseofbusiness,andhasrecognizedcontingenciesrelatedtocivil,
laborandtaxresultingfrompotentialactsandoperationsthatcouldbesubjecttoassessmentfromAuthorities.
AsofSeptember12,2014,FMUGrouphadthefollowingliabilitiesrelatedtocontingencies:
December31,2013
Additions
Updates
Reversals
Payments
September12,2014
Tax
Laborand
Civil
244,902,008
19,805,000
12,520,342
277,227,350
Total
2,984,304 247,886,312
290,000 20,095,000
12,520,342
(1,565,741) (1,565,741)
(562,000)
(562,000)
$ 1,146,563 $ 278,373,913
AsofSeptember12,2014,taxcontingenciesrelatedtouncertainincometaxpositionsintheamountof$79,653,000arepresentedin
thebalancesheetasnoncurrentIncometaxespayable.Taxcontingenciesrelatedtotaxesotherthanincometax,andlaborandcivil
claimsintheamountof
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Note11.Contingencies(Continued)
$197,574,350,$757,000and$389,563respectively,arepresentedasOthernoncurrentliabilitiesforSeptember12,2014.
FMUGroupispartytolegalproceedingsandisexposedtorisksofcontingenciesintax,laborandcivilcategories.Theongoing
lawsuitsarebeingdiscussedattheadministrativeandjudiciallevels,which,whenapplicable,aresupportedbyjudicialdeposits.The
provisionsforprobablelossesarisingfromtheselawsuitsandcontingenciesrisksareestimatedandupdatedbymanagement,basedonthe
supportofexternallegalconsultants.
LaborcontingenciesincludethequestioningofformeremployeeslinkedtodisputesovercompensationamountspaidbyFMU
Group.CivilcontingenciesarerelatedtolawsuitsfiledagainstFMUGrouprelatingtoclaimsforcompensationformaterialandmoral
damagesarisingfromunduecollections,lateissuanceofdiplomas,failuretoreturnregistrationfeesofholidaycourses,etc.character
problemsoperationaland/oracademic.
AsofSeptember12,2014,FMUGrouphaslawsuitsinvolvingrisksoflossclassifiedbymanagementaspossible,basedonthe
opinionofitslegaladvisors,forwhichnoreservewasrecordedattheestimatedtotalamountof$12,101,991.
Thefiguresforthecorrespondingjudicialdepositstoongoingclaimsarerecognizedasotherassetsinnoncurrentassets.
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Thefiguresforthecorrespondingjudicialdepositstoongoingclaimsarerecognizedasotherassetsinnoncurrentassets.
Note12.IncomeTaxes
FMUGroup'sstatutorytaxrateis34%.Significantcomponentsoftheincometax(expense)benefitonearningsfromcontinuing
operationswereasfollows:
Current
Contingencies
Deferred
Totalincometaxexpense
September12,
2014
(2,723,707)
(7,616,904)
37,524,073
27,183,462
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Incometaxbenefitwas$27,183,462fortheperiodendedSeptember12,2014,anddifferedfromtheamountcomputedbyapplying
theBrazilianfederalincometaxandsocialcontributioncombinedrateof34%topretaxincome(deemedincometax)asaresultofthe
following:
Computed"expected"taxbenefit
Increase(reduction)inincometaxesresultingfrom:
Taxonnotforprofitperiodincome/loss
TaxincentivePROUNI
Others
EffectofuncertainincometaxcontingenciesPrincipal
EffectofuncertainincometaxcontingenciesInterestandpenalties
Total
September12,2014
21,577,301
970,220
2,133,626
8,649,605
1,187
(3,298,000)
(2,850,477)
27,183,462
34%
1%
3%
14%
0%
(5%)
(4%)
43%
FMUGrouprecordsinterestandpenaltiesrelatedtouncertainincometaxpositionsasacomponentofincometaxexpense.Duringthe
periodendedSeptember12,2014,FMUGrouprecognizedinterestandpenaltiesrelatedtoincometaxesof$4,318,905.
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PROUNI("ProgramaUniversidadeparaTodos"or"UniversityforAll"Program)isagovernmenttaxprogram,whichencourages
institutionstoprovidestudentsfinancialassistanceintheformofdiscountsinreturnforfederaltaxincentives.EligibilityforPROUNIis
basedoneachstudent'sfamilymonthlyearnings.PROUNIisbasedontuitiondiscounts,andnofundsarereceivedbyFMUGroupnorthe
studentfromthefederalgovernmentforthetuitiondiscountsgranted.
Significantcomponentsofdeferredtaxassetsarisingfromcontinuingoperationswereasfollows:
Deferredtaxassets:
Accountsandnotesreceivableprincipallyduetoallowancefordoubtful
accounts
Deferredrevenue
Contingencies
Taxprovisionandexpenses
Others
Totaldeferredtaxassets
Deferredtaxliabilities:
Others
Totaldeferredtaxliabilities
September12,
2014
$ 6,898,190
10,791,355
9,868,701
9,062,700
937,367
37,558,313
(34,240)
(34,240)
$ 37,524,073
AsofSeptember12,2014,FMUGroup'sfederalandmunicipalstatutesaregenerallyopenbackto2009.
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TransactionsbetweenFMUGroupandOwners
Transactionswithrelatedpartiesareasfollows:
Noncurrentassets
Currentliabilities
RentPayable
Capitalcontribution
FMU
September12,2014
ACE
UESP
Total
$
2,950 $
$
$
2,950
26,044,274 7,096,832 1,175,000 34,316,106
100,000
129,000 3,200,000 3,429,000
RentPayable
FMUGroupleasesfromitsowners18facilitieswhichareusedforadministrativeandacademicpurposes.Thetotalrentexpensefor
thesefacilitiesfortheperiodendedSeptember12,2014was$31,440,000.AsofSeptember12,2014,thebalancepayablefortheleases
totaled$34,316,106.Theamountoftherentpayableislowerthantheamountthatwouldbeofferedtothirdpartiesduringanormalarm's
lengthtransaction.
RemunerationtoOwners
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FortheperiodendedSeptember12,2014,theCombinedStatementofOperationsincludessalariesandinkindremunerationspaidto
ownersintheamountsof$6,222,000.
Cashinterestpaymentswere$14,171,395fortheperiodendedSeptember12,2014.Netincometaxcashpaymentswere$852,962for
theperiodendedSeptember12,2014.
FMUGrouphasevaluatedsubsequenteventsfromthecombinedbalancesheetdatethroughSeptember23,2015,thedateatwhich
thecombinedfinancialstatementswereavailabletobeissued,anddeterminedthattherearenootheritemstodisclose.
Apreviouslynoted,onSeptember12,2014throughthepurchaseof100%ofitscapitalstockfromRedeInternacionalde
UniversidadesLaureateLtda.("Rede")andBusinessSchoolSaoPauloLtda.,FMUGroupbecameasubsidiaryofLaureateEducations,Inc.
InrelationwiththesaleofFMUGroup,andasofSeptember12,2014,accountspayableincluded$25millionsofaccruedexpenses
relatedtoconsultancyexpensesincurredinrelationwiththetransaction.
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SOCIEDADEEDUCACIONALSULRIOGRANDENSELTDA.
FinancialStatements
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IndependentAuditors'Report
Totheboardofdirectorsandquotaholders
SociedadeEducacionalSulRioGrandenseLtda.
WehaveauditedtheaccompanyingfinancialstatementsofSociedadeEducacionalSulRioGrandenseLtda.,whichcomprisethe
balancesheetasofDecember31,2013and2012,andtherelatedstatementsofincome,quotaholders'equityandcashflowsforeachofthe
twoyearsendedDecember31,2013.
Management'sResponsibilityfortheFinancialStatements
Managementisresponsibleforthepreparationandfairpresentationofthefinancialstatementsinaccordancewithaccounting
principlesgenerallyacceptedintheUnitedStatesofAmericathisincludesthedesign,implementation,andmaintenanceofinternal
controlrelevanttothepreparationandfairpresentationoffinancialstatementsthatarefreefrommaterialmisstatement,whetherdueto
fraudorerror.
Auditor'sResponsibility
Ourresponsibilityistoexpressanopiniononthefinancialstatementsbasedonouraudit.Weconductedourauditinaccordancewith
auditingstandardsgenerallyacceptedintheUnitedStatesofAmerica.Thosestandardsrequirethatweplanandperformtheauditto
obtainreasonableassuranceaboutwhetherthefinancialstatementsarefreefrommaterialmisstatement.
Anauditinvolvesperformingprocedurestoobtainauditevidenceabouttheamountsanddisclosuresinthefinancialstatements.The
proceduresselecteddependonourjudgment,includingtheassessmentoftherisksofmaterialmisstatementofthefinancialstatements,
whetherduetofraudorerror.Inmakingthoseriskassessments,weconsiderinternalcontrolrelevanttotheCompany'spreparationandfair
presentationofthefinancialstatementsinordertodesignauditproceduresthatareappropriateinthecircumstances,butnotforthe
purposeofexpressinganopinionontheeffectivenessoftheCompany'sinternalcontrol.Accordingly,weexpressnosuchopinion.An
auditalsoincludesevaluatingtheappropriatenessofaccountingpoliciesusedandthereasonablenessofsignificantaccountingestimates
madebymanagement,aswellasevaluatingtheoverallpresentationofthefinancialstatements.Webelievethattheauditevidencewe
haveobtainedissufficientandappropriatetoprovideabasisforourauditopinion.
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Opinion
Inouropinion,thefinancialstatementsreferredtoabovepresentfairly,inallmaterialrespects,thefinancialpositionofSociedade
EducacionalSulRioGrandenseLtda.atDecember31,2013and2012,andtheresultsoftheiroperationsandtheircashflowsforeachof
thetwoyearsendedDecember31,2013inaccordancewithaccountingprinciplesgenerallyacceptedintheUnitedStatesofAmerica.
/s/PricewaterhouseCoopers
PricewaterhouseCoopersAuditoresIndependentes
PortoAlegre,RS,Brazil
September28,2015
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STATEMENTSOFOPERATIONS
FORTHEYEARSENDEDDECEMBER31,2013AND2012
2013
Revenues
Costsandexpenses:
Directcosts
General&administrativeexpenses
Gainfromdistributionofassets
Operatingincome
Interestincome
InterestExpense
Incomefrombeforeincometaxes
Incometaxexpense
Netincome
December31,
2012
22,946,271
(15,427,519)
(3,361,846)
90,357,900
94,514,806
7,545,011
(404,319)
101,655,498
(4,689,900)
96,965,598
25,146,552
(16,851,291)
(3,552,377)
4,742,884
13,073,465
(103,499)
17,712,850
(7,877,165)
9,835,685
Theaccompanyingnotesareanintegralpartofthesefinancialstatements.
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BALANCESHEETS
ASOFDECEMBER31,2013AND2012
Assets
CurrentAssets:
Receivables:
Receivables,net
Totalcurrentassets
Land
Buildings
DeferredincomeTaxes
TotalAssets
LiabilitiesandStockholder'sEquity
CurrentLiabilities:
Accountspayable
Accountspayabletoquotaholders
Accruedexpenses
2013
December31,
2012
$ 56,385,598

6,291,730
(4,652,016)

1,639,714

249,555
58,274,867

8,553,520
(6,035,619)

2,517,901

5,990,188
$ 66,782,956

$
117,809
52,244,000

367,886
$ 131,033,482
6,607,190
(4,893,407)
1,713,783
15,963
132,763,228
4,917,222
27,303,717
8,337,113
(13,694,802)
26,863,250
5,165,377
$ 164,791,855
$
74,143
8,685,884
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Accruedexpenses
Incometaxespayable
TotalLiabilities
Quotaholders'equity:
Commonstock(parvalue$1.00pershareauthorized100,000
quotasissuedandoutstandingquotasof100,000asofDecember31,
2013and100,000asofDecember31,2012)
RetainedEarnings/(Accumulateddeficit)
Totalquotaholders'equity
TotalliabilitiesandQuotaholders'Equity
367,886
1,081,186
157,132
19,931,616
1,990,552
75,890,181
8,609,835
84,500,016
8,685,884
1,069,051
127,499
18,790,375
1,877,238
30,624,190
7,852,793
38,476,983
100,000
100,000
(17,817,060) 126,214,872
(17,717,060) 126,314,872
$ 66,782,956 $ 164,791,855
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STATEMENTSOFQUOTAHOLDER'SEQUITY
Common
Stock
Retained
Earnings
Total
quotaholders'
equity
CapitalContribution
Netincome
Dividendsdistribution
Distributionofassets(spinoff)
Others
Netincome
$
$ 116,379,187 $ 116,379,187
100,000

100,000

9,835,685
9,835,685
100,000 126,214,872 126,314,872
(75,476,171) (75,476,171)
(165,988,000) (165,988,000)

466,641
466,641

96,965,598
96,965,598
$ 100,000 $ (17,817,060) $ (17,717,060)
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STATEMENTSOFCOMPREHENSIVEINCOME
Fortheyearsended
December31,
2013
2012
Netincome
Othercomprehensive(loss)income
Totalothercomprehensive(loss)income
ComprehensiveincomeattributabletoSociedadeEducacionalSulRio
GrandenseLTDA.
$ 96,965,598 $ 9,835,685

$ 96,965,598 $ 9,835,685
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STATEMENTSOFCASHFLOWS
FORTHEYEARSDECEMBER31,2013AND2012
Netincome
Adjustmentstoreconcilenetincometonetcashprovidedby(usedin)
operatingactivities:
Rentexpense
Gainfromdistributionofassets
Baddebtexpense
Deferredincometaxes
Noncashlossfromincometaxcontingencies
Noncashlossfromnonincometaxcontingencies
Changeinoperatingassetsandliabilities:
Receivables
Prepaidexpensesandotherassets
Increaseinincometaxpayable
Netcashprovidedby(usedin)operatingactivitiesofcontinuing
operations
Purchaseofpropertyandequipment
Proceedsfromsaleofpropertyandequipment
Dividendspaid
Capitalcontribution
Netcashprovidedusedin(provideby)financingactivitiesofcontinuing
operations
2013
2012

$ 96,965,598 $
9,835,685
1,577,545
1,734,681
466,641
(90,357,900)
(241,391)
1,081,491
(824,811) (1,862,378)

8,220,466
870,356
2,128,217
315,460
429,903
(233,593)
57,745
(8,262,197)
8,389,986
1,141,241 (53,518,709)
29,633
92,995
1,446,582 (23,409,918)
(618,295)

(591,328)
(618,295)
(591,328)
(75,476,171)

100,000
(75,476,171)
(74,647,884)
131,033,482
56,385,598
100,000
23,901,246
154,934,728
$ 131,033,482
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$ 56,385,598 $ 131,033,482
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NotestoFinancialStatements
TheSOCIEDADEEDUCACIONALSULRIOGRANDENSELTDA.("FAPA"or"theCompany"),alimitedcompany,provideshigher
educationprogramsandservicestostudentsinPortoAlegre,Brazil.
OnNovember22,2013,theCompanymadeanassetdistributiontotwonewentitiesownedbyFAPA'squotaholders.Thelandand
buildingsinwhichFAPAprovidesserviceswerethespunoffitsbalancesheetasofthisdate(refertoNote5Spinoff).
OnOctober1,2012,theSecretariadaReceitaFederaldoBrazil,Brazilianinternalrevenueservices,revokedtheCompany's"tax
immunity"statusduetotheviolationoffederallaw9,532/97requirements.Therefore,fromOctober2012,theCompanywasrequiredto
payalltaxes.Asaresult,inOctober2012,theCompanychangeditsjudicialnaturefromanonprofittoaforprofitentity.Theforprofit
entitywasformedwithcapitalstockof$100,000.TheseFinancialStatementsarepreparedbasedonstandardsapplicabletoforprofit
companies.ThesefinancialstatementsarepreparedunderthepresumptionthattheCompanywillbeabletocontinueasagoingconcern.
AsofDecember31,2013theCompanypresentsanequitydeficitamountingto$17,717,060mainlyduetotheimpactoftheaccountingof
thespinoffofassets(refertoNote5Spinoff)atfairvalueaswellasthedividenddistribution.AsofDecember31,2013,theCompany
presentsanegativeworkingcapitalbalanceof$17,615,314whichisprimarilyduetotheimpactofaccountspayabletoquotaholders
(refertoNote5Spinoff).TheCompanyhasapositiveoperatingcashflow,andthenegativeworkingcapitalandequitydeficitdoesnot
impacttheabilityoftheCompanytorealizeitsassetsandtomeetitsobligationsintheordinarycourseofbusiness.
ThefinancialstatementshavebeenpreparedforthepurposeofcomplyingwithRule305ofRegulationSXoftheSecuritiesand
ExchangeCommission.
ThepreparationoffinancialstatementsinconformitywithaccountingprinciplesgenerallyacceptedintheUnitedStates(USGAAP)
requiresmanagementtomakeestimatesandassumptionsthataffectthereportedamountsofassetsandliabilitiesanddisclosureof
contingentassetsandliabilitiesatthedateofthefinancialstatementsandthereportedamountsofrevenuesandexpensesduringthe
reportingperiod.Actualresultscoulddifferfromthoseestimates.Significantitemssubjecttosuchestimatesandassumptionsincludethe
allowancefordoubtfulaccounts,usefullivesoffixedassets,andprovisionsforcivilandlaborrisksandtaxcontingencies.
(a)FunctionalCurrency
Thefunctionalcurrencyisthecurrencyoftheeconomicenvironmentinwhichacompanyprimarilydoesbusiness.TheBrazilianReal
isthefunctionalcurrencyoftheCompanyanditsfinancialstatementsarepresentedinitsfunctionalcurrency.
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NotestoFinancialStatements(Continued)
TheCompanydoesnothaveanytransactionsincurrenciesdifferentfromitsfunctionalcurrency.
(Unaudited)
FiscalYearEndedor
EndingDec31,
2009
2010
2011
2012
2013
AtEndofPeriod
(R$per$1.00)
0.57
0.60
0.54
0.49
0.42
Average
(ofmonth
endrates)
0.57
0.59
0.54
0.48
0.43
High
0.59
0.60
0.65
0.59
0.51
Low
0.41
0.53
0.53
0.47
0.41
(b)CashandCashEquivalents
TheCompanyconsidersallhighlyliquidinvestmentsthatarepurchasedwithanoriginalmaturityofthreemonthsorlesstobecash
equivalents.
(c)FinancialInstruments
FAPA'sfinancialinstrumentsconsistofcashandcashequivalents,accountsandnotesreceivable,otherreceivablesandaccounts
payables.ThefairvalueofthesefinancialinstrumentsapproximatestheircarryingamountsreportedintheBalanceSheet.
TheCompany'scashaccountsaremaintainedwithhighqualityfinancialinstitutionswithasignificantconcentrationintwo
institutions:BancoSantanderandBancoSafra.
TheCompanyaccountsreceivablearenotconcentratedwithanyonesignificantcustomer.
(d)AccountsandNotesReceivable
TheCompanyrecognizesreceivableswhenanacademicsessionbegins,althoughstudentsgenerallyenrollincoursespriortothestart
oftheacademicsession.Receivablesarerecognizedonlytotheextentthatamountsaredueandcollectionisreasonablyassured.
(e)AllowanceforDoubtfulAccounts
FAPArecordsanallowancefordoubtfulaccountstoreduceitsreceivablestotheirnetrealizablevalue.TheCompany'sallowance
estimationmethodologyisbasedontheageofthereceivables,thestatusofpastdueamounts,historicalcollectiontrends,current
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estimationmethodologyisbasedontheageofthereceivables,thestatusofpastdueamounts,historicalcollectiontrends,current
economicconditions,andstudentenrollmentstatus.Receivablesdeemedtobeuncollectiblearewrittenoffagainsttheallowancefor
doubtfulaccounts.Intheeventthatcurrentcollectiontrendsdifferfromhistoricaltrends,anadjustmentismadetotheallowanceaccount
andbaddebtexpense.
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(f)PropertyandEquipment,andLeasedAssets
Propertyandequipmentincludesland,buildings,furniture,computerequipmentandsoftware.FAPArecordspropertyandequipment
atcostlessaccumulateddepreciationandamortization.Repairsandmaintenancecostsareexpensedasincurred.
FAPAanalyzeseachleaseagreemententeredtodeterminewhetheritshouldbeclassifiedasacapitaloranoperatinglease.The
Companyrecognizeoperatingleaserentexpenseonastraightlinebasisovertheexpectedtermofeachlease.
Depreciationisrecordedonastraightlinebasisovertheestimatedusefullivesoftheassets.Totaldepreciationfortheyearsended
December31,2013and2012was$1,577,545and$1,734,681,respectively,whichwasentirelyrecordedasdirectcostsineachyear.
Buildings

25
510
(g)DirectCosts
DirectcostsreportedontheStatementofOperationsrepresentthecostofoperations,includinglaborcosts,anddepreciationand
amortizationexpense.
(h)LonglivedAssets
Longlivedassets,arereviewedforimpairmentwhenevereventsorchangesincircumstancesindicatethatthecarryingamountofan
assetorgroupofassetsmaynotbefullyrecoverable.Theseeventsorchangesincircumstancesmayinclude,butarenotlimitedto,a
significantdeteriorationofoperatingresults,achangeinregulatoryenvironment,changesinbusinessplans,oradversechangesin
anticipatedfuturecashflows.Ifanimpairmentindicatorispresent,theCompanyevaluatesrecoverabilitybyacomparisonofthecarrying
amountoftheassetstofutureundiscountednetcashflowsexpectedtoresultfromtheuseandeventualdispositionoftheassets.Ifthe
assetsaredeterminedtobeimpaired,theimpairmentrecognizedistheexcessofthecarryingamountoverthefairvalueoftheassets.Fair
valueisgenerallydeterminedbythediscountedcashflowmethod.Thediscountrateusedinanyestimateofdiscountedcashflowsisthe
ratecommensuratewithasimilarinvestmentofsimilarrisk.
(i)RevenueRecognition
RevenuesarerecognizedwhentheamountcanbereliablymeasuredandtheeconomicbenefitswillflowtotheCompany.The
Company'srevenuesprimarilyconsistoftuitionandeducationalservicerevenues.Revenuesarereportednetofdiscounts,rebates,taxes,
grantsorscholarshipsawarded.
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grantsorscholarshipsawarded.
Revenuesarenotrecognizediftherearesignificantuncertaintiesregardingrealization.Revenuesfromtuitionarerecognizedona
straightlinebasisovertheacademicsession.
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DeferredrevenueandstudentdepositsontheBalanceSheetconsistoftuitionpaidpriortothestartofacademicsessionsandunearned
tuitionamountsrecordedasaccountsreceivableafteranacademicsessionbegins.Ifastudentwithdrawsfromaninstitution,the
Company'sobligationtoissuearefunddependsontherefundpolicyandthetimingofthestudent'swithdrawal.Generally,theCompany's
refundobligationsarereducedoverthecourseoftheacademicterm.FAPArecordsrefundsasareductionofdeferredrevenueandstudent
deposits,asapplicable.
ThefollowingtableshowsthecomponentsofRevenuesoftotalnetrevenuefortheperiodspresented:
Other
Grossrevenue
Less:Discounts/waivers/scholarships
Less:Taxesonsales
Total
Fortheyearsended
December31,
2013
2012
24,184,262
897,892
25,082,154
(73,046)
(2,062,837)
22,946,271
$ 25,321,223
443,350
25,764,573
(123,351)
(494,670)
$ 25,146,552
(j)FairValueMeasurements
TheCompanyutilizesvaluationtechniquesthatmaximizetheuseofobservableinputsandminimizetheuseofunobservableinputs
totheextentpossible.TheCompanydeterminesfairvaluebasedonassumptionsthatmarketparticipantswoulduseinpricinganassetor
liabilityintheprincipalormostadvantageousmarket.Whenconsideringmarketparticipantassumptionsinfairvaluemeasurements,the
followingfairvaluehierarchydistinguishesbetweenobservableandunobservableinputs,whicharecategorizedinoneofthefollowing
levels:
Level1Inputs:Unadjustedquotedpricesinactivemarketsforidenticalassetsorliabilitiesaccessibletothereporting
entityatthemeasurementdate.
Level2Inputs:OtherthanquotedpricesincludedinLevel1inputsthatareobservablefortheassetorliability,either
directlyorindirectly,forsubstantiallythefulltermoftheassetorliability.
Level3Inputs:Unobservableinputsfortheassetorliabilityusedtomeasurefairvaluetotheextentthatobservableinputs
arenotavailable,therebyallowingforsituationsinwhichthereislittle,ifany,marketactivityfortheassetorliabilityat
measurementdate.
underASC82010.
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Thecarryingamountsofcashandcashequivalents,accountsandnotesreceivable,otherassets,accountspayable,andaccrued
expensesareareasonableestimateoftheirfairvalues,asperthelevel1hierarchy,duetotheirshorttermnature.Therearenootherfair
valuelevelsinFAPA'sFinancialStatements.
(k)Advertising
TheCompanyexpensesadvertisingcostsasincurred.Advertisingexpenseswere$228,043and$249,339fortheyearsended
December31,2013and2012,respectively,andarerecordedindirectcostsintheStatementsofOperations.
(l)IncomeTaxes
TheCompanyrecordstheamountoftaxespayableorrefundableforthecurrentyear.Deferredincometaxassetsandliabilitiesare
recordedwithrespecttotemporarydifferencesintheaccountingtreatmentofitemsforGAAPfinancialreportingpurposesandforincome
taxpurposes.Deferredtaxassetsandliabilitiesaremeasuredusingenactedtaxratesineffectfortheyearinwhichthosetemporary
differencesareexpectedtoberecoveredorsettled.Theeffectondeferredtaxassetsandliabilitiesofachangeintaxratesisrecognizedin
earningsintheperiodinwhichthenewrateisenacted.Where,basedontheweightofallavailableevidence,itismorelikelythannotthat
someportionofrecordeddeferredtaxassetswillnotberealized,avaluationallowanceisestablishedfortheamountthat,inmanagement's
judgment,issufficienttoreducethedeferredtaxassettoanamountthatismorelikelythannottoberealized.
(m)Contingencies
Liabilitiesforlosscontingenciesarisingfromclaims,assessments,litigation,fines,andpenaltiesandothersourcesarerecordedwhen
itisprobablethataliabilityhasbeenincurredandtheamountcanbereasonablyestimated.Legalcostsincurredinconnectionwithloss
contingenciesareexpensedasincurred.
Note3.SignificantRisksandUncertaintiesIncludingBusinessandCreditConcentrations
TheCompany'sactivitiesexposeittocreditandliquidityrisks.
CreditRisk
ThefinancialstatementsatDecember31,2013and2012includeaprovisiontocoverpossiblelossesonaccountsreceivablefrom
students.Nosinglecustomeraccountedformorethan5%oftheCompany'srevenuesin2013or2012,oraccountsreceivableat
December31,2013or2012.
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TheCompanylimitsitsexposuretocreditriskassociatedwithbanksandfinancialinvestmentsbyinvestinginfinancialinstitutions
highlyrecognizedsolvencyandprestige.
LiquidityRisk
LiquidityriskistheriskthattheCompanydoesnothavesufficientliquiditytomeetitsfinancialcommitments,duetothemismatch
oftermsorvolumebetweenreceiptsandpaymentsnetproceeds.
Tomanageliquidityofcash,assumptionsoffuturedisbursementsandreceipts,whicharemonitoreddailybytheFinanceDepartment
areestablished.
OnDecember31,2013and2012,theGrouphadcashandcashequivalentsof$51,901and$56,333,697,and$155,463and
$130,878,019,respectively.CashandcashequivalentsalongwithfundsgeneratedbynormaloperationsoftheCompanyareexpectedto
besufficienttomanageliquidityrisk.
Note4.AccountsandNotesReceivable
Therecordedamountinnotesreceivableforwhichanimpairmenthasbeenrecognizedandtherelatedallowancefordoubtful
accountsatDecember31,2013and2012were$4,652,016and$4,893,407respectively.Therewasnointerestincomerecognizedonthe
impairednotesreceivableduring2013and2012.FortheyearsendedDecember31,2013and2012,therewerenosalesofnotes
receivable.
TheCompany'saccountsreceivablesconsistofreceivablesrelatedtostudenttuitionandreceivablesrelatedtothe"Financingfor
HigherEducationStudies"("FIES").FIESisaprogramwhosepurposeistofinancethepostsecondaryeducationofstudentsenrolledin
privateinstitutions.Inaccordancewithcurrentlegislation,theCompanyreceivesfromtheBrazilianFundforEducationDevelopment
("FNDE")theamountsfinancedbythestudentsinFIES.
TheFIESProgramtargetsstudentsfromlowsocioeconomicbackgroundsenrolledatprivatepostsecondaryinstitutions.Eligible
studentsreceiveloanswithbelowmarketinterestratesthatarerequiredtoberepaidafteran18monthgraceperiodupongraduation.FIES
paystheCompanytaxcreditswhichcanbeusedtopaycertainfederaltaxesandsocialcontributions.FIESrepurchasesexcesscreditsfor
cash.AspartoftheFIESProgram,theCompanyisobligatedtopay15%ofanystudentdefault.Thedefaultobligationincreasesto30%of
anystudentdefaultiftheCompanyisnotcurrentwithitsfederaltaxes.FIESwithholdsbetween1%and3%oftuitionpaidtothe
Companytocoveranypotentialstudentdefaults("holdback").Ifthestudentpays100%oftheirloan,thewithheldamountswillbepaidto
theCompany.TheCompanyrecognizesrevenuesnetoftheamountswithheldbyFIES.FIESis8%and9%ofrevenuesfortheyearsended
December31,2013andDecember31,2012respectively.
DelinquencyistheprimaryindicatorofcreditqualityfortheCompany'sreceivables.Forreceivablesrelatedtotuitionprograms,the
Companyrecordsanallowancefordoubtfulaccountsbasedontheagingofthereceivable.
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Note4.AccountsandNotesReceivable(Continued)
TheactivityintheallowancefordoubtfulaccountsfortheyearsendedDecember31,2013and2012isasfollows:
Allowancefordoubtfulaccounts:
Beginningbalance
Writeoffs
Recoveries
Provision
Endingbalance
2013
December31,
2012
$ (4,893,407) $ (3,811,916)
655,710
(414,319) (1,081,491)
$ (4,652,016) $ (4,893,407)
Note5.Spinoff
OnNovember22,2013,theCompanymadedistributionstovariousquotaholdersintheformofcashandassetsintheamountof
$75,630,100.ThecompanymadeanassetdistributiontotwonewentitiesownedbyFAPA'squotaholders,SFSAssesoriaeConsultoria
S/SLTDA.andSociedadePortoalegrensedePesquinaEducacionalLTDA.Theassetsdistributedincluded(1)landandbuildingsinwhich
FAPAprovidesservicesandwithanetbookvalueof$23,386,100asofthespinoffdateand(2)cashintheamountof$52,244,000(referto
Note9RelatedParties).
InaccordancewithGAAP,thespinoffrepresentsanonreciprocaltransferwhichisrequiredtobeaccountedatfairvalue.FAPA
recognizedagainintheamountof$90,357,900forthedifferencebetweenthefairvalueandthehistoricalcostasdisclosedbelow:
Historicalnetbookvalueoflandsandbuildingsdistributed
Gainrecognizedintheincomestatement
FairValueoflandsandbuildingsdistributed
Accountspayabletoquotaholders
Totalassetsdistributed(spinoff)
23,386,100
90,357,900
113,744,000
52,244,000
165,988,000
FromNovember22,2013toDecember31,2013,withoutenteringintoaleaseagreementortransferringanyconsiderationtothe
owners,FAPAcontinuedutilizingthespinoffassetswithouttransferringanyconsiderationtothenewowners.Thiswasconsidered
expensespaidbythequotaholdersonbehalfoftheCompany.FAPArecognizedrentexpenseof$466,641andarelatedcapital
contribution(includedas"Others"intheStatementofQuotaholder'sEquity).
Note6.Commitments
OnJuly2014,theCompanysignedaleaseagreementrelatedtothedistributedassetswithaprospectivedate(refertoNote5),assuch,
theCompanyhasnosignificantcommitmentsasofyearendDecember31,2013and2012.
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Note7.Contingencies
TheCompanyissubjecttolegalactionsarisingintheordinarycourseofitsbusiness.Inmanagement'sopinion,theyhaveadequate
legaldefensesand/oraccruedliabilitieswithrespecttotheeventualityofsuchactions.FAPAdoesnotbelievethatanysettlementwould
haveamaterialimpactonitsFinancialStatements.
OtherCurrentandLongTermLiabilities
IncludedinOtherCurrentandLongTermLiabilitiesthereareprovisionsfortaxcontingenciesrelatedtofederalandmunicipaltaxes,
andaremainlytaxrisksrelatedtotaxesonincomeandfinancialtransactionsfromtaxpositionsandwhicharesubjecttotheassessmentof
taxauthorities.Theseprovisionsamountedto$10,600,387and$9,730,031,respectively.
Note8.IncomeTaxes
AsofDecember31,2013and2012,FAPAhasaccountedforincometaxpayableamountingto$19,931,616and$18,790,375,
respectively,relatedtothelossofits"taximmunity".InAugust22,2014,FAPAenteredtheREFISprogram,agovernmenttaxamnesty
programandpaid$17,825,044tosettlethesepayables.
Thesignificantcomponentsoftheincometaxexpenseareasfollows:
Current
Contingencies
Deferred
2013
December31,
2012
$ (4,373,469) $ (1,519,077)
(1,141,242) (8,220,466)
824,811 1,862,378
$ (4,689,900) $ (7,877,165)
Incometaxexpensewas$4,689,900fortheyearendedDecember31,2013,anddifferedfromtheamountcomputedbyapplyingthe
Brazilianfederalincometaxandsocialcontributioncombinedrateof34%topretaxincome(deemedincometax)asaresultofthe
following:
December31,
2013
Computed"expected"taxexpense
Increase(reduction)inincometaxesresultingfrom:
Nontaxablegainonrevaluationofassetstofairvalue
Interestandpenalities
Other
$ (34,562,869)
30,721,686
(1,141,242)
292,525
$ (4,689,900)
Incometaxexpensewas$7,877,165fortheyearendedDecember31,2012,anditdiffersfromtheamountcomputedbyapplyingthe
Brazilianfederalincometaxrateof34%topretaxincomeasa
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resultoftheadherenceoftheCompanytothe"LucroPresumidoProgram"bywhichtheincometaxexpenseiscalculatedbyapplyinga
rateof32%onrevenues(deemedincometax).Inaddition,asmentionedabove,FAPAwasanotforprofitentityfromJanuary1to
October1,2012whichledtoadditionalvariances.
Thetaxeffectsoftemporarydifferencesthatgiverisetosignificantportionsofthedeferredtaxassetsanddeferredtaxliabilitiesat
December31,2013and2012arepresentedbelow:
Deferredtaxassets:
Accountsandnotesreceivableprincipallyduetoallowancefor
doubtfulaccounts
Contingencies
December31,
2012
$ 508,575 $ 367,707
5,481,613 4,797,670
$ 5,990,188 $ 5,165,377
2013
TheCompanyrecordsinterestandpenaltiesrelatedtouncertaintaxpositionsasacomponentofIncometaxexpense.Duringtheyears
endedDecember31,2013and2012,theCompanyrecognizedinterestandpenaltiesrelatedtoincometaxesof$1,141,242and
$2,267,875,respectively.
AsofDecember31,2013,FAPA'sfederalandmunicipalstatutesaregenerallyopenbackto2009.
Note9.EmployerBenefitPlans
TheCompanysponsorsadefinedcontributionplanforallofitsemployees.FAPAmakesannualcontributionstotheplanbetween
50%to95%oftheparticipant'scontributioninaccordancewiththeyearsofwork.
Thefollowingtablesummarizesemployercontributionsduring2013and2012:
Employercontribution
PensionPlan
2013
2012
$ 32,877 $ 35,374
TransactionsbetweenFAPAandQuotaholders
OnNovember22,2013,theCompany'squotaholdersapprovedadistributionbywhichlandandbuildingswithanetbookvalueof
$23,386,100weredistributedtoSFSAssesoriaandSociedadeP.Pesquisaandcashfor$52,244,000approvedtobedistributed.Asof
December31,2013,FAPAhasnotsettledthisobligationand$52,244,000isincludedinthelineitemofAccountsPayableto
QuotaholdersintheBalanceSheet(refertoNote5Spinoff).
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AsofDecember31,2013and2012,theIncomeStatementincludessalariespaidtoquotaholdersintheamountsof$553,785and
$118,509,respectively.
Also,during2013and2012,theCompanyreceivedservicesrelatedtothecollectionofoutstandingreceivablesfromstudentsfrom
EducreditoGestaoeRecuperacaodeAtivosEducacionaisLTDA.,anentitypartiallyownedbyaquotaholder'srelative.Educreditoretains
theinterestonthepaymentscollectedfromstudentsasservicefees.
Netincometaxcashpaymentswere$4,039,307and$0fortheyearsendedDecember31,2013and2012,respectively.
Thedistributionofassets(refertoNote5)representsanoncashflowtransactionsasofDecember31,2013forthelandandbuildings
transferred.
Thecashobligationof$52,244,000(refertoNote9)representsanoncashflowtransactionasofDecember31,2013.Itisatransaction
thataffectedEquityandAccountsPayableandbecauseofthisisnotpresentedintheCashFlowStatement.
TheCompanyhasevaluatedsubsequenteventsfromthebalancesheetdatethroughSeptember28,2015,thedateatwhichthe
financialstatementswereavailabletobeissued,anddeterminedthattherearenootheritemstodisclose.
OnJanuary30,2014andJuly4 th,2014,theCompanysettledtheaccountpayabletotheSellersamountingto52,244,000(referto
notes5and9)bypayingincash$13millionand$39,244,000,respectivelyineachdate.
OnAugust12,2014,LaureateEducations,Inc.acquiredFAPA.Thetotalpurchasepricewas$9,361,556,andwaspaidinformoftwo
sellernoteswithatotaldiscountedpresentvalueofapproximately$6,250,802,plusanadditionaldeferredpaymentofapproximately
$3,110,754.
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29,000,000Shares
ClassACommonStock
CreditSuisse
MorganStanley
Barclays
MacquarieCapital
J.P.Morgan
BMOCapitalMarkets
Citigroup
Goldman,Sachs&Co.
Baird
BarringtonResearch
PiperJaffray
Stifel
WilliamBlair
BradescoBBI
BTGPactual
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PARTII
INFORMATIONNOTREQUIREDINPROSPECTUS
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INFORMATIONNOTREQUIREDINPROSPECTUS
Item13.OtherExpensesofIssuanceandDistribution.
Thefollowingtablesetsforththeexpenses(otherthanunderwritingdiscountsandcommissions)expectedtobeincurredin
connectionwiththisoffering.Allsuchamounts(excepttheSECregistrationfeeandtheFINRAfilingfee)areestimated.
SECregistrationfee
FINRAfilingfee
Nasdaqlistingfee
Advisoryfees
Printingandengravingexpenses
Legalfeesandexpenses
Accountingfeesandexpenses
BlueSkyfeesandexpenses
TransferAgentandRegistrarfees
Miscellaneous
Total
75,786
100,550
150,000
3,710,000
956,000
1,950,000
1,850,000
20,000
12,000
175,664
9,000,000
Item14.IndemnificationofDirectorsandOfficers.
Section102oftheGeneralCorporationLawoftheStateofDelaware(the"DGCL")permitsacorporationtoeliminatethepersonal
liabilityofdirectorsofacorporationtothecorporationoritsstockholdersformonetarydamagesforabreachoffiduciarydutyasa
director,exceptwherethedirectorbreachedhisdutyofloyalty,failedtoactingoodfaith,engagedinintentionalmisconductor
knowinglyviolatedalaw,authorizedthepaymentofadividendorapprovedastockrepurchaseinviolationofDelawarecorporatelawor
obtainedanimproperpersonalbenefit.Ouramendedandrestatedcertificateofincorporationprovidesforthislimitationofliability.
Section145oftheDGCLprovidesthatacorporationhasthepowertoindemnifyadirector,officer,employee,oragentofthe
corporation,orapersonservingattherequestofthecorporationforanothercorporation,partnership,jointventure,trustorotherenterprise
inrelatedcapacitiesagainstexpenses(includingattorneys'fees),judgments,finesandamountspaidinsettlementactuallyandreasonably
incurredbythepersoninconnectionwithanaction,suitorproceedingtowhichhewasorisapartyoristhreatenedtobemadeapartyto
anythreatened,pendingorcompletedaction,suitorproceedingbyreasonofsuchposition,ifsuchpersonactedingoodfaithandina
mannerhereasonablybelievedtobeinornotopposedtothebestinterestsofthecorporation,and,inanycriminalactionorproceeding,
hadnoreasonablecausetobelievehisconductwasunlawful,exceptthat,inthecaseofactionsbroughtbyorintherightofthe
corporation,noindemnificationshallbemadewithrespecttoanyclaim,issueormatterastowhichsuchpersonshallhavebeenadjudged
tobeliabletothecorporationunlessandonlytotheextentthattheCourtofChanceryorotheradjudicatingcourtdeterminesthat,despite
theadjudicationofliabilitybutinviewofallofthecircumstancesofthecase,suchpersonisfairlyandreasonablyentitledtoindemnity
forsuchexpenseswhichtheCourtofChanceryorsuchothercourtshalldeemproper.
Ouramendedandrestatedcertificateofincorporationandbylawsprovidethatwemustindemnify,andadvanceexpensesto,our
directorsandofficerstothefullestextentpermittedbytheDGCL.
Priortothecompletionofthisoffering,weintendtoenterintoseparateindemnificationagreementswitheachofourdirectorsand
certainofficers.Eachindemnificationagreementwillprovide,amongotherthings,forindemnificationtothefullestextentpermittedby
lawandour
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amendedandrestatedcertificateofincorporationandbylawsagainstanyandallexpenses,judgments,fines,penaltiesandamountspaidin
settlementofanyclaim.Theindemnificationagreementswillprovidefortheadvancementorpaymentofallexpensestotheindemnitee
andforthereimbursementtousifitisfoundthatsuchindemniteeisnotentitledtosuchindemnificationunderapplicablelawandour
amendedandrestatedcertificateofincorporationandbylaws.
Wemaintainageneralliabilityinsurancepolicythatcoverscertainliabilitiesofdirectorsandofficersofourcorporationarisingoutof
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Wemaintainageneralliabilityinsurancepolicythatcoverscertainliabilitiesofdirectorsandofficersofourcorporationarisingoutof
claimsbasedonactsoromissionsintheircapacitiesasdirectorsorofficers.
InanyunderwritingagreementweenterintoinconnectionwiththesaleofClassAcommonstockbeingregisteredhereby,the
underwriterswillagreetoindemnify,undercertainconditions,us,ourdirectors,ourofficersandpersonswhocontroluswithinthe
meaningoftheSecuritiesActof1933,asamended(the"SecuritiesAct"),againstcertainliabilities.
Item15.RecentSalesofUnregisteredSecurities.
Duringthethreeyearsprecedingthefilingofthisregistrationstatement,Registrantsoldthefollowingsecuritieswhichwerenot
registeredundertheSecuritiesActof1933,asamended:
OnDecember29,2015,Registrantissued$50.1millionaggregateprincipalamountofits9.250%seniornotesdue2019tothe
participantsinstockbaseddeferredcompensationarrangementsinpartialsettlementofthedeferredcompensationobligations.Thesenior
noteswereissuedpursuanttoSection4(a)(2)oftheSecuritiesActastransactionsbyanissuernotinvolvinganypublicoffering.
OnDecember30,2016,Registrantissued$10.453millionaggregateprincipalamountofits9.250%seniornotesdue2019tothe
participantsinstockbaseddeferredcompensationarrangementsinfinalsettlementofthedeferredcompensationobligations.Thesenior
noteswereissuedpursuanttoSection4(a)(2)oftheSecuritiesActastransactionsbyanissuernotinvolvinganypublicoffering.
OnDecember20,2016,Registrantsold343,000sharesofConvertibleRedeemablePreferredStockSeriesA,parvalue$0.001per
share,consistingof23,000sharesofConvertibleRedeemablePreferredStockSeriesA1soldtoonepurchaserand320,000sharesof
ConvertibleRedeemablePreferredStockSeriesA2soldto22purchasers.Thesecuritieswereofferedandsoldinaprivateplacement
offeringinrelianceuponexemptionsfromregistrationpursuanttoSection4(2)oftheSecuritiesActandRule506ofRegulationD
promulgatedundertheSecuritiesAct.
OnOctober2,2013,Registrantgrantedto226ofitsemployeesorotherserviceprovidersoptionstopurchaseanaggregateof
4,344,840sharesofcommonstockunderthe2013Planatanexercisepriceof$34.52.TheoptionswereissuedpursuanttoRule701
promulgatedunderSection3(b)oftheSecuritiesActastransactionsbyanissuernotinvolvinganypublicofferingorpursuanttobenefit
plansandcontractsrelatingtocompensationasprovidedunderRule701.
OnJune17,2014,Registrantgrantedtosixofitsemployeesorotherserviceprovidersoptionstopurchaseanaggregateof116,605
sharesofcommonstockunderthe2013Planatanexercisepriceof$27.76.TheoptionswereissuedpursuanttoRule701promulgated
underSection3(b)oftheSecuritiesActastransactionsbyanissuernotinvolvinganypublicofferingorpursuanttobenefitplansand
contractsrelatingtocompensationasprovidedunderRule701.
OnJuly10,2014,Registrantgrantedto99ofitsemployeesorotherserviceprovidersoptionstopurchaseanaggregateof269,307
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OnMarch4,2015,Registrantgrantedto154ofitsemployeesorotherserviceprovidersoptionstopurchaseanaggregateof424,307
OnMay14,2015,Registrantgrantedtofiveofitsemployeesorotherserviceprovidersoptionstopurchaseanaggregateof20,387
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OnSeptember29,2015,Registrantgrantedto13ofitsofficers,employeesorotherserviceprovidersoptionstopurchaseanaggregate
of1,002,407sharesofcommonstockunderthe2013Planatanexercisepriceof$26.32.TheoptionswereissuedpursuanttoRule701
promulgatedunderSection3(b)oftheSecuritiesActastransactionsbyanissuernotinvolvinganypublicofferingorpursuanttobenefit
plansandcontractsrelatingtocompensationasprovidedunderRule701.
OnFebruary10,2016,Registrantgrantedtotwoofitsofficers,employeesorotherserviceprovidersoptionstopurchaseanaggregate
of5,322sharesofcommonstockatanexercisepriceof$22.40pershare.TheoptionswereissuedpursuanttoRule701promulgatedunder
Section3(b)oftheSecuritiesActastransactionsbyanissuernotinvolvinganypublicofferingorpursuanttobenefitplansandcontracts
relatingtocompensationasprovidedunderRule701.
OnMay2,2016,Registrantgrantedto114ofitsofficers,employeesorotherserviceprovidersoptionstopurchaseanaggregateof
131,945sharesofcommonstockatanexercisepriceof$23.24pershare.TheoptionswereissuedpursuanttoRule701promulgatedunder
OnMay24,2016,Registrantgrantedthreeofitsofficers,employeesorotherserviceprovidersoptionstopurchaseanaggregateof
Section3(b)oftheSecuritiesActastransactionsbyanissuernotinvolvinganypublicofferingpursuanttobenefitplansandcontracts
OnOctober25,2016,Registrantgrantedoneofitsofficers,employeesorotherserviceprovidersoptionstopurchaseanaggregateof
Section3(b)oftheSecuritiesActastransactionsbyanissuernotinvolvinganypublicofferingpursuanttobenefitplansandcontracts
OnDecember8,2016,Registrantgrantedfourofitsofficers,employeesorotherserviceprovidersoptionstopurchaseanaggregateof
Section3(b)oftheSecuritiesActastransactionsbyanissuernotinvolvingtheSecuritiesActastransactionsbyanissuernotinvolving
anypublicofferingpursuanttobenefitplansandcontractsrelatingtocompensationasprovidedunderRule701.
OnOctober2,2013,Registrantgranted763,412PerformanceShareUnitsto126ofitsofficers,directors,employeesorotherservice
providers.ThePerformanceStockUnitsweregrantedunderthe2013PlanpursuanttoRule701promulgatedunderSection3(b)ofthe
SecuritiesActastransactionsbyanissuernotinvolvinganypublicofferingorpursuanttobenefitplansandcontractsrelatingto
compensationasprovidedunderRule701.
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OnJune17,2014,Registrantgranted15,233PerformanceShareUnitstofiveofitsofficers,directors,employeesorotherservice
OnJuly10,2014,Registrantgranted59,322PerformanceShareUnitsto86ofitsofficers,directors,employeesorotherservice
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OnMarch4,2015,Registrantgranted60,727PerformanceShareUnitsto84ofitsofficers,directors,employeesorotherservice
OnSeptember29,2015,Registrantgrantedtotwoofitsofficers,employeesorotherserviceprovidersanaggregateof
174,730PerformanceShareUnits.ThePerformanceShareUnitsweregrantedunderthe2013PlanpursuanttoRule701promulgatedunder
OnDecember16,2015,Registrantgranted30,578PerformanceStockUnitstotwoofitsofficers,employeesorotherserviceproviders.
ThePerformanceStockUnitsweregrantedunderthe2013PlanpursuanttoRule701promulgatedunderSection3(b)oftheSecuritiesAct
astransactionsbyanissuernotinvolvinganypublicofferingorpursuanttobenefitplansandcontractsrelatingtocompensationas
providedunderRule701.
OnFebruary10,2016,Registrantgrantedtotwoofitsofficers,employeesorotherserviceproviders544PerformanceShareUnits.The
PerformanceShareUnitswereissuedpursuanttoRule701promulgatedunderSection3(b)oftheSecuritiesActastransactionsbyan
issuernotinvolvinganypublicofferingorpursuanttobenefitplansandcontractsrelatingtocompensationasprovidedunderRule701.
OnMay2,2016,Registrantgrantedto114ofitsofficers,employeesorotherserviceproviders136,712PerformanceShareUnits.The
OnMay24,2016,Registrantgrantedthreeofitsofficers,employeesorotherserviceproviders2,832PerformanceShareUnits.The
OnOctober25,2016,Registrantgranted25ofitsofficers,employeesorotherserviceproviders71,588PerformanceShareUnits.The
II4
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OnDecember8,2016,Registrantgrantedfiveofitsofficers,employeesorotherserviceproviders2,195PerformanceShareUnits.The
issuernotinvolvinganypublicofferingorpursuanttoabenefitplansandcontractsrelatingtocompensationasprovidedunderRule701.
OnMay2,2014,Registrantgrantedanaggregateof10,007sharesofcommonstocktosixofitsdirectorsandboardobservers,of
which7,504wereRestrictedShares.Thecommonstockwasgrantedunderthe2013PlanpursuanttoRule701promulgatedunder
OnSeptember30,2014,Registrantgrantedanaggregateof18,558RestrictedSharestooneofitsdirectors.TheRestrictedShareswere
grantedunderthe2013PlanpursuanttoRule701promulgatedunderSection3(b)oftheSecuritiesActastransactionsbyanissuernot
involvinganypublicofferingorpursuanttobenefitplansandcontractsrelatingtocompensationasprovidedunderRule701.
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OnJune1,2015,Registrantgrantedanaggregateof8,117sharesofcommonstocktofiveofitsdirectorsandboardobservers,of
OnJune30,2016,Registrantgrantedanaggregateof13,984sharesofcommonstocktosevenofitsdirectorsandboardobservers,of
OnOctober2,2013,Registrantgranted61,108RestrictedStockUnitsto88ofitsofficersoremployees.TheRestrictedStockUnits
weregrantedunderthe2013PlanpursuanttoRule701promulgatedunderSection3(b)oftheSecuritiesActastransactionsbyanissuer
notinvolvinganypublicofferingorpursuanttobenefitplansandcontractsrelatingtocompensationasprovidedunderRule701.
OnJune17,2014,Registrantgranted1,852RestrictedStockUnitstotwoofitsofficersoremployees.TheRestrictedStockUnitswere
OnJuly10,2014,Registrantgranted56,572RestrictedStockUnitsto86ofitsofficersoremployees.TheRestrictedStockUnitswere
OnMarch4,2015,Registrantgranted62,472RestrictedStockUnitsto94ofitsofficersoremployees.TheRestrictedStockUnits
weregrantedunderthe2013PlanpursuanttoRule701promulgatedunderSection3(b)oftheSecuritiesActastransactionsbyanissuer
OnMay14,2015,Registrantgranted20,380RestrictedStockUnitstooneofitsofficers.TheRestrictedStockUnitsweregranted
underthe2013PlanpursuanttoRule701promulgatedunder
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OnSeptember29,2015,Registrantgrantedtofiveofitsofficers,employeesorotherserviceprovidersanaggregateof
81,638RestrictedStockUnits.TheRestrictedStockUnitsweregrantedunderthe2013PlanpursuanttoRule701promulgatedunder
OnDecember16,2015,Registrantgrantedtooneofitsofficers,employeesorotherserviceproviders,anaggregateof11,005
RestrictedStockUnits.TheRestrictedStockUnitsweregrantedunderthe2013PlanpursuanttoRule701promulgatedunderSection3(b)
oftheSecuritiesActastransactionsbyanissuernotinvolvinganypublicofferingorpursuanttobenefitplansandcontractsrelatingto
compensationprovidedunderRule701.
OnFebruary10,2016,Registrantgrantedtotwoofitsofficers,employeesorotherserviceproviders11,274RestrictedStockUnits.
TheRestrictedStockUnitswereissuedpursuanttoRule701promulgatedunderSection3(b)oftheSecuritiesActastransactionsbyan
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TheRestrictedStockUnitswereissuedpursuanttoRule701promulgatedunderSection3(b)oftheSecuritiesActastransactionsbyan
OnMay2,2016,Registrantgrantedto205ofitsofficers,employeesorotherserviceproviders174,142RestrictedStockUnits.The
RestrictedStockUnitswereissuedpursuanttoRule701promulgatedunderSection3(b)oftheSecuritiesActastransactionsbyanissuer
OnMay24,2016,Registrantgrantedsixofitsofficers,employeesorotherserviceproviders9,242RestrictedStockUnits.The
OnOctober25,2016,Registrantgranted44ofitsofficers,employeesorotherserviceproviders221,550RestrictedStockUnits.The
notinvolvinganypublicofferingorpursuanttobenefitplansandcontractsrelatingtocompensationunderRule701.
OnDecember8,2016,Registrantgrantedeightofitsofficers,employeesorotherserviceproviders5,194RestrictedStockUnits.The
Item16.ExhibitsandFinancialStatementSchedule.
(a)
Exhibits.SeetheExhibitIndeximmediatelyfollowingthesignaturepagehereto,whichisincorporatedbyreferenceasif
fullysetforthherein.
(b)
FinancialStatementSchedules
ThefollowingFinancialStatementScheduleisincludedherein:
SupplementalFinancialScheduleIIValuationandQualifyingAccounts.
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Item17.Undertakings.
InsofarasindemnificationforliabilitiesarisingundertheSecuritiesActmaybepermittedtoourdirectors,officersandcontrolling
personspursuanttotheforegoingprovisions,orotherwise,wehavebeenadvisedthatintheopinionoftheSecuritiesandExchange
CommissionsuchindemnificationisagainstpublicpolicyasexpressedintheSecuritiesActandis,therefore,unenforceable.Intheevent
thataclaimforindemnificationagainstsuchliabilities(otherthanthepaymentbyusofexpensesincurredorpaidbyadirector,officeror
controllingpersonofusinthesuccessfuldefenseofanyaction,suitorproceeding)isassertedbysuchdirector,officerorcontrolling
personinconnectionwiththesecuritiesbeingregistered,wewill,unlessintheopinionofcounselthematterhasbeensettledby
controllingprecedent,submittoacourtofappropriatejurisdictionthequestionwhethersuchindemnificationbyusisagainstpublic
policyasexpressedintheSecuritiesActandwillbegovernedbythefinaladjudicationofsuchissue.
Theundersignedregistrantherebyundertakestoprovidetotheunderwritersattheclosingspecifiedintheunderwritingagreement,
certificatesinsuchdenominationsandregisteredinsuchnamesasrequiredbytheunderwriterstopermitpromptdeliverytoeach
purchaser.
Weherebyundertakethat:
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(i)forpurposesofdetermininganyliabilityundertheSecuritiesAct,theinformationomittedfromtheformofprospectus
filedaspartofthisregistrationstatementinrelianceuponRule430AandcontainedinaformofprospectusfiledbytheRegistrant
pursuanttoRule424(b)(1)or(4)or497(h)undertheSecuritiesActshallbedeemedtobepartofthisregistrationstatementasof
thetimeitwasdeclaredeffective.
(ii)forpurposesofdetermininganyliabilityundertheSecuritiesAct,eachposteffectiveamendmentthatcontainsaformof
prospectusshallbedeemedtobeanewregistrationstatementrelatingtothesecuritiesofferedtherein,andtheofferingofsuch
securitiesatthattimeshallbedeemedtobetheinitialbonafideofferingthereof.
Theundersignedregistrantundertakesthatinaprimaryofferingofsecuritiesoftheundersignedregistrantpursuanttothisregistration
statement,regardlessoftheunderwritingmethodusedtosellthesecuritiestothepurchaser,ifthesecuritiesareofferedorsoldtosuch
purchaserbymeansofanyofthefollowingcommunications,theundersignedregistrantwillbeasellertothepurchaserandwillbe
consideredtoofferorsellsuchsecuritiestosuchpurchaser:
(i)anypreliminaryprospectusorprospectusoftheundersignedregistrantrelatingtotheofferingrequiredtobefiledpursuant
toRule424
(ii)anyfreewritingprospectusrelatingtotheofferingpreparedbyoronbehalfoftheundersignedregistrantorusedor
referredtobytheundersignedregistrant
(iii)theportionofanyotherfreewritingprospectusrelatingtotheofferingcontainingmaterialinformationaboutthe
undersignedregistrantoritssecuritiesprovidedbyoronbehalfoftheundersignedregistrantand
(iv)anyothercommunicationthatisanofferintheofferingmadebytheundersignedregistranttothepurchaser.
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SIGNATURES
PursuanttotherequirementsoftheSecuritiesActof1933,theregistranthasdulycausedthisregistrationstatementtobesignedonits
behalfbytheundersigned,thereuntodulyauthorized,intheCityofBaltimore,StateofMarylandonJanuary18,2017.
LAUREATEEDUCATION,INC.

By: /s/EILIFSERCKHANSSEN
Name: EilifSerckHanssen
Title: ExecutiveVicePresidentand
ChiefFinancialOfficer
PursuanttotherequirementsoftheSecuritiesActof1933,thisregistrationstatementhasbeensignedbythefollowingpersonsinthe
capacitiesindicatedonJanuary18,2017.
SIGNATURE
TITLE
DATE

606/620
1/20/2017
*
DouglasL.Becker
/s/EILIFSERCKHANSSEN
EilifSerckHanssen
*
TalDarmon

ChairmanandChiefExecutiveOfficer
January18,2017
andDirector(PrincipalExecutiveOfficer)

ExecutiveVicePresidentandChief
FinancialOfficer(PrincipalFinancial
Officer)

SeniorVicePresident,ChiefAccounting
OfficerandGlobalController(Principal
AccountingOfficer)
January18,2017
January18,2017

Director
January18,2017

Director
January18,2017

Director
January18,2017

Director
January18,2017
*
BrianF.Carroll
*
AndrewB.Cohen
*
DarrenM.Friedman
*
JohnA.Miller
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SIGNATURE
*
GeorgeMuoz
TITLE
DATE
Director
January18,2017

Director
January18,2017

Director
January18,2017

Director
January18,2017
*
JudithRodin
*
JonathanD.Smidt
*
IanK.Snow
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StevenM.Taslitz

Director
January18,2017

Director
January18,2017

Director
January18,2017
*
QuentinVanDoosselaere
*
RobertB.Zoellick
*By:
/s/EILIFSERCKHANSSEN
EilifSerckHanssen,
asattorneyinfact
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EXHIBITINDEX
Exhibit
No.
Description
1.1
2.1 #**
FormofUnderwritingAgreement
2.2 #**
2.3 #**
2.4 #**
EquityPurchaseAgreement,datedasofMay10,2013,byandbetweenRedeInternacionalde
UniversidadesLaureateLtda.,andDra.LabibiEliasAlvesdaSilva,Prof.Dr.EdevaldoAlvesda
Silva,Dra.AidaAlvesdaSilva,andDr.ArnoldFioravante,andFaculdadesMetropolitanas
UnidasAssociaoEducacionalinthecapacityofinterveningandconsentingparty
UniversidadesLaureateLtda.,andDra.LabibiEliasAlvesdaSilva,Prof.Dr.EdevaldoAlvesda
SilvaandDr.ArnoldFioravante,andAssociaodeCulturaeEnsino,inthecapacityof
interveningandconsentingparty
UniversidadesLaureateLtda.,andDra.LabibiEliasAlvesdaSilva,andDr.EduardoAlvesda
Silva,Dr.EdsonAlvesdaSilva,andUnioEducacionaldeSoPaulo,inthecapacityof
interveningandconsentingparty
QuotaPurchaseAgreement,datedasofJuly11,2014,byandbetweenSociedadedeEducacao
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2.4
QuotaPurchaseAgreement,datedasofJuly11,2014,byandbetweenSociedadedeEducacao
RitterdosReisLtda.andSolonFloresSant'anna,DarciSanfelici,AnaMariaLisboadeMello,
IronAugustoMullerand,asinterveningconsentingparties,SociedadeEducacionalSulRio
GrandenseS/SLtda.,SociedadePortoAlegrensedePesquisaEducacionalS/SLtda.,and
SFSAssessoriaeConsultoriaS/SLtda.
2.5 #**
2.6 #**
3.1 **
3.2 **
3.3 **
4.1 **
4.2 **
4.3
4.4 **
4.5 **
5.1
SaleandPurchaseAgreement,datedasofMarch15,2016,byandbetweenLaureate
InternationalB.V.andGraduateS.A.
SharePurchaseAgreement,datedasofApril15,2016,byandbetweenLaureateIB.V.and
Insignis.
FormofAmendedandRestatedCertificateofIncorporation
FormofAmendedandRestatedBylaws
CertificateofDesignationsofConvertibleRedeemablePreferredStock,SeriesAofLaureate
Education,Inc.
SeniorIndenture,datedJuly25,2012,amongLaureateEducation,Inc.,theguarantorsnamed
thereinandWellsFargoBank,NationalAssociation,astrustee
FirstSupplementalIndenture,datedNovember13,2012,amongLaureateEducation,Inc.,the
guarantorsnamedthereinandWellsFargoBank,NationalAssociation,astrustee
SecondSupplementalIndenture,datedDecember29,2015,amongLaureateEducation,Inc.,the
guarantorsnamedthereinandWellsFargoBank,NationalAssociation,astrustee(incorporated
hereinbyreferencetoExhibit4.3totheCompany'sRegistrationStatementonFormS4(File
No.333208758),filedonJanuary20,2016)
ThirdSupplementalIndenture,datedDecember30,2016,amongLaureateEducation,Inc.,the
guarantorsnamedthereinandWellsFargoBank,NationalAssociation,astrustee
Formof9.250%SeniorNotesdue2019(includedinExhibit4.1)
OpinionofDLAPiperLLP(US)
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Exhibit
No.
Description
10.1**
SecondAmendmenttoCreditAgreement,datedasofJune16,2011,amongLaureate
Education,Inc.andIniciativasCulturalesdeEspaaS.L.,asborrowers,certainfinancial
institutionslistedonthesignaturepagestheretoandGoldmanSachsCreditPartnersL.P.,as
AdministrativeAgentandCollateralAgent
10.2 **
10.3 **
10.4 **
10.5 **
AmendedandRestatedCreditAgreementdatedasofAugust17,2007andamendedand
restatedasofJune16,2011,amongLaureateEducation,Inc.andIniciativasCulturalesde
EspaaS.L.,asborrowers,thelendinginstitutionsfromtimetotimepartiesthereto,and
Citibank,N.A.(assuccessortoGoldmanSachsCreditPartnersL.P.),asAdministrativeAgent
andCollateralAgent
FirstAmendmenttoAmendedandRestatedCreditAgreement,datedasofJanuary18,2013,
enteredintobyLaureateEducation,Inc.andIniciativasCulturalesdeEspaaS.L.,asborrowers,
Citibank,N.A.,assuccessorAdministrativeAgentandCollateralAgent,andcertainfinancial
institutionslistedonthesignaturepagesthereto
SecondAmendmenttoAmendedandRestatedCreditAgreement,datedasofApril23,2013,
ThirdAmendmenttoAmendedandRestatedCreditAgreement,datedasofOctober3,2013,
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10.6 **
10.7 **
10.8 **
10.9 **
10.10 **
10.11 **
10.12 **
FourthAmendmenttoAmendedandRestatedCreditAgreementandAmendmenttotheU.S.
ObligationsSecurityAgreementandtheU.S.PledgeAgreement,datedasofJuly7,2015,
Citibank,N.A.,assuccessorAdministrativeAgentandCollateralAgent,theotherpartiesthereto
andcertainfinancialinstitutionslistedonthesignaturepagesthereto
JoinderAgreement,datedasofDecember22,2011,byandamongBankofMontreal,Chicago
Branch,LaureateEducation,Inc.andCitibank,N.A.,asAdministrativeAgentandCollateral
Agent
JoinderAgreement,datedasofDecember22,2011,byandamongMorganStanleySenior
Funding,Inc.,LaureateEducation,Inc.andCitibank,N.A.,asAdministrativeAgentand
CollateralAgent
JoinderAgreement,datedasofJanuary18,2013,byandamongthelenderspartythereto,
LaureateEducation,Inc.,asborrower,andCitibank,N.A.,asAdministrativeAgent
JoinderAgreement,datedasofApril23,2013,byandamongthelenderspartythereto,Laureate
Education,Inc.,asborrower,andCitibank,N.A.,asAdministrativeAgent
JoinderAgreement,datedasofDecember16,2013,byandamonglenderspartythereto,
LaureateEducation,Inc.,asborrower,andCitibank,N.A.,asAdministrativeAgent
GuaranteedatedasofAugust17,2007,bycertaindomesticsubsidiariesofLaureate
Education,Inc.,asGuarantorsinfavorofGoldmanSachsCreditPartnersL.P.,asCollateral
Agent,assupplementedbySupplementNo.1datedasofApril1,2009betweenLEI
Administration,LLC,astheNewGuarantor,andGoldmanSachsCreditPartnersL.P.,as
CollateralAgent,assupplementedbySupplementNo.2datedasofJuly15,2011,between
ExeterStreetHoldingsLLC,astheNewGuarantor,andGoldmanSachsCreditPartnersL.P.,as
CollateralAgent
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Exhibit
No.
Description
10.13**
SecurityAgreement,datedasofAugust17,2007,amongLaureateEducation,Inc.,andcertain
domesticsubsidiariesofLaureateEducation,Inc.,asGrantors,andGoldmanSachsCredit
PartnersL.P.,asCollateralAgent,assupplementedbySupplementNo.1datedasofApril1,
2009betweenLEIAdministration,LLC,astheNewGrantor,andGoldmanSachsCredit
PartnersL.P.,asCollateralAgent,assupplementedbySupplementNo.2datedasofJuly15,
2011betweenExeterStreetHoldingsLLC,astheNewGrantor,andGoldmanSachsCredit
PartnersL.P.,asCollateralAgent,asamendedbytheFourthAmendmenttoAmendedand
RestatedCreditAgreementandAmendmenttotheU.S.ObligationsSecurityAgreementandthe
U.S.PledgeAgreement,datedasofJuly7,2015
10.14 **
10.15 **
10.16 **
10.17 **
PledgeAgreement,datedasofAugust17,2007,amongLaureateEducation,Inc.,andcertain
domesticsubsidiariesofLaureateEducation,Inc.,asPledgors,andGoldmanSachsCredit
PartnersL.P.,asCollateralAgent,assupplementedbySupplementNo.1datedasofApril1,
2009betweenLEIAdministration,LLC,asAdditionalPledgor,andGoldmanSachsCredit
PartnersL.P.,asCollateralAgent,assupplementedbySupplementNo.2datedasofJuly15,
2011betweenExeterStreetHoldingsLLC,asAdditionalPledgor,andGoldmanSachsCredit
PartnersL.P.,asCollateralAgent,asamendedbytheFourthAmendmenttoAmendedand
RestatedCreditAgreementandAmendmenttotheU.S.ObligationsSecurityAgreementandthe
U.S.PledgeAgreement,datedasofJuly7,2015
AmendedandRestatedCollateralAgreement,datedasofJune16,2011,amongWalden
University,LLC,eachothersubsidiaryofLaureateEducation,Inc.thatbecomesapartythereto
fromtimetotime,andGoldmanSachsCreditPartnersL.P.,asCollateralAgent
ExchangeandRegistrationRightsAgreement,datedasofJuly25,2012,amongLaureate
Education,Inc.,theguarantorslistedonthesignaturepagestheretoandCitigroupGlobal
MarketsInc.,J.P.MorganSecuritiesLLC,BarclaysCapitalInc.,CreditSuisseSecurities
(USA)LLC,Goldman,Sachs&Co.,KKRCapitalMarketsLLCandMorganStanley&Co.LLC
ExchangeandRegistrationRightsAgreement,datedasofNovember13,2012,amongLaureate
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10.17 **
ExchangeandRegistrationRightsAgreement,datedasofNovember13,2012,amongLaureate
Education,Inc.,theguarantorslistedonthesignaturepagestheretoandJ.P.Morgan
SecuritiesLLC,BarclaysCapitalInc.,CitigroupGlobalMarketsCorp.,BMOCapital
MarketsCorp.,CreditSuisseSecurities(USA)LLC,Goldman,Sachs&Co.,KKRCapital
MarketsLLCandMorganStanley&Co.LLC
10.18
10.19 **
ExchangeandRegistrationRightsAgreement,datedasofDecember29,2015,amongLaureate
Education,Inc.,theguarantorslistedonthesignaturepagestheretoandtheinitialholderslisted
onthesignaturepagesthereto(incorporatedhereinbyreferencetoExhibit4.6totheCompany's
RegistrationStatementonFormS4(FileNo.333208758),filedonJanuary20,2016)
ForeignObligationsGuarantee,datedasofJanuary23,2008,byRedeInternacionalde
UniversidadesLaureate,Ltda.,asForeignObligationsGuarantor,infavorofGoldmanSachs
CreditPartnersL.P.,asCollateralAgentundertheCreditAgreementforthebenefitofthe
ForeignObligationsSecuredParties
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Exhibit
No.
Description
10.20**
ForeignObligationsGuarantee,datedasofJanuary23,2008,byLaureateEducation,Inc.,ICE
InversionesBrazil,SL,InversionesenEducacionLimitada,LaureateEducationMexico,S.de
R.L.deC.V.,LaureateEducationPeru,S.R.L.,LaureateHondurasS.deR.L.deC.V.,
LaureateIB.V.,LaureateInternationalB.V.,LaureateInternationalCostaRicaS.R.L.,LIUF,SAS,
OnlineHigherEducation,B.V.,LaureatePanama,S.A.,LaureateChileLimitada,andIniciativas
CulturalesdeEspaaS.L.,asForeignObligationsGuarantors,infavorofGoldmanSachsCredit
PartnersL.P.,asCollateralAgentundertheCreditAgreementforthebenefitoftheForeign
ObligationsSecuredParties
10.21 **
10.22 **
10.23 **
10.24 **
10.25 **
10.26 **
DeedofPledgeofReceivables,datedAugust17,2007,betweenGoldmanSachsCredit
PartnersL.P.andLaureateEducation,Inc.withrespecttointerestsinFleetStreetInternational
UniversitiesC.V.
DeedofPledgeofReceivables,datedSeptember2011,betweenLaureateEducation,Inc.,as
Pledgor,andCitibank,N.A.,initscapacityasCollateralAgent,asPledgee,withrespectto
interestsinFleetStreetInternationalUniversitiesC.V.
DeedofPledgeofReceivablesdatedAugust17,2007,betweenGoldmanSachsCredit
PartnersL.P.andLaureateEducationInternationalLimited,withrespecttointerestsinFleet
StreetInternationalUniversitiesC.V.
DeedofPledgeofReceivables,datedSeptember30,2011,betweenLaureateEducation
InternationalLimited,asPledgor,andCitibank,N.A.,initscapacityasCollateralAgent,as
Pledgee,withrespecttointerestsinFleetStreetInternationalUniversitiesC.V.
DeedofPledge(LaureateIB.V.),datedJanuary29,2008,byIniciativasCulturalesdeEspaa
S.L.infavorofGoldmanSachsCreditPartnersL.P.,initscapacityasCollateralAgentunderthe
CreditAgreementforthebenefitoftheSecuredParties
DeedofPledge(LaureateIB.V.),datedSeptember30,2011,betweenIniciativasCulturalesde
EspaaS.L.,asPledgor,Citibank,N.A.,asAdministrativeAgentandCollateralAgentunderthe
CreditAgreementforthebenefitoftheLendersundertheCreditAgreement,asPledgee,and
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CreditAgreementforthebenefitoftheLendersundertheCreditAgreement,asPledgee,and
LaureateIB.V.,astheCompany
10.27 **
10.28 **
10.29 **
DeedofPledge(LaureateInternationalB.V.),datedJanuary29,2008,byLaureateIB.V.infavor
ofGoldmanSachsCreditPartnersL.P.,asAdministrativeAgentandCollateralAgentunderthe
CreditAgreementforthebenefitoftheSecuredParties
DeedofPledge(LaureateInternationalB.V.),datedSeptember30,2011,between
LaureateIB.V.,asPledgor,Citibank,N.A.,asAdministrativeAgentandCollateralAgentunder
theCreditAgreementforthebenefitoftheLendersundertheCreditAgreement,asPledgee,and
LaureateInternationalB.V.,astheCompany
DeedofPledgeOverCreditRightsDerivedfromBankAccount,datedMarch14,2008,by
IniciativasCulturalesdeEspaaS.L.infavorofGoldmanSachsCreditPartnersL.P.,as
AdministrativeAgentandCollateralAgentundertheCreditAgreementforthebenefitofthe
SecuredParties,asamendedbythatAmendmentAgreementinRespectofPledgeOverCredit
RightsDerivedfromBankAccount,datedOctober5,2011,byandbetweenIniciativas
CulturalesdeEspaaS.L.,asPledgor,GoldmanSachsCreditPartnersL.P.,asPriorPledgee,and
Citibank,N.A.,actingasAdministrativeAgentandCollateralAgent,asPledgee
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Exhibit
No.
Description
10.30**
DeedofFirstPriorityPledgeOverCreditRights,datedMarch14,2008,byIniciativas
CulturalesdeEspaaS.L.infavorofGoldmanSachsCreditPartnersL.P.,asAdministrative
AgentandCollateralAgentundertheCreditAgreementforthebenefitoftheSecuredParties,as
amendedbythatAmendmentAgreementinRespectofPledgeOverCreditRights,dated
October5,2011,byandbetweenIniciativasCulturalesdeEspaaS.L.,asPledgor,Goldman
SachsCreditPartnersL.P.,asPriorPledgee,andCitibank,N.A.,actingasAdministrativeAgent
andCollateralAgent,asPledgee
10.31 **
10.32 **
10.33 **
10.34 **
10.35 **
10.36 **
10.37 **
10.38 **
DeedofPledgeofParticipations,datedMarch14,2008,byIniciativasCulturalesdeEspaaS.L.
infavorofGoldmanSachsCreditPartnersL.P.,asAdministrativeAgentandCollateralAgent
undertheCreditAgreementforthebenefitoftheSecuredParties,asamendedbythat
AmendmentAgreementinRespectofPledgeofShares,datedOctober5,2011,byandbetween
IniciativasCulturalesdeEspaaS.L.,asPledgor,GoldmanSachsCreditPartnersL.P.,asPrior
Pledgee,andCitibank,N.A.,actingasAdministrativeAgentandCollateralAgent,asPledgee
2007StockIncentivePlanforKeyEmployeesofLaureateEducation,Inc.anditsSubsidiaries
2007StockIncentivePlanFormofStockOptionAgreement,asamendedonAugust31,2010
2013LongTermIncentivePlanofLaureateEducation,Inc.anditsSubsidiaries,datedJune13,
2013,asamendedbytheFirstAmendmenttothe2013LongTermIncentivePlaneffectiveasof
September17,2015
2013StockIncentivePlanFormofStockOptionAgreementeffectiveasofSeptember11,2013
LaureateEducation,Inc.DeferredCompensationPlan,asamendedandrestatedeffective
January1,2009
FormofManagementStockholder'sAgreementforequityholders
EmploymentOfferLetter,datedJuly6,2015,betweenLaureateEducation,Inc.andEnderson
Guimares
**
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10.39 **
DeferredCompensationLetterAgreement,datedAugust16,2007,byandamongLCurve
SubInc.,LaureateEducation,Inc.andDouglasL.Becker
10.40 **
10.41 **
10.42 **
10.43 **
10.44 **
10.45 **
DeferredCompensationLetterAgreement,datedDecember24,2015,betweenLaureate
Education,Inc.andDouglasL.Becker(incorporatedhereinbyreferencetoExhibit10.37tothe
Company'sRegistrationStatementonFormS4(FileNo.333208758),filedonJanuary20,
2016)
2ndAmendedandRestatedExecutiveInterestSubscriptionAgreement,datedAugust31,2010,
betweenWengenAlberta,LimitedPartnershipandDouglasL.Becker
EmploymentOfferLetter,datedJuly21,2008,betweenLaureateEducation,Inc.andEilif
SerckHanssen
AmendmenttoEmploymentOfferLetter,datedDecember9,2010,betweenLaureate
Education,Inc.andEilifSerckHanssen
TimeBasedRestrictedStockAgreement,datedAugust5,2008,betweenLaureate
Education,Inc.andEilifSerckHanssen
FormofTimeBasedRestrictedStockUnitsAgreement,forgrantsfromandafterSeptember11,
2013
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Exhibit
No.
Description
10.46**
SupportServicesAgreementbetweenSantaFeUniversityofArtandDesign,LLCandLaureate
Education,Inc.datedOctober1,2014
10.47 **
10.48 **
10.49 **
10.50 **
10.51 **
10.52 **
10.53 **
10.54 **
10.55 **
10.56 **
10.57 **
10.58 **
10.59 **
10.60 **
MasterServiceandConfidentialityAgreement,datedApril28,2014,byandbetweenLaureate
Education,Inc.andAccentureLLP
SystemWideMasterAgreement,datedApril10,2015,betweenBlackboardInc.andLaureate
Education,Inc.
FormofStockholders'AgreementforEntityAppointedDirectors
FormofStockholders'AgreementforIndividualDirectors
2013StockIncentivePlanFormofRestrictedStockUnitsAgreement
2013StockIncentivePlanFormofPerformanceShareUnitsAgreement
FormofLaureateEducation,Inc.NoteExchangeAgreementdatedasofApril15,2016
ExecutiveRetentionAgreement,datedFebruary25,2016,byandbetweenRicardo
BerckemeyerandLaureateEducation,Inc.,effectiveasofSeptember1,2015
2013LongTermIncentivePlanFormofPerformanceShareAwardAgreementfor2016for
NamedExecutiveOfficers
2013LongTermIncentivePlanFormofPerformanceShareAwardAgreementfor2016
2013LongTermIncentivePlanFormofStockOptionAgreementfor2016forNamed
ExecutiveOfficers
2013LongTermIncentivePlanFormofStockOptionAgreementfor2016
2013LongTermIncentivePlanFormofRestrictedStockUnitAgreementfor2016forNamed
ExecutiveOfficers
2013LongTermIncentivePlanFormofRestrictedStockUnitAgreementfor2016
616/620
1/20/2017
10.61 **
10.62 **
10.63 **
10.64 **
10.65 **
FifthAmendmenttoAmendedandRestatedCreditAgreement,datedasofJune3,2016,entered
intobyLaureateEducation,Inc.,IniciativasCulturalesdeEspaaS.L.,Citibank,N.A.,as
successorAdministrativeAgentandCollateralAgent,theotherpartiestheretoandcertain
financialinstitutionslistedonthesignaturepagesthereto
SixthAmendmenttoAmendedandRestatedCreditAgreement,datedasofJuly7,2016,entered
intobyLaureateEducation,Inc.andIniciativasCulturalesdeEspaaS.L.,asborrowers,
Citibank,N.A.,assuccessorAdministrativeAgentandCollateralAgent,theotherpartiesthereto
andcertainfinancialinstitutionslistedonthesignaturepagesthereto
SubscriptionAgreement,datedasofDecember4,2016,byandamongLaureateEducation,Inc.,
MacquarieSierraInvestmentHoldingsInc.,andeachoftheotherPersonslistedonScheduleA
andScheduleBthereto.
FormofRegistrationRightsAgreementbyandamongLaureateEducation,Inc.,eachofthe
InvestorssetforthonScheduleAthereto,DouglasL.BeckerandWengenAlberta,Limited
Partnership.
FormofInvestors'StockholdersAgreementbyandamongLaureateEducation,Inc.,Wengen
Alberta,LimitedPartnershipandtheInvestorssetforthonScheduleAthereto.
10.66 **
FirstAmendmenttothe2013LongTermIncentivePlan,effectiveasofSeptember15,2015.
II15
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TableofContents
Exhibit
No.
Description
10.67**
10.68 **
SecondAmendmenttothe2013LongTermIncentivePlan,effectiveasofDecember14,2016.
10.69 **
10.70 **
10.71 **
10.72 **
10.73 **
21.1 **
23.1
23.2
23.3
23.4
24.1 **
24.2 **
99.1 **
*
**
#
DeferredCompensationLetterAgreement,datedDecember30,2016,betweenLaureate
Education,Inc.andDouglasL.Becker
ExchangeandRegistrationRightsAgreement,datedasofDecember30,2016,amongLaureate
Education,Inc.,theguarantorslistedonthesignaturepagestheretoandtheinitialholderslisted
onthesignaturepagesthereto
2013LongTermIncentivePlanFormofRestrictedStockUnitAgreementforOctober2016
2013LongTermIncentivePlanFormofPerformanceShareUnitAgreementforNamed
ExecutiveOfficersforOctober2016
2013LongTermIncentivePlanFormofPerformanceShareUnitAgreementforOctober2016
FormofCashLongTermIncentivePlanAgreement
ListofSubsidiariesoftheRegistrant
ConsentofPricewaterhouseCoopersLLP
ConsentofPricewaterhouseCoopersAuditoresIndependentes,SoPaulo,Brazil
ConsentofPricewaterhouseCoopersAuditoresIndependentes,PortoAlegre,RS,Brazil
ConsentofDLAPiperLLP(US)(includedinExhibit5.1)
PowersofAttorney
PowerofAttorneyforTalDarmon
ConsentofDirectorDesigneeWilliamL.Cornog
Tobefiledbyamendment.
Previouslyfiled.
LaureateEducation,Inc.herebyundertakestofurnishsupplementallyacopyofanyomittedscheduleorexhibitto
suchagreementtotheU.S.SecuritiesandExchangeCommissionuponrequest.
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Indicatesamanagementcontractorcompensatoryplanorarrangement.
Confidentialtreatmenthasbeenrequestedwithrespecttocertainportionsofthisexhibit.Omittedportionshavebeen
filedseparatelywiththeSecuritiesandExchangeCommission.
II16
TableofContents
SupplementalFinancialScheduleIIValuationandQualifyingAccounts
(InThousands)
Description
Deductedfromassetaccounts:
YearendedDecember31,2015:
receivable(1)
Valuationallowanceondeferredtax
assets(2)
Totaldeductedfromassetaccounts
receivable(1)(3)
assets(2)
receivable(1)
assets(2)
Additions
Chargesto
Chargesto
Costsand
Other
Expenses
Accounts
Balanceat
Beginning
ofPeriod
170,140 $ 107,162 $
994,434 157,960
$ 1,164,574 $ 265,122 $
167,521 $ 110,302 $
907,203 94,791
$ 1,074,724 $ 205,093 $

Deductions
Balanceat
Endof
Period
$ (115,644) $
161,658
(59,443) 1,092,951
$ (175,087) $ 1,254,609
4,736 $ (112,419) $
4,736
170,140
(7,560)
994,434
$ (119,979) $ 1,164,574
164,910 $ 102,662 $
$ (100,051) $
747,148 171,644
912,058 $ 274,306 $
(11,589)
907,203
$ (111,640) $ 1,074,724
167,521
Notes:
(1)
(2)
(3)
Deductionsincludesaccountsreceivablewrittenoffagainsttheallowance(netofrecoveries),reclassifications,and
foreigncurrencytranslation.
Deductionsincludesreclassifications.
ChargestoOtherAccountsin2014includesreclassifications.
S1
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620/620

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834,000 54,000 86,000

362,948 (220,224) (200,610) (201,671)

327,722 (299,705) (315,845) (162,453)

$ 330,539 $ (299,581) $ (316,248) $ (158,291) $

80,263 (139,416) (149,178) (109,970)

$ 195,970 $ 220,295 $ 170,486 $ 269,156 $ 277,202

(41,324) (173,642) (489,181) (889,083)

(6,705) (287,945) (177,550)

$ 327,722 $ (299,705) $ (315,845) $ (162,453) $ (85,076)

327,722 (299,705) (315,845) (162,453) (90,222)

362,948 (220,224) (200,610) (201,671)

(80,263) 139,416 149,178 109,970

202,735 209,390 282,946 288,331 242,725

$ 480,762 $ 475,865 $ 703,408 $ 773,525 $ 646,472

133,300,971 82.1%$ 2,714,764,000 84.5%$

481,471 $ 458,673 $ 461,584 $ 559,900 $ 427,305 $ 511,049

(422,130) (412,499) (515,877) (205,692) (363,050) (308,696)

2,177,596 2,290,900 2,514,319 2,656,726 2,353,014 2,108,438

4,242,255 4,698,007 4,734,834 4,401,461 3,608,509 3,391,271

2,548,387 2,313,923 2,498,611 2,350,067 2,284,464 2,086,055

324,759 1,017,068 1,465,755 1,596,097 1,701,965

$ 327,722 $(299,705) $(315,845) $(162,453) $ (85,076) $(209,655) $(114,305)

327,722 (299,705) (315,845) (162,453) (90,222) (217,347) (117,520)

81,587 117,730 (39,060) 91,246

362,948 (220,224) (200,610) (201,671)

1,929 (140,584) (65,898)

(80,263) 139,416 149,178 109,970

314,383 300,145 398,042 385,754 350,196 307,728 276,943

211,913 212,026 336,957 299,500 320,653 250,180 216,768

211,913 212,026 336,957 299,500 320,653 250,180 216,768

202,735 209,390 282,946 288,331 242,725 221,235 228,678

$ 480,762 $ 475,865 $ 703,408 $ 773,525 $646,472 $ 547,033 $ 576,019

$ (315.8) $ (162.5) $ (85.1)

$ 2,415.6 $ 2,532.5 $ 2,340.9

$ 486.2 $ 533.9 $ 501.4

374.3 426.2 392.3

$ 422.1 $ 405.6 $ 202.3

$ (12.3) $ (11.7) $ (3.1)

$ 170.5 $ 269.2 $ 277.2

34.4 172.6 756.7

2015 300,000 1,800,000(12) 5,054,170(9) 11,284,109(13)

(386,310) (307,101) (193,589)

(2,911) (98,316) 132,595

$ 120,944 $ 458,673 $ 122,712 $ 461,584

(702,110) (16)% (696,616) (16)% (554,601) (14)%

75,026 114,255 243,221

979,920 $ (12,271) $ 4,291,659

147,975 32,407 39,260

$ 731,979 $ 718,641 $ 647,046

$ 4,333,326 $ 3,482,417 $ 4,262,768 $ 4,222,334

$ (28,385) $ (2,977) $ (31,362)

(407) (2,039) (2,446)

$ 25.84 $ 48,851 12,102 $ 25.40 $ 57,094 8,459 $ 20.40 $ 119,604

$ 18.76 3,365 (841) $ 19.36 11,046 (226) $ 19.08

$ 26.12 $ 20,339 10,919 $ 25.84 $ 48,851 12,102 $ 25.40 $ 57,094

$ 26.08 $ 20,339 10,499 $ 25.56 $ 48,833 10,666 $ 24.60 $ 55,289

1.8 4.20% 1.906.95 52.47%

2.7 3.60% 2.116.52 52.47%

$ 5,629 $ (733) $ 2,667 Interestexpense $ (10,660) $ (5,374) $

(407) (27,788) (30,519)

(212) (5,114) (7,058)

(619) (32,902) (37,577)

31,856 37,370 73,534