Laureate Education Annual Report 2016

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FY2016 Annual Report · Laureate Education

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TABLE
OF
CONTENTS1

TABLE
OF
CONTENTS2

Table
of
Contents

UNITED
STATES

SECURITIES
AND
EXCHANGE
COMMISSION

Washington,
D.C.
20549

FORM
10-K

ý
ANNUAL
REPORT
PURSUANT
TO
SECTION
13
OR
15(d)
OF
THE
SECURITIES
EXCHANGE
ACT
OF
1934

For
the
fiscal
year
ended
December
31,
2016

TRANSITION
REPORT
PURSUANT
TO
SECTION
13
OR
15(d)
OF
THE
SECURITIES
EXCHANGE
ACT
OF
1934

For
the
transition
period
from

Commission
file
number
001-38002

Laureate
Education,
Inc.

(Exact
name
of
registrant
as
specified
in
its
charter)

DELAWARE

(State
or
Other
Jurisdiction
of

Incorporation
or
Organization)

52-1492296

(I.R.S.
Employer

Identification
No.)

650
S.
Exeter
Street

Baltimore,
Maryland
21202

(410)
843-6100

(Address,
including
zip
code,
and
telephone
number,
including

area
code,
of
registrant's
principal
executive
offices)

Securities
registered
pursuant
to
Section
12(b)
of
the
Act:

Title
of
each
class
registered
Class
A
common
stock,
par
value
$0.004
per
share

Name
of
each
exchange
on
which
registered
The
NASDAQ
Stock
Market
LLC

(Nasdaq
Global
Select
Market)

Securities
registered
pursuant
to
Section
12(g)
of
the
Act:
None

Indicate
by
check
mark
if
the
registrant
is
a
well-known
seasoned
issuer,
as
defined
in
Rule
405
of
the
Securities
Act.
Yes

Indicate
by
check
mark
if
the
registrant
is
not
required
to
file
reports
pursuant
to
Section
13
or
15(d)
of
the
Act.
Yes

Indicate
by
check
mark
whether
the
registrant
(1)
has
filed
all
reports
required
to
be
filed
by
Section
13
or
15(d)
of
the
Securities
Exchange
Act
of
1934
during
the
preceding
12
months
(or
for
such
shorter
period
that
the
registrant
was
required
to
file
such
reports),
and
(2)
has
been
subject
to
such
filing
requirements
for
the
past
90
days.
Yes

Indicate
by
check
mark
whether
the
registrant
has
submitted
electronically
and
posted
on
its
corporate
Web
site,
if
any,
every
Interactive
Data
File
required
to
be
submitted
and
posted
pursuant
to
Rule
405
of
Regulation
S-T
(§
232.405
of
this
chapter)
during
the
preceding
12
months
(or
for
such
shorter
period
that
the
registrant
was
required
to
submit
and
post
such
files).
Yes

Indicate
by
check
mark
if
disclosure
of
delinquent
filers
pursuant
to
Item
405
of
Regulation
S-K
(§
229.405
of
this
chapter)
is
not
contained
herein,
and
will
not
be
contained,
to
the
best
of
registrant's
knowledge,
in
definitive
proxy
or
information
statements
incorporated
by
reference
in
Part
III
of
this
Form
10-K
or
any
amendment
to
this
Form
10-K.

Indicate
by
check
mark
whether
the
registrant
is
a
large
accelerated
filer,
an
accelerated
filer,
a
non-accelerated
filer,
or
a
smaller
reporting
company.
See
definition
of
"large
accelerated
filer,"
"accelerated
filer"
and
"smaller
reporting
company"
in
Rule
12b-2
of
the
Exchange
Act.

Large
accelerated
filer

Accelerated
filer

Non-accelerated
filer

(Do
not
check
if
a

smaller
reporting
company)

Smaller
Reporting
Company

Indicate
by
check
mark
whether
the
registrant
is
a
shell
company
(as
defined
in
Rule
12b-2
of
the
Act).
Yes

The
registrant
completed
the
initial
public
offering
of
its
Class
A
common
stock,
par
value
$0.004
per
share,
on
February
6,
2017.
There
was
no
public
market
for
the
registrant's
common
stock
as
of
June
30,
2016,
the
last
business
day
of
the
registrant's
most
recently
completed
second
fiscal
quarter.

Indicate
the
number
of
shares
outstanding
of
each
of
the
issuer's
classes
of
common
stock,
as
of
the
latest
practicable
date.

Class
Class
A
common
stock,
par
value
$0.004
per
share
Class
B
common
stock,
par
value
$0.004
per
share

Outstanding
at
March
15,
2017
35,199,466
shares

133,205,013
shares

Table
of
Contents

INDEX

PART
I
Item
1.
Item
1A.
Item
1B.
Item
2.
Item
3.
Item
4.

PART
II
Item
5.

Business

Risk
Factors

Unresolved
Staff
Comments

Properties

Legal
Proceedings

Mine
Safety
Disclosures

Market
for
Registrant's
Common
Equity,
Related
Stockholder
Matters
and
Issuer
Purchases
of
Equity

Securities

Item
6.
Item
7.
Item
7A.
Item
8.
Item
9.
Item
9A.
Item
9B.

Selected
Financial
Data

Management's
Discussion
and
Analysis
of
Financial
Condition
and
Results
of
Operations

Quantitative
and
Qualitative
Disclosures
about
Market
Risk

Financial
Statements
and
Supplementary
Data

Changes
in
and
Disagreements
with
Accountants
on
Accounting
and
Financial
Disclosure

Controls
and
Procedures

Other
Information

PART
III
Item
10.
Item
11.
Item
12.
Item
13.
Item
14.

Directors,
Executive
Officers,
and
Corporate
Governance

Executive
Compensation

Security
Ownership
of
Certain
Beneficial
Owners
and
Management
and
Related
Stockholder
Matters

Certain
Relationships
and
Related
Transactions,
and
Director
Independence

Principal
Accountant
Fees
and
Services

PART
IV
Item
15.
Item
16.
Signature

Exhibits,
Financial
Statement
Schedules

Form
10-K
Summary

PAGE

NUMBER

152

153

155

156

159

166

219

221

348

355

390

396

402

404

416

417

As
used
in
this
Annual
Report
on
Form
10-K
(this
"Form
10-K"),
unless
otherwise
stated
or
the
context
otherwise
requires,
references
to
"we,"
"us,"
"our,"
the
"Company,"
"Laureate"
and
similar
references
refer
collectively
to
Laureate
Education,
Inc.
and
its
subsidiaries.
Unless
otherwise
stated
or
the
context
requires,
references
to
the
Laureate International Universities network
include
Santa
Fe
University
of
Art
and
Design
("SFUAD"),
which
is
owned
by
Wengen
Alberta,
Limited
Partnership,
an
Alberta
limited
partnership
("Wengen"),
our
controlling
stockholder.
Laureate
is
affiliated
with
SFUAD,
but
does
not
own
or
control
it
and,
accordingly,
SFUAD
is
not
included
in
the
financial
results
of
Laureate
presented
in
this
Form
10-K.

Table
of
Contents

Trademarks
and
Tradenames

LAUREATE,
LAUREATE
INTERNATIONAL
UNIVERSITIES
and
the
leaf
symbol
are
trademarks
of
Laureate
Education,
Inc.
in
the
United
States
and
other
countries.
This
Form
10-K
also
includes
other
trademarks
of
Laureate
and
trademarks
of
other
persons,
which
are
properties
of
their
respective
owners.

Industry
and
Market
Data

We
obtained
the
industry,
market
and
competitive
position
data
used
throughout
this
Form
10-K
from
our
own
internal
estimates
and
research
as
well
as
from
industry
publications
and
research,
surveys
and
studies
conducted
by
third
parties.
This
Form
10-K
also
contains
the
results
from
studies
by
Millward
Brown
and
Gallup,
Inc.
("Gallup").
We
commissioned
the
Millward
Brown
study
as
part
of
our
periodic
evaluation
of
employment
rates
and
starting
salary
information
for
our
graduates.
In
addition,
we
commissioned
the
Gallup
survey
to
explore
the
relationship
between
the
experiences
of
students
at
Walden
University,
our
online
university
located
in
the
United
States,
and
long-term
outcomes
of
those
students
based
on
the
survey
responses.

Industry
publications,
studies
and
surveys
generally
state
that
they
have
been
obtained
from
sources
believed
to
be
reliable,
although
they
do
not
guarantee
the
accuracy
or
completeness
of
such
information.
While
we
believe
that
each
of
these
publications,
surveys
and
studies
is
reliable,
we
have
not
independently
verified
industry,
market
and
competitive
position
data
from
third-party
sources.
While
we
believe
our
internal
business
research
is
reliable
and
the
market
definitions
are
appropriate,
neither
such
research
nor
these
definitions
have
been
verified
by
any
independent
source.

Presentation
Of
Financial
Information

On
May
2,
2016,
we
announced
a
change
to
our
operating
segments
in
order
to
align
our
structure
more
geographically.
Our
institution
in
Italy,
Nuova
Accademia
di
Belle
Arti
Milano
("NABA"),
including
Domus
Academy,
moved
from
our
GPS
segment
(as
defined
herein)
into
our
Europe
segment
(as
defined
herein).
Media
Design
School
("MDS"),
located
in
New
Zealand,
moved
from
our
GPS
segment
into
our
AMEA
segment
(as
defined
herein).
Our
GPS
segment
now
focuses
on
Laureate's
fully
online
global
operations
and
on
its
campus-based
institutions
in
the
United
States.
This
change
has
been
reflected
in
the
financial
statements
for
all
periods
presented.

On
January
10,
2017,
we
announced
that
we
plan
to
combine
our
Europe
and
AMEA
(each
as
defined
herein)
operations,
effective
March
31,
2017,
in
order
to
reflect
our
belief
that
we
will
be
able
to
operate
the
institutions
in
those
operations
more
successfully
and
efficiently
under
common
management.
The
Company
is
currently
evaluating
the
impact
of
this
combination
on
its
operating
segments.
All
information
in
this
Form
10-K
is
presented
consistently
with
our
operating
segments
as
in
effect
on
December
31,
2016,
and
on
the
date
of
this
Form
10-K,
and
does
not
reflect
any
possible
segment
realignment.

On
January
1,
2016,
Laureate
adopted
Accounting
Standards
Update
2015-03,
which
simplified
the
presentation
of
debt
issuance
costs
by
requiring
debt
issuance
costs
to
be
presented
as
a
deduction
from
debt.
At
adoption,
the
new
guidance
was
applied
retrospectively
to
all
prior
periods
presented
in
this
Form
10-K.

Our
consolidated
financial
statements
included
in
this
Form
10-K
are
presented
in
U.S.
dollars
($)
rounded
to
the
nearest
thousand,
with
many
amounts
in
this
Form
10-K
rounded
to
the
nearest
tenth
of
a
million.
Therefore,
discrepancies
in
the
tables
between
totals
and
the
sums
of
the
amounts
listed
may
occur
due
to
such
rounding.

Forward-Looking
Statements

This
Form
10-K
contains
"forward-looking
statements"
within
the
meaning
of
the
federal
securities
laws,
which
involve
risks
and
uncertainties.
You
can
identify
forward-looking
statements
because
they

Table
of
Contents

contain
words
such
as
"believes,"
"expects,"
"may,"
"will,"
"should,"
"seeks,"
"approximately,"
"intends,"
"plans,"
"estimates"
or
"anticipates"
or
similar
expressions
that
concern
our
strategy,
plans
or
intentions.
All
statements
we
make
relating
to
estimated
and
projected
earnings,
costs,
expenditures,
cash
flows,
growth
rates
and
financial
results
are
forward-looking
statements.
In
addition,
we,
through
our
senior
management,
from
time
to
time
make
forward-looking
public
statements
concerning
our
expected
future
operations
and
performance
and
other
developments.
All
of
these
forward-looking
statements
are
subject
to
risks
and
uncertainties
that
may
change
at
any
time,
and,
therefore,
our
actual
results
may
differ
materially
from
those
we
expected.
We
derive
most
of
our
forward-looking
statements
from
our
operating
budgets
and
forecasts,
which
are
based
upon
many
detailed
assumptions.
While
we
believe
that
our
assumptions
are
reasonable,
we
caution
that
it
is
very
difficult
to
predict
the
impact
of
known
factors,
and,
of
course,
it
is
impossible
for
us
to
anticipate
all
factors
that
could
affect
our
actual
results.
Important
factors
that
could
cause
actual
results
to
differ
materially
from
our
expectations,
including,
without
limitation,
in
conjunction
with
the
forward-
looking
statements
included
in
this
Form
10-K,
are
disclosed
under
various
sections
throughout
this
Form
10-K,
including,
but
not
limited
to,
Item
1—Business,
Item
1A—Risk
Factors,
and
Item
7—Management's
Discussion
and
Analysis
of
Financial
Condition
and
Results
of
Operations.
All
subsequent
written
and
oral
forward-looking
statements
attributable
to
us,
or
persons
acting
on
our
behalf,
are
expressly
qualified
in
their
entirety
by
the
factors
discussed
in
this
Form
10-K.
Some
of
the
factors
that
we
believe
could
affect
our
results
include:

•

the
risks
associated
with
our
operation
of
an
increasingly
global
business,
including
complex
management,
foreign
currency,
political,
legal,
tax
and
economic
risks;

our
ability
to
effectively
manage
the
growth
of
our
business;

our
ability
to
continue
to
make
acquisitions
and
to
successfully
integrate
and
operate
acquired
businesses;

the
development
and
expansion
of
our
global
education
network
and
the
effect
of
new
technology
applications
in
the
educational
services
industry;

the
effect
of
existing
laws
governing
our
business
or
changes
in
those
laws;

changes
in
the
political,
economic
and
business
climate
in
the
international
or
the
U.S.
markets
where
we
operate;

risks
of
downturns
in
general
economic
conditions
and
in
the
educational
services
and
education
technology
industries,
that
could,
among
other
things,
impair
our
goodwill
and
intangible
assets;

possible
increased
competition
from
other
educational
service
providers;

market
acceptance
of
new
service
offerings
by
us
or
our
competitors
and
our
ability
to
predict
and
respond
to
changes
in
the
markets
for
our
educational
services;

the
effect
on
our
business
and
results
of
operations
from
fluctuations
in
the
value
of
foreign
currencies;

our
ability
to
attract
and
retain
key
personnel;

the
fluctuations
in
revenues
due
to
seasonality;

our
ability
to
generate
anticipated
savings
from
our
Excellence in Process ("EiP")
program
or
our
shared
services
organizations
("SSOs");

our
ability
to
maintain
proper
and
effective
internal
controls
or
remediate
any
of
our
current
material
weaknesses
necessary
to
produce
accurate
financial
statements
on
a
timely
basis;

our
focus
on
a
specific
public
benefit
purpose
and
producing
a
positive
effect
for
society
may
negatively
influence
our
financial
performance;
and

the
future
trading
prices
of
our
Class
A
common
stock
and
the
impact
of
any
securities
analysts'
reports
on
these
prices.

We
caution
you
that
the
foregoing
list
of
important
factors
may
not
contain
all
of
the
material
factors
that
are
important
to
you.
In
addition,
in
light
of
these
risks
and
uncertainties,
the
matters
referred
to
in
the
forward-looking
statements
contained
in
this
Form
10-K
may
not
in
fact
occur.
We
undertake
no
obligation
to
publicly
update
or
revise
any
forward-looking
statement
as
a
result
of
new
information,
future
events
or
otherwise,
except
as
otherwise
required
by
law.

Table
of
Contents

ITEM
1.

BUSINESS

General

PART
I

We
are
the
largest
global
network
of
degree-granting
higher
education
institutions,
with
more
than
one
million
students
enrolled
at
our
70
institutions
in
25
countries
on
more
than
200
campuses,
which
we
collectively
refer
to
as
the
Laureate International Universities network.
We
participate
in
the
global
higher
education
market,
which
was
estimated
to
account
for
revenues
of
approximately
$1.5
trillion
in
2015,
according
to
GSV
Advisors
("GSV").
We
believe
the
global
higher
education
market
presents
an
attractive
long-term
opportunity,
primarily
because
of
the
large
and
growing
imbalance
between
the
supply
and
demand
for
quality
higher
education
around
the
world.
Advanced
education
opportunities
drive
higher
earnings
potential,
and
we
believe
the
projected
growth
in
the
middle
class
population
worldwide
and
limited
government
resources
dedicated
to
higher
education
create
substantial
opportunities
for
high-quality
private
institutions
to
meet
this
growing
and
unmet
demand.
Our
outcomes-driven
strategy
is
focused
on
enabling
millions
of
students
globally
to
prosper
and
thrive
in
the
dynamic
and
evolving
knowledge
economy.

In
1999,
we
made
our
first
investment
in
higher
education
and,
since
that
time,
we
have
developed
into
the
global
leader
in
higher
education,
based
on
the
number
of
students,
institutions
and
countries
making
up
our
network.
Our
global
network
of
70
institutions
comprises
58
institutions
we
own
or
control,
and
an
additional
12
institutions
that
we
manage
or
with
which
we
have
other
relationships.
Our
institutions
are
recognized
for
their
high-quality
academics.
For
example,
we
own
and
operate
Universidad
del
Valle
de
México
("UVM
Mexico"),
the
largest
private
university
in
Mexico,
which
in
2016
was
ranked
seventh
among
all
public
and
private
higher
education
institutions
in
the
country
by
Guía Universitaria ,
an
annual
publication
of
Reader's
Digest.
Our
track
record
for
delivering
high-quality
outcomes
to
our
students,
while
stressing
affordability
and
accessibility,
has
been
a
key
reason
for
our
long
record
of
success,
including
16
consecutive
years
of
enrollment
growth.
We
have
generated
compound
annual
growth
rates
("CAGRs")
in
total
enrollment
and
revenues
of
9.9%
and
8.7%,
respectively,
from
2009
through
December
31,
2016.

Since
being
taken
private
in
August
2007,
we
have
undertaken
several
initiatives
to
continually
improve
the
quality
of
our
programs
and
outcomes
for
our
students,
while
expanding
our
scale
and
geographic
presence,
and
strengthening
our
organization
and
management
team.
From
2007
to
December
31,
2016,
we
have
expanded
into
12
new
countries,
added
over
100
campuses
worldwide
and
grown
enrollment
from
approximately
300,000
to
more
than
one
million
students
with
a
combination
of
strong
organic
revenue
growth
of
8.5%
(average
annual
revenue
growth
from
2007
to
2016
excluding
acquisitions
and
dispositions)
and
the
successful
integration
of
41
strategic
acquisitions.
Key
to
this
growth
were
expansions
into
Brazil,
where
we
owned
13
institutions
with
a
combined
enrollment
of
approximately
259,000
students,
and
expansions
into
Asia,
the
Middle
East
and
Africa,
where
we
owned
or
controlled
21
institutions
with
a
combined
enrollment
of
approximately
85,700
students.
Further,
we
have
made
significant
capital
investments
and
continue
to
make
operational
improvements
in
technology
and
human
resources,
including
key
management
hires,
and
are
developing
scalable
back-office
operations
to
support
the
Laureate International Universities network,
including
implementing
a
vertically
integrated
information
technology,
finance,
accounting
and
human
resources
organization
that,
among
other
things,
are
designed
to
enhance
our
analytical
capabilities.
Finally,
over
the
past
several
years,
we
have
invested
heavily
in
technology-enabled
solutions
to
enhance
the
student
experience,
increase
penetration
of
our
hybrid
offerings
and
optimize
efficiency
throughout
our
network.
We
believe
these
investments
have
created
an
intellectual
property
advantage
that
has
further
differentiated
our
offerings
from
local
market
competitors.

The
Laureate International Universities network
enables
us
to
educate
our
students
locally,
while
connecting
them
to
an
international
community
with
a
global
perspective.
Our
students
can
take

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of
Contents

advantage
of
shared
curricula,
optional
international
programs
and
services,
including
English
language
instruction,
dual-degree
and
study
abroad
programs
and
other
benefits
offered
by
other
institutions
in
our
network.
We
believe
that
the
benefits
of
the
network
translate
into
better
career
opportunities
and
higher
earnings
potential
for
our
graduates.

The
institutions
in
the
Laureate International Universities network
offer
a
broad
range
of
undergraduate
and
graduate
degrees
through
campus-based,
online
and
hybrid
programs.
Approximately
93%
of
our
students
attend
traditional,
campus-based
institutions
offering
multi-year
degrees,
similar
to
leading
private
and
public
higher
education
institutions
in
the
United
States
and
Europe.
In
addition,
approximately
two
thirds
of
our
students
are
enrolled
in
programs
of
four
or
more
years
in
duration.
Our
programs
are
designed
with
a
distinct
emphasis
on
applied,
professional-oriented
content
for
growing
career
fields
and
are
focused
on
specific
academic
disciplines,
or
verticals,
that
we
believe
demonstrate
strong
employment
opportunities
and
provide
high
earnings
potential
for
our
students,
including:

Across
these
academic
disciplines,
we
continually
and
proactively
adapt
our
curriculum
to
the
needs
of
the
market,
including
emphasizing
the
core
STEM
(science,
technology,
engineering
and
math)
and
business
disciplines.
We
believe
the
STEM
and
business
disciplines
present
attractive
areas
of
study
to
students,
especially
in
developing
countries
where
there
exists
a
strong
and
ongoing
focus
to
develop
and
retain
professionally
trained
individuals.
Since
2009,
we
have
more
than
doubled
our
enrollment
of
students
pursuing
degrees
in
Business
&
Management,
Medicine
&
Health
Sciences
and
Engineering
&
Information
Technology,
our
three
largest
disciplines.
We
believe
the
work
of
our
graduates
in
these
disciplines
creates
a
positive
impact
on
the
communities
we
serve
and
strengthens
our
institutions'
reputations
within
their
respective
markets.

Across
the
world,
we
operate
institutions
that
address
regional,
national
and
local
supply
and
demand
imbalances
in
higher
education.
As
the
global
leader
in
higher
education,
we
believe
we
are
uniquely
positioned
to
effectively
deliver
high-quality
education
across
different
brands
and
tuition
levels
in
the
markets
in
which
we
operate.
In
many
developing
markets,
traditional
higher
education
students
(defined
as
18-24
year
olds)
have
historically
been
served
by
public
universities,
which
have
limited
capacity
and
are
often
underfunded,
resulting
in
an
inability
to
meet
growing
student
demands
and
employer
requirements.
Our
institutions
in
these
markets
offer
traditional
higher
education
students
a
private
education
alternative,
often
with
multiple
brands
and
price
points
in
each
market,
with
innovative
programs
and
strong
career-driven
outcomes.
In
many
of
these
same
markets,
non-traditional
students
such
as
working
adults
and
distance
learners
have
limited
options
for
pursuing
higher
education.
Through
targeted
programs
and
multiple
teaching
modalities,
we
are
able
to
serve
the
differentiated
needs
of
this
unique
demographic.
Our
flexible
approach
across
geographies
allows
Laureate
to
access
a
broader
addressable
market
of
students
by
efficiently
tailoring
institutions
to
meet
the
needs
of
a
particular
geography
and
student
population.

We
have
four
reporting
segments,
which
are
summarized
in
the
table
below.
We
group
our
institutions
by
geography
in
Latin
America
("LatAm"),
Europe
("Europe")
and
Asia,
Middle
East
and

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of
Contents

Africa
("AMEA")
for
reporting
purposes.
Our
Global
Products
and
Services
("GPS")
segment
includes
our
fully
online
universities
and
our
campus-based
institutions
in
the
United
States.

The
following
information
for
our
operating
segments
is
presented
as
of
December
31,
2016,
except
where
otherwise
indicated,
and
reflects
the
operating
segment
change
discussed
in
the
section
entitled
"Presentation
of
Financial
Information"
above.
For
further
information
related
to
our
segment
revenues,
see
"Item
7—Management's
Discussion
and
Analysis
of
Financial
Condition
and
Results
of
Operation—Results
of
Operations—Segment
Results."

Countries
Institutions
Enrollments
(rounded
to
nearest
hundred)
LTM
ended
December
31,
2016
Revenues
($
in
millions)‡
%
Contribution
to
LTM
ended
December
31,
2016
Revenues‡

LatAm
Europe
8

823,600

$2,442.0

61,700

$480.4

AMEA

85,700

$431.3

GPS

72,200

$900.5

Total

1,043,200

$4,244.2

58%

11%

10%

21%

100%

‡

The
elimination
of
inter-segment
revenues
and
amounts
related
to
Corporate,
which
total
$10.0
million,
is
not
separately
presented.

Our
Industry

We
are
the
leader
in
the
global
market
for
higher
education,
which
is
characterized
by
a
significant
imbalance
between
supply
and
demand,
especially
in
developing
economies.
In
many
countries,
demand
for
higher
education
is
large
and
growing.
GSV
estimates
that
higher
education
institutions
accounted
for
total
revenues
of
approximately
$1.5
trillion
globally
in
2015,
with
the
higher
education
market
expected
to
grow
by
approximately
5%
per
annum
through
2020.
Global
growth
in
higher
education
is
being
fueled
by
several
demographic
and
economic
factors,
including
a
growing
middle
class,
global
growth
in
services
and
technology-related
industries
and
recognition
of
the
significant
personal
and
economic
benefits
gained
by
graduates
of
higher
education
institutions.
At
the
same
time,
many
governments
have
limited
resources
to
devote
to
higher
education,
resulting
in
a
diminished
ability
by
the
public
sector
to
meet
growing
demand,
and
creating
opportunities
for
private
education
providers

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of
Contents

to
enter
these
markets
and
deliver
high-quality
education.
As
a
result,
the
private
sector
plays
a
large
and
growing
role
in
higher
education
globally.
While
the
Laureate International Universities network
is
the
largest
global
network
of
degree-granting
higher
education
institutions
in
the
world,
our
total
enrollment
of
more
than
one
million
students
represents
only
0.5%
of
worldwide
higher
education
students.

Large, Growing and Underpenetrated Population of Qualified Higher Education Students.

According
to
United
Nations
Educational,
Scientific
and
Cultural
Organization
("UNESCO"),
207.5
million
students
worldwide
were
enrolled
in
higher
education
institutions
in
2014,
more
than
double
the
99.7
million
students
enrolled
in
2000,
and
approximately
90%
of
those
students
were
enrolled
at
institutions
outside
of
the
United
States
as
of
2013.
In
many
countries,
including
throughout
Latin
America,
Asia
and
other
developing
regions,
there
is
growing
demand
for
higher
education
based
on
favorable
demographics,
increasing
secondary
completion
rates
and
increasing
higher
education
participation
rates,
resulting
in
continued
growth
in
higher
education
enrollments.
While
global
participation
rates
have
increased
for
traditional
higher
education
students
(defined
as
18-24
year
olds),
the
market
for
higher
education
is
still
significantly
underpenetrated,
particularly
in
developing
countries.
Given
the
low
penetration
rates,
many
governments
in
developing
countries
have
a
stated
goal
of
increasing
the
number
of
students
participating
in
higher
education.
For
example,
Mexico's
participation
rate
increased
from
approximately
16%
to
approximately
23%
from
2003
to
2014,
and
the
Mexican
government
has
set
a
goal
of
increasing
the
number
of
students
enrolled
in
higher
education
by
17%
over
the
next
three
years.
Other
developing
countries
with
large
addressable
markets
are
similarly
underpenetrated
as
evidenced
by
the
following
participation
rates
for
2014:
Saudi
Arabia
40%,
Brazil
35%,
China
28%
and
India
20%,
all
of
which
are
well
below
rates
of
developed
countries
such
as
the
United
States
and
Spain,
which
in
2013
had
participation
rates
of
approximately
63%
and
approximately
61%,
respectively.

Strong Economic Incentives for Higher Education.

According
to
the
Brookings
Institution,
approximately
3.2
billion
people
in
the
world
composed
the
middle
class
in
2016,
a
number
that
is
expected
to
be
over
five
billion
people
by
2028.
We
believe
that
members
of
this
large
and
growing
group
seek
advanced
education
opportunities
for
themselves
and
their
children
in
recognition
of
the
vast
differential
in
earnings
potential
with
and
without
higher
education.
According
to
data
from
the
Organization
for
Economic
Co-operation
and
Development
("OECD"),
in
certain
European
markets
in
which
we
operate,
the
earnings
from
employment
for
an
adult
completing
higher
education
were
approximately
55%
higher
than
those
of
an
adult
with
just
an
upper
secondary
education,
while
in
the
United
States
the
differential
was
approximately
68%.
This
income
gap
is
even
more
pronounced
in
many
developing
countries
around
the
world,
including
a
differential
of
approximately
139%
in
Chile
and
approximately
141%
in
Brazil.
OECD
statistics
also
show
that
overall
employment
rates
are
greater
for
individuals
completing
higher
education
than
for
those
who
have
not
completed
upper
secondary
education.
In
addition,
we
believe
as
economies
around
the
world
are
increasingly
based
on
the
services
sector,
they
will
require
significant
investment
in
human
capital,
advanced
education
and
specialized
training
to
produce
knowledgeable
professionals.
We
believe
the
cumulative
impact
of
favorable
demographic
and
socio-economic
trends,
coupled
with
the
superior
earnings
potential
of
higher
education
graduates,
will
continue
to
expand
the
market
for
private
higher
education.

Increasing Role of the Private Sector in Higher Education.

In
many
of
our
markets,
the
private
sector
plays
a
meaningful
role
in
higher
education,
bridging
supply
and
demand
imbalances
created
by
a
lack
of
capacity
at
public
universities.
In
addition
to
capacity
limitations,
we
believe
that
limited
public
resources,
and
the
corresponding
policy
reforms
to
make
higher
education
systems
less
dependent
on
the
financial
and
operational
support
of
local
governments,
have
resulted
in
increased
enrollments
in
private
institutions
relative
to
public
institutions.

Table
of
Contents

According
to
the
OECD,
from
2003
to
2013,
the
number
of
students
enrolled
in
private
institutions
grew
from
approximately
26%
to
approximately
31%
of
total
enrollments
within
OECD
countries.
For
example,
Brazil
and
Chile
rely
heavily
upon
private
institutions
to
deliver
quality
higher
education
to
students,
with
approximately
71%
(in
2012)
and
approximately
84%
(in
2013),
respectively,
of
higher
education
students
in
these
countries
enrolled
in
private
institutions.

The
decrease
in
government
funding
to
public
higher
education
institutions
in
recent
years
has
served
to
spur
the
growth
of
private
institutions,
as
tuitions
have
been
increasingly
funded
by
private
sources.
On
average,
OECD
countries
experienced
a
decrease
in
public
funding
from
approximately
69%
of
total
funding
in
2000
to
approximately
65%
in
2012.
For
example,
Mexico
experienced
a
decrease
in
public
funding
as
a
percentage
of
total
funding
of
approximately
ten
percentage
points
during
the
same
period.
We
believe
these
trends
have
increased
demand
for
competitive
private
institutions
as
public
institutions
are
unable
to
meet
the
demand
of
students
and
families
around
the
world,
especially
in
developing
markets.

Greater Accessibility to Higher Education through Online and Hybrid Offerings.

Improving
Internet
broadband
infrastructure
and
new
instruction
methodologies
designed
for
the
online
medium
have
driven
increased
acceptance
of
the
online
modality
globally.
According
to
a
survey
conducted
by
the
Babson
Survey
Research
Group,
approximately
71%
of
academic
leaders
rated
online
learning
outcomes
as
the
same
or
superior
to
classroom
learning
in
2014,
up
from
approximately
57%
in
2003.
GSV
estimates
that
the
online
higher
education
market
will
grow
by
a
CAGR
of
approximately
25%,
from
$49
billion
in
2012
to
$149
billion
in
2017.
Additionally,
new
online
and
hybrid
education
offerings
have
enabled
the
cost-effective
delivery
of
higher
education,
while
improving
overall
affordability
and
accessibility
for
students.
We
believe
that
increasing
student
demand,
coupled
with
growing
employer
and
regulatory
acceptance
of
degrees
obtained
through
online
and
hybrid
modalities,
will
continue
to
drive
significant
growth
in
the
online
and
hybrid
higher
education
market
globally.

Our
Strengths
and
Competitive
Advantages

We
believe
our
key
competitive
strengths
that
will
enable
us
to
execute
our
growth
strategy
include
the
following:

First Mover and Leader in Global Higher Education.

In
1999,
we
made
our
first
investment
in
global
higher
education.
Since
that
time,
the
Laureate
International Universities network
has
grown
to
include
70
institutions
in
25
countries
that
enroll
more
than
one
million
students,
of
which
approximately
95%
are
outside
of
the
United
States
and
over
85%
reside
in
developing
countries.
Our
growth
has
been
the
result
of
numerous
organic
initiatives,
supplemented
by
successfully
completing
and
integrating
41
acquisitions
since
August
2007,
substantially
all
of
which
were
completed
through
private
negotiations
and
not
as
part
of
an
auction
process.
Given
our
size
and
status
as
the
first
mover
in
many
of
our
markets,
we
have
been
able
to
acquire
many
marquee
assets,
which
we
believe
will
help
us
maintain
our
market-leading
position
due
to
the
considerable
time
and
expense
it
would
take
a
competitor
to
establish
an
integrated
network
of
international
universities
of
similar
scale
with
the
brands,
intellectual
property
and
accreditations
that
we
possess.

Long-Standing and Reputable University Brands Delivering High Quality Education.

We
believe
we
have
established
a
reputation
for
providing
high-
quality
higher
education
around
the
world,
and
that
our
schools
are
among
the
most
respected
higher
education
brands
in
their
local
markets.
Many
of
our
institutions
have
over
50-year
histories.
In
addition
to
long-standing
presences
in
their
local
communities,
many
of
our
institutions
are
ranked
among
the
best
in
their
respective
countries.
For
example,
the
Barómetro de la Educación Superior has
ranked
Universidad
Andrés
Bello
as
the
top
private
university
in
Chile.
Similarly,
in
Brazil,
Universidade
Anhembi
Morumbi
is
ranked
by
Guia do Estudante as
one
of
São
Paulo's
top
universities,
and
in
Europe,
Universidad
Europea
de
Madrid
is
the
second
largest
private
university
in
Spain
and
received
four
stars
in
the
prestigious
2015
QS
Stars
TM

Table
of
Contents

international
university
rating.
Our
U.S.-based
institutions
have
been
recognized
for
their
quality
and
value.
Walden
University,
a
member
of
the
Laureate
International Universities network,
was
singled
out
in
the
U.S.
Senate
Report
on
For
Profit
Higher
Education
in
2012
as
"perhaps
the
best
of
any
company
examined."
More
recently,
Walden
ranked
19th
on
the
list
of
the
top
100
universities
for
adult
learners
in
the
Washington Monthly 2016 College Rankings .

Our
strong
brands
are
perpetuated
by
our
student-centric
focus
and
our
mission
to
provide
greater
access
to
cost-effective,
high-quality
higher
education,
which
allows
more
students
to
pursue
their
academic
and
career
aspirations.
We
are
committed
to
continually
evaluating
our
institutions
to
ensure
we
are
providing
the
highest
quality
education
to
our
students.
Our
proprietary
management
tool,
the
Laureate
Education
Assessment
Framework
("LEAF"),
is
used
to
evaluate
institutional
performance
based
on
44
unique
criteria
across
five
different
categories:
Employability,
Learning
Experience,
Personal
Experience,
Access
&
Outreach
and
Academic
Excellence.
LEAF,
in
conjunction
with
additional
external
assessment
methodologies,
such
as
QS
Stars
TM
,
allows
us
to
identify
key
areas
for
improvement
in
order
to
drive
a
culture
of
quality
and
continual
innovation
at
our
institutions.
For
example,
more
than
81%
of
students
attending
Laureate
institutions
in
Brazil
are
enrolled
in
an
institution
with
an
IGC
score
(an
indicator
used
by
the
Brazilian
Ministry
of
Education
("MEC")
to
evaluate
the
quality
of
higher
education
institutions)
that
has
improved
since
2010.
In
addition,
our
Brazilian
institutions'
IGC
scores
have
increased
by
more
than
22%
on
average
from
2010
to
2015,
placing
three
of
our
institutions
in
the
top
quarter,
and
all
of
our
institutions
are
ranked
in
the
top
half
of
all
private
higher
education
institutions
in
the
country.

Many
of
our
institutions
and
programs
have
earned
the
highest
accreditation
available,
which
provides
us
with
a
strong
competitive
advantage
in
local
markets.
For
example,
we
serve
more
than
200,000
students
in
the
fields
of
medicine
and
health
sciences
on
over
100
campuses
throughout
the
Laureate
International Universities network,
including
22
medical
schools
and
19
dental
schools.
Medical
school
licenses
are
often
the
most
difficult
to
obtain
and
are
only
granted
to
institutions
that
meet
rigorous
standards.
We
believe
the
existence
of
medical
schools
at
many
of
our
institutions
further
validates
the
quality
of
our
institutions
and
programs.
Similarly,
other
institutions
have
received
numerous
specialized
accreditations,
including
those
for
Ph.D.
programs.
For
example,
UNAB,
UDLA
Ecuador,
and
UPC
are
three
of
only
11
universities
in
all
of
Latin
America
to
receive
a
U.S.
accreditation,
which
is
highly
regarded
and
difficult
to
attain.
Finally,
in
addition
to
Universidad
Europea
de
Madrid,
14
institutions
in
our
network
were
also
rated
by
QS
Stars™
international
university
rating,
which
is
a
prestigious
external
assessment.
In
2015,
many
Laureate
institutions
received
three
and
four
stars
as
indicated
below:

•

Four
Stars

•

European
University
Cyprus

Universidad
Andrés
Bello
(UNAB)

Three
Stars

•

Universidad
del
Valle
de
México
(UVM
Mexico)

Universidad
Peruana
de
Ciencias
Aplicadas
(UPC)

Universidad
Tecnológica
de
México
(UNITEC
Mexico)

Universidade
Anhembi
Morumbi
(UAM
Brazil)

Universidade
Potiguar
(UnP)

Universidade
Salvador
(UNIFACS)

Table
of
Contents

•

Centro
Universitário
Ritter
dos
Reis
(UniRitter)

Universidad
de
Las
Américas
(UDLA
Ecuador)

Istanbul
Bilgi
University

University
of
Petroleum
and
Energy
Studies
(UPES)

Universidad
Latina
de
Costa
Rica
(ULatina)

Universidad
Tecnológica
Centroamericana
(UNITEC
Honduras).

Superior Outcomes for Our Students.

We
offer
high-quality
undergraduate,
graduate
and
specialized
programs
in
a
wide
range
of
disciplines
that
generate
strong
interest
from
students
and
provide
attractive
employment
prospects.
We
design
our
programs
to
prepare
students
to
contribute
productively
in
their
chosen
professions
upon
employment.
Our
curriculum
development
process
includes
employer
surveys
and
ongoing
research
into
business
trends
to
determine
the
skills
and
knowledge
base
that
will
be
required
by
those
employers
in
the
future.
This
information
results
in
timely
curriculum
upgrades,
which
helps
ensure
that
our
graduates
acquire
the
skills
that
will
make
them
marketable
to
employers.
In
2014,
we
commissioned
a
study
by
Millward
Brown,
a
leading
third-party
market
research
organization,
of
graduates
at
Laureate
institutions
representing
over
60%
of
total
Laureate
enrollments.
Graduates
at
12
of
our
13
surveyed
international
institutions
achieved,
on
average,
equal
or
higher
employment
rates
within
12
months
of
graduation
as
compared
to
graduates
of
other
institutions
in
the
same
markets,
and
in
all
of
our
premium
institutions
surveyed,
graduates
achieved
higher
starting
salaries
as
compared
to
graduates
of
other
institutions
in
those
same
markets
(salary
premium
to
market
benchmarks
ranged
from
approximately
6%
to
approximately
118%).
In
addition,
a
joint
study
by
Laureate
and
the
IFC/World
Bank
Group
in
2014
showed
that
graduates
of
Laureate
institutions
in
Mexico
experienced
higher
rates
of
social
mobility,
finding
jobs
and
moving
up
in
socioeconomic
status
than
their
peers
in
non-Laureate
institutions.
In
2016,
we
conducted
a
similar
study
with
the
IFC
in
Peru
for
two
of
our
network
institutions,
Universidad
Peruana
de
Ciencias
Aplicadas
and
Cibertec,
which
showed
that
graduates
from
the
larger
programs
of
both
institutions
had
higher
salaries
than
their
control
group
counterparts.
Additionally,
graduates
from
UPC
were
found
to
experience
a
larger
positive
change
in
their
socioeconomic
status
than
their
peers
who
completed
studies
at
non-Laureate
institutions.

In
2016,
Walden
University
commissioned
Gallup
to
conduct
a
survey
of
Walden
University's
graduate-degree
alumni
using
its
Gallup-Purdue
Index.
The
survey
explored
the
relationship
between
Walden
University's
graduates'
experiences
and
long-term
outcomes
based
on
their
responses.
Gallup
administered
a
custom
survey,
developed
in
partnership
with
Walden
University,
to
Walden
University
graduate
degree
holders
and
a
national
sample
of
graduate
degree
holders
to
allow
comparison
of
outcomes
in
the
areas
of
professional
success,
return
on
investment
and
civic
engagement.
The
study
included
8,677
adults
who
received
graduate
degrees
from
Walden
University
between
1990
and
2015
as
well
as
6,687
graduates
from
the
national
sample.
Within
the
national
sample,
Gallup
created
an
additional
comparison
group
of
graduates
who
completed
half
or
more
of
their
graduate
degree
online,
the
"half-plus
graduate
alumni,"
more
closely
resembling
the
Walden
University
sample
set
of
online
alumni.
The
Walden
University
sample
is
more
likely
than
the
half-plus
online
graduate
alumni
sample
to
be
female
(76%
vs.
60%)
and
from
a
racial
or
ethnic
minority
group
(36%
vs.
28%),
and
the
Walden
University
alumni
are
more
likely
than
half-plus
online
graduate
alumni
to
be
the
first
generation
in
their
families
to
attend
college
(61%
vs.
48%).
As
evidenced
by
the
demographic
distinctions,
Walden
University
graduates
reflect
a
more
diverse
population
compared
with
both
national
comparison
groups.
The
survey
results
illustrate
how
many
Walden
University
graduates
went
on
to
advance
their
careers,
including
that
Walden
University
graduates
were
more
likely
than
comparison
groups
to
cite
their
degree
as
being
important
or
very
important
toward
getting
promoted,
achieving
a
salary
raise
and
changing
careers.
The
Gallup
survey
states
that
half-plus
online
graduate
alumni
are
more
likely
than

Table
of
Contents

Walden
University
alumni
to
have
degrees
in
well-compensated
professions,
including
those
with
degrees
in
business
and
management
(20%
half-plus
graduate
alumni
vs.
12%
for
Walden
University
alumni)
and
engineering
(5%
half-plus
graduate
alumni
vs.
0%
for
Walden
University
alumni).
Conversely,
Walden
University
alumni
are
predominantly
in
professions
that
typically
earn
less:
education
(23%
half-plus
graduate
alumni
vs.
29%
for
Walden
University
alumni),
teaching
(8%
half-plus
graduate
alumni
vs.
14%
for
Walden
University
alumni)
and
nursing
(6%
half-plus
graduate
alumni
vs.
24%
for
Walden
University
alumni).
According
to
Gallup's
survey,
career
advancement
following
receipt
of
a
Walden
University
graduate
degree
may
be
contributing
to
the
vast
majority
of
Walden
University
graduates
(88%)
saying
they
are
satisfied
with
their
personal
life
today,
on
par
with
half-plus
online
graduate
alumni
(86%)
and
graduate
degree
holders
nationally
(89%).
Additionally,
83%
of
Walden
University
graduates
agree
or
strongly
agree
that
they
were
challenged
academically
by
Walden
University,
higher
than
the
75%
of
half-plus
online
graduate
alumni
surveyed
but
similar
to
graduate
degree
holders
nationally
(83%).

Robust Technology and Intellectual Property Platform.

By
virtue
of
our
17
years
of
experience
operating
in
a
global
environment,
managing
campus-
based
institutions
across
multiple
disciplines
and
developing
and
administering
online
programs
and
curricula,
we
have
developed
an
extensive
collection
of
intellectual
property.
We
believe
this
collection
of
intellectual
property,
which
includes
online
capabilities,
campus
design
and
management,
recruitment
of
transnational
students,
faculty
training,
curriculum
design
and
quality
assurance,
among
other
proprietary
solutions,
provides
our
students
a
truly
differentiated
learning
experience
and
creates
a
significant
competitive
advantage
for
our
institutions
over
competitors.

A
critical
element
of
our
intellectual
property
is
a
suite
of
proprietary
technology
solutions.
Select
examples
include
OneCampus ,
which
connects
students
across
our
network
with
shared
online
courses
and
digital
experiences,
and
Slingshot, an
online
career
orientation
tool
that
enables
students
to
explore
career
paths
through
state-of-the-art
interest
assessment
and
rich
content
about
hundreds
of
careers.
Our
commitment
to
investing
in
technology
infrastructure,
software
and
human
capital
ensures
a
high-quality
educational
experience
for
our
students
and
faculty,
while
also
providing
us
with
the
infrastructure
to
manage
and
scale
our
business.

Our
intellectual
property
has
been
a
key
driver
in
developing
partnerships
with
prestigious
independent
institutions
and
governments
globally.
For
example,
we
have
partnered
with
other
traditional
public
and
private
higher
education
institutions
as
a
provider
of
online
services.
We
have
operated
this
model
for
more
than
ten
years
with
the
University
of
Liverpool
in
the
United
Kingdom
and,
more
recently,
we
have
added
new
partnerships
with
the
University
of
Roehampton
in
the
United
Kingdom
and
the
University
of
Miami
in
the
United
States.
Additionally,
in
2013,
the
Kingdom
of
Saudi
Arabia
launched
the
College
of
Excellence
program
with
a
long-term
goal
of
opening
100
new
technical
colleges,
and
sought
private
operators
to
manage
the
institutions
on
its
behalf
under
an
operating
model
in
which
the
Kingdom
of
Saudi
Arabia
funds
the
capital
requirements
to
build
the
institutions,
and
the
private
operator
runs
the
academic
operations
under
a
contract
model.
As
of
December
31,
2016,
we
have
been
awarded
contracts
to
operate
eight
of
the
33
colleges
for
which
contracts
have
been
awarded
to
date,
more
than
any
other
provider
in
the
Kingdom
of
Saudi
Arabia.

Scale and Diversification of Our Global Network.

The
Laureate International Universities network
is
diversified
across
25
countries,
70
campus-based
and
online
institutions
and
over
2,500
programs.
Additionally,
in
many
markets,
we
have
multiple
institutions
serving
different
segments
of
the
population,
at
different
price
points
and
with
different
academic
offerings.
Although
the
majority
of
our
institutions
serve
the
premium
segment
of
the
market,
we
also
have
expanded
our
portfolio
of
offerings
in
many
markets
to
include
high-quality
value
and
technical-vocational
institutions.
By
serving
multiple
segments
of
the
market,
all
with
high-quality
offerings,
we
are
able
to
continue
to
expand
our
enrollments
during
varying
economic
cycles.
Our
top
five
largest
markets,
as
measured
by
revenue,
represented
71%
of
our
consolidated
revenue
and
79%
of
our
total
enrollments
in
2016.
Our
top
five
largest
markets
are
home
to
15%
of
the
world's
higher
education
students.
We
believe
there
is
no
other
public
or
private
organization
that
commands
comparable
global
reach
or
scale.

Table
of
Contents

Our
global
network
allows
our
institutions
to
bring
their
distinctive
identities
together
with
our
proprietary
international
content,
managerial
best
practices
and
international
programs.
Through
collaboration
across
the
global
network,
we
can
efficiently
share
academic
curricula
and
resources,
create
dual
degree
programs
and
student
exchanges,
develop
our
faculty
and
incorporate
best
practices
throughout
the
organization.
In
addition,
our
wide-ranging
network
allows
us
to
continue
to
scale
our
business
by
facilitating
the
expansion
of
existing
programs
and
campuses,
the
launch
of
new
programs,
the
opening
of
new
campuses
in
areas
of
high
demand
and
the
strategic
acquisition
and
integration
of
new
institutions
into
our
network.
For
example,
the
resources
and
support
of
our
global
network
have
had
a
demonstrated
impact
on
our
Medicine
&
Health
Sciences
expansion
effort,
which
has
resulted
in
enrollment
growth
from
approximately
75,000
students
in
2009
to
more
than
200,000
students
as
of
December
31,
2016.
Furthermore,
the
existing
breadth
of
our
network
allows
us
to
provide
a
high-quality
educational
experience
to
our
students,
while
simultaneously
accessing
the
broadest
addressable
market
for
our
offerings.

In
recognition
of
the
benefits
of
our
international
scale,
and
in
order
to
formalize
our
organizational
focus
on
the
opportunities
presented
by
our
established
network,
we
created
the
Laureate
Network
Office
("LNO")
in
2015.
The
LNO
is
an
important
resource
that
allows
us,
among
other
things,
to
better
leverage
our
expertise
in
the
online
modality
to
increase
the
frequency
and
effectiveness
of
online
and
hybrid
learning
opportunities
across
the
network.

To
further
illustrate
the
breadth
and
diversity
of
our
global
network,
the
charts
below
show
the
mix
of
our
geographic
revenues,
programs,
modality
and
levels
of
study:

Based
on
12/31/2016
revenues

Note:
Europe
includes
revenues
from
Switzerland
and
the
United
Kingdom
that
are
captured
in
GPS
for
segment
reporting
purposes
and
excludes
revenues
from
Morocco
(which
are
shown
in
"Rest
of
World"
above)

Based
on
12/31/2016
revenues

Based
on
12/31/2016
total
enrollments

Based
on
12/31/2016
revenues

Table
of
Contents

Attractive Financial Model.

•

Strong and Consistent Growth.

We
have
a
proven
track
record
of
delivering
strong
financial
results
through
various
economic
cycles.
From
2009
to
2016,
our
revenues
and
Adjusted
EBITDA
grew
at
a
CAGR
of
8.7%
and
11.0%,
respectively
(9.5%
and
9.9%
on
a
constant
currency
basis,
respectively).
From
2009
to
2016,
our
net
income
increased
from
a
loss
of
$150.1
million
to
a
profit
of
$366.2
million
for
the
year
ended
December
31,
2016.
Adjusted
for
acquisitions
and
dispositions,
our
average
annual
organic
revenue
growth
over
the
same
period
was
6.8%
(9.8%
on
a
constant
currency
basis).
For
a
reconciliation
of
Adjusted
EBITDA
to
net
income
(loss),
see
"Item
6—Selected
Financial
Data."

Private Pay Model.

Approximately
75%
of
our
revenues
for
the
year
ended
December
31,
2016
were
generated
from
private
pay
sources.
We
believe
students'
and
families'
willingness
to
allocate
personal
resources
to
fund
higher
education
at
our
institutions
validates
our
strong
value
proposition.

Revenue Visibility Enhanced by Program Length and Strong Retention.

The
majority
of
the
academic
programs
offered
by
our
institutions
last
between
three
and
five
years,
and
approximately
two
thirds
of
our
students
were
enrolled
in
programs
of
at
least
four
years
or
more
in
duration,
as
of
December
31,
2016.
The
length
of
our
programs
provides
us
with
a
high
degree
of
revenue
visibility,
which
historically
has
led
to
more
predictable
financial
results.
Given
that
our
fall
student
intake
is
substantially
completed
by
the
end
of
September,
we
have
visibility
into
approximately
70%
of
the
following
year's
revenues,
assuming
a
constant
foreign
exchange
environment
and
assuming
retention
and
graduation
rates
in
line
with
historical
performance.
We
actively
monitor
and
manage
student
retention
because
of
the
impact
it
has
on
student
outcomes
and
our
financial
results.
The
historical
annual
student
retention
rate,
which
we
define
as
the
proportion
of
prior
year
students
returning
in
the
current
year
(excluding
graduating
students),
of
over
80%
has
not
varied
by
more
than
two
percentage
points
in
any
one
year
over
the
last
five
years.
Given
our
high
degree
of
revenue
visibility,
we
are
able
to
make
attractive
capital
investments
and
execute
other
strategic
initiatives
to
help
drive
sustainable
growth
in
our
business.

Attractive Return on Incremental Invested Capital ("ROIIC").

Our
capital
investments
since
inception
have
created
significant
scale
and
have
also
laid
the
foundation
for
continued
strong
organic
growth.
Given
that
we
have
already
made
foundational
infrastructure
investments
in
many
of
our
core
markets,
we
expect
to
recognize
attractive
returns
on
incremental
invested
capital
deployed.
As
of
December
31,
2015,
our
four-year
ROIIC
was
28.1%.
For
more
information
on
ROIIC,
see
"Item
6—Selected
Financial
Data."

Proven Management Team.

We
have
an
experienced
and
talented
senior
management
team,
with
strong
international
expertise
from
a
wide
variety
of
industry-leading
global
companies.
Our
executive
officers
have
been
with
us
an
average
of
14
years
and
have
led
our
transformation
into
the
largest
global
network
of
degree-granting
higher
education
institutions
in
the
world.
Douglas
L.
Becker,
our
Chairman,
Chief
Executive
Officer
and
founder,
has
led
our
Company
since
its
inception
in
1989
and
has
cultivated
an
entrepreneurial
and
collaborative
management
culture.
This
entrepreneurial
leadership
style
has
been
complemented
by
an
executive
management
team
with
broad
global
experience,
enabling
us
to
institute
strong
governance
practices
throughout
our
network.
The
strength
of
the
management
team
has
enabled
the
sharing
of
best
practices,
allowing
us
to
capitalize
on
favorable
market
dynamics
and
leading
to
the
successful
integration
of
numerous
institutions
into
the
Laureate International Universities network.
In
addition,
we
have
strong
regional
and
local
management
teams
with
a
deep
understanding
of
the
local
markets,
that
are
focused
on
meeting
the
needs
of
our
students
and
communities,
and
maintaining
key
relationships
with
regulators
and
business
leaders.
Our

Table
of
Contents

management
team
has
a
proven
track
record
of
gaining
the
trust
and
respect
of
the
many
regulatory
authorities
that
are
critical
to
our
business.

Our
Growth
Strategy

We
intend
to
continue
to
focus
on
growing
the
Laureate International Universities network
through
the
following
key
strategies:

Expand Programs, Demographics and Capacity.

We
will
continue
to
focus
on
opportunities
to
expand
our
programs
and
the
type
of
students
that
we
serve,
as
well
as
our
capacity
in
our
markets
to
meet
local
demand.
We
also
intend
to
continue
to
improve
the
performance
of
each
of
our
institutions
by
adopting
best
practices
that
have
been
successful
at
other
institutions
in
the
Laureate International Universities network.
We
believe
these
initiatives
will
drive
organic
growth
and
provide
an
attractive
return
on
capital.
In
particular,
we
intend
to:

•

Add New Programs and Course Offerings.

We
will
continue
to
develop
new
programs
and
course
offerings
to
address
the
changing
needs
in
the
markets
we
serve
by
using
shared
curricula
available
through
the
network,
and
in
consultation
with
leading
local
businesses.
New
programs
and
course
offerings
enable
us
to
consistently
provide
a
high-quality
education
that
is
desired
by
students
and
prospective
employers.
As
we
optimize
our
offerings
to
deliver
courses
in
high-demand
disciplines,
we
also
believe
we
will
be
able
to
increase
enrollment
and
improve
utilization
at
institutions
across
our
network.

Expand Target Student Demographics.

In
many
of
our
markets,
we
use
sophisticated
analytical
techniques
to
identify
opportunities
to
provide
quality
education
to
new
or
underserved
student
populations
where
market
demand
is
not
being
met,
such
as
non-traditional
students
(e.g.,
working
adults)
who
may
value
flexible
scheduling
options,
as
well
as
traditional
students.
Our
ability
to
provide
quality
education
to
these
underserved
markets
has
provided
additional
growth
to
the
Laureate International Universities network
and
we
intend
to
leverage
our
management
capabilities
and
local
knowledge
to
further
capitalize
on
these
higher
education
opportunities
in
new
and
existing
markets.
As
we
expand
in
a
particular
country
or
region,
we
often
develop
tailored
programs
to
address
the
unmet
needs
of
these
markets.

Increase Capacity at Existing and New Campus Locations.

We
will
continue
to
make
demand-driven
investments
in
additional
capacity
throughout
the
Laureate International Universities network
by
expanding
existing
campuses
and
opening
new
campuses,
including
in
new
cities.
We
employ
a
highly
analytical
process
based
on
economic
and
demographic
trends,
and
demand
data
for
the
local
market
to
determine
when
and
where
to
expand
capacity.
When
opening
a
new
campus
or
expanding
existing
facilities,
we
use
best
practices
that
we
have
developed
over
more
than
the
past
decade
to
cost-effectively
expedite
the
opening
and
development
of
that
location.

We
have
successfully
implemented
these
strategies
at
many
of
our
institutions.
For
example,
at
UVM
Mexico
we
grew
total
enrollments
from
approximately
37,000
students
in
2002
to
approximately
130,000
in
2016.
This
growth
was
the
result
of
the
introduction
of
new
programs,
including
in
the
fields
of
health
sciences,
engineering
and
hospitality,
the
addition
of
23
new
campus
locations
(from
13
in
2002
to
37
in
2016),
and
the
ability
to
serve
new
market
segments
such
as
working
adults.
While
UVM
Mexico
has
grown
into
the
largest
private
institution
in
Mexico,
our
relentless
focus
on
academic
quality
remains.
In
fact,
UVM
Mexico
has
improved
from
the
9
th

ranked
institution
in
2004
to
the
7
th

ranked
institution
in
2016
according
to
Guía Universitaria. Further
examples
of
our
successes
in
implementing
these
strategies
include:

•

At
UPC
in
Peru,
enrollment
grew
from
approximately
4,000
students
in
2004
to
approximately
51,000
in
2016.
This
growth
was
the
result
of
the
introduction
of
new
programs,
including
in
the

Table
of
Contents

•

fields
of
health
sciences
and
communications,
the
addition
of
three
new
campus
locations
(from
one
in
2004
to
four
in
2016),
and
the
ability
to
serve
new
market
segments
such
as
working
adults.
In
2015,
UPC
received
three
stars
in
the
prestigious
2015
QS
Stars™
international
university
rating.
In
2016,
UPC
became
the
first
Peruvian
university
accredited
at
the
highest
level
by
any
of
the
six
accreditation
bodies
of
the
United
States
when
it
was
accredited
by
the
Commission
on
Senior
Colleges
of
the
Western
Association
of
Schools
and
Colleges.

At
UAM
Brazil
in
Brazil,
enrollment
grew
from
approximately
21,000
students
in
2007
to
approximately
49,000
in
2016.
This
growth
was
the
result
of
the
introduction
of
new
programs,
including
health
sciences,
the
addition
of
two
campus
locations
(from
four
in
2007
to
six
in
2016),
and
the
ability
to
serve
new
market
segments.
UAM
Brazil
was
ranked
as
one
of
the
top
ten
private
universities
in
the
city
of
São
Paulo
based
on
results
from
the
Índice
Geral
de
Cursos,
a
systematic
evaluation
administered
by
the
Brazilian
Ministry
of
Education
to
judge
the
quality
of
academic
degree
programs,
and
received
three
stars
in
the
prestigious
2015
QS
Stars
TM
international
university
rating.

In
Spain,
at
Universidad
Europea
de
Madrid,
Universidad
Europea
de
Valencia
and
Universidad
Europea
de
Canarias,
enrollment
grew
from
approximately
6,000
students
in
1999
to
approximately
16,000
in
2016.
This
growth
was
the
result
of
the
introduction
of
new
programs
including
in
the
fields
of
health,
engineering
and
communications,
the
addition
of
four
campus
locations
(from
two
in
1999
to
six
in
2016),
and
the
ability
to
serve
new
market
segments
such
as
working
adults.
Universidad
Europea
de
Madrid
has
grown
to
become
the
second
largest
private
university
in
Spain
and
received
four
stars
in
the
prestigious
2015
QS
Stars
TM
international
university
rating.

Expand Penetration of Online and Hybrid Offerings.

We
intend
to
increase
the
number
of
our
students
who
receive
their
education
through
fully
online
or
hybrid
programs
to
meet
the
growing
demand
of
younger
generations
that
continue
to
embrace
technology.
Over
the
past
decade,
the
global
population
with
Internet
access
has
continued
to
grow,
and
Forrester
Research,
Inc.
("Forrester")
estimates
a
total
of
3.5
billion
people
will
have
Internet
access
by
2017,
representing
nearly
half
of
the
world's
population.
Additionally,
in
many
of
our
markets,
online
education
is
becoming
more
accepted
by
regulators
and
education
professionals
as
an
effective
means
of
providing
quality
higher
education.
As
the
quality
and
acceptance
of
online
education
increases
globally,
we
plan
to
continue
investing
in
both
expanding
our
stand-alone
online
course
offerings
and
enhancing
our
traditional
campus-based
course
offerings
via
complementary
online
delivery,
creating
a
hybrid
delivery
model.
We
believe
our
history
of
success
with
Walden
University,
a
fully
online
institution
in
the
United
States,
and
our
well-
developed
online
program
offerings
will
provide
a
considerable
advantage
over
local
competitors,
enabling
us
to
combine
our
strong
local
brands
with
our
experience
in
delivering
online
education.
By
the
end
of
2019,
our
goal
is
to
increase
the
number
of
student
credit
hours
taken
online,
which
was
approximately
15%
as
of
the
end
of
2016,
to
approximately
25%.
Some
of
our
network
institutions
are
already
implementing
online
programs
with
significant
progress
being
made.
Our
online
initiative
is
designed
to
not
only
provide
our
students
with
access
to
the
technology
platforms
and
innovative
programs
they
expect,
but
also
to
increase
our
enrollment
in
a
more
capital
efficient
manner,
leveraging
current
infrastructure
and
improving
classroom
utilization.

Expand Presence in AMEA.

AMEA
represents
the
largest
higher
education
market
opportunity
in
the
world
with
more
than
130
million
students
enrolled
in
higher
education
institutions
in
2014,
according
to
UNESCO.
Despite
the
large
number
of
students
enrolled,
participation
rates
in
the
region
suggest
significantly
underpenetrated
enrollment
given
the
strong
imbalance
between
the
supply
and
demand
for
higher
education.

In
2008,
we
entered
the
AMEA
higher
education
market
with
our
acquisition
of
an
interest
in
INTI
Education
Group
in
Malaysia.
In
the
last
eight
years,
we
have
grown
our
AMEA
footprint
to

Table
of
Contents

include
21
institutions
in
eight
countries,
serving
approximately
85,700
students,
representing
an
enrollment
CAGR
of
approximately
19%
since
entering
the
region
in
2008.
Recent
expansion
in
the
AMEA
region
includes
eight
Colleges
of
Excellence
in
the
Kingdom
of
Saudi
Arabia,
and
our
first
institution
in
Sub-
Saharan
Africa
in
2013,
Monash
South
Africa.
In
anticipation
of
continued
growth,
we
have
made
significant
investments
in
the
region,
including
hiring
an
experienced
regional
management
team
and
establishing
the
infrastructure
to
help
facilitate
growth
and
further
expand
our
footprint
in
the
region.
We
plan
to
continue
to
expand
our
presence
in
AMEA
by
prioritizing
markets
based
on
demographic,
market
and
regulatory
factors,
while
seeking
attractive
returns
on
capital.

Accelerate Partnership and Services Model Globally.

As
the
global
leader
in
higher
education,
we
believe
we
are
well-positioned
to
capitalize
on
additional
opportunities
in
the
form
of
partnership
and
service
models
that
are
designed
to
address
the
growing
needs
of
traditional
institutions
and
governments
around
the
world.

Increasingly
more
complex
services
and
operating
capabilities
are
required
by
higher
education
institutions
to
address
the
needs
of
students
effectively,
and
we
believe
our
expertise
and
knowledge
will
allow
us
to
leverage
our
intellectual
property
and
technology
to
serve
this
market
need.
We
have
partnered
with
traditional
public
and
private
education
institutions
as
a
provider
of
online
services
and
we
believe
there
will
be
opportunities
to
expand
that
platform
under
similar
relationships
with
other
prestigious
independent
institutions
in
the
future.
Additionally,
we
are
continually
adding
to
our
suite
of
solutions,
and
we
believe
many
of
these
products
and
services
will
provide
additional
contractual
and
licensing
opportunities
for
us
in
the
future.
For
example,
in
recent
years
we
have
significantly
advanced
our
digital
teaching
and
learning
efforts
through
proprietary
technology-enabled
solutions
such
as:

•

OneFolio, an
online
tool
that
connects
Laureate
faculty
members,
instructional
designers,
and
learning
architects
to
valuable
digital
resources
they
can
use
to
enhance
the
student
learning
experience.

Laureate Languages, which
provides
digital
language
learning
solutions
to
our
students
and
faculty
in
the
areas
of
General
English,
Professional
English
and
English
for
Academic
Purposes,
as
well
as
teacher
training
and
assessment.

Additionally,
governments
around
the
world
are
increasingly
focused
on
increasing
participation
rates
and
often
do
not
have
an
established
or
scalable
public
sector
platform
with
the
necessary
expertise
to
accomplish
that
objective,
and
therefore
are
willing
to
fund
private
sector
solutions.
We
believe
our
current
partnership
with
the
Kingdom
of
Saudi
Arabia,
where
we
were
selected
as
their
largest
partner
for
the
Colleges
of
Excellence
program,
is
a
demonstration
of
how
our
distinct
portfolio
of
solutions
differentiates
us
from
other
providers
who
participated
in
the
selection
process.
We
are
in
active
discussion
with
other
governments
regarding
similar
partnerships,
as
well
as
other
solutions
that
we
can
provide
to
existing
and
new
partners,
and
we
anticipate
this
could
be
a
source
of
additional
revenue
for
us
in
the
future.

Increase Operating Efficiencies through Centralization and Standardization.

In
2014,
we
launched
EiP
as
an
enterprise-wide
initiative
to
optimize
and
standardize
our
processes
to
enable
sustained
growth
and
margin
expansion.
The
program
aims
to
enable
vertical
integration
of
procurement,
information
technology,
finance,
accounting
and
human
resources,
thus
enabling
us
to
fully
leverage
the
growing
size
and
scope
of
our
local
operations.
Specifically,
we
have
developed
and
begun
to
deploy
regional
SSOs
around
the
world,
which
will
process
most
back-office
and
non-student
facing
transactions
for
the
institutions
in
the
Laureate International Universities network,
such
as
accounting,
finance
and
procurement.
The
implementation
of
EiP
and
regional
SSOs
are
expected
to
generate
significant
cost
savings
throughout
the
network
as
we
eliminate
redundant
processes
and
better
leverage
our
global
scale.
In
addition,
centralized
information
technology,
product
development
and
content
management
will
allow
us
to
propagate
best
practices
throughout
the
Laureate International Universities network
and
capitalize
on
efficiencies
to
help
improve
performance.
We
anticipate
EiP
will
require
an
investment
of

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of
Contents

approximately
$180
million
from
2015
to
2017,
with
the
first
significant
investments
already
having
been
made
in
2015.
These
investments
have
already
begun
to
generate
cost
savings
and,
upon
completion
of
the
project,
we
expect
these
efficiencies
to
generate
approximately
$100
million
in
annual
cost
savings
in
2019,
while
also
enhancing
our
internal
controls
and
the
speed
of
integration
of
new
acquisitions.
We
also
believe
these
initiatives
will
enhance
the
student
experience
by
improving
the
quality
of
our
operations
and
by
enabling
additional
reinvestment
in
facilities,
faculty
and
course
offerings.

Target Strategic Acquisitions.

Since
being
taken
private
in
August
2007,
we
have
made
41
acquisitions
with
an
aggregate
purchase
price
of
approximately
$2.0
billion,
including
assumed
debt.
Substantially
all
of
these
acquisitions
were
completed
through
private
negotiations
and
not
as
part
of
an
auction
process,
which
we
believe
demonstrates
our
standing
as
a
partner
of
choice.
We
intend
to
continue
to
expand
through
the
selective
acquisition
of
institutions
in
new
and
existing
markets.
We
employ
a
highly
disciplined
approach
to
acquisitions
by
focusing
on
key
characteristics
that
make
certain
markets
particularly
attractive
for
private
higher
education,
such
as
demographics,
economic
and
social
factors,
the
presence
of
a
stable
political
environment
and
a
regulatory
climate
that
values
private
higher
education.
When
we
enter
a
new
market
or
industry
sector,
we
target
institutions
with
well-regarded
reputations
and
which
are
well-respected
by
regulators.
We
also
invest
time
and
resources
to
understand
the
managerial,
financial
and
academic
resources
of
the
prospect
and
the
resources
we
can
bring
to
that
institution.
After
an
acquisition,
we
focus
on
organic
growth
and
financial
returns
by
applying
best
practices
and
integrating,
both
operationally
and
financially,
the
institution
into
the
Laureate International Universities network,
and
we
have
a
strong
track
record
of
success.
For
all
the
institutions
we
acquired
between
1999
and
December
31,
2011,
we
achieved
average
enrollment
and
revenue
CAGRs
of
approximately
15%
and
approximately
19%,
respectively,
in
the
four
full
years
following
the
first
anniversary
of
the
acquisition.
Further,
we
achieved
operating
income
CAGRs
(adjusted
for
impairment
charges)
of
approximately
44%,
translating
into
a
margin
expansion
of
nearly
six
percentage
points
for
the
same
period.
Additionally,
we
bring
programs
and
expertise
to
increase
the
quality
and
reputation
of
institutions
after
we
acquire
them,
and
assist
them
in
earning
new
forms
of
licenses
and
accreditations.
We
believe
our
experienced
management
team,
history
of
strong
financial
performance
rooted
in
the
successful
integration
of
previous
acquisitions,
local
contacts
and
cultural
understanding
makes
us
the
leading
choice
for
higher
education
institutions
seeking
to
join
an
international
educational
network.

Our
History

We
were
founded
in
1989
as
Sylvan
Learning
Systems,
Inc.,
a
provider
of
a
broad
array
of
supplemental
and
remedial
educational
services.
In
1999,
we
made
our
first
investment
in
global
higher
education
with
our
acquisition
of
Universidad
Europea
de
Madrid,
and
in
2001
we
entered
the
market
for
online
delivery
of
higher
education
services
in
the
United
States
with
our
acquisition
of
Walden
University.
In
2003,
we
sold
the
principal
operations
that
made
up
our
then
K-12
educational
services
business
and
certain
venture
investments
deemed
not
strategic
to
our
higher
education
business,
and
in
2004
we
changed
our
name
to
Laureate
Education,
Inc.
Between
the
time
we
sold
the
K-12
educational
services
business
in
2003
and
August
2007,
we
acquired
nine
institutions
for
an
aggregate
purchase
price
of
approximately
$160
million,
including
assumed
debt,
and
entered
seven
new
countries.

In
August
2007,
we
were
acquired
in
a
leveraged
buyout
by
a
consortium
of
investment
funds
and
other
investors
affiliated
with
or
managed
by,
among
others,
Douglas
L.
Becker,
our
Chairman
and
Chief
Executive
Officer
and
founder,
Steven
M.
Taslitz,
a
director
of
the
Company,
Kohlberg
Kravis
Roberts
&
Co.
L.P.
(together
with
its
affiliates,
"KKR"),
Point
72
Asset
Management,
L.P.
(together
with
its
affiliates,
including
Cohen
Private
Ventures,
LLC
("Cohen
Private
Ventures"),
"CPV"),
Bregal
Investments,
Inc.
(together
with
its
affiliates,
"Bregal"),
StepStone
Group
LP
(together
with
its
affiliates,
"StepStone"),
Sterling
Fund
Management,
LLC
(together
with
its
affiliates
and
investment
funds
managed
by
it,
"Sterling
Partners")
and
Snow
Phipps
Group,
LLC
(together
with
its
affiliates,

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"Snow
Phipps"
and,
collectively,
the
"the
Wengen
Investors"),
for
an
aggregate
total
purchase
price
of
$3.8
billion,
including
$1.7
billion
of
debt,
all
of
which
has
been
refinanced
or
replaced.
See
"Item
1A—Risk
Factors—Risks
Relating
to
Our
Indebtedness—The
fact
that
we
have
substantial
debt
could
materially
adversely
affect
our
ability
to
raise
additional
capital
to
fund
our
operations
and
limit
our
ability
to
pursue
our
growth
strategy
or
to
react
to
changes
in
the
economy
or
our
industry."
We
believe
that
these
investors
have
embraced
our
mission,
commitment
to
academic
quality
and
ongoing
focus
to
provide
a
social
benefit
to
the
communities
we
serve.

After
being
taken
private
in
August
2007,
we
undertook
several
initiatives
to
continually
improve
the
quality
of
our
programs
and
outcomes
for
our
students,
while
expanding
our
scale
and
geographic
presence,
and
strengthening
our
organization
and
management
team.
Since
August
2007,
we
have
completed
41
acquisitions
with
an
aggregate
purchase
price
of
approximately
$2
billion,
including
assumed
debt,
and
entered
12
new
countries,
and
we
now
have
a
total
institution
count
of
70.

In
early
2013,
International
Finance
Corporation
("IFC"),
a
member
of
the
World
Bank
Group,
the
IFC
Africa,
Latin
American
and
Caribbean
Fund,
LP
and
the
Korea
Investment
Corporation
(together
with
the
IFC,
the
"the
IFC
Investors")
collectively
invested
$200
million
in
our
common
stock.
IFC
is
a
global
development
institution
that
helps
developing
countries
achieve
sustainable
growth
by
financing
investment
in
the
private
sector
and
providing
advisory
services
to
businesses
and
governments.
The
investment
in
Laureate
received
the
unanimous
approval
of
the
Board
of
Directors
of
the
IFC
in
2012.
We
believe
that
the
IFC
made
its
investment
in
our
common
stock
to
underscore
its
long-term
commitment
to
supporting
education
with
strategic
clients
that
have
the
ability
to
develop
much-needed
job-market
skills,
because
of
our
substantial
presence
in
emerging
markets
and
because
of
its
belief
that
working
with
us
would
have
a
significant
impact
on
human
development
in
the
countries
where
we
operate.
Two
Laureate
institutions
received
IFC
investments
even
before
their
affiliation
with
Laureate.

In
December
2013,
the
boards
of
directors
of
Wengen
and
Laureate
authorized
the
combination
of
Laureate
and
Laureate
Education
Asia
Limited
("Laureate
Asia").
Laureate
Asia
was
a
subsidiary
of
Wengen
that
provided
higher
education
programs
and
services
to
students
through
a
network
of
licensed
institutions
located
in
Australia,
China,
India,
Malaysia
and
Thailand.
Wengen
transferred
100%
of
the
equity
of
Laureate
Asia
to
Laureate.
The
transaction
is
accounted
for
as
a
transfer
between
entities
under
common
control
and,
accordingly,
the
accounts
of
Laureate
Asia
are
retrospectively
included
in
the
financial
statements
and
notes
thereto
included
elsewhere
in
this
Form
10-K.

We
consummated
our
initial
public
offering
("IPO")
on
February
6,
2017.
On
January
31,
2017,
in
connection
with
our
initial
public
offering,
our
Amended
and
Restated
Certificate
of
Corporation
was
accepted
for
filing
by
the
Secretary
of
State
of
the
State
of
Delaware,
and
effective
upon
such
filing,
a
4
to
1
reverse
stock
split
for
our
common
stock
was
consummated
and
each
share
of
our
common
stock
then
outstanding
was
automatically
reclassified
into
Class
B
Common
Stock,
a
newly
established
class
of
the
Company's
common
stock,
with
any
resulting
fractional
shares
rounded
down
to
the
next
whole
share.
On
February
2,
2017,
we
filed
a
Prospectus
for
our
initial
public
offering
with
the
Securities
and
Exchange
Commission
pursuant
to
Rule
424(b)(4)
under
the
Securities
Act
of
1933,
as
amended.
We
issued
35,000,000
shares
of
our
Class
A
common
stock
and
began
trading
on
the
Nasdaq
under
the
symbol
"LAUR".
The
net
proceeds
to
us
from
the
offering,
after
deducting
underwriting
discounts
and
commissions,
were
$456.5
million.

Public
Benefit
Corporation
Status

In
October
2015,
we
redomiciled
in
Delaware
as
a
public
benefit
corporation
as
a
demonstration
of
our
long-term
commitment
to
our
mission
to
benefit
our
students
and
society.
Public
benefit
corporations
are
a
relatively
new
class
of
corporations
that
are
intended
to
produce
a
public
benefit
and
to
operate
in
a
responsible
and
sustainable
manner.
Under
Delaware
law,
public
benefit

Table
of
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corporations
are
required
to
identify
in
their
certificate
of
incorporation
the
public
benefit
or
benefits
they
will
promote
and
their
directors
have
a
duty
to
manage
the
affairs
of
the
corporation
in
a
manner
that
balances
the
pecuniary
interests
of
the
stockholders,
the
best
interests
of
those
materially
affected
by
the
corporation's
conduct,
and
the
specific
public
benefit
or
public
benefits
identified
in
the
public
benefit
corporation's
certificate
of
incorporation.
Public
benefit
corporations
organized
in
Delaware
are
also
required
to
assess
their
benefit
performance
internally
and
to
disclose
publicly
at
least
biennially
a
report
detailing
their
success
in
meeting
their
benefit
objectives.

We
do
not
believe
that
an
investment
in
the
stock
of
a
public
benefit
corporation
differs
materially
from
an
investment
in
a
corporation
that
is
not
designated
as
a
public
benefit
corporation.
We
believe
that
our
ongoing
efforts
to
achieve
our
public
benefit
goals
will
not
materially
affect
the
financial
interests
of
our
stockholders.
Holders
of
our
Class
A
common
stock
have
voting,
dividend
and
other
economic
rights
that
are
the
same
as
the
rights
of
stockholders
of
a
corporation
that
is
not
designated
as
a
public
benefit
corporation.
See
"Risk
Factors—Risks
Relating
to
Investing
in
Our
Class
A
Common
Stock—As
a
public
benefit
corporation,
our
focus
on
a
specific
public
benefit
purpose
and
producing
a
positive
effect
for
society
may
negatively
influence
our
financial
performance."

Our
public
benefit,
as
provided
in
our
certificate
of
incorporation,
is:
to
produce
a
positive
effect
(or
a
reduction
of
negative
effects)
for
society
and
persons
by
offering
diverse
education
programs
delivered
online
and
on
premises
operated
in
the
communities
that
we
serve.
By
doing
so,
we
believe
that
we
provide
greater
access
to
cost-effective,
high-quality
higher
education
that
enables
more
students
to
achieve
their
academic
and
career
aspirations.
Most
of
our
operations
are
outside
the
United
States,
where
there
is
a
large
and
growing
imbalance
between
the
supply
and
demand
for
quality
higher
education.
Our
stated
public
benefit
is
firmly
rooted
in
our
company
mission
and
our
belief
that
when
our
students
succeed,
countries
prosper
and
societies
benefit.
Becoming
a
public
benefit
corporation
underscores
our
commitment
to
our
purpose
and
our
stakeholders,
including
students,
regulators,
employers,
local
communities
and
stockholders.

Certified
B
Corporation

The
following
description
of
the
certification
processes
and
standards
was
provided
to
us
by
the
independent
organization
that
designated
us
as
a
Certified
B
Corporation.
The
first
step
in
becoming
a
Certified
B
Corporation
is
taking
and
passing
a
comprehensive
and
objective
assessment
of
a
business's
positive
impact
on
society
and
the
environment.
The
assessment
varies
depending
on
the
company's
size
(number
of
employees),
sector
and
location.
The
standards
in
the
assessment
are
created
and
revised
by
an
independent
governing
body
that
determines
eligibility
to
be
a
Certified
B
Corporation.

By
completing
a
set
of
over
200
questions,
which
are
customized
for
the
company
being
assessed,
that
reflect
impact
indicators,
best
practices
and
outcomes,
a
company
receives
a
composite
score
on
a
200-point
scale
representative
of
its
overall
impact
on
its
employees,
customers,
communities
and
the
environment.
Representative
indicators
in
the
assessment
range
from
payment
above
a
living
wage,
employee
benefits,
charitable
giving/community
service,
use
of
renewable
energy
and,
in
the
case
of
educational
institutions
like
Laureate,
student
outcomes
such
as
retention,
graduation
and
employment
rates.

Table
of
Contents

Certification
as
a
Certified
B
Corporation
requires
that
a
company
achieve
a
reviewed
assessment
score
of
at
least
an
80.
The
review
process
includes
a
phone
review,
a
random
selection
of
indicators
for
verifying
documentation
and
a
random
selection
of
company
locations
for
onsite
reviews,
including
employee
interviews
and
facility
tours.
In
the
case
of
Laureate's
assessment,
each
subsidiary,
as
well
as
the
corporate
office
in
Baltimore,
was
required
to
complete
an
individual
assessment
for
review
that
would
be
aggregated
based
on
size
to
calculate
an
overall
score.
The
assessment
also
includes
a
disclosure
questionnaire,
including
any
sensitive
practices,
fines
and
sanctions
related
to
the
company
or
its
partners.

For
Laureate,
certification
also
required
us
to
adopt
the
public
benefit
corporation
structure,
a
step
we
have
already
completed.
Once
certified,
every
Certified
B
Corporation
must
make
its
assessment
score
transparent
on
the
independent
non-profit
organization's
website.
Acceptance
as
a
Certified
B
Corporation
and
continued
certification
is
at
the
sole
discretion
of
the
independent
organization.

Social
Responsibility

We
are
serious
about
making
an
enduring
commitment
to
the
communities
we
serve.
We
do
this
through
a
range
of
scholarships
and
awards,
donations
to
non-profits
aligned
with
our
mission
and
through
creating
international
opportunities
for
our
students.

As
part
of
this
commitment,
since
2003,
we
have
provided
financial
support
to
the
International
Youth
Foundation
("IYF")
directly
and
through
our
affiliated
charitable
foundation.
The
IYF
was
founded
in
1990
with
a
grant
from
the
W.K.
Kellogg
Foundation.
IYF
is
a
highly
regarded
international
non-profit,
with
a
mission
to
build
partnerships,
initiatives,
and
curricula
that
prepare
young
women
and
men
to
succeed
as
citizens,
employees,
entrepreneurs,
and
change-makers
around
the
world.

IYF
was
started
before
we
made
our
first
investment
in
higher
education
and
13
years
before
we
provided
it
with
any
financial
support.
Neither
we
nor
our
founder
Mr.
Becker
controls
or
manages
IYF,
which
is
an
independent
and
respected
charitable
organization.
Mr.
Becker
has
served
as
an
unpaid
volunteer
member
of
the
IYF's
14-member
board,
and
the
only
IYF
board
member
affiliated
with
us,
since
2003
and
as
the
board's
chair
since
2006.
IYF
has
a
longstanding
relationship
with
the
United
States
Agency
for
International
Development
("USAID"),
dating
to
1999,
and
was
cited
for
excellence
by
USAID
during
the
George
W.
Bush
administration.
IYF
has
worked
in
partnership
with
USAID,
the
U.S.
government
agency
that
provides
foreign
assistance
and
promotes
democracy
in
over
100
countries,
on
youth
capacity-building,
employability
and
civic
engagement
programs
all
across
the
world.
These
grants
are
awarded
on
a
competitive
basis,
based
on
an
organization's
proven
track
record
using
funding
to
accomplish
USAID
goals.

Since
2003,
we
and
our
affiliated
foundation
have
donated
approximately
$9
million
to
IYF.
We
have
never
received
any
funds
from
IYF.

Support
of
Recognized
World
Leaders

In
2010,
former
U.S.
President
Bill
Clinton
signed
a
five-year
contract
to
serve
as
the
Laureate International Universities network's
Honorary
Chancellor.
During
his
term,
President
Clinton
advised
the
network
on
issues
such
as
social
responsibility,
youth
leadership
and
civic
engagement,
while
also
speaking
to
students,
faculty
and
staff
worldwide.
During
his
term,
President
Clinton
visited
19
Laureate
campuses
in
14
countries.
Immediately
following
the
end
of
his
term
on
its
originally
scheduled
expiration
date,
the
former
president
of
Mexico,
Ernesto
Zedillo,
assumed
the
similar
role
of
Presidential
Counselor
for
the
Laureate
International Universities network.

Table
of
Contents

Our
Programs

We
believe
the
diversity
afforded
by
our
program
offerings
helps
insulate
us
against
an
economic
downturn
in
any
one
area
of
study.
We
offer
our
programs
through
traditional
classroom
instruction
as
well
as
partially
or
fully
online
methods
that
we
believe
are
attractive
to
both
traditional
students
and
working
adults,
a
fast-growing
cohort
that
we
expect
to
represent
an
increasing
part
of
our
revenue
mix
in
the
future.
Our
fully
online
programs
offer
our
students
a
convenient
and
cost-effective
alternative
to
traditional
classroom
instruction
and
currently
enroll
students
from
over
175
countries
worldwide.
Our
educational
institutions
offer
a
diverse
range
of
academic
programs,
at
the
undergraduate
and
graduate
level,
including:

•

Business
&
Management:
Undergraduate
and
graduate
programs
in
Accounting,
Economics,
Finance,
Human
Resources,
International
Business,
Management
and
Marketing.

Medical
&
Health
Sciences:
Undergraduate
and
graduate
programs
in
Aesthetics,
Dentistry,
Medicine,
Nursing,
Nutrition,
Optometry,
Pharmacy,
Physical
Therapy,
Psychology
and
Veterinary
Sciences.

Engineering
&
Information
Technology:
Undergraduate
and
graduate
programs
in
Civil
Engineering,
Electrical
Engineering,
Environmental
Engineering,
Computer
Networks,
Industrial
Engineering,
Mechanical
Engineering,
Renewable
Energies,
Software
Development
and
Telecommunications.

Architecture,
Art
&
Design:
Undergraduate
and
graduate
programs
in
Architecture,
Contemporary
Art,
Culture,
Dance,
Fashion
Design,
Game
Design,
Graphic
Design,
Interior
Design,
Music
and
Theater.

Education:
Undergraduate
and
graduate
programs
in
multiple
fields
including
Educational
Theory,
History,
Language
and
Literature,
Music,
Post-
secondary
Education,
Primary
&
Secondary
Education,
Sciences
and
Special
Education.

Law
&
Legal
Studies:
Undergraduate
and
graduate
programs
in
Business
Law,
Contract
Law,
Criminal
Justice
Studies,
Intellectual
Property
and
Real
Estate
Law.

Communications:
Undergraduate
and
graduate
programs
in
Communication
Sciences,
Corporate
Communications,
Journalism,
Media
Management
and
Public
Relations.

Hospitality
Management:
Undergraduate
and
graduate
programs
in
Culinary
Arts,
Event
Management,
Hotel
Management
and
Tourism
Management.

Our
educational
institutions
also
offer
upper
secondary
programs
in
Mexico.
Our
operational
infrastructure
and
management
approach
are
highly
flexible
and
enable
us
to
adapt
quickly
to
unique
situations
and
evolving
international
market
trends.
We
continually
monitor
our
programs
that
have
been
successful
in
their
native
markets
and
assess
the
ability
to
successfully
provide
a
similar
offering
in
other
markets.
This
approach
allows
us
to
readily
disseminate
global
best
practices
across
different
fields
of
study,
optimize
our
educational
delivery
for
the
benefit
of
our
students
and
further
differentiate
us
from
our
locally
based
competition.
We
also
provide
convenient
and
flexible
instructional
delivery
methods
that
allow
students
to
attend
classes,
complete
coursework
and
pursue
a
degree
partially
or
entirely
via
distance
learning,
thereby
increasing
the
convenience,
accessibility
and
flexibility
of
our
campus-based
educational
programs.
We
expect
to
leverage
our
already
strong
standing
in
these
program
areas
through
the
continued
development
of
rich
media
content,
while
bolstering
our
degree
programs
in
other
areas
of
study.
We
believe
these
flexible
offerings
distinguish
us
from
many
traditional
universities
that
currently
do
not
effectively
address
the
flexibility
required
by
students.

Many
of
our
institutions
have
medical,
dental
and
other
health
sciences
programs
that
include
providing
clinical
training
to
their
students.
As
part
of
our
commitment
to
civic
engagement,
we

Table
of
Contents

provide
free
or
low-cost
medical
care
to
local
community
members.
In
2015,
approximately
150,000
patients
were
served
by
our
institutions.

Our
Operating
Segments

On
May
2,
2016,
we
announced
a
change
to
our
operating
segments
in
order
to
align
our
structure
more
geographically.
Our
institution
in
Italy,
NABA,
including
Domus
Academy,
moved
from
our
GPS
segment
into
our
Europe
segment.
MDS,
located
in
New
Zealand,
moved
from
our
GPS
segment
into
our
AMEA
segment.
Our
GPS
segment
now
focuses
on
Laureate's
fully
online
global
operations
and
on
its
campus-based
institutions
in
the
United
States.
We
determine
our
operating
segments
based
on
information
utilized
by
our
chief
operating
decision
maker
to
allocate
resources
and
assess
performance.
See
Note
6,
Business
and
Geographic
Segment
Information,
in
our
consolidated
financial
statements
for
financial
information
regarding
our
operating
segments
and
financial
information
about
geographic
areas;
see
also
"Item
7—Management's
Discussion
and
Analysis
of
Financial
Condition
and
Results
of
Operation—Results
of
Operations—Segment
Results
and—Overview—Factors
Affecting
Comparability—Seasonality."

LatAm

As
of
the
date
of
this
Form
10-K,
our
LatAm
segment
consists
of
29
licensed
higher
education
institutions
and
has
operations
in
Brazil,
Chile,
Costa
Rica,
Honduras,
Mexico,
Panama
and
Peru
at
which
we
enrolled
approximately
823,600
students
as
of
December
31,
2016.
Our
LatAm
segment
includes
one
institution
in
Ecuador
with
which
we
have
contractual
arrangements
that
are
managed
within
the
segment.
The
institutions
primarily
serve
18-
to
24-year-old
students
and
offer
an
education
that
emphasizes
professional-oriented
fields
of
study
with
undergraduate
and
graduate
degrees
in
a
wide
range
of
disciplines,
including
business,
education,
hospitality
management,
law,
health
sciences,
information
technology
and
engineering.

Table
of
Contents

The
following
table
presents
information
about
the
institutions
in
our
LatAm
segment
(unless
otherwise
noted,
we
own
each
of
these
institutions):

Country
Brazil

Chile

Higher
Education
Institution

Universidade
Anhembi
Morumbi
(UAM
Brazil)

Universidade
Potiguar
(UnP)

Centro
Universitário
dos
Guararapes
(CUG)

Faculdade
Internacional
da
Paraíba
(FPB)

Business
School
São
Paulo
(BSP)

Centro
Universitário
do
Norte
(UniNorte)

FADERGS
Centro
Universitário
(FADERGS)

Instituton
Brasileiro
de
Medicina
de
Reabilitação
(Uni
IBMR)

Universidade
Salvador
(UNIFACS)

Centro
Universitário
Ritter
dos
Reis
(UniRitter)

Faculdade
dos
Guararapes
de
Recife
(FGR)

FMU
Education
Group
(FMU)

Faculdade
Porto-Alegrense
(FAPA)

Universidad
de
Las
Américas
(UDLA
Chile)

Instituto
Profesional
AIEP
(AIEP)

Universidad
Andrés
Bello
(UNAB)

Instituto
Profesional
Escuela
Moderna
de
Música
(EMM)

Universidad
Viña
del
Mar
(UVM
Chile)

Costa
Rica
Universidad
Latina
de
Costa
Rica
(ULatina)

Universidad
Americana
(UAM
Costa
Rica)

Universidad
de
Las
Américas
(UDLA
Ecuador)

Ecuador
Honduras
Universidad
Tecnológica
Centroamericana
(UNITEC
Honduras)
Mexico

Panama
Peru

Universidad
del
Valle
de
México
(UVM
Mexico)

Universidad
Tecnológica
de
México
(UNITEC
Mexico)

Universidad
Interamericana
de
Panamá
(UIP)

Universidad
Peruana
de
Ciencias
Aplicadas
(UPC)

CIBERTEC

Universidad
Privada
del
Norte
(UPN)
Instituto
Tecnológico
del
Norte
(ITN)

Year
Joined

Laureate

Network

2005

2007

2008

2009

2010

2012

2014

2000*

2003

2003*

2008

2009*

2003

2008

2003†

2005*

2000

2008

2003

2004

2007

Year

Founded

1970

1981

2002

2005

1994

2004

1974

1972

1971

1990

1968

2008

1988

1960

1989

1940

1988

1989

1998

1995

1987

1960

1966

1994

1983

1994

1984

†

Not-for-profit
institution
consolidated
by
Laureate
as
a
variable
interest
entity.

Not-for-profit
institution
not
consolidated
by
Laureate.

Our
LatAm
institutions
consist
of:

Brazil

•

Universidade Anhembi Morumbi (UAM Brazil).

Founded
in
1970,
UAM
Brazil
provides
undergraduate
and
graduate
degrees
in
architecture,
arts,
business
administration,
communications,
design,
education,
engineering/technology,
health
sciences,
medicine
and
hospitality
management.
UAM
Brazil
is
located
in
São
Paulo,
State
of
São
Paulo.

Universidade Potiguar (UnP).

Founded
in
1981,
UnP
offers
undergraduate
and
graduate
degrees
in
business
administration,
engineering/technology,
health
sciences,
medicine,
law
and
social
sciences.
UnP
has
campuses
located
in
Natal
and
Mossoró,
Rio
Grande
do
Norte.

Table
of
Contents

•

Chile

Centro Universitário dos Guararapes (CUG).

Founded
in
2002,
CUG
(formerly
Faculdade
dos
Guararapes),
offers
undergraduate
and
graduate
degree
programs
in
business
administration,
education,
health
sciences,
law,
engineering
and
technology
to
its
students.
FG
is
located
in
Jaboatão
dos
Guararapes,
Pernambuco.

Faculdade Internacional da Paraíba (FPB).

FPB
was
founded
in
2005
and
delivers
undergraduate
degree
programs
in
business
administration,
law,
nutrition,
nursing,
environmental
engineering
and
gastronomy.
FPB
is
located
in
João
Pessoa,
Paraíba.

Business School São Paulo (BSP).

Founded
in
1994,
BSP
focuses
on
the
development
of
business
leaders
with
a
strong
international
perspective.
BSP
offers
masters
of
business
administration,
certificates
and
executive
education
programs
in
management,
leadership,
international
business
and
strategy.
BSP
is
located
in
São
Paulo,
State
of
São
Paulo.

Centro Universitário do Norte (UniNorte).

Founded
in
1994,
UniNorte
offers
undergraduate
and
graduate
degrees
in
architecture,
business,
education,
health
sciences,
social
sciences
and
technology.
UniNorte
is
located
in
Manaus,
Amazonas.

FADERGS Centro Universitário (FADERGS).

Founded
in
2004,
FADERGS
(formerly
known
as
Faculdade
de
Desenvolvimento
do
Rio
Grande
do
Sul
and
as
ESADE)
offers
undergraduate
and
graduate
courses
in
accounting,
business
administration,
economics,
law
and
psychology.
FADERGS
is
located
in
Porto
Alegre,
Rio
Grande
do
Sul.

Instituto Brasileiro de Medicina de Reabilitação (Uni IBMR).

Founded
in
1974,
Uni
IBMR
delivers
undergraduate
and
graduate
degrees
in
business
administration,
hospitality
management
and
health
sciences.
Uni
IBMR
is
located
in
Rio
de
Janeiro,
State
of
Rio
de
Janeiro.

Universidade Salvador (UNIFACS).

Founded
in
1972,
UNIFACS
students
are
enrolled
in
undergraduate
and
graduate
programs
in
architecture,
business
administration,
communication,
computer
science,
design,
engineering,
health
sciences
and
law.
UNIFACS
has
campuses
located
in
Salvador,
Bahia.

Centro Universitário Ritter dos Reis (UniRitter).

Founded
in
1971,
UniRitter
offers
undergraduate
and
graduate
degrees
in
architecture,
business,
design
and
law.
UniRitter
has
campuses
located
in
Porto
Alegre
and
Canoas,
Rio
Grande
do
Sul.

Faculdade dos Guararapes de Recife (FGR).

Founded
in
1990,
FGR
offers
undergraduate
programs
in
business
administration,
civil
engineering,
architecture
and
urbanism.
FGR
is
located
in
Recife,
Pernambuco.
FGR
also
offers
programs
through:

•

CEDEPE Business School (CEDEPE).

Founded
in
1990,
CEDEPE
offers
graduate
business
programs.
CEDEPE
is
located
in
Recife,
Pernambuco.

FMU Education Group (FMU).

Founded
in
1968,
FMU
offers
undergraduate,
graduate,
and
continuing
education
programs
in
arts
and
humanities,
accounting,
business,
communications,
design,
engineering,
information
technology,
law,
health
sciences,
marketing,
social
sciences
and
veterinary
medicine.
With
70,000
students
at
eight
campuses
and
online
in
São
Paulo,
State
of
São
Paulo,
FMU
is
the
largest
Laureate
network
institution
in
Brazil.

Faculdade Porto-Alegrense (FAPA).

Founded
in
2008,
FAPA
offers
undergraduate
and
graduate
degree
programs
in
business
and
education.
FAPA
is
located
in
Porto
Alegre,
Rio
Grande
do
Sul.

Universidad de Las Américas (UDLA Chile).

Founded
in
1988,
UDLA
Chile
offers
undergraduate
and
graduate
programs
in
agricultural
and
environmental
sciences,
architecture,

Table
of
Contents

•

Costa
Rica

•

Ecuador

•

Honduras

•

design
and
arts,
business
administration,
education,
engineering,
law,
health
sciences
and
social
sciences.
UDLA
Chile
has
campuses
located
in
Santiago,
Concepción
(southern
Chile)
and
Viña
del
Mar
(central
Chile).

Instituto Profesional AIEP (AIEP).

Founded
in
1960,
AIEP
offers
technical
and
professional
certificates
in
business,
information
technology,
communications,
construction
and
civil
works,
cosmetology,
fashion
design,
health
sciences,
social
development,
theater,
sports
and
sound
and
television.
AIEP
has
20
campuses
located
in
16
cities
throughout
Chile.

Universidad Andrés Bello (UNAB).

Founded
in
1989,
UNAB
offers
undergraduate
and
graduate
degrees
in
architecture
and
design,
business
administration,
communication,
ecology
and
natural
resources,
education,
engineering
and
information
technology,
health
sciences,
hospitality,
human
sciences,
law
and
maritime
studies.
UNAB
has
campuses
in
Santiago,
Concepción
and
Viña
del
Mar.

•

IEDE Escuela de Negocios (IEDE Chile).

Founded
in
1994
as
a
satellite
campus
of
IEDE
in
Spain,
IEDE
Chile
provides
a
wide
range
of
graduate
degree
and
management
training
programs
focused
on
business
administration.
IEDE
Chile
is
located
in
Santiago.

Instituto Profesional Escuela Moderna de Música (EMM).

Founded
in
1940,
EMM
delivers
certificate
and
professional
programs
in
dance
and
music.
EMM
is
located
in
Santiago
and
Viña
del
Mar.

Universidad de Viña del Mar (UVM Chile).

UVM
Chile
was
founded
in
1988
and
offers
undergraduate
degrees
in
a
variety
of
fields
including
architecture,
agricultural
sciences,
art
and
design,
communications,
education,
engineering,
geography,
health
sciences,
history,
law,
nursing
and
technology.
UVM
Chile
has
campuses
in
Viña
del
Mar.

Universidad Latina de Costa Rica (ULatina).

ULatina
was
founded
in
1989
and,
in
2010,
was
combined
with
Universidad
Interamericana
de
Costa
Rica,
which
was
founded
in
1986
and
joined
the
Laureate International Universities network
in
2003.
ULatina
offers
undergraduate,
graduate
and
doctorate
programs
in
business
administration,
education,
engineering
and
architecture,
health
sciences,
social
sciences
and
hospitality
management.
ULatina
has
campuses
in
San
José
and
regional
sites
located
throughout
Costa
Rica.

Universidad Americana (UAM Costa Rica).

Founded
in
1998,
UAM
Costa
Rica
offers
undergraduate
and
graduate
degrees
in
advertising,
business
administration,
education,
engineering,
graphic
design
and
physical
therapy.
UAM
Costa
Rica
has
campuses
located
in
San
José,
Cartago
and
Heredia,
Costa
Rica.

Universidad de Las Américas (UDLA Ecuador).

Founded
in
1995,
UDLA
Ecuador
offers
technical/vocational,
undergraduate
and
graduate
programs
in
architecture,
business
administration
and
economics,
communications,
engineering
and
agricultural
sciences,
gastronomy,
health
sciences,
hotel
management
and
tourism,
law,
medicine
and
social
sciences.
UDLA
Ecuador
is
located
in
Quito,
Ecuador.

Universidad Tecnológica Centroamericana (UNITEC Honduras).

Founded
in
1987,
UNITEC
Honduras
offers
technical/vocational,
undergraduate
and
graduate
programs
in
business
administration,
communications,
engineering
and
information
technology
and
health
sciences.

Table
of
Contents

UNITEC
Honduras
launched
Centro Universitario Tecnológico (CEUTEC) in
2005
to
provide
working
adults
with
business
administration,
accounting,
graphic
design
and
information
technology
degree
programs.
UNITEC
Honduras
has
campuses
located
in
Tegucigalpa,
La
Ceíba
and
San
Pedro
Sula.

Mexico

•

Panama

Peru

•

Universidad del Valle de México (UVM Mexico).

Founded
in
1960,
UVM
Mexico
delivers
high
school,
undergraduate
(traditional
and
working
adult)
and
graduate
programs
in
arts
and
humanities,
economics/business
administration,
hospitality
management,
engineering,
health
sciences
and
social
sciences.
UVM
Mexico
is
the
largest
private
university
in
Mexico
and
the
largest
institution
in
the
Laureate International Universities
network.
It
has
campuses
located
throughout
Mexico.

Universidad Tecnológica de México (UNITEC Mexico).

Founded
in
1966,
UNITEC
Mexico
offers
high
school,
undergraduate
and
graduate
programs
in
art
and
design,
health
sciences,
business
administration,
engineering,
sciences
and
social
sciences.
UNITEC
has
campuses
in
Mexico
City,
the
State
of
Mexico,
the
State
of
Guanajuato
and
the
State
of
Jalisco.

Universidad Interamericana de Panamá (UIP).

Founded
in
1994,
UIP
offers
undergraduate,
graduate
and
continuing
education
programs
in
administrative
sciences,
art,
design
and
architecture,
business
administration,
engineering,
gastronomy,
hotel
management,
human
resources,
information
technology,
law,
maritime
administration
and
tourism.
In
2014,
Universidad
Latinoamericana
de
Ciencia
y
Tecnología
(ULACIT),
which
was
founded
in
1991
and
became
a
part
of
the
Laureate International Universities network
in
2004
was
integrated
into
UIP.
UIP
is
located
in
Panama
City,
Panama.

Universidad Peruana de Ciencias Aplicadas (UPC).

Founded
in
1994,
UPC
offers
undergraduate
and
graduate
degree
programs
in
architecture,
business
administration,
communications,
culinary
arts,
design,
economics,
education
and
learning
management,
engineering,
medicine
and
health
sciences,
music,
hospitality
management,
law,
psychology
and
performing
arts.
UPC
is
located
in
Lima,
Peru.

CIBERTEC.

Founded
in
1983,
CIBERTEC
offers
technical
and
vocational
programs
in
automotive
mechanics,
business
administration,
industrial
electronics,
electrical
and
construction
engineering,
graphic
design
and
information
technology.
CIBERTEC
has
campuses
in
Lima
and
Arequipa,
Peru.

Universidad Privada del Norte (UPN).

Founded
in
1994,
UPN
offers
undergraduate
and
graduate
degree
programs
in
business
administration,
architecture,
communications,
engineering,
law
and
health
sciences.
UPN
has
campuses
in
Trujillo,
Cajamarca
and
Lima,
Peru.

Instituto Tecnológico del Norte (ITN).

Founded
in
1984,
ITN
provides
business
administration,
industrial
electronics,
electrical
and
construction
engineering,
graphic
design
and
information
technology
degree
programs.
ITN
is
located
in
Trujillo,
Peru.

Table
of
Contents

Tuition and Fees

Tuition
varies
at
each
of
the
higher
education
institutions
in
our
LatAm
segment
depending
on
the
curriculum
and
type
of
program.
Tuition
payment
options
vary
by
institution
and
primarily
include
monthly
installment
payment
plans
and
lump
sum
payments
at
the
beginning
of
the
academic
period.
Historically,
we
have
increased
tuition
as
educational
costs
and
inflation
have
risen.
Students
are
generally
responsible
for
transportation
and
housing
expenses
and
costs
related
to
textbook
and
supply
purchases
required
for
their
educational
programs.
At
some
of
the
institutions,
we
offer
these
services
to
the
student
body,
which
generates
incremental
revenues.

Students
and
their
families
typically
self-finance
their
education
or
seek
third-party
financing
programs.
However,
in
certain
markets
in
Latin
America
there
are
various
forms
of
government-supported
student
financing
programs
as
discussed
below.

Government-Sponsored Student Financing Programs

The
Crédito
con
Aval
del
Estado
(the
"CAE
Program"),
a
government
sponsored
student
loan
program
in
Chile,
was
enacted
by
the
Chilean
government
in
2005
and
formally
implemented
in
2006
to
promote
higher
education
in
Chile
for
lower
socio-economic
level
students
with
good
academic
standing.
Chilean
institutions
in
the
Laureate International Universities network
(universities
and
technical-vocational
schools)
participate
in
this
program.
The
CAE
Program
involves
tuition
financing
and
guarantees
that
are
shared
by
our
institutions
and
the
government.
As
part
of
the
program,
Chilean
institutions
provide
guarantees
resulting
in
contingent
liabilities
to
third-party
financing
institutions
ranging
from
90%
to
60%
of
the
tuition
loans
made
directly
to
qualified
students
enrolled
through
the
CAE
Program.
The
guarantees
by
the
institutions
are
for
the
period
during
which
the
student
is
enrolled,
and
the
guarantees
are
assumed
entirely
by
the
government
upon
the
student's
graduation.
Additionally,
when
a
student
leaves
one
of
our
institutions
and
enrolls
in
another
CAE-qualified
institution,
our
institution
will
remain
guarantor
of
the
tuition
loans
that
have
been
granted
to
him
up
to
such
date,
and
until
the
student's
graduation
from
the
new
CAE-qualified
institution.
All
loans
under
the
CAE
Program
have
an
interest
rate
of
2%
per
annum,
contain
repayment
terms
that
would
not
require
a
graduate
to
make
combined
principal
and
interest
payments
of
more
than
10%
of
his
or
her
monthly
income
in
any
month
during
the
180-month
repayment
period
and
provide
that
any
balance
remaining
be
forgiven
at
the
end
of
the
180-month
repayment
period.
Institutional
accreditation
by
the
National
Accreditation
Commission
is
required
for
new
students
to
participate
in
the
CAE
Program.
One
of
our
institutions
in
Chile,
Universidad
de
Las
Américas
("UDLA
Chile"),
lost
its
accreditation
for
the
period
from
January
2014
to
March
2016
so
new
students
at
that
institution
could
not
participate
in
the
CAE
Program
during
that
period.
UDLA
Chile's
accreditation
was
reinstated
in
March
2016
for
three
years,
until
March
2019.
The
Nuevo Milenio scholarship
("NMS")
program
was
created
by
the
Chilean
government
in
2001
to
support
access
to
vocational
and
technical
education
for
students
in
the
lowest
two
income
quintiles
who
met
or
exceeded
certain
academic
standards.
Originally,
it
provided
eligible
students
with
an
annual
scholarship
grant
of
up
to
CLP
360,000.
Over
the
years,
eligibility
was
extended
first
to
students
in
the
three
lowest
income
quintiles
and
then,
in
2015,
to
the
lowest
70%
who
met
or
exceeded
certain
academic
standards,
and
the
annual
amount
of
the
scholarship
was
raised
incrementally
to
CLP
600,000.
For
2016,
the
NMS
was
divided
into
three
parts:
(i)
NMS
I,
which
grants
eligible
students
scholarships
of
up
to
CLP
600,000
per
year;
(ii)
NMS
II,
which
grants
students
scholarships
of
up
to
CLP
850,000
per
year,
provided
the
students
come
from
the
first
five
income
deciles
and
the
tech/voc
institution
in
which
they
are
enrolled
is
organized
as
a
not-for-profit
legal
entity
or,
if
the
tech/voc
institution
is
not
so
organized,
the
institution
has
stated
in
writing
its
intention
to
become
a
not-for-profit
entity
and
to
be
accredited;
and
(iii)
NMS
III,
which
grants
students
scholarships
of
up
to
CLP
900,000
per
year,
provided
that
such
students
and
the
institution
in
which
they
enroll
meet
the
requirements
for
NMS
II
and
the
tech/voc
institution
was,
on
December
31,
2015,
accredited
for
four
years
or
more.
The
Chilean

Table
of
Contents

tech/voc
institutions
in
the
Laureate International Universities network
do
not
meet
each
of
these
tests,
so
students
at
these
institutions
are
only
eligible
for
NMS
I
scholarships
under
the
current
law.

There
is
no
assurance
that
any
legislation
that
is
introduced
or
passed
by
the
Chilean
Congress
will
conform
to
the
government's
proposal.
See
"Item
1A—
Risk
Factors—Risks
Relating
to
Our
Business—Political
and
regulatory
developments
in
Chile
may
materially
adversely
affect
our
operations."
and
"Item
1A—
Risk
Factors—Risks
Relating
to
Our
Business—Regulatory
changes
in
Chile
may
reduce
access
to
student
financing
for
some
of
our
students
in
Chile,
which
could
reduce
enrollments
at
our
Chilean
institutions."

In
Brazil,
there
are
two
main
federal
government
programs
that
provide
either
financing
or
financial
support
to
students,
the
Fundo
de
Financiamento
Estudantil
("FIES")
and
the
Programa
Universidade
Para
Todos
("PROUNI").
Both
are
used
by
substantially
all
of
our
Brazilian
institutions.
FIES
provides
direct
financing
to
students.
PROUNI
is
a
government
program
that
provides
federal
taxes
incentives
to
educational
institutions
in
exchange
for
providing
scholarships
to
lower
income
students.
In
previous
years,
the
Brazilian
government
made
efforts
to
improve
the
operation
of
FIES
and
to
increase
overall
participation,
creating
more
higher
education
opportunities
for
the
economically
disadvantaged.
However,
due
to
a
series
of
recent
programmatic
changes
described
below,
we
experienced
a
decrease
in
the
enrollment
of
students
participating
in
FIES
in
2015.

FIES
targets
students
from
low
socio-economic
backgrounds
enrolled
at
private
post-secondary
institutions.
Eligible
students
receive
loans
with
below
market
interest
rates
that
are
required
to
be
repaid
after
an
18-month
grace
period
upon
graduation.
FIES
pays
participating
educational
institutions
tax
credits
which
can
be
used
to
pay
certain
federal
taxes
and
social
contributions.
FIES
repurchases
excess
credits
for
cash.
As
part
of
the
program,
our
institutions
are
obligated
to
pay
up
to
15%
of
any
student
default.
The
default
obligation
increases
to
up
to
30%
of
any
student
default
if
the
institution
is
not
current
with
its
federal
taxes.
In
the
past,
FIES
withheld
between
1%
and
3%
of
tuition
paid
to
the
institutions
to
cover
any
potential
student
defaults
("holdback").
If
the
student
pays
100%
of
his
or
her
loan,
the
withheld
amounts
will
be
paid
to
the
participating
education
institutions.

Since
February
2014,
all
new
students
who
participate
in
FIES
must
also
enroll
in
Fundo
de
Garantia
de
Operações
de
Crédito
Educativo
("FGEDUC").
FGEDUC
is
a
government-mandated,
private
guarantee
fund
administered
by
the
Bank
of
Brazil
that
allows
participating
educational
institutions
to
insure
themselves
for
90%
(or
13.5%
of
15%)
of
their
losses
related
to
student
defaults
under
the
FIES
program.
The
cost
of
the
program
is
6.25%
of
the
amount
covered,
which
represents
5.63%
of
a
student's
full
tuition.
Similar
to
FIES,
the
administrator
withholds
5.63%
of
a
student's
full
tuition
to
fund
the
guarantee
by
FGEDUC.

As
of
December
31,
2016,
approximately
20%
of
our
students
in
Brazil
participated
in
FIES,
representing
approximately
29%
of
our
2016
Brazil
revenues.

In
December
2014,
the
MEC
along
with
the
Brazilian
Fund
for
Education
Development
("FNDE"),
the
agency
that
directly
administers
FIES,
announced
several
significant
rule
changes
to
the
FIES
program
beginning
in
2015.
These
changes
limit
the
number
of
new
participants
and
the
annual
budget
of
the
program,
and
delay
payments
to
post-secondary
institutions
with
more
than
20,000
FIES
students
that
would
otherwise
have
been
due
in
2015.
The
first
change
implements
a
minimum
score
on
the
high
school
achievement
exam
in
order
to
enroll
in
the
program.
The
second
change
alters
the
schedule
for
the
payment
and
repurchase
of
credits
as
well
as
limits
the
opportunities
for
post-secondary
institutions
to
sell
any
unused
credits
such
that
there
is
a
significant
delay
between
the
time
the
post-
secondary
institution
provides
the
educational
services
to
the
students
and
the
time
it
receives
payment
from
the
government
for
2015.
In
addition
to
these
rule
changes,
FNDE
implemented
a
policy
for
current
students'
loan
renewals
for
2015,
which
provides
that
returning
students
may
not
finance
an
amount
that
increases
by
more
than
6.41%,
which
was
later
increased
to
8.5%,
from
the
amount
financed
in
the
previous
semester,
regardless
of
any
increases
in
tuition
or
in
the
number
of

Table
of
Contents

courses
in
which
the
student
is
enrolled,
a
policy
that
we
believe
violates
the
applicable
law.
For
2016,
MEC
announced
that
there
will
be
no
limitation
to
the
tuition
increase.
Moreover,
in
the
first
and
second
intakes
of
2015,
the
online
enrollment
and
re-enrollment
system
that
all
post-secondary
institutions
and
students
must
use
to
access
the
program
has
experienced
numerous
technical
and
programming
faults
that
have
also
interfered
with
the
enrollment
and
re-enrollment
process.
Numerous
challenges
to
these
changes
and
requests
for
judicial
relief
from
the
system's
faults
have
been
filed
in
the
Brazilian
courts,
most
of
which
are
pending.
The
2016
enrollment
and
re-enrollment
schedule
has
been
released
and,
so
far,
the
system
has
not
presented
any
major
issues.

In
October
2015,
FNDE
initiated
negotiations
with
the
Brazilian
Association
of
Post-Secondary
Institutions
("ABRAES")
aiming
at
settling
the
FIES
payments
that
were
delayed
in
2015.
The
proposal
from
MEC,
which
was
accepted
by
ABRAES,
was
to
divide
the
total
amount
due
into
three
annual
installments
to
be
paid
one
fourth
in
2016,
one
fourth
in
2017
and
half
in
2018.
The
parties
also
agreed
that
the
yearly
installments
will
be
paid
in
June
of
each
year,
and
the
amounts
will
be
adjusted
to
reflect
an
inflation
index
from
the
date
of
the
respective
maturity
until
the
effective
payment.
FNDE
also
agreed
not
to
take
any
discriminatory
measures
in
the
future
related
to
the
payment
due
to
the
post-secondary
institutions,
and
not
to
impose
any
limitation
on
the
issuance
of
certificates
and
repurchase
of
credits
due
to
the
post-secondary
institutions,
which
basically
means
that
all
certificates
will
be
issued
and
repurchased
in
their
respective
fiscal
years,
except
for
those
intended
to
be
issued
and
repurchased
in
December,
which
will
be
paid
in
January
of
the
following
year.
The
parties
executed
the
settlement
agreement
on
January
28,
2016
and
it
was
approved
by
the
office
of
the
Attorney
General
of
Brazil
on
February
3,
2016.
The
Federal
Court
of
Brasilia
ratified
the
settlement
agreement
on
March
17,
2016.
Our
post-secondary
institutions
in
Brazil
are
associated
with
ABRAES
and
signed
the
settlement
agreement
as
well;
therefore,
it
will
apply
to
us.

On
December
11,
2015,
MEC
issued
new
FIES
regulations
("Normative
Ordinance
No.
13"),
which
supersedes
in
all
significant
aspects
the
rules
previously
in
force.
Normative
Ordinance
No.
13
defined
and
clarified
some
rules
for
student
eligibility
and
classification,
higher
education
institution
participation
and
selection
of
the
vacancies
that
will
be
offered
to
the
students
in
the
first
intake
of
2016.

Among
other
changes,
it
created
a
"waiting
list"
concept
for
students
not
selected
in
the
first
selection
call.
It
also
instituted
a
rule
that
allows
the
remaining
vacancies
that
were
not
filled
in
by
the
waiting
list
students
to
be
redistributed
among
other
programs
of
the
post-secondary
institution.

The
rules
for
student
eligibility
are
to
have
a
gross
household
income
of
not
more
than
2.5
times
the
minimum
wage
per
capita
(which
was
raised
by
the
MEC
to
3.0
times
on
June
17,
2016)
and
to
have
taken
the
National
High
School
Proficiency
Exam
at
least
once
since
2010,
with
a
minimum
score
of
450
points,
and
to
have
a
score
greater
than
zero
in
the
test
of
writing.

Regarding
the
participation
of
post-secondary
institutions
in
FIES,
institutions
must
sign
a
participation
agreement
that
contains
their
proposal
of
the
number
of
vacancies
offered
and
the
following
information
per
shift
(morning,
evening)
and
campus
location:
(i)
tuition
gross
amount
for
the
entire
course,
including
all
semesters;
(ii)
total
tuition
gross
amount
per
course
for
the
first
semester,
which
must
reflect
at
least
a
five
percent
discount
to
the
course
list
price;
and
(iii)
the
number
of
vacancies
that
will
be
offered
through
the
FIES
selection
process.
Also,
only
courses
with
scores
of
3,
4
or
5
in
the
National
Higher
Education
Evaluation
System
("SINAES")
evaluation
are
eligible
to
receive
FIES
students.

Table
of
Contents

expenses.
Provisional
presidential
decrees
are
instruments
with
the
force
of
law
that
the
President
of
Brazil
can
issue
in
cases
of
importance
and
urgency.
They
have
immediate
effect
and
are
valid
for
60
days,
extendable
only
once
for
the
same
period.
Effectiveness
beyond
that
period
required
approval
of
the
National
Congress,
which
took
place
on
November
9,
2016,
and
it
was
enacted
into
law
on
December
2,
2016
(Law
No.
13.366/2016).

In
August
2016,
the
MEC
issued
additional
FIES
regulations
("Normative
Ordinance
No.
17")
expanding
the
guidelines
previously
defined
in
Normative
Ordinance
No.
13.
Among
other
things,
Normative
Ordinance
No.
17
describes
in
greater
detail
how
to
calculate
remaining
vacancies,
sets
forth
procedures
and
deadlines
for
the
completion
of
the
filling
of
the
remaining
vacancies,
and
provides
for
dealing
with
exceptional
situations
where
procedural
errors
or
other
obstacles
have
prevented
students
from
accessing
remaining
vacancies
in
a
timely
manner.

Another
change
in
the
new
regulation
was
the
number
(or
percentage)
of
vacancies
that
can
be
offered
by
the
post-secondary
institutions
in
relation
to
the
score
obtained
in
SINAES
evaluation,
which
was
reduced:

•

to
up
to
50%
of
the
number
of
vacancies
in
courses
with
a
score
of
5
(from
up
to
100%);

to
up
to
40%
of
the
number
of
vacancies
in
courses
with
a
score
of
4
(from
up
to
75%);

to
up
to
30%
of
the
number
of
vacancies
in
courses
with
a
score
of
3
(from
up
to
50%);
and

to
up
to
25%
of
the
number
of
vacancies
in
courses
that
are
in
the
process
of
authorization
by
MEC
(from
up
to
50%).

The
criteria
for
the
selection
of
vacancies
by
MEC
to
be
offered
to
students
were
also
modified
by
Normative
Ordinance
No.
13
and
the
regionality
provisions
of
the
prior
Normative
Ordinances
(i.e.,
vacancies
offered
in
the
Northeast,
North
and
Central-West
regions
would
have
had
priority
over
those
offered
in
the
South
and
Southeast
regions)
were
excluded
from
the
regulation.
Normative
Ordinance
No.
13
replaces
the
regionality
criterion
with
a
new
criterion
of
"social
relevance
determined
by
micro-regions,"
which
means
that
for
each
micro-region
they
will
take
into
consideration
the
demand
for
higher
education
for
educational
financing
(calculated
by
FIES)
and
the
Human
Development
Index
of
each
micro-region.
All
of
the
other
criteria
provided
in
the
previous
regulation
were
maintained
in
the
new
one
(i.e.,
(i)
FIES
budget
and
the
availability
of
resources,
(ii)
course
score
under
SINAES's
evaluation
and
(iii)
priority
courses,
as
defined
by
the
government
(pedagogy,
engineering
and
health
sector
courses)).
Normative
Ordinance
No.
13
also
contains
two
annexes,
which
address
in
great
detail
the
selection
and
tiebreaker
criteria
for
the
vacancies,
as
well
as
the
rules
for
redistribution
of
remaining
vacancies.

Brazil's
economy
continues
to
present
challenges
to
growth
and
create
pricing
pressures
in
the
education
sector.
Our
new
student
enrollment
in
Brazil
was
negatively
affected
by
these
conditions
as
well
as
the
changes
to
the
FIES
program.
If
economic
conditions
continue
to
weaken
and
the
Brazilian
government
implements
additional
austerity
measures,
our
ability
to
grow
our
student
enrollment
in
Brazil
may
be
further
negatively
affected.
The
Brazilian
government's
changes
to
the
FIES
program
resulted
in
a
substantial
increase
in
the
total
number
of
new
FIES
contracts
in
that
country
in
2014,
an
election
year,
and
then
a
reduction
in
the
total
number
of
new
FIES
contracts,
from
over
700,000
in
2014
to
approximately
300,000
in
2015.
As
a
result,
Laureate's
new
enrollments
of
students
in
the
FIES
program
also
decreased
similarly
in
2015;
however,
this
did
not
have
a
material
impact
on
our
2015
results
of
operations
since
total
enrollments
for
all
students
increased
in
2015.
Any
potential
impact
on
total
enrollment
would
not
occur
until
the
FIES
students
from
the
expansion
of
the
program
have
graduated,
and
would
depend
on
the
Brazilian
government's
commitment
to
the
FIES
program.
In
addition,
the
Brazilian
government
reduced
the
frequency
of
payments
to
participating
institutions
during
2015.

Table
of
Contents

These
programs
are
more
fully
described
in
"—Industry
Regulation—Brazilian
Regulation"
and
"—Industry
Regulation—Chilean
Regulation"
and
in
Note
11,
Commitments
and
Contingencies,
to
our
consolidated
financial
statements
included
elsewhere
in
this
Form
10-K.

Europe

Our
Europe
segment
consists
of
13
licensed
higher
education
institutions,
and
has
operations
in
Cyprus,
Germany,
Morocco,
Italy,
Portugal,
Spain
and
Turkey
at
which
we
enrolled
approximately
61,700
students
as
of
December
31,
2016.
The
institutions
primarily
serve
18-
to
24-year-old
students
and
offer
an
education
that
emphasizes
professional-oriented
fields
of
study
with
undergraduate
and
graduate
degrees
in
a
wide
variety
of
disciplines,
including
business,
hospitality
management,
health
sciences,
architecture,
engineering
and
art
and
design.

The
following
table
presents
information
about
our
institutions
in
our
Europe
segment
(unless
otherwise
noted,
we
own
each
of
these
institutions):

Country
Cyprus
Germany
Business
and
Information
Technology
School
(BiTS)

European
University
Cyprus
(EUC)

Higher
Education
Institution

HTK
Academy
of
Design
(HTK)

Nuova
Accademia
di
Belle
Arti
Milano
(NABA)

Italy
Morocco
Université
Internationale
de
Casablanca
(UIC)
Portugal
Universidade
Europeia
(UE)

IADE-U—Instituto
de
Arte,
Design
e
Empresa—Universitário
(IADE-U)
Instituto
Português
de
Administração
de
Marketing
de
Porto
(IPAM
Porto)
Instituto
Português
de
Administração
de
Marketing
de
Lisboa
(IPAM
Lisboa)

Spain

Universidad
Europea
de
Madrid
(UEM)

Universidad
Europea
de
Canarias
(UEC)

Universidad
Europea
de
Valencia
(UEV)

Turkey

Istanbul
Bilgi
University

Not-for-profit
institution
consolidated
by
Laureate
as
a
variable
interest
entity.

Our
Europe
institutions
consist
of:

Year
Joined

Laureate

Network

2005

2007

2011

2009

2010

2011

2015

1999

2010

2012

2006*

Year

Founded

1961

2000

1987

1980

2010

1962

1969

1984

1987

1995

2010

2012

1996

Cyprus

•

Germany

•

European University Cyprus (EUC).

EUC
was
founded
as
Cyprus
College
in
1961
and
granted
university
status
as
European
University
Cyprus
in
2007.
EUC
offers
undergraduate,
graduate
and
postgraduate
degrees
in
arts,
education,
business,
humanities,
social
and
behavioral
sciences,
law,
computer
science,
engineering,
health
sciences
and
medicine.
EUC
is
located
in
Nicosia.

Business and Information Technology School (BiTS).

BiTS
was
founded
in
2000
and
absorbed
BTK University of Applied Science in
2017.
BiTS
has
a
business
&
management
school,
which
offers
undergraduate,
graduate
degree
and
working
adult
programs
in
business
administration,
communication,
business
psychology,
sports
and
event
management,
and
an
art
&
design
school,

Table
of
Contents

•

Italy

Morocco

•

Portugal

•

Spain

which
delivers
degree
programs
in
communication,
photography,
design
and
illustration
and
game
design.
BiTS
is
located
in
Iserlohn,
Hamburg
and
Berlin,
Germany.

HTK Academy of Design (HTK).

Founded
in
1987
in
Hamburg
and
in
2000
in
Berlin,
HTK
offers
vocational
programs
in
design.
HTK
is
located
in
Hamburg
and
Berlin,
Germany.

Nuova Accademia di Belle Arti Milano (NABA).

Founded
in
1980,
NABA
offers
accredited
undergraduate
and
graduate
degree
programs
in
fashion
design,
graphic
design,
product
design,
visual
arts,
stage
design,
interior
design,
photography
and
multimedia
communication.
NABA
is
located
in
Milan,
Italy.
NABA
also
provides
specialized
programs
through
Domus
Academy.

•

Domus Academy (DA).

Founded
in
1982,
DA
delivers
masters
degree
programs
in
fashion,
design,
business
design,
experience
design
and
urban
architecture.
All
programs
are
delivered
in
English
and
are
based
in
Milan,
Italy.

Université Internationale de Casablanca (UIC).

Founded
in
2010,
UIC
was
created
through
a
partnership
between
Société
Maroc
Emirats
Arabes
Unis
de
Développement
(SOMED)
and
Laureate
Education,
Inc.
UIC
offers
undergraduate
and
graduate
degrees
in
business,
engineering,
health
sciences,
hospitality
and
sports
management.
UIC
is
located
in
Casablanca,
Morocco.

Universidade Europeia (UE).

UE,
formerly
named
"Instituto
Superior
de
Línguas
e
Administração
de
Lisboa",
was
founded
in
1962
and
its
operation
as
a
higher
education
establishment
was
authorized
by
ministerial
decision
in
June
1986.
UE
was
recognized
as
a
university
("
universidade ")
in
2013.
UE
provides
undergraduate
and
graduate
degrees
("
licenciaturas "
and
"
mestrados ")
in
business,
law,
marketing,
hospitality
and
tourism,
computer
sciences,
human
resources,
psychology
and
sports,
and
two
doctorates
("
doutoramentos ")
in
business
and
tourism
management.
UE
is
located
in
Lisbon,
Portugal.

IADE-U—Instituto de Arte, Design e Empresa—Universitário (IADE-U).

Founded
in
1969,
IADE-U
was
the
first
higher
education
institute
in
Portugal
to
focus
on
design.
IADE-U
obtained
official
State
recognition
as
a
university
institution
("
instituto universitário ")
in
2012.
IADE-U
offers
undergraduate
and
masters
degrees
("
licenciaturas "
and
"
mestrados ")
in
design,
marketing
and
advertising
and
photography,
and
one
doctorate
("
doutoramento" )
in
design.
IADE-U
is
located
in
Lisbon.

Instituto Português de Administração de Marketing de Porto (IPAM Porto) was
launched
in
Porto
in
1984.
IPAM
Porto
obtained
official
State
recognition
as
a
higher
education
establishment
in
1990.
IPAM
Porto
offers
undergraduate
and
masters
degrees
("
licenciaturas "
and
"
mestrados ")
in
marketing.

Instituto Português de Administração de Marketing de Lisboa (IPAM Lisboa).

IPAM
Lisboa
opened
in
1987.
IPAM
Lisboa
obtained
official
State
recognition
as
a
higher
education
establishment
in
1991.
IPAM
Lisboa
offers
undergraduate
and
masters
degrees
("
licenciaturas "
and
"
mestrados
")
in
marketing.

Universidad Europea de Madrid (UEM).

Founded
in
1995,
UEM
offers
undergraduate
and
graduate
degree
programs
in
arts
and
architecture,
business,
communications
and
humanities,

Table
of
Contents

economics,
engineering
and
computer
science,
health
sciences
and
mechanics,
law
and
physical
activity
and
sports
science.
UEM
is
located
in
Madrid,
Spain.
Additionally,
UEM
provides
specialized
programs
through
the
following
institutions:

•

IEDE Business School (IEDE).

Founded
in
1991,
IEDE
offers
graduate
degree
programs
to
those
seeking
positions
in
higher
management.
IEDE
is
located
in
Madrid,
Spain.

Real Madrid International School.

Founded
in
2005,
the
Real
Madrid
International
School
is
a
partnership
between
Real
Madrid,
one
of
the
most
recognized
sports
clubs
in
the
world,
and
UEM.
Together,
the
two
institutions
offer
graduate
degree
programs
in
sports
management,
health,
communication
and
leisure
programs.
The
Real
Madrid
International
School
is
located
in
Madrid,
Spain.

Universidad Europea de Canarias (UEC).

Founded
in
2010,
UEC
offers
undergraduate
programs
in
management,
marketing,
tourism
and
leisure
management,
communications
and
advertising,
and
architecture,
and
graduate
programs
in
business,
renewable
energy,
nursing
and
physiotherapy.
UEC
is
located
in
La
Orotava
in
the
Canary
Islands.

Universidad Europea de Valencia (UEV).

Founded
in
2012,
UEV
offers
undergraduate
and
graduate
programs
in
architecture,
business,
communication,
health
sciences
and
law.
UEV
is
located
in
Valencia,
Spain.

Istanbul Bilgi University.

Founded
in
1996,
Istanbul
Bilgi
University
offers
undergraduate
and
graduate
degrees
in
communication,
business,
social
sciences,
law,
architecture,
engineering
and
health
sciences.
Istanbul
Bilgi
University
is
located
in
Istanbul,
Turkey.

•

Turkey

•

Tuition and Fees

Tuition
varies
at
each
of
the
institutions
in
our
Europe
segment
depending
on
the
curriculum
and
type
of
program.
Tuition
payment
options
vary
by
institution
and
primarily
include
monthly
installment
payment
plans
and
lump
sum
payments
at
the
beginning
of
the
academic
year.
Historically,
we
have
increased
tuition
as
educational
costs
and
inflation
have
risen.

Students
and
their
families
are
generally
responsible
for
room
and
board
fees,
transportation
expenses
and
costs
related
to
textbook
and
supply
purchases
required
for
their
educational
programs.
Several
of
our
institutions
in
our
Europe
segment
also
have
revenue-generating
room
and
board
fees.

Students
typically
self-finance
their
education
or
seek
third-party
financing
programs.

AMEA

Our
AMEA
segment
consists
of
21
licensed
higher
education
institutions,
and
has
operations
in
Australia,
China,
India,
Malaysia,
New
Zealand,
Saudi
Arabia,
South
Africa
and
Thailand
at
which
we
enrolled
approximately
85,700
students
as
of
December
31,
2016
as
adjusted
for
the
realignment
of
MDS
into
our
AMEA
segment.
The
segment
includes
9
licensed
institutions
in
the
Kingdom
of
Saudi
Arabia
and
one
institution
in
China
that
we
manage
through
joint
venture
or
other
arrangements.
The
institutions
primarily
serve
18-
to
24-year-old
students
and
offer
an
education
that
emphasizes
professional-oriented
fields
of
study
with
undergraduate
and
graduate
degrees
in
a
wide
range
of
disciplines,
including
business,
engineering,
information
technology,
law,
arts,
fashion
and
design,
education,
hospitality
management
and
health
sciences,
as
well
as
vocational
diplomas.

Table
of
Contents

We
have
historically
focused
on
entering
new
geographic
markets
through
acquiring
institutions
with
an
established
name
and
operational
history;
however,
we
also
occasionally
work
with
local
partners
to
enter
markets
through
joint
ventures
to
launch
new
higher
education
institutions.
Through
these
partnerships,
we
can
apply
our
programmatic
and
management
expertise
to
help
develop
the
institutions,
while
benefiting
from
our
partner's
local
market
knowledge
and
experience
and
limiting
our
financial
exposure.

The
following
table
presents
information
about
the
institutions
in
our
AMEA
segment
(unless
otherwise
noted,
we
own
each
of
these
institutions):

Country
Australia

China

India

Higher
Education
Institution

Blue
Mountains
International
Hotel
Management
School
(BMIHMS)

THINK
Education
Group
(THINK)

Torrens
University
Australia
(TUA)

Blue
Mountains
International
Hotel
Management
School—Suzhou
(Blue
Mountains

Suzhou)

Hunan
International
Economics
University
(HIEU)

Pearl
Academy
(Pearl)

University
of
Petroleum
and
Energy
Studies
(UPES)

University
of
Technology
and
Management
(UTM)

INTI
Education
Group
(INTI
Malaysia)

Malaysia
New
Zealand
Media
Design
School
(MDS)
Saudi
Arabia
Riyadh
Polytechnic
Institute
(RPI)

International
Tourism
and
Hospitality
College
at
Riyadh
(ITHCR)
International
Technical
College
at
Jeddah
(ITCJ)
International
Technical
Female
College
at
Makkah
(ITCM)
International
Technical
Female
College
at
Al-Kharj
(ITCAK)
International
Tourism
and
Hospitality
College
at
Al-Madinah
(ITHCAM)
International
Technical
Female
College
at
Al-Nammas
(ITCAN)
International
Technical
Female
College
at
Buraydah
(ITCB)
International
Technical
Female
College
at
Wadi
Al-Dawaser
(ITCWAD)

South
Africa
Monash
South
Africa
(MSA)
Thailand

Stamford
International
University
(SIU)

‡

Not-for-profit
institution
consolidated
by
Laureate
as
a
variable
interest
entity.

Managed
by
Laureate
as
part
of
a
joint
venture
arrangement.

Managed
by
Laureate
under
contract
with
the
Kingdom
of
Saudi
Arabia.

Year
Joined

Laureate

Network

2008

2013

2014

2008‡

2009*

2011*

2013*

2008

2011

2010‡

2013#

2014#

2015#

2014#

2013

2011*

Year

Founded

1991

2006

2014

2004

1997

1993

2003

2011

1986

1998

2010

2013

2014

2015

2014

2001

1995

Our
AMEA
institutions
consist
of:

Australia

•

Blue Mountains International Hotel Management School (BMIHMS).

Founded
in
1991,
BMIHMS
offers
undergraduate
and
graduate
degrees
in
hospitality
management
through
campuses
located
in
Leura
and
Sydney.

Table
of
Contents

•

THINK Education Group (THINK).

THINK
was
founded
in
2006
and
through
its
member
colleges
can
trace
its
origins
back
to
1961.
THINK
provides
specialized
programs
through
the
following
institutions:

•

APM College of Business and Communication (APM).

Founded
in
1986,
APM
offers
vocational
programs
in
business
and
management,
marketing,
event
management
and
public
relations.
APM
has
campus
locations
in
Sydney
and
Brisbane.

Australasian College of Natural Therapies (ACNT).

Founded
in
1981,
ACNT
offers
undergraduate
and
vocational
programs
in
nutrition,
naturopathy,
western
herbal
medicine,
massage,
health
science
and
fitness.
ACNT
has
campus
locations
in
Sydney
and
Brisbane.

Australian National College of Beauty (ANCB).

Founded
in
2008,
ANCB
offers
a
diploma
in
beauty
therapy.
ANCB
has
campus
locations
in
Sydney
and
Brisbane.

CATC Design School (CATC).

Founded
in
1982,
CATC
offers
undergraduate
and
vocational
programs
in
graphic
design,
interior
design
and
photography.
CATC
has
campus
locations
in
Sydney,
Melbourne
and
Brisbane.

Jansen Newman Institute (JNI).

Founded
in
1978,
JNI
offers
undergraduate,
vocational
and
graduate
programs
in
counseling
and
psychotherapy
and
community
services.
JNI
is
located
in
Sydney
and
Brisbane.

Southern School of Natural Therapies (SSNT).

Founded
in
1961,
SSNT
offers
undergraduate
programs
in
Chinese
medicine,
naturopathy,
western
herbal
medicine,
nutritional
medicine,
clinical
myotherapy,
massage
and
health
science.
SSNT
is
located
in
Melbourne.

William Blue College of Hospitality Management (WBCHM).

Founded
in
1990,
WBCHM
offers
vocational
and
undergraduate
programs
in
hotel
and
hospitality
management,
event
management,
tourism
management,
commercial
cookery
and
business
management.
WBCHM
is
located
in
Sydney
and
Brisbane.

Until
2016,
THINK
also
provided
specialized
higher
education
programs
through
the
following
institutions:

•

APM College of Business and Communication (APM).

Founded
in
1986,
APM
offered
undergraduate
programs
in
business
and
management,
marketing,
event
management
and
public
relations.
APM
has
campus
locations
in
Sydney
and
Brisbane.

Billy Blue College of Design (BBCD).

Founded
in
1987,
BBCD
offered
undergraduate
programs
in
communication
design,
digital
media
design,
branded
fashion
design,
interior
design
and
graphic
design.
BBCD
has
campus
locations
in
Melbourne,
Sydney,
Brisbane
and
Perth.

In
2016,
these
higher
education
programs
transitioned
to
and
are
now
offered
by
Torrens
University
Australia.

•

Torrens University Australia (TUA).

Commencing
operations
in
2014,
TUA
offers
undergraduate
and
graduate
programs
in
business
and
management,
marketing,
event
management,
public
relations,
communication
design,
digital
media
design,
branded
fashion
design,
interior
design
and
graphic
design,
business
administration,
design,
education,
global
project
management
and
public
health.
In
2015,
TUA
acquired
Chifley
Business
School
to
expand
its
offerings
in
business
administration
and
project
management.
Commencing
in
2016,
TUA
also
offers
undergraduate
and
graduate
degrees
in
hospitality
management
that
have
been
offered
by
BMIHMS
and
offers
the
higher
education
programs
previously
offered
by
APM
and
BBCD.
TUA
has
campuses
in
Adelaide,
Sydney,
Melbourne
and
Brisbane,
Australia.

Table
of
Contents

China

India

•

Malaysia

•

New
Zealand

•

Saudi
Arabia

•

Blue Mountains International Hotel Management School—Suzhou (Blue Mountains Suzhou).

Founded
in
2004,
Blue
Mountains
Suzhou
is
managed
by
TUA
in
cooperation
with
the
Suzhou
Tourism
and
Finance
Institute.
Blue
Mountains
Suzhou
offers
diplomas
and
associate
degrees
in
hotel
management
and
students
have
the
opportunity
to
continue
their
education
at
TUA
toward
an
Australian
Bachelor
of
Business
degree.
Blue
Mountains
Suzhou
is
located
in
Suzhou,
China.

Hunan International Economics University (HIEU).

Founded
in
1997,
HIEU
offers
undergraduate
degrees
in
commerce,
business
management,
foreign
languages,
computer
science,
electronic
engineering,
and
art
and
design.
HIEU
is
located
in
Changsha,
China.

Pearl Academy (Pearl).

Founded
in
1993,
Pearl
offers
undergraduate
and
graduate
programs
in
fashion
design
and
creative
business.
Pearl
has
campuses
in
Delhi,
Jaipur,
Noida
and
Mumbai.

University of Petroleum and Energy Studies (UPES).

Founded
in
2003,
UPES
offers
sector
focused
graduate,
postgraduate
and
doctoral
degree
programs
in
oil
and
gas,
power,
aviation
and
aerospace,
port
&
shipping,
automotive,
infrastructure,
electronics,
information
technology,
logistics
and
supply
chain,
design
and
legal
studies.
UPES
is
located
in
Dehradun,
India.

University of Technology and Management (UTM).

Founded
in
2011,
UTM
offers
graduate
programs
in
computer
sciences
&
information
technology,
travel
&
tourism
and
economics
and
management.
UTM
is
located
in
Shillong,
India.

INTI Education Group (INTI Malaysia).

Founded
in
1986,
INTI
Malaysia
offers
undergraduate
and
graduate
degrees
in
business
and
law,
computing
and
information
technology,
engineering
and
technology,
languages
and
liberal
arts,
and
applied
sciences
and
mathematics.
INTI
Malaysia
has
locations
in
Kuala
Lumpur,
Selangor,
Penang,
Sabah
and
Nilai
(Negeri
Sembilan),
Malaysia.

Media Design School (MDS).

Founded
in
1998,
MDS
provides
certificate
programs
in
graphic
design,
creative
advertising,
visual
effects
and
game
development.
MDS
is
located
in
Auckland,
New
Zealand.

Riyadh Polytechnic Institute (RPI).

Founded
in
2010,
RPI
is
a
private-public
initiative
launched
by
the
Kingdom
of
Saudi
Arabia
to
help
meet
the
increasing
demand
for
Saudi
nationals
with
industrial
technical
skills.
RPI
offers
two-year
programs
in
engineering,
business,
accounting
and
technology.
RPI
is
operated
by
Laureate
Vocational
Saudi
Arabia
("LVSA")
through
a
joint
venture
with
Obeikan
Education
("Obeikan"),
a
subsidiary
of
the
Obeikan
Investment
Group,
one
of
the
largest
industrial
groups
in
the
Kingdom
of
Saudi
Arabia.
RPI
is
located
in
Riyadh,
Saudi
Arabia.

International Tourism and Hospitality College at Riyadh (ITHCR).

Founded
in
2013,
ITHCR
is
part
of
a
government-led
initiative
that
partners
with
international
providers
to
manage
colleges
designed
to
train
and
develop
qualified,
employment
ready
graduates
to
meet
the
needs
of
the
Saudi
labor
market.
The
college
offers
Diplomas
for
high
school
graduates
in
Business
Administration
and
Tourism,
Hospitality
and
Leisure.
ITHCR
is
operated
by
LVSA.

Table
of
Contents

•

International Technical College at Jeddah (ITCJ).

Founded
in
2013,
ITCJ
is
part
of
a
government-led
initiative
that
partners
with
international
providers
to
manage
colleges
designed
to
train
and
develop
qualified,
employment
ready
graduates
to
meet
the
needs
of
the
Saudi
labor
market.
ITCJ
offers
Diplomas
for
high
school
graduates
in
Business
Administration,
Information
Technology
Technical
Support
and
Electrical
Technology.
ITCJ
is
operated
by
LVSA.

International Technical Female College at Makkah (ITCM).

Founded
in
2013,
ITCM
is
part
of
a
government-led
initiative
that
partners
with
international
providers
to
manage
colleges
designed
to
train
and
develop
qualified,
employment
ready
graduates
to
meet
the
needs
of
the
Saudi
labor
market.
ITCM
offers
Diplomas
for
high
school
graduates
in
Business
Administration,
Tourism,
Hospitality
and
Leisure,
and
Information
Technology
Technical
Support.
ITCM
is
operated
by
LVSA.

International Technical Female College at Al-Kharj (ITCAK).

Founded
in
2013,
ITCAK
is
part
of
a
government-led
initiative
that
partners
with
international
providers
to
manage
colleges
designed
to
train
and
develop
qualified,
employment
ready
graduates
to
meet
the
needs
of
the
Saudi
labor
market.
ITCAK
offers
Diplomas
for
high
school
graduates
in
Business
Administration,
Tourism,
Hospitality
and
Leisure,
and
Information
Technology
Technical
Support.
ITCAK
is
operated
by
LVSA.

International Tourism and Hospitality College at Al-Madinah (ITHCAM).

Founded
in
2014,
ITHCAM
is
part
of
a
government-led
initiative
that
partners
with
international
providers
to
manage
colleges
designed
to
train
and
develop
qualified,
employment
ready
graduates
to
meet
the
needs
of
the
Saudi
labor
market.
The
college
offers
Diplomas
for
high
school
graduates
in
Business
Administration
and
Tourism,
Hospitality
and
Leisure.
ITHCAM
is
operated
by
LVSA.

International Technical Female College at Al-Nammas (ITCAN).

Founded
in
2015,
ITCAN
is
part
of
a
government-led
initiative
that
partners
with
international
providers
to
manage
colleges
designed
to
train
and
develop
qualified,
employment
ready
graduates
to
meet
the
needs
of
the
Saudi
labor
market.
ITCAN
offers
Diplomas
for
high
school
graduates
in
Business
Administration,
Tourism,
Hospitality
and
Leisure,
and
Information
Technology
Technical
Support.
ITCAN
is
operated
by
LVSA.

International Technical Female College at Buraydah (ITCB).

Founded
in
2015,
ITCB
is
part
of
a
government-led
initiative
that
partners
with
international
providers
to
manage
colleges
designed
to
train
and
develop
qualified,
employment
ready
graduates
to
meet
the
needs
of
the
Saudi
labor
market.
ITCB
offers
Diplomas
for
high
school
graduates
in
Business
Administration,
Tourism,
Hospitality
and
Leisure,
and
Information
Technology
Technical
Support.
ITCB
is
operated
by
LVSA.

International Technical Female College at Wadi Al-Dawaser (ITCWAD).

Founded
in
2014,
ITCWAD
is
part
of
a
government-led
initiative
that
partners
with
international
providers
to
manage
colleges
designed
to
train
and
develop
qualified,
employment
ready
graduates
to
meet
the
needs
of
the
Saudi
labor
market.
ITCWAD
offers
Diplomas
for
high
school
graduates
in
Business
Administration,
Tourism,
Hospitality
and
Leisure,
and
Information
Technology
Technical
Support.
ITCWAD
is
operated
by
LVSA.

South
Africa

•

Monash South Africa (MSA).

Founded
in
2001
by
Monash
University,
MSA
offers
undergraduate
and
graduate
degree
programs
in
business
and
economics,
information
technology,
social
sciences
and
health
sciences.
Laureate
acquired
a
controlling
interest
in
MSA
in
2014.
MSA
is
located
in
Johannesburg,
South
Africa.

Table
of
Contents

Thailand

•

Stamford International University (SIU).

Founded
in
1995,
SIU
offers
international
and
Thai
undergraduate
and
graduate
degree
programs
in
business
&
management,
communication,
hospitality
management
and
information
technology.
SIU
is
located
in
Hua
Hin
and
Bangkok,
Thailand.

Tuition and Fees

Tuition
varies
at
each
of
the
institutions
in
our
AMEA
segment
depending
on
the
curriculum
and
type
of
program.
Tuition
payment
options
vary
by
institution
and
primarily
include
monthly
installment
payment
plans
and
lump
sum
payments
at
the
beginning
of
the
academic
year.
Historically,
we
have
increased
tuition
as
educational
costs
and
inflation
have
risen.

Students
and
their
families
are
generally
responsible
for
room
and
board
fees,
transportation
expenses
and
costs
related
to
textbook
and
supply
purchases
required
for
their
educational
programs.
Blue
Mountains
International
Hotel
Management
School,
our
Chinese
institutions,
Monash
South
Africa,
Stamford
International
University,
the
INTI
Group
and
our
Indian
institutions
have
revenue-generating
room
and
board
fees.

Students
typically
self-finance
their
education
or
seek
third-party
financing
programs.
However,
in
certain
markets
in
the
AMEA
region
there
are
various
forms
of
government-supported
student
financing
programs,
as
discussed
below.

Government-Sponsored Student Financing Programs

In
Australia,
the
Commonwealth
government
has
established
income-contingent
loan
schemes
that
assist
eligible
fee-paying
students
to
pay
all
or
part
of
their
tuition
fees
(separate
schemes
exist
for
higher
education
and
vocational
courses).
Under
the
schemes
the
relevant
fees
are
paid
directly
to
the
institutions.
A
corresponding
obligation
then
exists
from
the
participating
student
to
the
Commonwealth
government.
The
Australian
institutions
have
no
responsibility
in
connection
with
the
repayment
of
these
loans
by
students
and,
generally,
this
assistance
is
not
available
to
international
students.
In
December
2016,
the
Australian
government
introduced
a
new
loan
scheme
for
vocational
courses.
This
will
replace
the
previous
funding
model
for
loans
for
vocational
studies
(which
will
be
phased
out
during
2017).
Under
the
new
arrangements
vocational
educational
providers
will
be
required
to
reapply
for
registration
for
their
students
to
be
eligible
to
receive
loans
for
vocational
courses.
To
be
eligible
for
registration
vocational
educational
providers,
among
other
matters,
will
be
required
to
demonstrate
a
minimum
of
50%
completion
rates.
Relevant
fees
will
be
paid
monthly
in
arrears
and
caps
will
be
placed
on
the
amount
of
loans
available
for
particular
categories
of
courses.
THINK
made
a
provisional
application
to
be
approved
for
these
purposes
and
that
application
was
approved
until
June
30,
2017,
which
is
the
maximum
period
available.
THINK
has
submitted
a
further
formal
application
for
approval
which,
if
granted,
will
apply
from
July
1,
2017
for
a
period
of
up
to
seven
years.
BMIHMS
and
TUA
currently
provide
only
higher
education
programs
which
are
not
affected
by
these
changes.
However,
TUA
has
also
made
a
formal
application
to
cover
vocational
courses
it
may
wish
to
offer
in
the
future.
The
Australia
institutions
have
been
deliberately
placing
emphasis
on
higher
education
courses
in
TUA
in
anticipation
of
these
changes.

In
China,
Thailand
and
Malaysia
there
are
also
government
programs
available
to
our
students,
however,
they
do
not
represent
a
material
portion
of
the
revenues
of
our
institutions
in
these
countries.
In
the
Kingdom
of
Saudi
Arabia,
our
students'
tuition
is
fully
funded
by
the
government
and
the
government
pays
the
tuition
for
each
student
either
directly
to
us
or,
in
the
case
of
RPI,
to
the
institution
which,
in
turn,
pays
us.
The
government
also
provides
a
monthly
stipend
to
each
student
enrolled
at
the
eight
colleges
of
excellence,
while
at
RPI,
the
private
companies
sponsoring
the
students

Table
of
Contents

pay
the
stipend.
The
payments
are
based
on
our
enrollments,
with
minimum
payments
set
for
each
institution.

GPS

Institutions
in
our
GPS
segment
have
products
and
services
that
span
the
Laureate International Universities network,
with
a
total
enrollment
of
approximately
72,200
students
as
of
December
31,
2016,
as
adjusted
for
the
segment
change.
Institutions
in
our
GPS
segment
provide
fully
online
degree
programs
through
a
U.S.-based
accredited
institution,
Walden
University,
and
internationally,
through
Laureate
Online
Education
B.V.,
which
is
based
in
Amsterdam
and
partners
with
the
University
of
Liverpool
and
the
University
of
Roehampton
in
the
United
Kingdom.
We
provide
professional-oriented
fully
online
undergraduate
and
graduate
degree
programs
largely
to
working
professionals
through
distance
learning
and
offer
online
degree
programs
in
education,
psychology,
health
and
human
services,
management,
nursing
and
information
technology.
These
fully
online
institutions
provide
us
expertise
in
online
education
that
we
can
leverage
throughout
the
campus-based
institutions
in
our
LatAm,
Europe
and
AMEA
segments.
Our
fully
online
institutions
enrolled
approximately
68,200
students
as
of
December
31,
2016.

In
addition,
within
this
segment,
we
owned
three
smaller,
campus-based
institutions
in
the
United
States.
Our
GPS
segment
also
provides
support
services
to
SFUAD.
These
campus-based
institutions
primarily
serve
18-
to
24-year-old
students
and
offer
an
education
that
emphasizes
professional-oriented
fields
of
study.
The
curriculum
in
these
institutions
is
leveraged
throughout
the
Laureate International Universities network
through
student
exchange
programs,
dual
degrees
and
certificate
offerings.
These
campus-based
institutions
enrolled
approximately
4,000
students
as
of
December
31,
2016.

The
following
table
presents
information
about
the
institutions
in
our
GPS
segment
(unless
otherwise
noted,
we
own
each
of
these
institutions):

Country
Global Online
United
Kingdom

United
States
Campus-Based
United
States

Higher
Education
Institution

Laureate
Online
Education
B.V.
(University
of
Liverpool)

Laureate
Online
Education
B.V.
(University
of
Roehampton)

Walden
University

NewSchool
of
Architecture
and
Design

Kendall
College

Santa
Fe
University
of
Art
and
Design
(SFUAD)

University
of
St.
Augustine
for
Health
Sciences
(St.
Augustine)

Year
Joined

Laureate

Network

Year

Founded

2004

2012

2001

2008

2009†

2013

1881

2004

1970

1980

1934

1859

1979

†

SFUAD
is
separately
owned
by
Wengen.
Laureate
provides
support
services
to
SFUAD
pursuant
to
contractual
arrangements.
See
"Item
13
—Certain
Relationships
and
Related
Transactions,
and
Director
Independence—Agreements
with
Wengen—SFUAD
Shared
Services
Agreement."
On
May
17,
2016,
LEI
Holdings—US
I,
Inc.,
a
wholly
owned
subsidiary
of
Wengen,
entered
into
an
agreement
to
sell
SFUAD
to
Joshua
Education,
Inc.,
a
U.S.
subsidiary
of
Raffles
Education
Corporation
Limited,
subject
to
all
necessary
regulatory
approvals.
This
agreement
was
terminated
by
the
parties
thereto
on
March
29,
2017.
As
used
herein,
our
"U.S.
Institutions"
refers
to
NewSchool
of
Architecture
and
Design,
Kendall
College,
St.
Augustine
and
Walden
University.

Table
of
Contents

Online
Institutions

•

United
States

•

Laureate Online Education B.V.

Laureate
Online
Education
B.V.
is
the
exclusive
worldwide
online
career
partner
of
the
University
of
Liverpool
and
the
University
of
Roehampton
and
specializes
in
the
delivery
of
online
graduate
programs
to
working-adult
students.
Laureate
Online
Education
B.V.
is
based
in
Amsterdam.

•

University of Liverpool.

Founded
in
1881,
the
University
of
Liverpool,
a
public
university
in
the
United
Kingdom,
through
Laureate
Online
Education
B.V.,
offers
online
graduate
degree
programs
in
business
administration,
health
sciences,
law
and
information
technology.

University of Roehampton.

Founded
in
2004,
the
University
of
Roehampton,
a
public
university
in
the
United
Kingdom,
through
Laureate
Online
Education
B.V.,
offers
online
graduate
degree
programs
in
business
and
international
management.

Walden University.

Established
in
1970,
Walden
University
is
an
online
university
that
delivers
bachelor's,
master's,
doctoral
and
post-doctoral
programs
in
counseling,
education,
health
sciences,
human
services,
management,
nursing,
psychology,
public
administration,
public
health
and
technology.
Walden
University
is
headquartered
in
Minneapolis,
Minnesota.

NewSchool of Architecture and Design.

Founded
in
1980,
NewSchool
of
Architecture
and
Design
offers
undergraduate
and
graduate
degree
programs
in
architecture,
art
and
design,
graphic
design,
history
and
theory,
professional
practice,
technology
and
urban
studies.
NewSchool
of
Architecture
and
Design
is
located
in
San
Diego,
California.

Kendall College.

Founded
in
1934,
Kendall
College
offers
undergraduate,
associate
and
certificate
programs
in
business
administration,
culinary
arts,
education
and
hospitality
management.
Kendall
College
is
located
in
Chicago.

Santa Fe University of Art and Design (SFUAD).

Founded
in
1859,
SFUAD
(formerly
the
College
of
Santa
Fe)
offers
undergraduate
degrees
in
arts
management,
contemporary
music,
creative
writing
and
literature,
graphic
design
and
digital
arts,
film,
performing
arts,
photography
and
studio
arts.
SFUAD
also
offers
semester-long
and
intensive
English
language
programs
to
foreign
students.

University of St. Augustine for Health Sciences (St. Augustine).

Founded
in
1979,
St.
Augustine
offers
graduate
and
doctoral
degree
and
non-
degree
programs
in
physical
therapy,
occupational
therapy,
orthopedic
assistants,
education
and
health
sciences.
St.
Augustine
has
campus
locations
in
St.
Augustine
and
Miami,
Florida,
San
Marcos,
California
and
Austin,
Texas.

Tuition and Fees

Tuition
varies
at
each
of
the
institutions
in
our
GPS
segment
depending
on
the
curriculum
and
type
of
program.
Tuition
payment
options
vary
by
institution
and
primarily
include
monthly
installment
payment
plans
and
lump
sum
payments
at
the
beginning
of
the
academic
year.
Historically,
we
have
increased
tuition
as
educational
costs
and
inflation
have
risen.

Students
at
U.S.
campus-based
programs
are
generally
responsible
for
room
and
board
fees,
transportation
expenses
and
costs
related
to
textbook
and
supply
purchases
required
for
their
educational
programs.

Currently
there
are
no
company-sponsored
financing
arrangements
in
our
GPS
segment.
However,
students
in
our
U.S.
Institutions
are
eligible
for
the
U.S.
Department
of
Education
(the
"DOE")
Title
IV
program
federal
financial
aid
under
the
U.S.
Higher
Education
Act
(the
"HEA").

Table
of
Contents

Marketing

We
believe
that
effective
marketing
is
a
key
to
the
success
of
our
business,
enabling
us
to
attract
prospective
students
to
our
institutions
and
increase
enrollment.
We
focus
on
marketing
as
a
way
to
increase
awareness
of
the
institutions
in
each
of
their
respective
markets
and
to
highlight
the
benefits
provided
by
the
Laureate International Universities network.
We
leverage
best
practices
across
our
entire
network
to
help
our
institutions
develop
effective
marketing
programs.

We
recognize
that
the
vast
majority
of
our
students
reside
within
the
communities
where
our
campuses
are
located.
Because
our
target
market
is
in
close
proximity
to
our
institutions,
developing
and
maintaining
a
powerful
local
presence
is
one
of
the
cornerstones
of
our
brand
building
strategy.
We
believe
a
strong
brand
is
one
of
the
key
variables
for
future
sustainable
growth.
We
promote
activities
that
encourage
direct
participation
and
interaction
between
the
community
and
our
institutions.
For
example,
many
of
our
institutions
provide
valuable
services
to
the
residents
in
the
local
communities
including
access
to
our
veterinary
and
medical
facilities
at
reduced
costs,
legal
aid
support
and
use
of
our
facilities,
including
remedial
course
offerings
and
gym
memberships.
Additionally,
many
of
our
institutions'
sports
teams
serve
as
a
source
of
civic
pride
for
the
local
residents
including
our
students
and
their
families.
These
informal
interactions
serve
to
enhance
the
trusted
nature
of
our
local
brands,
which
in
turn
facilitates
a
word-of-mouth
referral
network
that
helps
to
attract
quality
students
beyond
the
use
of
traditional
student
recruitment
practices.

During
enrollment
campaigns,
we
augment
our
long-term
brand
building
activities
with
professional
advertising
campaigns
employing
a
variety
of
media,
including
television,
radio,
outdoor
and
print
advertising.
We
also
use
direct
mail,
web
advertising
and
one-on-one
meetings
with
students
and
their
families.
Each
institution
is
responsible
for
implementing
its
own
marketing
campaigns,
although
we
provide
a
forum
for
the
network's
marketing
departments
to
share
best
practices.
During
the
last
several
years,
we
have
increased
the
amounts
spent
on
marketing
and
advertising
to
meet
the
large
demand
for
our
programs,
and
we
anticipate
that
this
trend
will
continue.

Additionally,
we
strive
to
develop
strong
relationships
with
local
high
schools
that
serve
as
feeder
schools
for
many
of
our
institutions.
We
believe
we
have
developed
strong
relationships
with
many
of
these
feeder
schools
and
expect
that
will
continue
to
provide
a
valuable
source
of
referrals
for
many
of
the
institutions
in
our
network.

Competition

We
face
competition
in
each
of
our
operating
segments.
We
believe
competition
focuses
on
price,
educational
quality,
reputation,
location
and
facilities.

LatAm, Europe and AMEA

The
market
for
higher
education
outside
the
United
States
is
highly
fragmented
and
marked
by
large
numbers
of
local
competitors.
The
target
demographics
are
primarily
18-
to
24-year-olds
in
the
individual
countries
in
which
we
compete.
We
generally
compete
with
both
public
and
private
higher
education
institutions
on
the
basis
of
price,
educational
quality,
reputation
and
location.
Public
institutions
tend
to
be
less
expensive,
if
not
free,
but
more
selective
and
less
focused
on
practical
programs
aligned
around
career
opportunities.
We
believe
we
compare
favorably
with
competitors
because
of
our
focus
on
quality,
professional-oriented
curriculum
and
the
competitive
advantages
provided
by
our
global
network.
At
present,
we
believe
no
other
company
has
a
similar
network
of
international
institutions.
There
are
a
number
of
other
private
and
public
institutions
in
each
of
the
countries
in
which
we
operate.
Because
the
concept
of
private
higher
education
institutions
is
fairly
new
in
many
countries,
it
is
difficult
to
predict
how
the
markets
will
evolve
and
how
many
competitors
there
will
be
in
the
future.
We
expect
competition
to
increase
as
the
markets
mature.

Table
of
Contents

GPS

The
market
for
fully
online
higher
education
is
highly
fragmented
and
competitive,
with
no
single
institution
having
any
significant
market
share.
The
target
demographics
for
our
Global
Online
institutions
are
adult
working
professionals
who
are
over
25
years
old.
Our
Global
Online
institutions
compete
with
traditional
public
and
private
nonprofit
institutions
and
for-profit
schools.
Typically,
public
institutions
charge
lower
tuitions
than
our
Global
Online
institutions
because
they
receive
state
subsidies,
government
and
foundation
grants,
and
tax-deductible
contributions
and
have
access
to
other
financial
sources
not
available
to
our
Global
Online
institutions.
However,
tuition
at
private
nonprofit
institutions
is
typically
higher
than
the
average
tuition
rates
charged
by
our
Global
Online
institutions.
Our
Global
Online
institutions
compete
with
other
educational
institutions
principally
based
upon
price,
educational
quality,
reputation,
location,
educational
programs
and
student
services.

See
"Item
1A—Risk
Factors—Risks
Relating
to
Our
Business—The
higher
education
market
is
very
competitive,
and
we
may
not
be
able
to
compete
effectively."

Recent
Developments

Sale of Glion and Les Roches Hospitality Management Schools

On
March
15,
2016,
we
signed
an
agreement
with
Eurazeo,
a
publicly
traded
French
investment
company,
to
sell
Glion
and
Les
Roches
and
associated
institutions
(the
"Swiss
Institution
Sale")
for
a
total
transaction
value
of
CHF
380
million
(approximately
$385
million
at
the
signing
date),
subject
to
certain
adjustments.
The
sale
included
the
operations
of
Glion
in
Switzerland
and
the
United
Kingdom,
with
a
total
of
approximately
1,800
students,
and
the
operations
of
Les
Roches
in
Switzerland
and
the
United
States,
as
well
as
LRG
in
Switzerland,
Les
Roches
Jin
Jiang
in
China,
RACA
in
Jordan
and
Les
Roches
Marbella
in
Spain,
with
a
combined
total
of
approximately
3,000
students.
The
transaction
closed
on
June
14,
2016
and
we
received
total
net
proceeds
of
approximately
$339
million.
We
are
continuing
to
provide
certain
back-office
services
to
Glion
and
Les
Roches,
and
programs
of
those
institutions
will
continue
on
various
campuses
in
the
Laureate International Universities network
throughout
the
world.

Sale of Operations in France

On
April
19,
2016,
we
signed
an
agreement
with
Apax
Partners,
a
private
equity
firm,
under
which
Apax
Partners
acquired
LIUF
SAS
(the
"French
Institution
Sale"),
our
French
holding
company
("LIUF"),
for
a
total
transaction
value
of
EUR
201
million
(approximately
$228
million
at
the
signing
date),
subject
to
certain
adjustments.
LIUF
comprised
our
five
institutions
located
in
France
with
a
total
student
population
of
approximately
7,500:
École
Supériure
du
Commerce
Extérieur,
Institut
Français
de
Gestion,
European
Business
School,
École
Centrale
d'Electronique
and
Centre
d'Études
Politiques
et
de
la
Communication.
The
transaction
closed
on
July
20,
2016
and
we
received
total
net
proceeds
of
approximately
$207
million.

Senior Note Exchange Transaction

On
April
15,
2016,
we
entered
into
separate,
privately
negotiated
note
exchange
agreements
(the
"Note
Exchange
Agreements")
with
certain
existing
holders
(the
"Existing
Holders")
of
our
outstanding
9.250%
Senior
Notes
due
2019
(the
"Senior
Notes
due
2019,"
or
the
"Senior
Notes")
pursuant
to
which
we
will
exchange
$250.0
million
in
aggregate
principal
amount
of
Senior
Notes
for
shares
of
our
Class
A
common
stock.
We
expect
the
exchange
to
be
completed
within
one
year
and
one
day
after
the
consummation
of
our
initial
public
offering.
The
number
of
shares
of
Class
A
common
stock
issuable
will
equal
104.625%
of
the
aggregate
principal
amount
of
Senior
Notes
to
be
exchanged,
or
$261.6
million,
divided
by
$14.00,
the
initial
public
offering
price
per
share
of
Class
A
common
stock
in
our
initial
public
offering.
Following
our
initial
public
offering,
but
prior
to
the
exchange,
the
Senior

Table
of
Contents

Notes
subject
to
the
exchange
will
continue
to
receive
interest
at
the
same
rate
as
the
Senior
Notes
that
are
not
subject
to
the
exchange.

Pursuant
to
the
Note
Exchange
Agreements,
on
June
15,
2016
and
March
1,
2017,
we
also
repurchased
from
the
existing
holders
approximately
$85.1
million
aggregate
principal
amount
of
Senior
Notes
at
par
value,
plus
accrued
and
unpaid
interest
and
special
interest.

Upon
consummation
of
all
of
the
transactions
described
above,
we
will
have
retired
up
to
$335.1
million
in
aggregate
principal
amount
of
Senior
Notes.

At
the
initial
public
offering
price
of
$14.00
per
share,
and
assuming
the
completion
of
the
exchange
transaction
one
year
and
one
day
after
the
date
of
our
initial
public
offering,
we
expect
to
issue
an
aggregate
of
18,683,036
shares
of
Class
A
common
stock
in
connection
with
the
exchange
transaction.

The
exchange
of
Senior
Notes
for
shares
of
Class
A
common
stock
will
be
effected
in
reliance
on
the
exemption
from
registration
provided
by
Section
4(a)(2)
of
the
Securities
Act.
Nothing
herein
shall
constitute
or
be
deemed
to
constitute
an
offer
to
sell
or
the
solicitation
of
an
offer
to
buy
the
Senior
Notes.

Series A Preferred Stock Offering

On
December
4,
2016,
we
signed
a
subscription
agreement
(the
"Subscription
Agreement")
with
six
investors,
including
KKR
and
Snow
Phipps,
pursuant
to
which
we
agreed
to
issue
and
sell
to
those
investors
an
aggregate
of
400,000
shares
of
a
new
series
of
our
convertible
redeemable
preferred
stock
(the
"Series
A
Preferred
Stock")
in
a
private
offering
for
total
gross
proceeds
of
$400
million
and
net
proceeds
of
approximately
$383
million.
Closing
of
the
first
tranche
of
funding
for
this
transaction
(the
"Closing")
occurred
on
December
20,
2016
and
we
received
net
proceeds,
after
issuance
costs,
of
approximately
$328
million.
One
investor
funded
a
portion
of
its
purchase
price
equal
to
$57
million
(approximately
$55
million
net
of
issuance
costs)
on
January
18,
2017
and
the
remainder
on
January
23,
2017.
The
proceeds
from
the
Series
A
Preferred
Stock
offering
have
and
will
be
used
primarily
to,
among
other
things,
repay
a
portion
of
our
outstanding
debt,
including
our
revolving
credit
facility.

Dividends
compound
quarterly
and,
if
not
paid
in
shares
of
Series
A
Preferred
Stock
on
a
quarterly
basis
or
in
cash,
accrue
when,
as
and
if
declared
by
the
board
of
directors
of
the
Company,
on
each
share
of
Series
A
Preferred
Stock.
The
holders
of
shares
of
Series
A
Preferred
Stock
are
entitled
to
the
payment
of
their
liquidation
preference
in
cash
in
certain
circumstances,
including
upon
the
sale
of
the
Company
or
the
sale
of
all
or
substantially
all
of
our
assets,
and
upon
a
change
in
control
of
Wengen.
The
holders
of
Series
A
Preferred
Stock
do
not
have
any
voting
rights
except
as
required
by
law
and
with
respect
to
certain
extraordinary
actions.

The
shares
of
Series
A
Preferred
Stock
are
only
convertible
into
shares
of
our
Class
A
common
stock
under
certain
circumstances,
including
upon
the
closing
of
a
sale
of
the
Company
or
Wengen,
in
the
event
Wengen
no
longer
exclusively
controls
us
and,
following
our
initial
public
offering
and
except
in
certain
circumstances,
by
us
and
the
holders
of
the
Series
A
Preferred
Stock
into
shares
of
our
Class
A
common
stock
commencing
on
the
earlier
to
occur
of
one
day
following
the
first
anniversary
of
the
closing
of
our
initial
public
offering
and
the
time
immediately
prior
to
the
effectiveness
of
a
registration
statement
filed
by
us
in
connection
with
our
first
follow-on
public
offering
following
our
initial
public
offering
in
which
the
holders
of
shares
of
Series
A
Preferred
Stock
receive
net
proceeds
not
less
than
the
Priority
Amount.
"Priority
Amount"
means,
generally,
shares
of
our
Class
A
common
stock
in
a
dollar
amount
equal
to,
as
of
any
date
of
determination,
the
greater
of
(a)
25%
of
the
aggregate
offering
price
of
all
Class
A
common
stock
proposed
to
be
offered
and
sold
in
our
first
follow-on
public
offering
following
our
initial
public
offering
and
(b)
$275
million.

Table
of
Contents

The
shares
of
Series
A
Preferred
Stock
are
redeemable
(i)
at
our
option
subject
to
certain
conditions,
and
(ii)
by
the
holders
of
the
Series
A
Preferred
Stock
after
the
fifth
anniversary
of
the
issue
date,
in
each
case,
at
a
redemption
price
per
share
equal
to
115%
of
the
sum
of
the
issue
amount
per
share
plus
any
accrued
and
unpaid
dividends.
If
we
fail
to
redeem
the
shares
of
Series
A
Preferred
Stock
when
required
after
the
fifth
anniversary
of
the
issue
date,
the
holders
of
the
Series
A
Preferred
Stock
are
entitled
to
certain
remedies,
including
the
ability
to
take
control
of
a
majority
of
our
board
of
directors
and
cause
a
sale
of
the
Company
and/or
cause
us
to
raise
debt
or
equity
capital
in
an
amount
sufficient
to
redeem
the
remaining
outstanding
shares
of
Series
A
Preferred
Stock.

Upon
the
closing
and
funding
of
the
purchase
price
of
the
Series
A
Preferred
Stock
offering
in
full,
which
was
a
qualified
equity
issuance
under
our
Senior
Secured
Credit
Facilities
(as
defined
below),
the
applicable
LIBOR
margin
for
the
2021
Extended
Term
Loan
(as
defined
below)
under
our
Senior
Secured
Credit
Facilities
was
reduced
to
7.5%
and
the
applicable
ABR
margin
was
reduced
to
6.5%.
The
applicable
LIBOR
margin
for
the
revolving
credit
line
under
our
Senior
Secured
Credit
Facilities
was
reduced
to
3.75%
and
the
applicable
ABR
margin
was
reduced
to
2.75%.
In
addition,
the
additional
scheduled
payment
on
such
2021
Extended
Term
Loan
in
the
amount
of
$62.5
million
will
not
be
required
under
our
Senior
Secured
Credit
Facilities.

Intellectual
Property

We
currently
own,
or
have
filed
applications
for,
trademark
registrations
for
the
word
"Laureate,"
for
"Laureate
International
Universities"
and
for
the
Laureate
leaf
logo
in
the
trademark
offices
of
all
jurisdictions
around
the
world
where
we
operate
institutions
of
higher
learning.
We
have
also
registered
or
filed
applications
in
the
applicable
jurisdictions
where
we
operate
for
the
marks
"Laureate
Online
International"
and
"Laureate
Online
Education."
In
addition,
we
have
the
rights
to
trade
names,
logos,
and
other
intellectual
property
specific
to
most
of
our
higher
education
institutions,
in
the
countries
in
which
those
institutions
operate.

Employees

As
of
December
31,
2016,
we
had
approximately
65,000
employees,
of
which
approximately
9,000
were
full-time
academic
teaching
staff
and
21,000
were
part-time
academic
teaching
staff.
In
addition,
we
have
approximately
560
part-time
academic
teaching
staff
who
are
classified
as
contractors,
principally
in
Chile
and
Brazil.
Our
employees
at
many
of
our
institutions
outside
the
United
States
are
represented
by
labor
unions
under
collective
bargaining
agreements,
as
is
customary
or
required
under
local
law
in
those
jurisdictions.
At
various
points
throughout
the
year,
we
negotiate
to
renew
collective
bargaining
agreements
that
have
expired
or
that
will
expire
in
the
near
term.
We
consider
ourselves
to
be
in
good
standing
with
all
of
the
labor
unions
of
which
our
employees
are
members
and
believe
we
have
good
relations
with
all
of
our
employees.

Effect
of
Environmental
Laws

We
believe
we
are
in
compliance
with
all
applicable
environmental
laws,
in
all
material
respects.
We
do
not
expect
future
compliance
with
environmental
laws
to
have
a
material
adverse
effect
on
our
business.

Available
Information

Our
principal
executive
offices
are
located
at
650
S.
Exeter
Street,
Baltimore,
Maryland
21202,
telephone
(410)
843-6100.
Our
annual
report
on
Form
10-K,
quarterly
reports
on
Form
10-Q,
current
reports
on
Form
8-K,
and
amendments
to
those
reports
are
available
free
of
charge
to
shareholders
and
other
interested
parties
through
the
"Investor
Relations"
portion
of
our
website
at
http://investors.laureate.net
as
soon
as
reasonably
practical
after
they
are
filed
with
the
Securities
and

Table
of
Contents

Exchange
Commission
("SEC").
The
SEC
maintains
a
website,
www.sec.gov,
which
contains
reports
and
other
information
filed
electronically
with
the
SEC
by
us.
Various
corporate
governance
documents,
including
our
Audit
Committee
Charter,
Compensation
Committee
Charter,
Nominations
and
Corporate
Governance
Committee
Charter,
and
Code
of
Conduct
and
Ethics
are
available
without
charge
through
the
"Investor
Relations,"
"Corporate
Governance"
portion
of
our
investor
relations
website,
listed
above.

Industry
Regulation

Brazilian
Regulation

The
Brazilian
educational
system
is
organized
according
to
a
system
of
cooperation
among
federal,
state
and
local
governments.
Higher
education
(i.e.,
undergraduate
and
graduate
level
education
provided
by
public
and
private
higher
education
institutions
("HEI"))
is
regulated
primarily
at
the
federal
level,
particularly
in
terms
of
public
policy
goals,
accreditation
and
academic
oversight;
however,
the
state
and
municipal
governments
are
also
involved,
principally
in
relation
to
taxation,
real
estate
and
operational
permitting
issues.

With
respect
to
the
federal
role,
The
National
Educational
Basis
and
Guidelines
Law
("LDB"),
provides
the
general
framework
for
the
provision
of
educational
services
in
Brazil
and
establishes
the
duty
of
the
federal
government
to:

•

coordinate
the
national
educational
policy;

define
the
National
Education
Plan,
in
coordination
with
the
states,
the
Federal
District
of
Brasilia
and
municipalities;

provide
technical
and
financial
assistance
to
the
states,
the
Federal
District
of
Brasilia
and
municipalities;

establish,
in
collaboration
with
the
states,
the
Federal
District
of
Brasilia
and
municipalities,
skills
and
guidelines
for
early
childhood
education,
elementary
and
secondary
education
that
will
guide
the
curriculum
and
their
minimum
syllabus,
ensuring
the
regular
basic
education;

ensure
national
process
of
evaluation
of
higher
education
institutions,
with
the
cooperation
of
evaluation
agencies
that
have
responsibility
for
this
level
of
education;

create
an
evaluation
process
for
the
academic
performance
of
elementary,
secondary
and
higher
education
in
collaboration
with
educational
institutions
in
order
to
improve
the
quality
of
education;
and

issue
rules
and
regulations
regarding
higher
education.

The
responsibility
of
the
Federal
Government
in
regulating,
monitoring
and
evaluating
higher
education
institutions
and
undergraduate
programs
is
exercised
by
MEC,
along
with
a
number
of
other
federal
agencies
and
offices
that
are
related
to
MEC.

MEC

MEC
is
the
highest
authority
of
the
higher
education
system
in
Brazil
and
has
the
power
to:

•

confirm
the
decisions
of
the
National
Board
of
Education
("CNE")
regarding
the
accreditation
and
reaccreditation
of
institutions
of
higher
education;

confirm
the
systems
and
evaluation
criteria
adopted
by
the
National
Institute
of
Educational
Studies
Anísio
Teixeira
("INEP");

confirm
opinions
and
regulatory
proposals
issued
by
the
CNE;

Table
of
Contents

•

issue
implementing
rules,
(regulations,
notices,
and
technical
advisories
governing
the
conduct
of
higher
education);
and

regulate
and
monitor
the
system
of
higher
education.

CNE—National Board of Education

CNE
is
a
consultative
advisory
and
deliberative
body
of
MEC.
It
consists
of
the
Board
of
Basic
Education
and
the
Board
of
Higher
Education,
each
composed
of
12
members
appointed
by
the
President
of
Brazil.
The
Board
of
Higher
Education
has
the
power
to:

•

support
the
development
and
monitor
the
implementation
of
the
National
Education
Plan;

analyze
and
issue
opinions
on
the
results
of
the
evaluation
procedures
of
higher
education;

offer
suggestions
for
drafting
the
National
Education
Plan
and
to
monitor
their
implementation;

decide
on
the
curriculum
guidelines
proposed
by
the
MEC,
for
undergraduate
courses;

deliberate
on
the
reports
submitted
by
MEC
on
the
recognition
of
courses
and
qualifications
offered
by
higher
education
institutions,
as
well
as
on
prior
authorization
from
those
offered
by
non-university
institutions;

approve
the
authorization,
accreditation
and
periodic
reaccreditation
of
higher
education
institutions,
based
on
reports
and
assessments
provided
by
MEC;

approve
the
statutes
of
universities
and
the
regiment
of
the
other
higher
education
institutions
that
are
part
of
the
Federal
educational
system;

deliberate
on
the
reports
for
periodic
recognition
of
master's
and
doctoral
programs,
prepared
by
the
MEC,
based
on
the
evaluation
of
the
programs;

analyze
matters
relating
to
the
implementation
of
legislation
regarding
higher
education;
and

advise
MEC
in
higher
education
related
matters.

INEP—National Institute of Educational Studies Anísio Teixeira

INEP
is
a
federal
agency
linked
to
MEC
that
is
the
primary
statistical
and
information-gathering
body
for
the
entire
Brazilian
education
system.
The
performance
data
it
collects
and
publishes
is
used
by
MEC,
the
legislature
and
the
rest
of
the
executive
branch,
as
well
as
the
public,
to
debate
and
make
policy
and
programmatic
decisions
about
education.
INEP
has
the
power
to:

•

carry
out
visits
to
institutions
of
higher
education
for
on-site
evaluations
in
the
process
of
accreditation
and
reaccreditation
of
institutions
and
in
the
authorization,
recognition,
accreditation
and
renewal
of
recognition
processes
of
undergraduate
and
sequential
programs;

conduct
research
and
analysis
of
data
related
to
education
in
Brazil;
and

implement
the
SINAES.

CONAES—National Commission on Higher Education Evaluation

CONAES
is
a
committee
under
MEC
supervision
composed
of
13
members.
CONAES
has
the
power
to:

•

coordinate
and
monitor
SINAES;

establish
guidelines
to
be
followed
by
INEP
in
the
development
of
programmatic
evaluation
tools;

Table
of
Contents

•

approve
the
evaluation
tools
and
submit
them
for
approval
by
the
Minister
of
Education;
and

submit
the
list
of
programs
to
be
evaluated
by
the
National
Examination
of
Student
Performance
("ENADE")
examination,
to
the
Minister
of
Education.

SERES—Higher Education Regulation and Supervision Secretariat

In
2011,
SERES,
which
operates
as
an
arm
of
MEC,
became
the
specific
agency
directly
responsible
for
regulation
and
supervision
of
public
and
private
HEIs,
as
well
as
undergraduate
courses
and
lato sensu post-graduate
programs,
both
in-person
and
distance
learning
modalities.
Its
mission
is
to
elevate
the
quality
level
of
all
higher
education
through
the
establishment
of
guidelines
for
the
expansion
of
HEIs
and
their
courses,
in
accordance
with
national
curriculum
guidelines
and
proprietary
quality
parameters,
and
include:

•

to
plan
and
coordinate
the
policy-making
process
for
the
regulation
and
supervision
of
higher
education;

to
accredit
undergraduate
(and
sequential)
courses,
both
through
in-person
and
distance
learning;

to
oversee
HEIs
and
courses,
in
order
to
fulfill
the
educational
legislation
and
to
induce
improvements
in
the
quality
of
higher
education
standards,
applying
the
penalties
provided
for
in
legislation;

to
establish
guidelines
for
the
preparation
of
assessment
instruments
for
and
higher
education
courses;

to
manage
the
public
system
of
registration
and
database
of
HEIs
and
higher
education
courses;
and

to
propose
the
design
of
actions
and
updating
of
reference
and
curriculum
guidelines
for
undergraduate
courses,
as
well
as
benchmarks
for
quality
distance
education,
considering
curricular
guidelines
and
various
forms
of
technology.

According
to
the
LDB,
higher
education
can
be
offered
by
public
or
private
higher
education
institutions.
A
private
institution
of
higher
education
shall
be
controlled,
managed
and
maintained
by
an
individual
person(s)
or
legal
entity,
in
either
case
referred
to
as
the
"
mantenedora ."
The
mantenedora
is
responsible
for
obtaining
resources
to
meet
the
needs
of
the
duly
authorized
HEI,
which
in
regulatory
terms
is
referred
to
as
the
"
mantida ."
A
mantenedora
may
be
authorized
to
operate
more
than
one
mantida.
In
any
case,
the
mantenedora
is
legally
and
financially
responsible
for
all
of
its
mantidas.
Each
of
our
HEIs
in
Brazil
is
maintained
by
a
Laureate-controlled
mantenedora.

Private
institutions
of
higher
education
may
be:

•

private
institutions
of
higher
education
with
profit
purposes
created
and
maintained
by
one
or
more
individuals
or
private
legal
entities;

community
institutions,
founded
by
groups
of
individuals
or
one
or
more
legal
entities,
including
cooperatives,
teachers
and
students
that
include
community
representatives
in
its
supporting
entity;

religious
institutions,
instituted
by
individuals
or
groups
for
one
or
more
legal
entities
that
meet
specific
religious
and
ideological
orientation
and
that
include
community
representatives
in
its
supporting
entity;
or

nonprofit
private
institutions,
charitable
or
not
charitable,
which
are
also
sometimes
referred
to
as
philanthropic
or
nonphilanthropic.

Table
of
Contents

According
to
organizational
and
academic
prerogatives,
institutions
of
undergraduate
learning
can
be:

•

Colleges
(
faculdades) :
Colleges
are
institutions
of
public
or
private
education
offering
degree
programs
in
more
than
one
area
of
knowledge
and
that
are
supported
by
a
single
supporting
entity
and
have
specific
administration
and
management.
Colleges
may
offer
programs
at
the
following
levels:
traditional
undergraduate
programs,
technological
undergraduate
programs,
specialization
and
graduate
programs
(master's
and
Ph.D.
degrees).
Colleges
do
not
have
minimum
requirements
for
the
qualifications
of
professors
and
their
labor
practices,
and
cannot
establish
new
campuses
or
create
programs
and
new
locations
without
the
prior
permission
of
MEC.

University
Centers
(
centro universitários ):
University
centers
are
public
or
private
educational
institutions
that
offer
a
variety
of
programs
in
higher
education,
including
undergraduate
programs,
extension
courses
and
lato sensu graduate
programs—master's
and
Ph.D.
degrees;
they
must
also
provide
learning
opportunities
and
career
development
for
their
professors.
At
least
one
third
of
the
faculty
of
a
university
center
must
be
composed
of
persons
with
masters
or
doctorate
degrees.
In
addition,
at
least
one
fifth
of
its
professors
must
be
composed
of
professors
who
work
full
time.
University
centers
have
the
autonomy
to
create,
organize
and
extinguish
individual
courses
and
degree
programs,
as
well
as
relocate
or
expand
locations
in
their
existing
programs
in
the
municipality
where
the
university
center's
headquarters
is
located,
without
prior
permission
of
MEC.
A
university
center
cannot
open
campuses
outside
the
municipality
where
its
seat
is
located.

Universities
(
universidades ):
Universities
are
public
or
private
institutions
of
higher
education
that
offer
several
degree
programs,
extension
activities
and
development
of
institutional
research.
Like
the
university
centers,
at
least
one
third
of
the
faculty
of
a
university
must
be
composed
of
persons
with
masters
or
doctorate
degrees.
In
addition,
at
least
one
third
of
a
university's
faculty
must
be
composed
of
professors
who
work
full
time.
Similar
to
university
centers,
universities
have
autonomy
to
create,
organize
and
extinguish
individual
courses
and
degree
programs,
as
well
as
to
relocate
or
expand
locations
in
their
existing
programs
in
the
municipality
where
the
university's
headquarters
is
located,
without
prior
permission
of
MEC.
Additionally,
universities
have
the
ability,
upon
prior
authorization
by
MEC,
to
apply
for
accreditation
of
new
campuses
and
courses
outside
the
municipality
where
the
university's
seat
is
located,
provided
that
they
are
within
the
same
state
as
the
seat.

Among
the
HEI
in
the
Laureate International Universities network,
there
are
three
faculdades (Faculdade
Internacional
da
Paraíba,
located
in
João
Pessoa,
PB;
Faculdades
Porto-Alegrense,
located
in
Porto
Alegre,
RS;
and
Faculdade
dos
Guararapes
de
Recife,
located
in
Recife,
PE),
six
university
centers
(FADERGS
Centro
Universitário,
located
in
Porto
Alegre,
RS;
Centro
Universitário
dos
Guararapes,
located
in
Jaboatão
dos
Guararapes,
PE;
FMU
Education
Group,
located
in
São
Paulo,
SP;
Centro
Universitário
Ritter
dos
Reis,
located
in
Porto
Alegre,
RS;
Centro
Universitário
do
Norte,
located
in
Manaus,
AM;
and
Instituto
Brasileiro
de
Medicina
de
Reabilitação—IBMR,
located
in
Rio
de
Janeiro,
RJ),
as
well
as
three
universities
(Universidade
Potiguar,
located
in
Natal,
RN;
UNIFACS—
Universidade
Salvador,
located
in
Salvador,
BA;
and
Universidade
Anhembi
Morumbi,
located
in
São
Paulo,
SP).
In
addition,
Business
School
São
Paulo,
which
is
a
professional
degree-granting
institution,
is
owned
and
operated
by
Universidade
Anhembi
Morumbi,
and
CEDEPE
Business
School,
which
is
a
professional
degree-granting
institution,
is
operated
as
a
division
of
Faculdade
dos
Guararapes
de
Recife.
As
noted
below,
each
form
of
HEI
is
entitled
to
a
different
level
of
autonomy
within
the
regulatory
framework.
In
turn,
we
factor
the
respective
levels
of
autonomy
into
the
operational
strategy
for
each
HEI,
as
the
requirement
of
prior
or
post-facto
MEC
approval
can
delay
or
nullify
specific
new
campus
expansion
projects,
new
course
offerings,
and
increases
in
the
number
of
authorized
seats
per
course.

Legislation
provides
for
specific
levels
of
didactic,
scientific
and
administrative
autonomy
to
universities,
university
centers
and
colleges
in
differing
degrees
with
the
aim
of
limiting
outside
influence
by
other
institutions
or
persons
outside
of
the
HEI's
internal
governance
structure.

Table
of
Contents

LDB
provides
that
the
following
powers
are
guaranteed
to
universities
and
university
centers
in
the
exercise
of
their
autonomy:

•

creation,
organization,
and
extinguishment
of
degree
programs
in
their
facilities,
subject
to
applicable
regulations;

establishment
of
the
curriculum
of
their
courses
and
programs,
subject
to
applicable
general
guidelines;

establishment
of
plans,
programs
and
projects
related
to
scientific
research,
artistic
production
and
extracurricular
activities;

establishment
of
the
number
of
available
seats;
except
in
respect
of
programs
in
law,
medicine,
dentistry
and
psychology,
where
the
total
number
of
available
seats
in
the
entire
system
is
controlled
by
MEC
in
conjunction
with
the
input
of
the
relevant
professional
associations;

preparation
and
amendment
of
their
bylaws
in
accordance
with
the
general
applicable
standards;
and

the
right
to
grant
degrees,
diplomas
and
other
qualifications.

LDB
provides
that
the
following
powers
are
guaranteed
to
colleges
in
the
exercise
of
their
autonomy:

•

establishment
of
the
curriculum
of
their
courses
and
programs,
subject
to
applicable
general
guidelines;

establishment
of
plans,
programs
and
projects
related
to
scientific
research,
artistic
production
and
extracurricular
activities;

preparation
and
amendment
of
their
bylaws
in
accordance
with
the
general
applicable
standards;
and

the
right
to
grant
degrees,
diplomas
and
other
qualifications.

Although
colleges
have
administrative
autonomy,
they
do
not
enjoy
academic
autonomy
and,
therefore,
are
subject
to
MEC's
prior
authorization
to
create
new
programs
and
degree
programs.

Accreditation.

The
first
accreditation
of
an
institution
of
higher
education
is
necessarily
as
a
college.
The
accreditation
as
a
university
or
university
center
is
only
granted
after
the
institution
has
operated
as
a
college
for
at
least
six
years
and
has
demonstrated
that
it
has
met
satisfactory
quality
standards,
including
positive
evaluation
by
the
SINAES,
as
well
as
met
legal
requirements
applicable
to
each
type
of
institution
of
undergraduate
learning,
including
minimum
degree
attainment
and
terms
of
faculty
employment.

LDB
establishes
that
higher
education
shall
include
the
following
programs:

•

continuing
education
programs
(
cursos sequênciais ),
open
to
applicants
who
meet
the
requirements
established
by
the
higher
educational
institutions,
provided
they
have
completed
high
school
or
equivalent;

undergraduate
programs,
including
traditional
and
technological
undergraduate
programs,
that
are
open
to
applicants
who
have
completed
secondary
education
or
the
equivalent
and
have
passed
the
selection
process
or
university
entrance
examination;

graduate
programs,
including
master's
degrees
and
Ph.D.s,
specialization
programs,
advanced
training
courses
and
others,
open
to
applicants
who
have
an
undergraduate
degree
and
meet
the
requirements
set
by
the
educational
institutions;
and

Table
of
Contents

•

extension
programs
with
a
social
character
that
grant
certificates
to
students,
open
to
applicants
who
meet
the
requirements
established,
in
each
case,
by
the
educational
institutions.

Following
accreditation,
colleges
must
obtain
MEC
permission
to
offer
new
undergraduate
degree
programs.
As
a
consequence
of
their
autonomy,
universities
and
university
centers
do
not
require
MEC
authorization
to
create
programs
in
the
city
where
the
university's
or
university
center's
seat
is
located.
They
need
only
inform
MEC
about
the
programs
they
offer
for
registration,
evaluation
and
subsequent
recognition.
However,
the
creation
of
graduate
programs
in
law,
medicine,
dentistry
and
psychology,
whether
by
colleges,
universities
or
university
centers,
are
subject
to
the
opinion
of
the
proper
professional
associations.
These
associations
are
also
consulted
in
the
reaccreditation
process.

Additionally,
and
as
a
consequence
of
their
autonomy,
universities
also
can
apply
for
accreditation
of
campuses
and
the
authorization
and
recognition
of
programs
outside
the
municipality
where
the
university's
seat
is
located.
The
campuses
and
programs
not
located
in
the
city
of
the
university's
seat
are
not
entitled
to
the
autonomy
of
the
main
university
and
must
be
controlled
and
supervised
by
the
university.
Effectively,
these
campuses
are
treated
like
colleges
for
educational
regulatory
purposes.
Within
the
network
in
Brazil,
the
UnP
Mossoró
Campus,
the
UNIFACS
Feira
de
Santana
Campus
and
the
UniRitter
Canoas
Campus
fall
into
this
category.

Once
a
university
has
obtained
the
authorization
to
provide
a
particular
program,
the
HEI,
including
university
centers
and
universities,
also
must
obtain
the
recognition
of
such
course,
as
a
condition
for
national
validation
of
the
diploma.
The
application
for
recognition
must
be
made
at
least
one
year
after
the
start
of
the
program
and
no
later
than
half
of
the
time
required
for
its
completion.
The
authorization
and
the
recognition
of
programs
and
accreditation
of
institutions
of
higher
education
must
be
renewed
periodically
in
accordance
with
the
regularly
applicable
MEC
evaluation
process.

Evaluation.

SINAES
was
established
to
evaluate
HEI
as
institutions
of
higher
education,
traditional
degree
and
technology
degree
programs
and
student
academic
performance.
The
main
objective
of
this
evaluation
system
is
to
improve
the
quality
of
higher
education
in
Brazil.
In
practice,
the
CONAES
conducts
the
monitoring
and
coordination
efforts
of
SINAES.
The
results
of
the
institutional
and
course
evaluations
are
represented
on
a
scale
of
five
levels
and
are
considered
in
the
process
of
accreditation,
recognition
and
renewal
of
accreditation
of
programs
and
accreditation
and
reaccreditation
of
institutions.

In
the
case
of
unsatisfactory
results,
the
HEI
will
be
required
to
enter
into
an
agreement
with
MEC
that
establishes
a
remediation
program
that
includes
among
other
requirements:
(i)
diagnosis
of
the
unsatisfactory
conditions;
(ii)
development
and
implementation
of
measures
to
be
taken
to
remedy
the
unsatisfactory
conditions;
and
(iii)
establishment
of
deadlines
and
goals
for
remediation.

Failure
to
comply,
in
whole
or
in
part,
with
the
conditions
provided
in
the
term
of
commitment
may
result
in
one
or
more
penalties
imposed
by
MEC,
including
temporary
suspension
of
the
opening
of
the
selective
process
for
undergraduate
programs
and
cancellation
of
accreditation
or
reaccreditation
of
the
institution
and
the
authorization
for
operation
of
its
programs.

External
evaluations
of
institutions
of
higher
education
are
carried
out
by
the
INEP
in
two
instances,
first,
when
an
institution
applies
for
its
first
accreditation
and
second,
by
the
end
of
each
evaluation
cycle
of
SINAES.
Institutions
of
higher
education
are
evaluated
based
on
the
following
criteria,
among
others:
(i)
institutional
development
plan;
(ii)
social
and
institutional
responsibility;
(iii)
infrastructure
and
financial
condition;
and
(iv)
pedagogical
monitoring
of
student
academic
performance.

The
evaluation
of
undergraduate
programs
is
made
at
the
time
of
the
first
accreditation
by
MEC,
and
consists
of
the
analysis
of
academic
methodology,
faculty,
student
and
technical-administrative
bodies
and
the
infrastructure
of
the
institution
and
is
periodically
updated
at
the
end
of
each
evaluation
cycle
of
SINAES.

Table
of
Contents

The
evaluation
of
graduate
programs
is
made
by
the
Coordinating
Agency
for
the
Improvement
of
Highly
Educated
Persons
("CAPES"),
which
is
responsible
for
establishing
the
quality
standard
required
of
masters
and
doctoral
programs
along
with
the
identification
and
evaluation
of
the
courses
that
meet
this
standard.
Its
recommendations
are
subject
to
the
approval
of
the
CNE.
Programs
are
evaluated
according
to
the
requirements
established
for
each
specific
program.
CAPES
updates
its
evaluation
of
graduate
programs
every
three
years,
which
is
the
validity
period
of
an
authorization.

The
evaluation
of
student
academic
performance
is
conducted
by
INEP,
which
requires
each
student
to
sit
for
the
ENADE
in
order
to
verify
the
knowledge
and
technical
skill
of
the
student
body.
Each
ENADE
test
is
developed
in
accordance
with
the
content
and
specific
curriculum
of
each
educational
program.
Students
enrolled
in
undergraduate
programs
take
the
ENADE
every
three
years.
In
this
system,
students
are
evaluated
at
the
end
of
the
last
year
of
each
program.

The
overall
grade
for
each
class
of
students
is
calculated
based
on
the
weighted
arithmetic
average
of
all
students
in
a
specific
program
selected
for
the
exam.
INEP
evaluates
the
standard
deviation
of
the
student's
evolution
in
each
program
in
order
to
compare
it
with
national
standards.

Transfer of control of mantenedoras.

The
change
of
control
of
mantenedoras
does
not
require
prior
approval
from
MEC.
A
change
of
control
need
only
be
reported
to
MEC
after
the
fact.
However,
the
transfer
of
an
HEI
(mantida)
to
another
mantenedora
must
be
previously
approved
by
MEC.
The
new
mantenedora
must
meet
the
necessary
requirements
for
accreditation
of
an
institution
of
higher
education
and
provide
all
appropriate
documentation
proving
economic,
financial
and
academic
capacity
to
do
so.
Laureate's
usual
method
for
the
acquisition
of
control
is
to
acquire
an
interest
in
a
pre-existing
mantenedora.
There
may
be
circumstances
in
the
future
that
warrant
a
departure
from
this
course
of
conduct,
in
which
case
Laureate
will
follow
the
prescribed
MEC
requirements.

Although
changes
of
control
exercised
by
Laureate
do
not
ordinarily
need
MEC
prior
approval
or
review,
due
to
the
level
of
Laureate's
consolidated
gross
revenues
throughout
Brazil,
current
Brazilian
law
requires
that
every
control
transaction,
with
limited
exceptions,
that
Laureate
enters
into
must
be
submitted
to
the
Brazilian
anti-trust
authority,
the
Conselho
Administrativo
de
Defesa
Economico
(the
"CADE"),
for
approval.
Such
request
for
approval
must
be
granted
prior
to
the
definitive
closing
of
such
transaction.
CADE
has
the
power
to
reject
and/or
alter
any
transaction
or
any
part
of
a
transaction
that
it
deems
to
unduly
restrict
competition.

Incentive program.

PROUNI
is
a
federal
program
of
tax
benefits
designed
to
increase
higher
education
participation
rates
by
making
college
more
affordable.
PROUNI
provides
private
HEI
with
an
exemption
from
certain
federal
taxes
in
exchange
for
granting
partial
and
full
scholarships
to
low-income
students
enrolled
in
traditional
and
technology
undergraduate
programs.
All
of
our
HEI
adhere
to
PROUNI.

HEI
may
join
PROUNI
by
signing
a
term
of
membership
valid
for
ten
years
and
renewable
for
the
same
period.
This
term
of
membership
shall
include
the
number
of
scholarships
to
be
offered
in
each
program,
unit
and
class,
and
a
percentage
of
scholarships
for
degree
programs
to
be
given
to
indigenous
and
Afro-
Brazilians.
To
join
PROUNI,
an
educational
institution
must
maintain
a
certain
relationship
between
the
number
of
scholarships
granted
to
regular
paying
students.
The
relationship
between
the
number
of
scholarships
and
regular
paying
students
is
tested
annually.
If
this
relationship
is
not
observed
during
a
given
academic
year
due
to
the
departure
of
students,
the
institution
must
adjust
the
number
of
scholarships
in
a
proportional
manner
the
following
academic
year.

An
HEI
that
has
joined
PROUNI
and
remains
in
good
standing
is
exempted,
in
whole
or
in
part,
from
the
following
taxes
during
the
period
in
which
the
term
of
membership
is
in
effect:

•

IRPJ
(income
tax)
and
CSLL
(social
contribution),
with
respect
to
the
portion
of
net
income
in
proportion
to
revenues
from
traditional
and
technology
undergraduate
programs;
and

Table
of
Contents

•

Cofins
(Contribution
for
the
Financing
of
Social
Security)
and
PIS
(Program
of
Social
Integration),
concerning
revenues
from
traditional
and
technology
undergraduate
programs.

A
number
of
municipal
and
state
governments
have
sought
to
replicate
PROUNI
by
creating
their
own
programs
that,
for
example,
offer
tax
incentives
through
a
reduction
in,
or
credits
against,
the
ISS
(Municipal
Services
Tax)
in
exchange
for
scholarships
to
targeted
social
groups
or
professions.
Laureate
owns
and
operates
HEI
in
several
jurisdictions
where
such
local
incentive
programs
are
in
force.

Student financing program.

FIES
is
a
federal
program
established
to
provide
financing
to
students
enrolled
in
courses
in
private
institutions
of
higher
education
that
have
maintained
a
minimum
satisfactory
evaluation
according
to
SINAES
and
receive
a
grade
of
3
or
higher
out
of
5
on
the
ENADE.
The
primary
factor
in
determining
whether
a
student
is
eligible
to
receive
full
or
partial
financing
is
how
he
or
she
scores
on
the
program's
means
testing
of
household
income
relative
to
the
cost
of
tuition.

Under
this
basic
structure,
FIES
targets
both
of
the
government's
education
policy
goals:
increased
access
and
improved
academic
quality
outcomes.
The
HEI
receives
the
benefit
of
the
FIES
program
through
its
participation
in
the
intermediation
of
CFT-E
(Certificado
Financeiro
do
Tesouro)
bonds,
which
are
public
bonds
issued
to
the
HEI
by
the
federal
government
that
the
HEI
may
use
to
pay
the
national
social
security
tax
imposed
by
the
INSS
(National
Social
Security
Institute)
and
certain
other
federal
tax
obligations.
If
the
HEI
is
current
with
its
taxes
(i.e.,
it
possesses
a
tax
clearance
certificate
and
is
not
otherwise
involved
in
any
tax-related
disputes
with
the
federal
government
that
are
not
being
defended
in
compliance
with
applicable
security/bond
requirements)
then
the
HEI
also
has
the
option
to
sell
the
bonds
for
cash
in
a
public
auction
conducted
by
one
of
the
government-sponsored
banks.

Although
the
federal
government
is
the
direct
creditor
to
the
students,
federal
law
stipulates
that
the
HEI
bear
a
portion
of
the
credit
risk,
which
level
of
risk
has
been
subject
to
change
in
recent
years.
There
are
two
different
types
of
guarantees
in
FIES
contracts:

•

contracts
with
guarantor(s),
when
the
student
names
someone
(or
a
group
of
people)
as
the
underwriter(s)
of
his
or
her
loan.
In
this
case,
the
HEI
is
responsible
for
up
to
15%
(for
institutions
with
no
tax
disputes)
and
up
to
30%
(if
the
institution
has
one
or
more
open
tax
disputes
that
are
not
being
defended
in
compliance
with
the
applicable
security/bond
requirements)
of
all
related
delinquencies.
In
the
past,
to
effectuate
this
contribution
the
federal
government
withheld
between
1%
and
3%
of
the
value
of
the
HEI's
monthly
CFT-E
receipts
during
the
course
of
the
student's
enrollment,
but
this
has
been
replaced
by
the
FGEDUC
guarantee
described
below.
In
case
there
is
no
default,
or
the
default
is
smaller
than
the
amount
blocked,
the
federal
government
will
release
the
withheld
CFT-E
amounts.
The
government
has
yet
to
establish
guidelines
determining
how
the
HEI
shall
remit
the
unpaid
balance
in
the
event
that
the
default
amount
is
higher
than
the
blocked
amounts;
and

contracts
with
a
guarantee
by
FGEDUC,
a
public
fund
created
for
this
purpose,
as
the
underwriter
of
his
or
her
loan.
Since
February
2014,
FGEDUC
has
become
mandatory
for
all
new
FIES
students.
In
this
case
the
federal
government
requires
a
contribution
of
5.63%
of
the
tuition
value
from
the
HEI.
The
HEI
contributes
5.63%
of
the
FIES
student's
full
tuition
to
the
federal
fund.
FGEDUC
guarantees
90%
of
the
loan
amount,
leaving
the
HEI
responsible
for
15%
of
the
other
10%
in
case
of
default.

Since
February
2014,
all
new
students
who
participate
in
FIES
must
also
enroll
in
FGEDUC.
FGEDUC
allows
participating
educational
institutions
to
insure
themselves
for
90%
(or
13.5%
of
15%)
of
their
losses
related
to
student
defaults
under
the
FIES
program.
The
cost
of
the
program
is
6.25%
of
the
amount
covered,
which
represents
5.63%
of
a
student's
full
tuition.
Similar
to
FIES,
the
administrator
withholds
5.63%
of
a
student's
tuition
to
fund
the
guarantee
by
FGEDUC.

Table
of
Contents

As
of
December
31,
2016,
approximately
20%
of
our
students
in
Brazil
participated
in
FIES,
representing
approximately
29%
of
our
Brazil
2016
revenues.

In
December
2014,
the
MEC
along
with
FNDE,
the
agency
that
directly
administers
FIES,
announced
several
significant
rule
changes
to
the
FIES
program
beginning
in
2015.
These
changes
raise
the
eligibility
requirements,
reduce
the
annual
budget
of
the
program
and
delay
payments
to
post-secondary
institutions
with
more
than
20,000
FIES
students
that
would
otherwise
have
been
due
in
2015.
The
first
change
implements
a
minimum
score
on
the
high
school
achievement
exam
in
order
to
enroll
in
the
program.
The
second
change
alters
the
schedule
for
the
payment
and
repurchase
of
credits
as
well
as
limits
the
opportunities
for
post-
secondary
institutions
to
sell
any
unused
credits
such
that
there
is
a
significant
delay
between
the
time
the
post-secondary
institution
provides
the
educational
services
to
the
students
and
the
time
it
receives
payment
from
the
government
for
2015.
In
addition
to
these
rule
changes,
FNDE
implemented
a
policy
for
current
students'
loan
renewals
for
2015,
which
provides
that
returning
students
may
not
finance
an
amount
that
increases
by
more
than
6.41%,
which
was
later
increased
to
8.5%,
from
the
amount
financed
in
the
previous
semester,
regardless
of
any
increases
in
tuition
or
in
the
number
of
courses
in
which
the
student
is
enrolled,
a
policy
that
we
believe
violates
the
applicable
law.
For
2016,
MEC
announced
that
there
will
be
no
limitation
to
the
tuition
increase.
Moreover,
in
the
first
and
second
intakes
of
2015,
the
online
enrollment
and
re-enrollment
system
that
all
post-secondary
institutions
and
students
must
use
to
access
the
program
has
experienced
numerous
technical
and
programming
faults
that
have
also
interfered
with
the
enrollment
and
re-enrollment
process.
Numerous
challenges
to
these
changes
and
requests
for
judicial
relief
from
the
system's
faults
have
been
filed
in
the
Brazilian
courts,
most
of
which
are
pending.
The
2016
enrollment
and
re-
enrollment
schedule
has
been
released
and,
so
far,
the
system
has
not
presented
any
material
issues.

In
October
2015,
FNDE
initiated
negotiations
with
ABRAES
aiming
at
settling
the
FIES
payments
that
were
delayed
in
2015.
The
proposal
from
MEC,
which
was
accepted
by
ABRAES,
was
to
divide
the
total
amount
due
into
three
annual
installments
to
be
paid
one
fourth
in
2016,
one
fourth
in
2017
and
half
in
2018.
The
parties
also
agreed
that
the
yearly
installments
will
be
paid
in
June
of
each
year,
and
the
amounts
will
be
adjusted
to
reflect
an
inflation
index
from
the
date
of
the
respective
maturity
until
the
effective
payment.
FNDE
also
agreed
not
to
take
any
discriminatory
measures
in
the
future
related
to
the
payment
due
to
the
post-
secondary
institutions,
and
not
to
impose
any
limitation
on
the
issuance
of
certificates
and
repurchase
of
credits
due
to
the
post-secondary
institutions,
which
basically
means
that
all
certificates
will
be
issued
and
repurchased
in
their
respective
fiscal
years,
except
for
those
intended
to
be
issued
and
repurchased
in
December,
which
will
be
paid
in
January
of
the
following
year.
The
parties
executed
the
settlement
agreement
on
January
28,
2016
and
it
was
approved
by
the
office
of
the
Attorney
General
of
Brazil
on
February
3,
2016.
The
Federal
Court
of
Brasilia
ratified
the
settlement
agreement
on
March
17,
2016.
Our
post-
secondary
institutions
in
Brazil
are
associated
with
ABRAES
and
signed
the
settlement
agreement
as
well;
therefore,
it
will
apply
to
us.

On
December
11,
2015,
MEC
issued
Normative
Ordinance
No.
13,
which
supersede
in
all
significant
aspects
the
rules
previously
in
force.
Normative
Ordinance
No.
13
defined
and
clarified
some
rules
for
student
eligibility
and
classification,
higher
education
institution
participation
and
selection
of
the
vacancies
that
will
be
offered
to
the
students
in
the
first
intake
of
2016.

Table
of
Contents

Regarding
the
participation
of
post-secondary
institutions
in
FIES,
institutions
still
must
sign
a
participation
agreement
that
contains
their
proposal
of
the
number
of
vacancies
offered
and
the
following
information
per
shift
(morning,
evening)
and
campus
location:
(i)
tuition
gross
amount
for
the
entire
course,
including
all
semesters;
(ii)
total
tuition
gross
amount
per
course
for
the
first
semester,
which
must
reflect
at
least
a
five
percent
discount
to
the
course
list
price;
and
(iii)
the
number
of
vacancies
that
will
be
offered
through
the
FIES
selection
process.
Also,
only
courses
with
scores
of
3,
4
or
5
in
the
SINAES
evaluation
are
eligible
to
receive
FIES
students.

On
July
14,
2016,
Provisional
Presidential
Decree
No.
741/2016
(Medida
Provisória
No.
741/2016)
revising
the
FIES
payments
rules
was
published
in
the
official
gazette.
According
to
the
new
decree,
higher
education
institutions
became
liable
for
the
administration
fees
and
expenses
charged
by
the
government
banks
that
manage
FIES
loans.
The
decree
became
effective
immediately
and
the
government
will
withhold
two
percent
of
all
FIES
payments
to
cover
such
administration
fees
and
expenses.
Provisional
presidential
decrees
are
instruments
with
the
force
of
law
that
the
President
of
Brazil
can
issue
in
cases
of
importance
and
urgency.
They
have
immediate
effect
and
are
valid
for
60
days,
extendable
only
once
for
the
same
period.
Effectiveness
beyond
that
period
required
approval
of
the
National
Congress,
which
took
place
on
November
9,
2016,
and
it
was
enacted
into
law
on
December
2,
2016
(Law
No.
13.366/2016).

In
August
2016,
the
MEC
issued
Normative
Ordinance
No.
17
expanding
the
guidelines
previously
defined
in
Normative
Ordinance
No.
13.
Among
other
things,
Normative
Ordinance
No.
17
describes
in
greater
detail
how
to
calculate
remaining
vacancies,
sets
forth
procedures
and
deadlines
for
the
completion
of
the
filling
of
the
remaining
vacancies,
and
provides
for
dealing
with
exceptional
situations
where
procedural
errors
or
other
obstacles
have
prevented
students
from
accessing
remaining
vacancies
in
a
timely
manner.

•

to
up
to
50%
of
the
number
of
vacancies
in
courses
with
a
score
of
5
(from
up
to
100%);

to
up
to
40%
of
the
number
of
vacancies
in
courses
with
a
score
of
4
(from
up
to
75%);

to
up
to
30%
of
the
number
of
vacancies
in
courses
with
a
score
of
3
(from
up
to
50%);
and

to
up
to
25%
of
the
number
of
vacancies
in
courses
that
are
in
the
process
of
authorization
by
MEC
(from
up
to
50%).

Brazil's
economy
continues
to
present
challenges
to
growth
and
create
pricing
pressures
in
the
education
sector.
Our
new
student
enrollment
in
Brazil
was
negatively
affected
by
these
conditions
as

Table
of
Contents

well
as
the
changes
to
the
FIES
program.
If
economic
conditions
continue
to
weaken
and
the
Brazilian
government
implements
additional
austerity
measures,
our
ability
to
grow
our
student
enrollment
in
Brazil
may
be
further
negatively
affected.
The
Brazilian
government's
changes
to
the
FIES
program
resulted
in
a
substantial
increase
in
the
total
number
of
new
FIES
contracts
in
that
country
in
2014,
an
election
year,
and
then
a
reduction
in
the
total
number
of
new
FIES
contracts,
from
over
700,000
in
2014
to
approximately
300,000
in
2015.
As
a
result,
Laureate's
new
enrollments
of
students
in
the
FIES
program
also
decreased
similarly
in
2015;
however,
this
did
not
have
a
material
impact
on
our
2015
results
of
operations
since
total
enrollments
for
all
students
increased
in
2015.
Any
potential
impact
on
total
enrollment
would
not
occur
until
the
FIES
students
from
the
expansion
of
the
program
have
graduated,
and
would
depend
on
the
Brazilian
government's
commitment
to
the
FIES
program.
In
addition,
the
Brazilian
government
reduced
the
frequency
of
payments
to
participating
institutions
during
2015.
In
2017,
a
new
rule
was
adopted
as
part
of
the
FIES
regulations
that
limits
the
total
amount
financed
each
semester
to
BRL
30,000
per
student
and
allows
the
students
to
pay
any
amount
in
excess
of
such
limit
directly
to
the
HEI
(Normative
Ordinance
No.
04/2017).

Distance education.

Distance
Education,
or
Educação
à
Distância
("EaD")
in
Brazil,
is
regulated
by
the
LDB.
The
law
defines
EaD
as
an
educational
modality
in
which
the
didactic
and
pedagogical
measurement
in
teaching
and
learning
processes
occur
with
the
use
of
media,
information
and
communication
technologies,
with
students
and
teachers
developing
educational
activities
at
different
places
and/or
times.

EaD
programs
can
be
offered
at
different
levels
and
types
of
higher
education,
like
professional
education,
including
technical,
medium
and
technological
level
of
higher
education,
higher
education,
covering
continuing
education
programs,
undergraduate,
specialization,
masters
and
PhD.
EaD
programs
may
only
be
offered
by
HEI
that
are
regularly
accredited
by
the
MEC.
The
accreditation
request
and
respective
renewal
for
EaD
programs
is
separate
from
the
accreditation
process
for
the
in-person
programs
delivered
by
the
HEI.

Universities
and
university
centers
accredited
to
offer
EaD
programs
may
create,
organize
and
extinguish
courses
or
higher
education
programs,
upon
notice
to
MEC,
and
the
courses
or
programs
created
can
only
be
offered
within
the
limits
of
the
scope
defined
in
the
HEI's
accreditation
act.
Colleges
(faculdades),
must
request
MEC
authorization
to
offer
each
specific
EaD
program.

The
list
of
requirements
for
accreditation
in
the
federal
education
system
comprehends
physical
infrastructure,
academic
facilities,
and
details
the
characteristics
and
equipment
for
the
library
and
laboratory
operations,
along
with
the
accessibility
plan
and
priority
seating.
Once
issued,
the
EaD
accreditation
license
issued
by
MEC
defines
the
scope
of
the
HEI's
EaD
operations
in
the
country,
and
any
expansion
beyond
the
licensed
area
may
only
occur
with
specific
MEC
permission.
The
HEI
accreditation
for
the
provision
of
EaD
programs
is
valid
for
the
evaluation
cycle
term
and
is
renewable.

EaD
programs
must
be
designed
with
the
same
duration
as
their
respective
in-person
course
programs.
Moreover,
the
EaD
regulatory
scheme
requires
that
the
HEI
perform
some
aspects
in-person
as
follows:
(i)
student
assessments;
(ii)
compulsory
trainee
programs,
when
provided
for
in
the
relevant
legislation;
(iii)
dissertation
defense
for
course
completion,
when
provided
for
in
the
relevant
legislation;
and
(iv)
activities
related
to
teaching
laboratories,
where
applicable.
The
in-person
events
must
be
performed
at
the
HEI's
campus
or
at
a
specific,
brick
and
mortar
learning
center
duly
accredited
for
this
purpose,
referred
to
as
a
"polo."

It
is
also
noteworthy
that
the
HEI
offering
EaD
programs,
particularly
the
polos,
are
subject
to
inspection
by
the
MEC
at
any
time.
Those
inspections
aim
to
demonstrate
whether
those
HEI
are
compliant
with
legal
and
regulatory
requirements.
In
the
event
of
any
irregularity
not
corrected
within
the
given
deadlines,
the
HEI
may
be
subject
to
certain
penalties,
including
disqualification.

Table
of
Contents

EaD
certificates
or
diplomas
issued
by
accredited
HEI
have
national
validity
with
the
same
force
and
effect
as
those
certificates
or
diplomas
issued
for
the
completion
of
in-person
programs.

Chilean
Regulation

The
Political
Constitution
of
the
Republic
of
Chile
guarantees
every
individual's
right
to
education
and
sets
forth
the
state's
obligation
to
promote
the
development
of
education
at
all
levels.
It
also
provides
for
liberty
in
teaching,
which
includes
the
right
to
open,
organize
and
maintain
educational
institutions,
providing
that
a
Constitutional
Organic
Law,
which
requires
a
super-majority
vote
in
the
Chilean
Congress,
must
establish
the
requirements
for
the
official
recognition
of
educational
institutions.

The
General
Law
on
Education
sets
forth
the
requirements
and
the
procedure
for
the
official
recognition
of
educational
institutions,
providing
for
an
educational
system
that
is
mixed
in
nature,
including
a
form
of
education
owned
and
managed
by
the
state
and
its
bodies
and
another
one
that
is
privately
provided.
The
principles
that
inspire
the
Chilean
educational
system
include
those
of
universality,
by
virtue
of
which
education
should
be
affordable
to
all
individuals,
quality
of
education,
and
respect
for
and
promotion
of
the
autonomy
of
the
educational
institutions,
within
the
framework
of
the
laws
governing
them.

In
the
case
of
higher
education,
the
law
provides
a
licensing
system
for
new
institutions
that,
once
completed,
makes
it
possible
for
these
institutions
to
achieve
full
autonomy.
This
autonomy
consists
of
every
higher
education
institution's
right
to
govern
itself,
as
provided
in
its
bylaws,
in
all
matters
regarding
the
fulfillment
of
its
purpose,
and
encompasses
academic,
economic
and
administrative
autonomy.
Academic
autonomy
includes
the
higher
education
entities'
power
to
decide
by
themselves
the
manner
in
which
their
teaching,
research
and
extension
functions
will
be
fulfilled
and
the
establishment
of
their
curricula
and
programs.
Economic
autonomy
makes
it
possible
for
those
establishments
to
manage
their
resources
to
fulfill
their
goals
pursuant
to
their
bylaws
and
the
laws,
while
administrative
autonomy
empowers
each
higher
education
establishment
to
organize
its
operation
in
the
form
deemed
most
appropriate
in
accordance
with
its
bylaws
and
the
relevant
laws.

The
Ministry
of
Education
("MINEDUC")
is
the
department
of
state
in
charge
of
promoting
the
development
of
education
at
all
levels.
Its
functions
include
those
of
proposing
and
assessing
the
policies
and
plans
for
educational
and
cultural
development,
assigning
the
necessary
resources
for
the
conduct
of
educational
and
cultural
extension
activities,
evaluating
the
development
of
education,
discussing
and
proposing
general
norms
applicable
to
the
sector
and
overseeing
their
enforcement,
granting
official
recognition
to
educational
institutions,
supervising
the
activities
of
its
dependent
units
and
fulfilling
the
other
functions
assigned
by
the
law.

The
MINEDUC's
Higher
Education
Division
is
the
unit
in
charge
of
overseeing
compliance
with
the
legal
and
regulatory
norms
that
govern
higher
education,
of
providing
advice
on
the
proposal
of
policies
at
this
level
of
education
and
of
establishing
institutional
relations
with
the
officially
recognized
higher
education
institutions.

The
National
Education
Council
(
Consejo Nacional de Educación )
is
an
autonomous
entity
composed
of
ten
members
who
must
be
academicians,
professors
or
professionals
with
an
outstanding
career
in
teaching
and
educational
management
and
whose
functions,
regarding
higher
education,
consist
of:

•

managing
the
license-granting
system
for
new
institutions;

deciding
on
institutional
projects
submitted
by
institutions
for
the
purpose
of
their
official
recognition;

verifying
the
development
of
institutional
projects
of
the
institutions
that
have
been
approved;

Table
of
Contents

•

establishing
selective
examination
systems
for
the
subjects
or
courses
of
study
delivered
by
the
higher
education
institutions
subject
to
license-
granting
processes
in
order
to
evaluate
compliance
with
the
curricula
and
programs
and
the
performance
of
students;

requesting
from
the
MINEDUC,
on
a
supported
basis,
the
revocation
of
official
recognition
of
the
universities,
professional
institutes
and
technical
training
centers
under
the
license-granting
process;

managing
the
revocation
process
of
higher
education
institutions;

assisting
the
MINEDUC
in
the
management
of
the
shutdown
processes
of
autonomous
higher
education
institutions,
especially
as
to
the
process
of
awarding
diplomas
and
degrees
to
students
who
are
in
the
course
of
their
education
at
the
time
of
shutdown;
and

serving
as
an
appeals
body
for
decisions
of
the
National
Accreditation
Commission.

The
National
Accreditation
Commission
(
Comisión Nacional de Acreditación )
is
an
autonomous
entity,
the
function
of
which
is
to
verify
and
promote
the
quality
of
the
autonomous
universities,
professional
institutes
and
technical
training
centers
and
of
the
courses
of
study
and
programs
offered
by
them.
In
particular,
the
National
Accreditation
Commission
is
required
to
deliver
an
opinion
on
the
institutional
accreditation
of
higher
education
institutions,
authorize
the
private
agencies
in
charge
of
accreditation
of
courses
of
study
and
undergraduate
programs
and
bachelor
programs
and
specialty
programs
in
the
area
of
health,
and
supervise
their
operation.

The
Managing
Commission
of
the
Credit
System
for
Higher
Education
Studies
(
Comisión Administradora del Sistema de Créditos para Estudios Superiores
)
is
an
entity
whose
functions
include
defining
and
assessing
policies
for
the
development
and
implementation
of
financing
arrangements
for
higher
education
studies,
entering
into
and
proposing
modifications
to
any
necessary
agreements
with
both
domestic
and
foreign
public
and
private
financing
entities
and
implementing
those
arrangements,
and
defining
and
evaluating
the
policies
for
higher
education
loans
guaranteed
by
the
state.

Organization and recognition of higher education institutions.

The
law
recognizes
state-owned
higher
education
institutions,
which
may
only
be
created
by
a
law,
and
private
institutions
that
must
be
organized
in
accordance
with
provisions
contained
in
the
law.
The
Chilean
legislation
provides
that
the
state
will
officially
recognize
the
following
higher
education
institutions:

•

Universities:

Universities
may
grant
professional
certificates
and
all
kinds
of
academic
degrees,
including
graduate
certificates,
bachelor's
degrees
and
Ph.Ds.
Universities
are
the
only
institutions
entitled
to
grant
professional
certificates
with
respect
to
which
the
law
requires
having
previously
obtained
a
bachelor's
degree.

Professional Institutes:

Professional
institutes
may
only
confer
professional
certificates
of
the
type
that
do
not
require
a
bachelor's
degree,
and
technical
certificates
of
a
superior
level
to
those
students
who
have
completed
programs
of
at
least
1,600
class
hours
without
receiving
a
bachelor's
degree.

Technical Training Centers:

Technical
training
centers
may
only
confer
a
technical
certificate
of
a
superior
level
to
those
students
who
have
completed
programs
of
at
least
1,600
class
hours.

Educational
institutions
of
the
armed
forces
and
police.

Private
universities
must
be
created
in
accordance
with
the
procedures
set
forth
by
law,
and
must
always
be
not-for-profit
entities
in
order
to
be
officially
recognized.

Private
professional
institutes
and
technical
training
centers
may
be
created
by
any
individual
or
legal
entity,
they
may
be
organized
as
for-profit
or
not-for-
profit
entities,
and
their
sole
purpose
must
be
the
creation,
organization
and
maintenance
of
a
professional
institute
or
technical
training
center.

Table
of
Contents

In
order
to
be
officially
recognized,
universities,
professional
institutes
and
technical
training
centers
must
have
the
necessary
teaching,
didactic,
economic,
financial
and
physical
resources
to
offer
the
academic
degrees,
professional
certificates
or
technical
certificates,
as
appropriate,
which
must
be
certified
by
the
National
Education
Council.
Additionally,
these
institutions
must
have
a
certification
granted
by
the
National
Education
Council
evidencing
that
the
entity
has
had
both
its
institutional
project
and
its
academic
programs
approved
and
that
it
will
have
the
progressive
verification
of
its
institutional
development
performed.
Higher
education
institutions
may
only
start
their
teaching
activities
once
the
official
recognition
has
been
granted.

The
official
recognition
of
a
higher
education
institution
may
be
revoked
and,
in
the
case
of
universities,
their
legal
existence
may
be
revoked
through
a
supported
Statutory
Decree
of
the
MINEDUC,
after
a
decision
of
the
National
Education
Council
adopted
by
the
majority
of
its
members
in
a
meeting
called
for
that
sole
purpose
and
after
hearing
the
affected
party,
if
that
party
(i)
fails
to
comply
with
the
objectives
set
forth
in
its
bylaws,
(ii)
conducts
activities
contrary
to
morals,
public
order,
good
customs
or
national
security,
(iii)
commits
gross
violations
of
its
bylaws,
or
(iv)
ceases
to
confer
professional
certificates
to
its
graduates.

The
law
provides
for
a
system
of
license
grants
to
higher
education
institutions,
which
includes
the
approval
of
institutional
project
and
the
evaluation,
progress
and
materialization
of
its
educational
project
for
a
period
of
no
less
than
six
years,
at
the
end
of
which
they
may
become
fully
autonomous.

National system of quality assurance in higher education.

The
law
provides
for
a
system
of
quality
assurance
in
higher
education
that
includes
a
system
of
institutional
accreditation
that
consists
of
a
process
of
analysis
of
existing
mechanisms
within
the
autonomous
higher
education
institutions
to
guarantee
their
quality,
bearing
in
mind
both
the
existence
of
those
mechanisms
and
their
application
and
results,
and
a
process
of
accreditation
of
courses
of
study
or
programs,
consisting
of
a
process
of
verification
of
the
quality
of
the
courses
of
study
or
programs
offered
by
the
autonomous
higher
education
institutions,
on
the
basis
of
their
declared
purposes
and
the
criteria
set
forth
by
the
respective
academic
and
professional
communities.

Both
the
institutional
accreditation
and
the
accreditation
of
courses
of
study
and
undergraduate
programs
are
voluntary,
except
that
the
courses
of
study
and
academic
programs
leading
to
the
professional
degrees
of
Surgeon,
Elementary
Education
Teacher,
Secondary
Education
Teacher,
Differential
Education
Teacher
and
Nursery
School
Teacher
are
subject
to
mandatory
accreditation.

The
institutional
accreditation
is
filed
with
the
National
Accreditation
Commission,
whereas
the
accreditation
of
courses
of
study
and
undergraduate
programs
can
be
performed
by
domestic,
foreign
or
international
accreditation
entities
authorized
by
the
National
Accreditation
Commission.

Tax benefits.

Chilean
universities
recognized
by
the
state,
and
the
associations,
corporations,
partnerships
and
foundations
that
are
created,
organized
or
maintained
by
those
universities,
are
exempted
from
paying
tax
on
the
income
arising
exclusively
from
their
educational
activities.
Likewise,
educational
institutions
are
exempted
from
paying
value-added
tax,
an
exemption
that
is
limited
to
the
revenues
arising
from
their
teaching
activities.
Additionally,
universities
are
exempted
from
paying
withholding
taxes
for
payments
made
abroad.
There
are
also
specific
tax
benefits
for
donations
made
to
universities.

Financing.

The
Chilean
state
contributes
to
the
direct
financing
of
universities
existing
as
of
December
31,
1980
by
means
of
contributions
from
the
state.
In
addition,
all
universities,
professional
institutes
and
technical
training
centers
recognized
as
higher
education
institutions
receive
an
indirect
contribution
from
the
state,
which
is
distributed
on
the
basis
of
the
scores
obtained
in
the
university
admission
test
by
the
students
enrolled
in
each
higher
education
institution.

Table
of
Contents

Under
the
CAE
Program,
the
state
guarantees
up
to
90%
of
the
principal
plus
interest
on
loans
granted
by
financial
institutions
to
students
of
higher
education
at
autonomous,
accredited
institutions
officially
recognized
by
the
state
that
select
their
first-year
students
on
the
basis
of
the
score
obtained
in
the
university
admission
test
and
that
use
the
aforesaid
indirect
contribution
by
the
state
exclusively
for
institutional
development
purposes.

The
NMS
program
supports
access
to
vocational
and
technical
education
for
students
in
the
lowest
70%
who
met
or
exceeded
certain
academic
standards
by
providing
annual
scholarships
(i)
under
NMS
I
in
amounts
up
to
CLP
600,000;
(ii)
under
NMS
II
in
amounts
up
to
CLP
850,000
per
year
for
students
who
come
from
the
first
five
income
deciles
if
the
tech/voc
institution
in
which
they
are
enrolled
is
organized
as
a
not-for-profit
legal
entity
or,
if
the
tech/voc
institution
is
not
so
organized,
the
institution
has
stated
in
writing
its
intention
to
become
a
not-for-profit
entity
and
to
be
accredited;
and
(iii)
under
NMS
III
in
amounts
up
to
CLP
900,000
per
year,
provided
that
such
students
and
the
institution
in
which
they
enroll
meet
the
requirements
for
NMS
II
and
the
tech/voc
institution
was,
on
December
31,
2015,
accredited
for
four
years
or
more.

Recent developments.

Because
of
an
ongoing
controversy
in
Chile
with
respect
to
the
quality
of
higher
education
and
compliance
with
the
regulations
applicable
to
higher
education
institutions,
since
July
2011
several
reforms
have
been
promoted
by
the
Chilean
government.
Some
of
these
reforms
were
approved
during
the
previous
administration,
such
as
amendments
to
the
CAE
Program
reducing
from
6%
to
2%
per
annum
the
interest
rate
that
CAE
debtors
must
pay,
limiting
principal
and
interest
payments
under
that
program
to
10%
of
a
debtor's
monthly
income,
and
providing
for
the
termination
of
the
debt
after
a
180-month
period.

Other
legislative
reforms
were
promoted
by
members
of
the
previous
Chilean
Congress
but
were
not
supported
by
the
previous
Chilean
government,
including
proposals
to
restrict
related
party
transactions
between
higher
education
institutions
and
entities
that
control
them.
In
November
and
December
2013,
Chile
held
national
elections.
The
presidential
election
was
won
by
former
president
Michelle
Bachelet,
who
assumed
office
on
March
11,
2014,
and
a
political
coalition
led
by
Ms.
Bachelet
won
the
elections
for
both
houses
of
the
Chilean
Congress,
in
each
case
for
four
years
beginning
on
March
11,
2014.
Although
the
election
platform
of
the
new
government
mentioned
that
stronger
regulation
of
higher
education
was
required,
it
did
not
contain
specific
commitments
with
respect
to
the
abovementioned
reforms,
other
than
the
creation
of
a
special
agency
to
oversee
higher
education
institutions'
compliance
with
law
and
regulations.
In
the
second
quarter
of
2014,
the
new
government
announced
the
withdrawal
of
all
of
the
prior
administration's
higher
education
proposals
and
its
intent
to
submit
new
bills
to
the
Chilean
Congress.

In
December
2014,
the
Chilean
Congress
adopted
the
Provisional
Administrator
Law,
which
provides
for
the
appointment
of
a
provisional
administrator
or
closing
administrator
to
handle
the
affairs
of
failing
universities
or
universities
found
to
have
breached
their
bylaws
(the
"Provisional
Administrator
Law").
In
addition,
the
Chilean
Congress
has
approved
legislation
that
would
permit,
but
not
require,
universities
and
technical/vocational
institutes
to
include
in
their
bylaws
provisions
contemplating
the
participation
of
students,
professors
and
employees
in
the
governance
of
the
institution.

On
November
27,
2015,
the
Chilean
Congress
passed
the
2016
budget
law
(the
"2016
Budget
Law").
By
means
of
the
2016
Budget
Law,
the
administration
sought
to
implement
a
policy
to
grant
free
access
to
higher
education
to
students
from
the
first
five
income
deciles
who
attend
certain
universities
or
tech/voc
institutions.
For
university
students,
the
Budget
Law
would
have
required
them
to
be
enrolled
in
universities
that
either
are
members
of
the
Consejo de Rectores de
las Universidades Chilenas (the
"CRUCh")
or
are
private
universities
that
are
not
members
of
the
CRUCh
that,
on
September
30,
2015,
met
the
following
requirements:
(a)
being
accredited
for
four
years
or
more;
(b)
not
being
related
to
for-profit
legal
entities;
and
(c)
having
a
representative
of
the
students
or

Table
of
Contents

non-academic
personnel
as
a
member
of
their
governing
body.
For
tech/voc
students,
the
2016
Budget
Law
would
have
required
them
to
be
enrolled
in
institutions
organized
as
not-for-profit
legal
entities
that
were
accredited
for
four
or
more
years.

On
December
21,
2015,
the
Constitutional
Tribunal
(the
"CT")
declared
portions
of
the
2016
Budget
Law
dealing
with
higher
education
institutions
to
be
unconstitutional,
in
particular
those
portions
that
would
require
students
to
attend
institutions
with
specific
characteristics
in
order
to
obtain
free
tuition
as,
under
the
Chilean
Constitution,
that
would
constitute
arbitrary
discrimination
affecting
students
who
are
in
the
same
economic
condition.

Before
the
CT
published
the
text
of
its
decision,
the
administration
submitted
a
bill
modifying
the
2016
Budget
Law
that
establishes
different
conditions
to
access
free
higher
education
(the
ley corta or
"Short
Law")
to
the
Chilean
Congress.
The
Short
Law
was
approved
by
Congress
two
days
after
its
submission,
on
December
23,
2015,
and
published
on
December
26,
2015.
The
Short
Law
was
effective
only
during
2016
and
was
not
subject
to
a
constitutional
challenge.

Under
the
Short
Law,
for
university
students
to
be
eligible
for
free
tuition,
they
had
to
come
from
the
first
five
income
deciles
and
enroll
either
in
a
State-
owned
university
or
in
a
private
university
that
on
December
27,
2015
was
accredited
for
at
least
four
years
and
controlled
by
individuals
or
not-for-profit
legal
entities.
The
Short
Law
excluded
tech/voc
students
from
eligibility
for
free
tuition
in
2016.
However,
the
Short
Law
provided
that
free
tuition
for
tech/voc
students
would
be
implemented
within
three
years
provided
that
they
attend
tech/voc
institutions
that
were
accredited
for
at
least
four
years
and
were
organized
as
not-for-
profit
legal
entities.
The
Short
Law
provided
that
tech/voc
institutions
that
were
organized
as
for-profit
entities
should,
not
later
than
December
27,
2015,
state
their
intention
to
reorganize
as
not-for-profit
entities
in
order
to
be
eligible
to
participate
in
NMS
II
and
NMS
III.

For
the
period
between
the
effective
date
of
the
Short
Law
and
such
time
as
students
at
tech/voc
institutions
became
eligible
to
participate
in
the
free
tuition
program,
the
Short
Law
modified
the
allocations
of
the
NMS.
The
Short
Law
divided
this
scholarship
program
into
three
parts:
(i)
NMS
I,
which
grants
students
who
meet
certain
personal
conditions
scholarships
of
up
to
CLP
600,000
per
year;
(ii)
NMS
II,
which
grants
students
scholarships
of
up
to
CLP
850,000
per
year,
provided
the
students
come
from
the
first
five
income
deciles
and
the
tech/voc
institution
in
which
they
are
enrolled
is
organized
as
a
not-for-profit
legal
entity
or,
if
the
tech/voc
institution
is
not
so
organized,
the
institution
has
stated
in
writing
its
intention
to
become
a
not-for-profit
entity
and
to
be
accredited;
and
(iii)
NMS
III,
which
grants
students
scholarships
of
up
to
CLP
900,000
per
year,
provided
that
such
students
and
the
institution
in
which
they
enroll
meet
the
requirements
for
NMS
II
and
the
tech/voc
institution
was,
on
December
31,
2015,
accredited
for
four
years
or
more.

The
Chilean
universities
and
tech/voc
institutions
in
the
Laureate International Universities network
did
not
meet
each
of
these
tests,
so
students
at
these
institutions
were
not
eligible
for
free
tuition
or
NMS
II
or
NMS
III
scholarships
under
the
Short
Law.

On
November
11,
2016,
the
Chilean
Congress
passed
the
2017
budget
law
(the
"2017
Budget
Law").
The
2017
Budget
Law
included
changes
to
the
policies
for
granting
free
access
to
higher
education
and
scholarships
to
students
from
the
first
five
and
seven
income
deciles
who
attend
certain
universities
or
tech/voc
institutions.

Table
of
Contents

for
students
if
they
are
enrolled
in
institutions
(i)
organized
as
not-for-profit
legal
entities
or
as
for-profit
legal
entities
that
have
filed
for
transformation
to
not-for-
profit
legal
entities
under
the
"Transformation
Law"
passed
by
the
Chilean
Congress
on
November
16,
2016,
before
December
15,
2016,
(ii)
accredited
for
four
years
or
more
as
of
December
23,
2016,
(iii)
having
as
controllers
not-for-profit
legal
entities
or
natural
persons,
(iv)
having
stated
their
intention
to
participate
in
the
free
access
system
before
December
15,
2016,
and
(v)
having
a
transparent
admission
system
that
must
have
been
published
on
the
institution's
website
by
December
1,
2016.

The
2017
Budget
Law
also
modified
the
allocations
of
the
Bicentenario Scholarship
("the
BS
Program").
The
BS
Program
supports
access
to
higher
education
for
university
students
coming
from
one
of
the
first
seven
income
deciles
and
covers
the
full
amount
of
tuition
up
to
an
amount
authorized
by
the
government.
Historically,
the
BS
Program
solely
benefited
students
of
CRUCh
universities.
The
2017
Budget
Law
terminated
the
differentiation
between
CRUCh
and
non-
CRUCh
universities
for
eligibility
for
the
BS
Program.
Thus,
for
2017,
3,500
BS
Program
scholarships
will
be
granted
to
students
at
non-CRUCh
universities
and
3,500
additional
BS
Program
scholarships
will
be
granted
to
students
at
non-CRUCh
universities
in
2018.
By
2019,
the
government
promises
to
have
an
equal
BS
Program
scholarship
policy
for
all
universities,
whether
CRUCh
or
non-CRUCh.
Students
may
apply
for
a
BS
Program
scholarship
if
their
university
is
accredited
for
at
least
four
years
and
if
80%
of
the
university's
newly
enrolled
students
have
an
average
result
from
the
national
university
admissions
examination,
high
school
grades
and
high
school
rankings
above
a
specified
level.

Under
the
2017
Budget
Law,
the
NMS
II
and
NMS
III
are
available
to
all
students
enrolled
in
a
tech/voc
institution,
whether
for-profit
or
not-for-profit:
(i)
NMS
II
in
an
amount
of
CLP
860,000
per
year,
or
up
to
the
effective
government-approved
tuition
fee
if
it
is
less
than
that
amount,
for
students
who
come
from
the
first
five
income
deciles
with
an
average
high
school
grade
of
5.0
and
the
tech/voc
institution
in
which
they
are
enrolled
being
accredited
for
at
least
three
years;
and
(ii)
NMS
III,
in
an
amount
up
to
CLP
900,000
per
year,
or
up
to
the
effective
government-approved
tuition
fee
if
it
is
less
than
that
amount,
provided
that
such
students
and
the
institution
in
which
they
enroll
meet
the
requirements
for
NMS
II
and
the
tech/voc
institution
was,
on
December
31,
2016,
accredited
for
four
years
or
more.
The
NMS
III
scholarship
will
last
until
the
tax
benefit
established
in
the
Transformation
Law
for
tech/voc
institutions
ends.

Finally,
under
the
2017
Budget
Law,
the
Comptroller
General
will
be
in
charge
of
overseeing
the
use
of
the
public
resources
in
higher
education.

In
April
2016,
the
Chilean
Congress
made
reforms
to
specific
career
disciplines,
including
pedagogy.
Law
20,903
created
the
teaching
professional
development
system
(
Sistema de Desarrollo Profesional Docente ),
which
aims
to
improve
the
quality
of
training
for
those
who
choose
to
study
pedagogy
by
setting
new
program
admission
requirements
and
mandatory
institutional
accreditation
standards
for
pedagogy
career
programs.
As
these
changes
have
only
taken
effect
in
2017,
their
impact
cannot
yet
be
determined;
however,
the
Chilean
universities
in
the
Laureate International Universities network
are
preparing
to
adjust
to
the
new
regime
and
will
be
monitoring
the
effects
on
their
pedagogy
programs.

On
July
4,
2016,
the
Chilean
President
submitted
to
the
Chilean
Congress
a
bill
(the
"Higher
Education
Bill")
that,
if
approved,
would
change
the
entire
regulatory
landscape
of
higher
education
in
Chile,
as
it
would
amend
and/or
replace
most
of
the
currently
applicable
legislation,
including
repealing
the
current
laws
governing
universities,
professional
institutes
and
technical
training
centers.
The
changes
contemplated
in
the
Higher
Education
Bill
that
are
most
relevant
to
us
are:

(1)

Table
of
Contents

(2)

(3)

(4)

development,
support
and
continuous
improvement
of
the
quality
of
higher
education
institutions
and
their
relationship
with
the
needs
of
the
country,
and
on
the
allocation
of
public
funds;
(ii)
to
manage
the
procedures
relating
to
the
granting
and
revocation
of
the
official
recognition
of
higher
education
institutions;
(iii)
to
take
custody
of
the
academic
records
of
higher
education
institutions
that
have
lost
their
official
recognition;
(iv)
to
manage
the
Common
Access
System
for
Higher
Education
Institutions;
(v)
to
manage
the
National
Higher
Education
Information
System;
(vi)
to
coordinate
the
various
public
institutions
and
services
that
have
authority
on
higher
education
matters;
(vii)
to
establish
coordination
mechanisms
for
the
members
of
the
boards
of
directors
of
state-owned
universities
who
are
appointed
by
the
President;
(viii)
to
generate
and
coordinate
with
regional
and
local
governments
instances
of
participation
and
dialogue
with
and
among
higher
education
institutions
as
well
as
the
collaboration
and
transfer
of
best
practices
among
them,
and
between
such
institutions
and
secondary
schools;
(ix)
to
develop
studies
on
the
higher
education
system;
(x)
to
maintain
a
registry
of
higher
education
institutions
with
access
to
public
funding;
and
(xi)
to
have
any
other
function
that
the
law
may
assign
to
it.

The
creation
of
a
new
Common
Access
System
for
Higher
Education
Institutions,
to
be
managed
by
the
Undersecretary
of
Higher
Education,
which
would
establish
the
process
and
mechanisms
for
the
application,
admission
and
selection
of
undergraduate
students,
and
which
would
be
mandatory
at
all
higher
education
institutions
that
receive
public
funding
through
the
MINEDUC.

The
creation
of
a
National
Higher
Education
Information
System,
to
be
managed
by
the
Undersecretary
of
Higher
Education,
which
would
include,
among
other
things,
information
about
students,
enrollment,
faculty,
resources,
infrastructure
and
results
of
the
academic
process
at
higher
education
institutions;
about
the
nature
of
the
higher
education
institutions,
their
members
and
individuals
that
are
part
of
their
administrative
bodies;
about
the
financial
condition
and
solvency
of
higher
education
institutions,
including
their
annual
audited
financial
statements;
and
information
about
related
party
transactions.
Both
the
Superintendence
of
Higher
Education
and
the
Higher
Education
Quality
Council
would
provide
all
information
they
receive
from
higher
education
institutions
to
the
Undersecretary
of
Higher
Education
to
be
included
in
the
National
Higher
Education
Information
System.

The
creation
of
a
new
National
System
of
Quality
Assurance
of
Higher
Education,
to
be
established
by
the
MINEDUC
through
the
Undersecretary
of
Higher
Education,
the
National
Education
Council,
the
Higher
Education
Quality
Council
and
the
Superintendence
of
Higher
Education,
the
functions
of
which,
among
others,
would
be
to:
(i)
develop
policies
to
promote
quality,
suitability,
articulation,
inclusion
and
equality
in
the
execution
of
the
duties
of
higher
education
institutions;
(ii)
license
new
higher
education
institutions;
(iii)
provide
the
institutional
accreditation
of
autonomous
higher
education
institutions;
and
(iv)
enforce
the
compliance
of
higher
education
institutions
with
the
rules
applicable
to
higher
education
and
the
legality
of
the
use
of
their
resources,
supervise
their
administrative
and
financial
feasibility,
and
their
academic
commitments
to
students.

Table
of
Contents

information
systems
that
contain
relevant
decisions
regarding
the
different
accreditation
processes;
(iv)
executing
and
promoting
actions
for
continuous
improvement
of
the
quality
of
higher
education
institutions;
(v)
keeping
a
registry
of
peer
reviewers
who
are
part
of
the
accreditation
process;
(vi)
training
peer
reviewers;
and
(vii)
submitting
data
to
the
National
Higher
Education
Information
System.

Under
the
National
System
of
Quality
Assurance
of
Higher
Education,
institutional
accreditation
would
be
mandatory
for
all
autonomous
higher
education
institutions
and
would
consist
of
the
evaluation
and
verification
of
compliance
with
quality
standards,
as
well
as
the
analysis
of
internal
mechanisms
for
quality
assurance,
considering
both
their
existence
and
their
application
and
results,
and
their
alignment
with
the
mission
and
purpose
of
higher
education
institutions.
All
institutional
accreditations
would
last
for
eight
years.
The
accreditation
process
would
include
the
evaluation,
for
all
campuses
and
for
the
undergraduate
careers
and
programs
selected
by
the
board
of
the
Higher
Education
Quality
Council,
of
the
management
and
institutional
resources,
internal
quality
assurance,
teaching
and
results
of
the
education
process,
generation
of
knowledge,
creation
and
innovation,
and
association
with
the
environment,
of
the
respective
higher
educational
institutions.
Accredited
institutions
would
be
classified
under
one
of
three
different
categories.
Category
C
institutions
would
need
to
obtain
prior
approval
of
the
Higher
Education
Quality
Council
to
open
new
campuses
or
programs,
while
Category
B
institutions
would
need
to
obtain
such
approval
only
to
open
careers
or
programs
in
a
field
of
knowledge
not
regularly
offered
by
the
institution
or
which
has
not
been
offered
in
the
last
two
years,
and
Category
A
institutions
would
not
need
to
obtain
any
approval
to
open
new
campuses,
careers
or
programs.

The
bill
also
provides
that
certain
careers
and
study
programs,
i.e.,
medical
and
education
programs,
as
well
as
doctorate-level
programs
be
mandatorily
accredited.

Accreditation
decisions
would
not
be
appealable
although
reconsideration
could
be
sought
before
the
Higher
Education
Quality
Council
not
later
than
15
days
after
the
notification
of
decision.

(5)

The
creation
of
a
Superintendence
of
Higher
Education,
whose
purpose
is
to
enforce
and
monitor
compliance
with
the
legal
and
regulatory
provisions
that
govern
higher
education,
as
well
as
the
legality
of
the
use
of
resources
by
higher
education
institutions
and
to
supervise
their
financial
feasibility.
Its
functions
and
powers
would
be,
among
others,
to:
(i)
enforce
compliance
with
the
law
by
higher
education
institutions,
their
organizers,
controllers,
members,
associates,
partners,
owners,
founders,
legal
representatives
and
board
members;
(ii)
ensure
that
the
requirements
or
conditions
that
resulted
in
official
recognition
of
the
higher
education
institutions
are
maintained;
(iii)
supervise
the
financial
feasibility
of
higher
education
institutions;
(iv)
ensure
the
legality
of
the
use
of
resources
of
higher
education
institutions;
(v)
ensure
that
higher
education
institutions
comply
with
the
terms,
conditions,
and
modalities
of
the
academic
commitments
undertaken
with
students;
(vi)
arrange
and
conduct
audits
of
higher
education
institutions;
(vii)
visit
the
academic
and
administrative
establishments
and
offices
of
higher
education
institutions
and
of
the
institutions'
organizers
that
are
related
to
the
management
of
the
respective
institution
in
order
to
carry
out
the
functions
assigned
to
the
Superintendence,
accessing
any
documents,
books
or
information
required
for
the
purposes
of
enforcement,
and
reviewing
all
the
transactions,
assets,
books,
accounts,
files
and,
in
general,
any
documents
or
information
it
deems
necessary
for
the
supervision
of
the
individuals
or
institutions
inspected
and
of
the
third
parties
with
which
they
interact;
(viii)
require
pertinent
information
needed
for
it
to
fulfill
its
duties
to
be
provided
to
it
by
inspectors
and
inspecting
institutions
and
related
third
parties,
and
by
any
relevant
government
entities;
(ix)
summon
organizers,
controllers,
members,
associates,
partners,
owners,
founders,
legal
representatives,
board
members
or
employees
of
the
inspected

Table
of
Contents

institutions,
or
of
those
who
exercise
those
positions
at
related
institutions,
and
any
other
person
who
has
entered
into
an
agreements
of
any
kind
with
the
above,
to
testify
before
it,
and
summon
witnesses
to
provide
any
information
it
deems
necessary
to
fulfill
its
duties;
(x)
respond
to
inquiries
submitted
to
it
within
the
scope
of
its
powers,
receive
and
resolve
claims,
and
mediate
claims,
when
applicable;
(xi)
investigate
and
resolve
complaints
that
arise;
(xii)
bring
charges,
process
them,
adopt
provisional
measures,
and
resolve
the
proceedings
underway
regarding
any
infraction
that
comes
to
its
attention;
(xiii)
apply
penalties
in
accordance
with
the
law;
(xiv)
apply
and
provide
administrative
interpretations
of
the
applicable
law,
and
issue
general
instructions
to
the
sector
subject
to
its
enforcement;
(xv)
send
information
brought
to
its
attention
in
the
exercise
of
its
duties
and
powers
to
the
Higher
Education
Quality
Council
when
such
information
indicates
violations
within
the
scope
of
the
matters
it
regulates;
(xvi)
remit
information
brought
to
its
attention
in
the
exercise
of
its
duties
to
the
Public
Prosecutor
when
such
information
indicates
that
a
crime
has
been
committed;
(xvii)
manage
the
information
it
compiles
in
the
exercise
of
its
duties,
in
a
coordinated
effort
with
the
Undersecretary
of
Higher
Education,
for
adequate
development
of
the
National
Higher
Education
Information
System;
(xviii)
reach
agreements
with
other
public
services
regarding
electronic
transfers
of
information
to
facilitate
execution
of
their
functions;
(xix)
generate
indexes,
statistics
and
studies
with
the
information
delivered
by
the
institutions
it
inspects,
and
produce
publications
within
the
scope
of
its
powers;
and
(xx)
provide
technical
advisory
services
to
the
MINEDUC
and
other
entities
within
the
scope
of
its
powers.

Sanctions
imposed
by
the
Superintendence
of
Higher
Education
would
be
appealable
to
the
courts.

Higher
education
institutions
would
be
required
to
provide
to
the
Superintendence
of
Higher
Education
the
following
information:
(i)
their
audited
consolidated
annual
financial
statements
and
any
information
about
any
fact
that
may
significantly
affect
its
financial
condition;
(ii)
a
list
of
their
partners
or
members,
and
of
any
individuals
exercising
executive
functions;
(iii)
information
about
related
party
transactions;
(iv)
information
about
tax-exempt
donations;
and
(v)
a
list
of
entities
in
which
the
institution
holds
an
interest
of
more
than
10%
and
of
not-for-profit
entities
in
which
it
is
entitled
to
appoint
at
least
one
board
member.

New
regulations
applicable
to
not-for-profit
educational
institutions
(including
universities)
that
would:
(i)
provide
that
their
controllers
and
members
can
only
be
individuals,
other
not-for-profits
or
state-owned
entities;
(ii)
create
the
obligation
to
use
their
resources
and
reinvest
their
surplus
or
profits
in
the
pursuit
of
their
objectives
and
in
enhancing
the
quality
of
the
education
they
provide;
(iii)
create
the
obligation
to
have
a
board
of
directors,
which
cannot
delegate
its
functions,
and
whose
members
cannot
be
removed
unless
approved
by
the
majority
of
the
board
and
for
serious
reasons;
and
(iv)
prohibit
related
party
transactions
with
their
founders,
controllers,
members
of
the
board,
rector
and
their
relatives
or
related
entities,
unless
the
counterparty
to
the
transaction
is
another
not-for-profit
entity,
and
establish
regulations
for
other
related
party
transactions
which
include
the
need
for
them
to
be
under
market
conditions
and
approved
by
the
board.

A
new
system
to
provide
public
funding
to
higher
education
institutions
and
free
higher
education
to
certain
students.
Under
the
new
system,
all
licensed
higher
education
institutions
would
be
eligible
to
receive
public
"institutional
funding
for
gratuity"
as
long
as
they
complied
with
the
following
requirements:
(i)
accreditation;
(ii)
not-for-profit
or
state-owned;
(iii)
be
part
of
the
Common
Access
System
for
Higher
Education
Institutions;
and
(iv)
apply
policies
approved
by
the
Undersecretary
of
Higher
Education
that
permit
fair
student
access
and
implement
vulnerable
student
support
programs
that
promote
their
retention,
providing
that
at
least
20%
of
the
total
admissions
of
the
university
are
granted
to
students
from
homes
within
the
country's
four
lowest-income
deciles.
The
institutions
that
would
be
part
of
the
public
funding
system
would
be
subject
to
regulation
of
fees
charged
which
would
be
set
by
the
Undersecretary
of
Higher
Education.

(6)

(7)

Table
of
Contents

We
are
currently
evaluating
the
effect
the
proposed
Higher
Education
Bill
would
have
on
the
Chilean
institutions
in
the
Laureate International Universities
network
if
it
is
adopted
in
the
form
introduced
in
the
Chilean
Congress.
We
cannot
predict
whether
or
not
the
proposed
Higher
Education
Bill
will
be
adopted
in
this
form,
or
if
any
higher
education
legislation
will
be
adopted
that
would
affect
the
institutions
in
the
Laureate International Universities network.
However,
if
any
such
legislation
is
adopted,
it
could
have
a
material
adverse
effect
on
our
results
of
operations
and
financial
condition.

In
June
2012,
an
investigative
committee
of
the
Chilean
Chamber
of
Deputies
issued
a
preliminary
report
on
the
Chilean
higher
education
system
alleging
that
certain
universities,
including
the
three
universities
that
Laureate
controls
in
Chile,
have
not
complied
with
the
requirements
of
Chilean
law
that
universities
be
not-
for-profit.
Among
the
irregularities
cited
in
the
report
are
high
salaries
to
board
members
or
top
executives,
outsourcing
of
services
to
related
parties,
and
that
universities
are
being
bought
and
sold
by
foreign
and
economic
groups.
The
investigative
committee
referred
its
report
to
the
MINEDUC
and
to
the
Public
Prosecutor
of
Chile
to
determine
whether
there
has
been
any
violation
of
the
law.
The
Public
Prosecutor
appointed
a
regional
prosecutor
to
investigate
whether
any
criminal
charges
should
be
brought
for
alleged
violations
of
the
laws
on
higher
education
and,
more
than
three
years
later,
no
charges
have
been
brought
by
the
regional
prosecutor
against
any
institutions
in
the
Laureate International Universities network.
On
July
19,
2012,
the
Chilean
Chamber
of
Deputies
rejected
the
report
of
the
investigative
committee.
In
December
2012,
in
light
of
the
criminal
prosecution
of
the
former
president
of
the
National
Accreditation
Commission
for
alleged
bribery,
the
Chilean
Chamber
of
Deputies
mandated
its
Education
Commission
to
be
an
investigative
committee
regarding
the
functioning
of
the
National
Accreditation
Commission,
especially
with
respect
to
compliance
with
the
National
Accreditation
Commission's
duty
to
oversee
higher
education
entities.
The
Education
Commission
delivered
a
report,
which
was
approved
by
the
Chamber
of
Deputies
on
October
1,
2013,
containing
several
recommendations
to
improve
regulation
of
the
higher
education
accreditation
system.
Additionally,
the
Chilean
Chamber
of
Deputies
approved
the
creation
of
a
special
investigative
committee
to
resume
the
investigation
of
higher
education
performed
by
the
investigative
committee
that
issued
the
June
2012
report
that
was
previously
rejected
by
the
Chamber
of
Deputies.
On
January
15,
2014,
that
investigative
committee
approved
a
new
report
recommending,
among
other
things,
improvements
to
the
Chilean
higher
education
system
regulations,
amendments
to
the
higher
education
financing
system,
particularly
the
CAE
Program,
imposition
of
criminal
penalties
for
violation
of
the
requirement
that
universities
be
not-for-profit,
and
support
of
legislation
that
would
prohibit
related
party
transactions,
prohibit
the
transfer
of
control
of
universities,
and
require
universities
to
have
independent
board
members.
The
report
was
approved
by
the
full
Chamber
of
Deputies
on
April
1,
2014.

On
February
18,
2014,
the
MINEDUC
disclosed
that
on
November
15,
2013
and
February
11,
2014,
it
had
initiated
internal
investigations
into
UDLA
Chile
and
UNAB,
respectively.
The
investigations
were
initiated
upon
referrals
from
the
National
Education
Council
and
the
National
Accreditation
Commission,
which
had
conveyed
to
the
MINEDUC
their
concerns
regarding
certain
agreements
entered
into
by
UDLA
Chile
and
UNAB
with
their
controlling
entities,
including
concerns
about
the
amount
and
real
use
made
by
the
universities
of
the
services
provided
under
those
agreements.
The
investigations
are
an
initial
step
by
the
MINEDUC
to
determine
whether
the
Ministry
should
begin
formal
sanction
proceedings
against
the
universities.
The
MINEDUC
also
disclosed
that
it
had
delivered
relevant
documentation
on
the
matter
to
the
Public
Prosecutor.
In
January
2016,
the
MINEDUC
announced
that
it
had
closed
the
investigation
into
UNAB.

In
May
2014,
Servicio
de
Impuestos
Internos
Chile
("SII")
instituted
an
audit
of
UVM
Chile,
UNAB
and
UDLA
Chile
questioning
whether
they
had
regularly
paid
their
taxes
as
non-profit
entities
for
the
period
2011
to
2014,
specifically
in
relation
to
their
financial
dealings
with
Laureate,
for-profit
entities.
Any
non-
compliance
with
the
non-profit
laws
would
subject
them
to
the
payment
of
additional
taxes
and
penalties.
As
of
August
2015,
SII
had
notified
all
three
institutions
that
its
audit
detected
"no

Table
of
Contents

differences"
in
the
taxes
paid
and
the
taxes
owed,
and
provided
a
written
closure
letter
to
each
of
the
institutions.
In
December
2016,
SII
notified
separately
UDLA
Chile
and
UNAB
that
as
part
of
the
general
audit
program
called
"
Auditoría Integral a Universidades, "
it
was
requesting
supporting
documentation
from
them
for
the
tax
periods
between
November
2013
and
October
2016.
On
March
21,
2017,
SII
sent
a
similar
notification
to
UVM
Chile
regarding
the
tax
periods
from
May
2014
to
October
2016.
Each
institution
will
submit
responsive
documents
that
support
taxes
paid
related
to
its
revenues
and
expenses,
including
to
the
extent
such
revenues
and
expenses
involve
financial
dealings
with
Laureate
for-profit
entities.

In
June
2016,
the
MINEDUC
notified
UNAB
that
it
was
opening
an
investigation
into
possible
violations
of
the
not-for-profit
nature
of
UNAB.
In
September
2016,
the
MINEDUC
notified
UVM
Chile
that
it
was
opening
a
similar
investigation
of
UVM
Chile.
Each
of
the
institutions
continues
to
be
responsive
to
the
MINEDUC's
requests
as
part
of
these
investigations.
Each
investigation
will
be
conducted
by
an
investigator
appointed
by
the
MINEDUC
under
the
Provisional
Administrator
Law,
and
both
UNAB
and
UVM
Chile
have
been
advised
that
the
investigations
will
last
at
least
six
months.
Procedural
safeguards
in
the
investigation
process
include
notice,
the
right
to
present
written
statements
and
evidence,
and
the
requirement
that
the
decision
be
based
on
the
formal
record.
Under
the
Provisional
Administrator
Law,
at
the
end
of
the
investigation
the
MINEDUC
can
either
close
the
investigation
or
issue
a
report
imposing
one
of
the
following
measures:
(i)
ordering
a
recovery
plan
for
the
investigated
institution,
should
the
MINEDUC
verify
severe
breaches
of
the
institution's
financial,
administrative,
labor
or
academic
commitments;
(ii)
with
the
prior
consent
of
the
National
Education
Council,
naming
a
provisional
administrator
for
the
institution
if
the
MINEDUC
determines
that
(a)
there
are
serious
risks
to
the
administrative
or
financial
viability
of
the
institution
that
may
affect
the
continuity
of
its
educational
programs,
(b)
there
are
serious
and
recurring
breaches
of
the
academic
commitments
of
the
institution
to
its
students
due
to
a
lack
of
educational
or
teaching
resources
available
to
grant
professional
or
technical
degrees,
(c)
it
is
impossible
for
the
institution
to
maintain
its
academic
functions
due
to
sanctions,
injunctions
or
foreclosures
affecting
the
institution,
its
campuses
or
its
assets,
(d)
the
institution
is
declared
bankrupt
or
(e)
a
recovery
plan
pursuant
to
(i)
above
has
not
been
presented,
has
been
rejected
or
has
been
breached
by
the
institution;
or
(iii)
initiating
a
process
to
revoke
the
institution's
license,
in
which
case
it
would
name
a
closing
administrator.
If
the
MINEDUC
were
to
impose
any
sanctions,
UNAB
or
UVM
Chile,
as
the
case
may
be,
would
have
several
routes
to
appeal
or
challenge
that
decision,
both
within
the
MINEDUC
and
in
the
courts
or
other
governmental
bodies.
UNAB
and
UVM
Chile
are
cooperating
with
the
investigation.

Mexican
Regulation

Mexican
law
provides
that
private
entities
are
entitled
to
render
education
services
in
accordance
with
applicable
legal
provisions.
These
provisions
regulate
the
education
services
rendered
by
the
federal
government,
the
states
and
private
entities
and
contain
guidelines
for
the
allocation
of
the
higher
education
role
among
the
federal
government,
the
states
and
the
municipalities,
including
their
respective
economic
contributions
in
order
to
jointly
participate
in
the
development
and
coordination
of
higher
education.

There
are
three
levels
of
regulation
in
Mexico:
federal;
state;
and
municipal.
The
federal
authority
is
the
Federal
Ministry
of
Public
Education
(
Secretaría de
Educación Pública ).
Each
of
the
31
states
and
Mexico
City
has
the
right
to
establish
a
local
Ministry
of
Education,
and
each
municipality
of
each
state
may
establish
a
municipal
education
authority
that
only
has
authority
to
advertise
and
promote
educational
services
and/or
activities.
Additionally,
since
February
26,
2013,
the
National
Institute
for
the
Evaluation
of
Educational
Services
(
Instituto Nacional para la Evaluación de la Educación )
is
in
charge
of,
among
other
things,
evaluating
the
quality
of
the
study
plans
and
programs
for
Basic
and
Mid-Superior
education
services
(as
further
described
below).

Table
of
Contents

Some
functions
are
exclusive
to
the
Federal
Ministry
of
Education
such
as
the
establishment
of
study
plans
and
programs
for
Basic
and
Mid-Superior
education
services
Other
functions
are
exclusive
to
the
state
Ministries
of
Education
such
as
the
coordination
and
administration
of
the
local
registry
of
students,
teachers,
education
institutions
and
schools.
There
are
also
concurrent
functions
such
as
the
granting
and
withdrawal
of
governmental
recognition
of
validity
of
studies
(
Reconocimiento de Validez Oficial de Estudios )
("REVOEs,"
for
its
acronym
in
Spanish).

The
General
Law
on
Education
(
Ley General de Educación )
in
Mexico
classifies
studies
in
the
following
three
categories:
(i)
Basic
Education,
which
includes
pre-school
(kindergarten),
elementary
school
and
junior
high
school
(
secundaria );
(ii)
Mid-Superior
Education,
which
includes
high
school
(
prepataroria )
and
equivalent
studies,
as
well
as
professional
education
that
does
not
consider
preparatoria as
a
prerequisite;
and
(iii)
Superior
Education,
which
includes
the
studies
taught
after
prepataroria, including
undergraduate
school
(
licenciatura ),
specialties
(
especialidades ),
masters
studies,
doctorate
studies
and
studies
for
teachers
(
educación normal ).

The
General
Law
on
Education
provides
that
in
order
for
private
entities
to
be
able
to
provide
Basic
Education
Services
and
studies
for
teachers
(
educación
normal ),
a
prior
governmental
authorization
is
required
(the
"Authorization").
For
other
studies,
including
Mid-Superior
and
Superior
Education
Services,
no
prior
governmental
authorization
is
required.
However,
if
the
private
entities
desire
to
provide
Mid-Superior
and
Superior
Education
Services,
and
want
those
studies
to
be
integrated
into
the
federal
and/or
local
public
educational
system,
they
must
obtain
a
REVOE
by
the
federal
and/or
local
Ministry
of
Education,
respectively.

The
REVOEs
are
issued
by
the
Federal
Ministry
of
Education
under
the
General
Law
on
Education,
or
by
any
of
the
state
Ministries
of
Education
under
the
applicable
state
law.
REVOEs
are
granted
for
each
program
taught
in
each
campus.
If
there
is
a
change
in
the
program
or
in
the
campus
in
which
it
is
taught,
the
entity
will
need
to
get
a
new
REVOE.

The
Federal
Ministry
of
Education
has
issued
a
set
of
general
resolutions
(
Acuerdos )
that
regulate
the
general
requirements
for
obtaining
REVOEs.
The
main
Acuerdos are
(i)

Acuerdo 243
issued
on
May
27,
1998
to
set
the
general
guidelines
for
obtaining
an
Authorization
or
REVOE,
and
(ii)

Acuerdo
279
issued
on
July
10,
2000
to
set
the
procedures
related
to
REVOEs
for
Superior
Education
studies.
The
Federal
Ministry
of
Education
recommends
to
the
local
Ministries
of
Education
the
adoption
and
inclusion
of
the
provisions
contained
in
Acuerdo 243
and
Acuerdo 279
in
the
local
Law
on
Education
and
other
applicable
local
laws
and
regulations.

In
general
terms,
federal
and
state
laws
in
Mexico
provide
for
three
requirements
for
granting
REVOEs:

•

personnel
that
have
adequate
qualifications
to
render
education
services
and
that
comply
with
the
appropriate
administrative
requirements;

facilities
that
meet
the
hygiene,
security
and
pedagogic
conditions
determined
by
the
authority;
and

studies,
plans
and
programs
that
the
authority
considers
appropriate.

Depending
on
each
state,
other
requirements
may
apply,
for
example,
that
private
institutions
that
provide
educational
services
with
REVOEs
need
to
be
registered
with
the
corresponding
local
authorities.

Acuerdo 279
regulates
in
detail
the
provisions
contained
under
the
General
Law
on
Education
to
grant
REVOEs
for
Superior
Education
studies,
regarding
faculty,
plans
and
programs
of
studies,
inspection
visits,
procedures,
etc.
Acuerdo 279
provides
that
the
faculty
that
participate
in
programs
taught
by
private
institutions
must
be
full-time
faculty
or
faculty
retained
by
subject.
Acuerdo 279
regulates
the
qualifications
that
the
faculty
members
have
to
meet
depending
on
whether
they
are

Table
of
Contents

full-time
or
part-time,
and
provides
that
a
minimum
percentage
of
courses
need
to
be
taught
by
full-time
faculty,
which
percentage
depends
on
the
type
of
program
taught.

Acuerdo 279
also
provides
that
private
institutions
that
provide
Superior
Education
services
in
accordance
with
presidential
decrees
or
secretarial
resolutions
(
acuerdos secretariales )
issued
specifically
to
them
may
maintain
the
obligations
provided
to
them
thereunder
and
may
function
under
the
provisions
of
Acuerdo
279
to
the
extent
the
provisions
of
this
latter
Acuerdo benefit
them.
Currently,
Universidad
Tecnológica
de
México,
S.C.
and
Universidad
del
Valle
de
México,
S.C.
have
secretarial
resolutions
that
were
issued
in
their
favor
before
the
issuance
of
Acuerdo 279.
The
obligations
contained
in
these
secretarial
resolutions
generally
conform
to
the
obligations
provided
under
Acuerdo
279.

The
regulatory
authorities
are
entitled
to
conduct
inspection
visits
to
the
facilities
of
educational
institutions
to
verify
compliance
with
applicable
legal
provisions.
Failure
to
comply
with
applicable
legal
provisions
may
result
in
the
imposition
of
fines,
in
the
cancellation
of
the
applicable
REVOE
and
in
the
closure
of
the
education
facilities.

Private
institutions
with
REVOEs
are
required
to
grant
a
minimum
percentage
of
scholarships
to
students.
Acuerdo
279
provides
that
private
institutions
grant
scholarships
to
at
least
five
percent
of
the
total
students
registered
during
each
academic
term.
Scholarships
consist,
in
whole
or
in
part,
of
payment
of
the
registration
and
tuition
fees
established
by
the
educational
institution.
The
granting
of
scholarships
has
to
be
provided
for
in
the
internal
regulations
of
the
educational
institution,
which
regulations
must
provide:

•

authority
of
the
institution
that
will
coordinate
the
application
and
supervision
of
the
compliance
with
the
applicable
provisions;

terms
and
procedures
for
the
expedition
and
dissemination
of
the
scholarships
grant;

requirements
with
which
the
applicants
of
scholarships
will
have
to
comply;

types
of
scholarships
offered;

procedures
for
the
delivery
of
results;
and

conditions
to
maintain
and
to
cancel
scholarships.

Acuerdo 279
provides
for
the
minimum
percentage
of
courses
that
must
be
taught
by
full-time
faculty.
Private
education
institutions
that
do
not
meet
the
minimum
requirements
must
submit
to
the
education
authority,
for
approval,
a
detailed
justification
in
that
regard
making
reference
to
the
area
of
knowledge
of
the
plan
of
studies,
level
thereof,
education
mode,
general
purpose
of
the
plan
and
educational
model
proposed
for
the
referenced
studies.
In
addition,
for
masters
studies
focused
in
research,
the
university
must
have
at
least
one
full-time
active
investigator
for
every
25
students
and
for
doctorate
studies,
must
have
at
least
one
full-time
active
investigator
for
every
ten
students.

Private
entities
may
also
obtain
the
recognition
of
validity
of
their
programs
from
the
National
Autonomous
University
of
Mexico
(
Universidad Nacional
Autónoma de México or
"UNAM").
The
General
Regulations
of
Incorporation
and
Validation
of
Studies
issued
by
UNAM
provide
that
programs
followed
in
private
entities
may
be
"incorporated"
to
UNAM
in
order
for
UNAM
to
recognize
their
validity.
For
the
programs
to
be
incorporated
the
following
general
requirements
must
be
met:

•

they
have
to
be
complete
cycles
and
not
isolated
subjects;

the
private
entity
must
have
appropriate
infrastructure
(workshops,
laboratories,
libraries,
etc.);

the
private
entity
must
have
professors,
study
plans,
programs
and
other
academic
elements
approved
by
UNAM;
and

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of
Contents

•

the
private
entity
must
be
subject
to
the
inspection
and
surveillance
of
UNAM
and
pay
the
corresponding
fees.

The
UNAM
regulations
also
provide
that
private
entities
incorporated
to
UNAM
must
grant
scholarships
to
at
least
five
percent
of
the
total
students
registered
in
such
entity.
These
scholarships
shall
consist
of
the
exemption
in
whole
of
payment
of
the
registration
and
tuition
fees
established
by
the
educational
entity.
The
students
entitled
to
have
this
benefit
will
be
selected
by
UNAM.
Some
of
our
high
school
programs
and
one
of
our
medical
programs
are
incorporated
to
UVM
Mexico.

Peruvian
Regulation

We
operate
four
post-secondary
education
institutions
in
Peru,
two
of
which
are
universities
and
two
of
which
are
technical-vocational
institutes.
Peruvian
law
provides
that
universities
and
technical-vocational
institutes
can
be
operated
as
public
or
private
entities,
and
that
the
private
entities
may
be
organized
for
profit.
The
Ministry
of
Education
has
overall
responsibility
for
the
national
education
system.

In
2014,
the
Peruvian
Congress
enacted
a
new
University
Law
to
regulate
the
establishment,
operation,
monitoring
and
closure
of
universities.
The
law
also
promotes
continuous
improvement
of
quality
at
Peruvian
universities.
The
law
created
a
new
agency,
the
Superintendencia
de
Educación
Superior
Universitaria
("SUNEDU"),
which
is
responsible
for
carrying
out
the
governmental
role
in
university
regulation,
including
ensuring
quality.
While
institutional
autonomy
is
still
recognized,
and
universities
are
permitted
to
create
their
own
internal
governance
rules
and
determine
their
own
academic,
management
and
economic
systems,
including
curriculum
design
and
entrance
and
graduation
requirements,
all
of
these
matters
are
now
subject
to
review
and
evaluation
by
SUNEDU
through
its
periodic
review
of
universities
as
part
of
a
license
renewal
process.

Under
the
new
law,
university
licenses
are
temporary
but
renewable,
and
will
be
granted
by
SUNEDU
for
a
maximum
of
six
years.
On
November
24,
2015
the
Board
of
SUNEDU
promulgated
regulations
for
the
university
licensing
process.
For
licenses
to
be
renewed,
universities
will
have
to
demonstrate
to
SUNEDU
that
it
comply
with,
at
a
minimum,
certain
Basic
Quality
Conditions
("BQCs")
(i.e.,
that
they
have
specified
academic
goals
and
that
the
degrees
granted
and
plans
of
study
are
aligned
with
those
goals,
that
their
academic
offerings
are
compatible
with
their
planning
goals,
(e.g.,
there
is
sufficient
labor
demand
for
careers
offered)
that
there
are
only
two
regular
semesters
of
studies
per
year,
that
they
have
appropriate
infrastructure
and
equipment,
that
they
engage
in
research,
that
they
have
a
sufficient
supply
of
qualified
teachers,
at
least
25%
of
whom
will
need
to
be
full-time,
that
they
supply
adequate
basic
complementary
educational
services
(e.g.,
medical
and
psychological
services
and
sports
activities),
that
they
provide
appropriate
placement
office
services,
and
that
they
have
transparency
of
institutional
information).
The
relicensing
process
started
on
December
15,
2015
and
will
end
on
December
31,
2017
and
is
divided
by
groups.
UPC
and
UPN
have
been
included
in
Group
5,
the
review
process
for
which
will
start
in
early
2017,
although
universities
are
permitted
to
apply
earlier
than
their
scheduled
time.
UPN
applied
early
in
July
2016,
while
UPC
has
until
February
2017
to
file.
The
review
committee
of
SUNEDU
will
issue
a
license
at
the
end
of
the
relicensing
process
or,
alternatively,
not
issue
a
license
and
provide
for
a
remediation
period
if
one
or
more
of
the
BQCs
are
not,
in
its
opinion,
satisfied.
Following
a
one-year
period,
SUNEDU
will
make
a
new
verification
visit
after
the
university
has
presented
and
implemented
its
remediation
plan.

Technical-vocational
institutes
are
regulated
by
the
Ministry
of
Education,
which
grants
operating
licenses
for
not
less
than
three
nor
more
than
six
years,
after
which
the
Ministry
conducts
a
revalidation
process.
The
approval
of
new
institute
licenses
is
based
on
the
evaluation
by
the
Ministry
of
the
institute's
institutional
goals,
the
curricula
of
its
education
programs
and
their
link
with
careers
needed
in
the
Peruvian
economy,
the
availability
of
adequate
qualified
teachers,
the
institute's
infrastructure,
the
institute's
financial
resources,
and
the
favorable
opinion
of
the
National
System
of

Table
of
Contents

Assessment,
Accreditation
and
Certification
of
Education
Quality
("SINEACES")
regarding
the
appropriateness
of
the
programs
the
institute
is
offering.
SINEACES
is
also
responsible
for
the
accreditation
of
programs
and
careers
at
all
higher
education
institutions.
On
November
2,
2016
a
new
law
regarding
technical-vocational
institutes
(the
"Institutes
Law")
was
enacted.
Regulations
are
expected
to
be
issued
within
120
days
from
the
date
of
passage.
Under
the
Institutes
Law,
technical-vocational
institutes
are
regulated
by
the
Ministry
of
Education,
which
grants
operating
licenses.
The
Institutes
Law
has
created
two
types
of
institutes,
Higher
Education
Institutes
("Institutes")
and
Higher
Education
Colleges
("Colleges").
Institutes
are
dedicated
to
technical
careers
and
Colleges
are
devoted
to
technical
careers
related
to
education
as
well
as
science
and
information
Technology.
Colleges
grant
Technical
Bachelor
Degrees
and
Professional
Technical
Degrees.
The
scope
of
such
degrees
will
be
defined
more
completely
by
the
implementing
regulations.
Institutes
and
Colleges
are
subject
to
a
mandatory
license
granted
by
the
Ministry
of
Education,
based
on
an
evaluation
to
determine
compliance
with
BQCs.
BQCs
include:
an
appropriate
institutional
management
guaranteeing
a
proper
relation
with
the
educational
model
of
the
institution;
appropriate
academic
management
and
proper
program
studies
aligned
with
the
Ministry
of
Education
norms;
appropriate
infrastructure
and
equipment
to
develop
educational
activities;
adequate
teachers
and
staff
which,
at
a
minimum,
should
consist
of
20%
full-time
staff;
and
appropriate
financial
and
economic
provisions.
The
licensing
process
of
institutes
is
still
to
be
determined
by
the
regulations.
However,
the
Law
provides
that
the
process
will
last
no
more
than
90
days
and
will
grant
a
license
for
a
five-year
period
to
be
renewed
once
expired.
Unlike
licenses,
quality
accreditation
is
voluntary
except
for
certain
careers
for
which
it
might
be
mandatory
as
determined
by
law.
Such
accreditation
will
be
taken
into
consideration
for
access
to
public
grants
for
scholarships
and
research
among
other
things.
Private
Institutes
and
Colleges
may
be
organized
as
for-profit
or
not-for-
profit
entities
under
Peruvian
law.
Not-for-profit
Colleges'
and
Institutes'
income
is
exempt
from
taxes
on
their
educational
activities.
For-profit
Colleges
and
Institutes
are
subject
to
income
taxes,
but
may
qualify
for
a
tax
credit
on
30%
of
their
reinvested
income,
subject
to
a
reinvestment
program
to
be
filed
with
the
Ministry
of
Education
for
a
maximum
term
of
five
years.
The
specific
requirements
of
such
programs
are
still
to
be
determined
by
the
regulations.

There
was
a
Presidential
election
in
Peru
during
the
second
quarter
of
2016,
and
the
new
President
entered
into
office
at
the
end
of
July
2016.
In
December
2016,
the
new
President
appointed
a
new
Minister
of
Education
following
the
impeachment
by
the
Peruvian
Congress
of
the
prior
Minister
of
Education.
We
do
not
expect
any
changes
in
policy
as
a
result
of
the
appointment
of
the
new
Minister
of
Education.

Turkish
Regulation
and
Internal
Investigation

Through
our
European
segment,
we
operate
Istanbul
Bilgi
University,
a
network
institution
located
in
Turkey
that
consolidates
under
the
variable
interest
entity
model.
Istanbul
Bilgi
University
is
established
as
a
"Foundation
High
Education
Institution"
(a
"Foundation
University")
under
the
Turkish
higher
education
law,
sponsored
by
an
educational
foundation
(the
"the
Bilgi
Foundation").
As
such,
it
is
subject
to
regulation,
supervision
and
inspection
by
the
Turkish
Higher
Education
Council
(the
"YÖK").
In
2014,
the
Turkish
parliament
amended
the
higher
education
law
to
provide
expanded
authority
to
the
YÖK
with
respect
to
Foundation
Universities,
including
authorizing
additional
remedies
for
violations
of
the
higher
education
law
and
of
regulations
adopted
by
the
YÖK.
On
November
19,
2015,
the
YÖK
promulgated
an
"Ordinance
Concerned
with
Amendment
to
Foundation
High
Education
Institutions"
(the
"Ordinance")
the
principal
effects
of
which
relate
to
the
supervision
and
inspection
of
Foundation
Universities
by
the
YÖK.
Under
the
Ordinance,
the
YÖK
has
expanded
authority
to
inspect
accounts,
transactions,
activities
and
assets
of
Foundation
Universities,
as
well
as
their
academic
units,
programs,
projects
and
subjects.
The
Ordinance
establishes
a
progressive
series
of
five
remedies
that
the
YÖK
can
take
in
the
event
it
finds
a
violation
of
the
Ordinance,
ranging
from
(1)
a
warning
and
request
for
correction
to
(2)
the
suspension
of
the
Foundation
University's
ability
to
establish
new
academic
units
or
programs
to
(3)
limiting
the
number
of
students
the
Foundation

Table
of
Contents

University
can
admit,
including
ceasing
new
admissions,
to
(4)
provisional
suspension
of
the
Foundation
University's
license
to
(5)
cancellation
of
the
Foundation
University's
license.
Since
the
promulgation
of
the
Ordinance,
the
YÖK
has
cancelled
the
licenses
of
15
Foundation
Universities.

The
Ordinance
specifies
that
Foundation
Universities
cannot
be
established
by
foundations
in
order
to
gain
profit
for
themselves,
and
prohibits
specified
types
of
fund
transfers
from
Foundation
Universities
to
their
sponsoring
foundation,
with
certain
exceptions
for
payments
made
under
contractual
arrangements
for
various
goods
and
services
that
are
provided
at
or
below
current
market
rates.
Istanbul
Bilgi
University
has
entered
into
contractual
arrangements
with
a
subsidiary
of
Laureate
that
is
a
member
of
the
board
of
trustees
of
the
Bilgi
Foundation,
and
has
affiliates
that
are
also
members
of
that
board,
to
provide
Istanbul
Bilgi
University
with
management,
operational
and
student
services
and
certain
intellectual
property
at
fair
market
rates.
The
YÖK
conducts
annual
audits
of
the
operations
of
Istanbul
Bilgi
University
and
currently
is
in
the
process
of
completing
its
most
recent
audit.
If
the
YÖK
were
to
determine
that
any
of
these
contracts
or
the
payments
made
by
Istanbul
Bilgi
University
to
this
Laureate
subsidiary,
or
any
other
activities
of
Istanbul
Bilgi
University,
including,
as
further
described
below,
the
donation
of
40.0
million
Turkish
Liras
made
by
the
university
to
a
charitable
foundation
that
was
subsequently
reimbursed
to
the
university
by
certain
Laureate-owned
entities,
violate
the
Ordinance
or
other
applicable
law,
the
YÖK
could
take
actions
against
Istanbul
Bilgi
University
up
to
and
including
cancellation
of
its
license.
Further,
if
the
YÖK
were
to
determine
that
any
administrators
of
Istanbul
Bilgi
University
have
directly
taken
any
actions
or
supported
any
activities
that
are
intended
to
harm
the
integrity
of
the
state,
the
license
of
the
university
could
be
cancelled.
In
July
2016,
a
coup
attempt
increased
political
instability
in
Turkey,
and
the
uncertainties
arising
from
the
failed
coup
in
Turkey
could
lead
to
changes
in
laws
affecting
Istanbul
Bilgi
University
or
result
in
modifications
to
the
current
interpretations
and
enforcement
of
the
Ordinance
or
other
laws
and
regulations
by
the
YÖK.

As
previously
disclosed,
during
the
fourth
quarter
of
2014,
we
recorded
an
operating
expense
of
$18.0
million
(the
value
of
40.0
million
Turkish
Liras
at
the
date
of
donation)
for
a
donation
by
our
network
institution
in
Turkey
to
a
charitable
foundation.
We
believed
the
donation
was
encouraged
by
the
Turkish
government
to
further
a
public
project
supported
by
the
government
and
expected
that
it
would
enhance
the
position
and
ongoing
operations
of
our
institution
in
Turkey.
The
Company
has
learned
that
the
charitable
foundation
which
received
the
donation
disbursed
the
funds
at
the
direction
of
a
former
senior
executive
at
our
network
institution
in
Turkey
and
other
external
individuals
to
a
third
party
without
our
knowledge
or
approval.

In
June
2016,
the
Audit
Committee
of
the
Board
of
Directors
initiated
an
internal
investigation
into
this
matter
with
the
assistance
of
external
counsel.
The
investigation
concerns
the
facts
surrounding
the
donation,
violations
of
the
Company's
policies,
and
possible
violations
of
the
FCPA
and
other
applicable
laws
in
what
appears
to
be
a
fraud
perpetrated
by
the
former
senior
executive
at
our
network
institution
in
Turkey
and
other
external
individuals.
This
includes
an
investigation
to
determine
if
the
diversion
was
part
of
a
scheme
to
misappropriate
the
funds
and
whether
any
portion
of
the
funds
was
paid
to
government
officials.
We
have
not
identified
that
any
other
officers
or
employees
outside
of
Turkey
were
involved
in
the
diversion
of
the
intended
donation.
Although
we
are
pursuing
efforts
to
recover
the
diverted
funds,
including
through
legal
proceedings,
there
is
no
assurance
that
we
will
be
successful.

Table
of
Contents

As
a
result
of
the
investigation,
which
is
ongoing,
we
took
steps
to
remove
the
former
senior
executive
at
our
network
institution
in
Turkey.
Because
of
the
complex
organizational
structure
in
Turkey,
this
took
approximately
one
month
and
during
that
period
our
access
to
certain
aspects
of
the
business
including
the
financial
and
other
records
of
the
university
was
interrupted.
The
former
senior
executive
is
now
no
longer
affiliated
with
our
network
institution
and
we
again
have
access
to
the
financial
and
other
records
of
the
university.

In
September
2016,
we
voluntarily
disclosed
the
investigation
to
the
U.S.
Department
of
Justice
(the
"DOJ")
and
the
SEC.
The
Company
is
fully
cooperating
with
these
agencies
in
their
investigations
and
inquiries
relating
to
this
matter.
The
Company
has
internal
controls
and
compliance
policies
and
procedures
that
are
designed
to
prevent
misconduct
of
this
nature
and
support
compliance
with
laws
and
best
practices
throughout
its
global
operations.
The
Company
is
taking
steps
to
enhance
these
internal
controls
and
compliance
policies
and
procedures.
The
investigations
relating
to
the
donation
are
ongoing,
and
we
cannot
predict
the
outcome
at
this
time,
or
the
impact,
if
any,
to
the
Company's
consolidated
financial
statements
or
predict
how
the
resulting
consequences,
if
any,
may
impact
our
internal
controls
and
compliance
policies
and
procedures,
business,
ability
or
right
to
operate
in
Turkey,
results
of
operations
or
financial
position.
If
we
are
found
to
have
violated
the
FCPA
or
other
laws
applicable
to
us,
we
may
be
subject
to
criminal
and
civil
penalties
and
other
remedial
measures,
which
could
materially
adversely
affect
our
business,
financial
condition,
results
of
operations
and
liquidity.

See
"Item
1A—Risk
Factors—Risks
Relating
to
Our
Business—We
currently
have
four
material
weaknesses
in
our
internal
control
over
financial
reporting
that,
if
not
corrected,
could
result
in
material
misstatements
of
our
financial
statements"
and
"Item
1A—Risk
Factors—Risks
Relating
to
Our
Business—Our
institutions
are
subject
to
uncertain
and
varying
laws
and
regulations,
and
any
changes
to
these
laws
or
regulations
or
their
application
to
us
may
materially
adversely
affect
our
business,
financial
condition
and
result
of
operations."

U.S.
Regulation

Our
institutions
in
the
United
States
are
subject
to
extensive
regulation
by
the
DOE,
accrediting
agencies
and
state
educational
agencies.
The
regulations,
standards
and
policies
of
these
agencies
cover
substantially
all
of
our
U.S.
Institutions'
operations,
including
their
educational
programs,
facilities,
instructional
and
administrative
staff,
administrative
procedures,
marketing,
recruiting,
finances,
results
of
operations
and
financial
condition.

As
institutions
of
higher
education
that
grants
degrees
and
diplomas,
our
U.S.
Institutions
are
required
to
be
authorized
by
appropriate
state
educational
agencies.
In
addition,
the
DOE
regulates
our
U.S.
Institutions
due
to
their
participation
in
federal
student
financial
aid
programs
under
Title
IV
of
the
HEA,
or
Title
IV
programs.
Title
IV
programs
currently
include
grants
and
educational
loans
provided
directly
by
the
federal
government,
including
loans
to
students
and
parents
through
the
William
D.
Ford
Federal
Direct
Loan
Program
(the
"Direct
Loan
Program").
The
Direct
Loan
Program
offers
Federal
Stafford
Loans,
Federal
Parent
PLUS
Loans,
Federal
Grad
PLUS
Loans
and
Federal
Consolidation
Loans.
Prior
to
July
1,
2010,
Title
IV
programs
also
included
educational
loans
issued
by
private
banks
with
below-market
interest
rates
that
are
guaranteed
by
the
federal
government
in
the
event
of
a
student's
default
on
repaying
the
loan.
A
significant
percentage
of
students
at
our
U.S.
Institutions
rely
on
the
availability
of
Title
IV
programs
to
finance
their
cost
of
attendance.

Table
of
Contents

To
participate
in
Title
IV
programs,
our
U.S.
Institutions
are
required
to
both
maintain
authorization
by
the
appropriate
state
educational
agency
or
agencies
and
be
accredited
by
an
accrediting
agency
recognized
by
the
DOE.
The
HEA
requires
accrediting
agencies
recognized
by
the
DOE
to
review
and
monitor
many
aspects
of
an
institution's
operations
and
to
take
appropriate
action
if
the
institution
fails
to
meet
the
accrediting
agency's
standards.

We
plan
and
implement
our
business
activities
to
comply
with
the
standards
of
these
regulatory
agencies.
To
monitor
compliance
with
this
regulatory
environment,
institutions
participating
in
Title
IV
programs
undergo
periodic
reviews
to
demonstrate,
among
other
things,
that
they
maintain
proper
accreditation,
state
authorization,
and
adequate
financial
resources.
Historically,
our
U.S.
Institutions
have
maintained
eligibility
to
access
Title
IV
funding.

State Education Licensure and Regulation

Our
U.S.
Institutions
are
required
by
the
HEA
to
be
authorized
by
applicable
state
educational
agencies
in
the
states
where
we
are
located
to
participate
in
Title
IV
programs.
To
maintain
requisite
state
authorizations,
our
U.S.
Institutions
are
required
to
continuously
meet
standards
relating
to,
among
other
things,
educational
programs,
facilities,
instructional
and
administrative
staff,
marketing
and
recruitment,
financial
operations,
addition
of
new
locations
and
educational
programs
and
various
operational
and
administrative
procedures.
These
standards
can
be
different
than
and
conflict
with
the
requirements
of
the
DOE
and
other
applicable
regulatory
bodies.
State
laws
and
regulations
may
limit
our
ability
to
offer
educational
programs
and
offer
certain
degrees.
Some
states
may
also
prescribe
financial
regulations
that
are
different
from
those
of
the
DOE
and
many
require
the
posting
of
surety
bonds.
Failure
to
comply
with
the
requirements
of
applicable
state
educational
agencies
could
result
in
us
losing
our
authorization
to
offer
educational
programs
in
those
states.
If
that
were
to
occur,
the
applicable
state
educational
agency
could
force
us
to
cease
operations
in
their
state.
Even
if
the
applicable
state
educational
agency
does
not
require
an
institution
to
cease
operations
on
an
immediate
basis,
the
loss
of
authorization
by
that
state
educational
agency
would
then
cause
our
institution
in
such
state
to
lose
eligibility
to
participate
in
Title
IV
programs,
and
such
loss
of
Title
IV
program
eligibility
could
force
that
institution
to
cease
operations
in
such
state.
Alternatively,
the
state
educational
licensing
agencies
could
restrict
the
institution's
ability
to
offer
certain
degree
or
diploma
programs.
We
may
also
be
subject
to
review
by
applicable
state
educational
agencies
or
associations.

Each
of
our
U.S.
Institutions
maintains
an
authorization
from
the
pertinent
state
regulatory
authority
in
which
such
institutions
are
physically
located,
or
is
exempt
under
current
state
law
from
a
requirement
to
be
specifically
authorized.
If
any
of
the
authorizations
provided
to
one
or
more
of
our
U.S.
Institutions
are
determined
not
to
comply
with
the
DOE
regulations,
or
one
or
more
of
our
U.S.
Institutions
is
unable
to
obtain
or
maintain
an
authorization
that
satisfies
the
DOE
requirements,
students
at
the
pertinent
institution
may
be
unable
to
access
Title
IV
funds,
which
could
have
a
material
adverse
effect
on
our
business,
financial
condition
and
results
of
operations
in
the
United
States.

On
December
19,
2016,
the
DOE
published
final
regulations
regarding
state
authorization
for
programs
offered
through
distance
education
and
state
authorization
for
foreign
locations
of
institutions.
Among
other
provisions,
these
final
regulations
require
that
an
institution
participating
in
the
Title
IV
federal
student
aid
programs
and
offering
postsecondary
education
through
distance
education
be
authorized
by
each
state
in
which
the
institution
enrolls
students,
if
such
authorization
is
required
by
the
state.
The
DOE
would
recognize
authorization
through
participation
in
a
state
authorization
reciprocity
agreement,
if
the
agreement
does
not
prevent
a
state
from
enforcing
its
own
laws.
The
final
regulations
also
require
that
foreign
additional
locations
and
branch
campuses
be
authorized
by
the
appropriate
foreign
government
agency
and,
if
at
least
50%
of
a
program
can
be
completed
at
the
location/branch,
be
approved
by
the
institution's
accrediting
agency
and
be
reported
to
the
state
where
the
main
campus
is
located.
The
final
regulations
would
also
require
institutions
to:

Table
of
Contents

document
the
state
process
for
resolving
complaints
from
students
enrolled
in
programs
offered
through
distance
education
or
correspondence
courses;
and
make
certain
public
and
individualized
disclosures
to
enrolled
and
prospective
students
about
their
distance
education
programs.
These
final
regulations
are
effective
July
1,
2018.

Independent
of
this
matter
of
federal
regulation,
several
states
have
asserted
jurisdiction
over
educational
institutions
offering
online
degree
programs
that
have
no
physical
location
or
other
presence
in
the
state,
but
that
have
some
activity
in
the
state,
such
as
enrolling
or
offering
educational
services
to
students
who
reside
in
the
state,
conducting
practica
or
sponsoring
internships
in
the
state,
employing
faculty
who
reside
in
the
state
or
advertising
to
or
recruiting
prospective
students
in
the
state.
Thus,
our
activities
in
certain
states
constitute
a
presence
requiring
licensure
or
authorization
under
requirements
of
state
law,
regulation
or
policy
of
the
state
educational
agency,
even
though
we
do
not
have
a
physical
facility
in
such
states.
Therefore,
in
addition
to
the
states
where
we
maintain
physical
facilities,
we
have
obtained,
or
are
in
the
process
of
obtaining,
approvals
or
exemptions
that
we
believe
are
necessary
in
connection
with
our
activities
that
may
constitute
a
presence
in
such
states
requiring
licensure
or
authorization
by
the
state
educational
agency
based
on
the
laws,
rules
or
regulations
of
that
state.
Some
of
our
approvals
are
pending
or
are
in
the
renewal
process.
St.
Augustine
does
not
have
current
approvals
or
exemptions
from
the
state
educational
agencies
of
twelve
states
in
which
St.
Augustine
does
not
maintain
physical
locations
but
has
enrolled
a
small
number
of
students.
For
each
such
state,
St.
Augustine
is
either
in
the
process
of
applying
for
such
approval/exemption
or
has
plans
to
submit
such
applications
in
2017.
In
recent
years,
several
states
have
voluntarily
entered
into
State
Authorization
Reciprocity
Arrangements
("SARA")
that
establish
standards
for
interstate
offering
of
postsecondary
distance
education
courses
and
programs.
If
an
institution's
home
state
participates
in
SARA
and
authorizes
the
institution
to
provide
distance
education
in
accordance
with
SARA
standards,
then
the
institution
need
not
obtain
additional
authorizations
for
distance
education
from
any
other
SARA
member
state.
None
of
our
U.S.
Institutions
participate
in
SARA.

Notwithstanding
our
efforts
to
obtain
approvals
or
exemptions,
state
regulatory
requirements
for
online
education
vary
among
the
states,
are
not
well
developed
in
many
states,
are
imprecise
or
unclear
in
some
states
and
can
change
frequently.
Because
our
U.S.
Institutions
enroll
students
in
online
degree
programs,
we
expect
that
regulatory
authorities
in
other
states
where
we
are
not
currently
licensed
or
authorized
may
request
that
we
seek
additional
licenses
or
authorizations
for
these
institutions
in
their
states
in
the
future.
If
any
of
our
U.S.
Institutions
fails
to
comply
with
state
licensing
or
authorization
requirements
for
a
state,
or
fails
to
obtain
licenses
or
authorizations
when
required,
that
institution
could
lose
its
state
licensure
or
authorization
by
that
state,
which
could
prohibit
it
from
recruiting
prospective
students
or
offering
services
to
current
students
in
that
state.
We
could
also
be
subject
to
other
sanctions,
including
restrictions
on
activities
in
that
state,
fines
and
penalties.
We
review
the
licensure
requirements
of
other
states
when
we
believe
that
it
is
appropriate
to
determine
whether
our
activities
in
those
states
may
constitute
a
presence
or
otherwise
may
require
licensure
or
authorization
by
the
respective
state
education
agencies.
In
addition,
state
laws
and
regulations
may
limit
our
ability
to
offer
educational
programs
and
to
award
degrees
and
may
limit
the
ability
of
our
students
to
sit
for
certification
exams
in
their
chosen
fields
of
study.
New
laws,
regulations
or
interpretations
related
to
offering
educational
programs
online
could
increase
our
cost
of
doing
business
and
affect
our
ability
to
recruit
students
in
particular
states,
which
could,
in
turn,
adversely
affect
our
U.S.
Institutions'
enrollments
and
revenues
and
have
a
material
adverse
effect
on
our
business.

We
also
are
subject
to
extensive
state
laws
and
regulations,
including
standards
for
instruction,
qualifications
of
faculty,
administrative
procedures,
marketing,
recruiting,
financial
operations
and
other
operational
matters.
In
recent
years,
the
proprietary
education
industry
has
experienced
broad-based,
intensifying
scrutiny
in
the
form
of
increased
investigations
and
enforcement
actions.
In
October
2014,

Table
of
Contents

the
DOE
announced
an
interagency
task
force
composed
of
the
DOE,
the
U.S.
Federal
Trade
Commission
(the
"FTC"),
the
U.S.
Departments
of
Justice,
Treasury
and
Veterans
Affairs,
the
Consumer
Financial
Protection
Bureau
(the
"CFPB"),
the
SEC,
and
numerous
state
attorneys
general.
Attorneys
general
in
several
states
have
become
more
active
in
enforcing
consumer
protection
laws,
especially
related
to
recruiting
practices
and
the
financing
of
education
at
proprietary
educational
institutions.
In
addition,
several
state
attorneys
general
have
recently
partnered
with
the
CFPB
to
review
industry
practices.
The
FTC
has
also
recently
issued
civil
investigative
demands
to
several
other
U.S.
proprietary
educational
institutions,
which
require
the
institutions
to
provide
documents
and
information
related
to
the
advertising,
marketing,
or
sale
of
secondary
or
postsecondary
educational
products
or
services,
or
educational
accreditation
products
or
services.
If
our
past
or
current
business
practices
are
found
to
violate
applicable
consumer
protection
laws,
or
if
we
are
found
to
have
made
misrepresentations
to
our
current
or
prospective
students
about
our
educational
programs,
we
could
be
subject
to
monetary
fines
or
penalties
and
possible
limitations
on
the
manner
in
which
we
conduct
our
business,
which
could
materially
and
adversely
affect
our
business,
financial
condition,
results
of
operations
and
cash
flows.
To
the
extent
that
more
states
or
government
agencies
commence
investigations,
act
in
concert,
or
direct
their
focus
on
our
U.S.
Institutions,
the
cost
of
responding
to
these
inquiries
and
investigations
could
increase
significantly,
and
the
potential
impact
on
our
business
would
be
substantially
greater.

In
addition
to
state
or
government
agency
actions,
we
are
subject
to
litigation
and
complaints
to
state
educational
agencies
by
current
and
former
students
alleging
violations
of
state
consumer
protection
laws.
See
"Item
3—Legal
Proceedings"
for
more
information
regarding
student
litigation
matters.
On
September
8,
2016,
the
Minnesota
Office
of
Higher
Education
("MOHE")
sent
to
Walden
University
an
information
request
regarding
its
doctoral
programs
and
complaints
filed
by
doctoral
students,
as
part
of
a
program
review
that
MOHE
is
conducting.
We
have
been
informed
by
MOHE
that
in
an
effort
to
better
understand
the
context,
background
and
issues
related
to
doctoral
student
complaints
in
Minnesota,
MOHE
is
initiating
a
full
review
of
doctoral
programs
for
institutions
registered
in
Minnesota.

State Professional Licensure

Many
states
have
specific
licensure
requirements
that
an
individual
must
satisfy
to
be
licensed
as
a
professional
in
specified
fields,
including
fields
such
as
education
and
healthcare.
These
requirements
vary
by
state
and
by
field.
A
student's
success
in
obtaining
licensure
following
graduation
typically
depends
on
several
factors,
including
but
not
limited
to:
the
background
and
qualifications
of
the
individual
graduate;
whether
the
institution
and
the
program
were
approved
by
the
state
in
which
the
graduate
seeks
licensure;
whether
the
program
from
which
the
student
graduated
meets
all
requirements
for
professional
licensure
in
that
state;
whether
the
institution
and
the
program
are
accredited
and,
if
so,
by
what
accrediting
agencies;
and
whether
the
institution's
degrees
are
recognized
by
other
states
in
which
a
student
may
seek
to
work.
Several
states
also
require
that
graduates
pass
a
state
test
or
examination
as
a
prerequisite
to
becoming
certified
in
certain
fields,
such
as
teaching
and
nursing.
In
several
states,
an
educational
program
must
be
approved
by
a
professional
association
in
order
for
graduates
to
be
licensed
in
that
professional
field.
In
the
field
of
psychology,
an
increasing
number
of
states
require
approval
by
either
the
American
Psychological
Association
("APA")
or
the
Association
of
State
and
Provincial
Psychology
Boards
("ASPPB").
To
date,
Walden
University
has
been
unable
to
obtain
approval
of
its
Ph.D.
program
in
Counseling
Psychology
from
the
ASPPB
or
APA.
Additionally,
states
often
require
a
criminal
background
clearance
before
granting
certain
professional
licensures
or
certifications.
The
catalogs
for
our
U.S.
Institutions
inform
students
that
it
is
incumbent
upon
the
student
to
verify
whether
a
specific
criminal
background
clearance
is
required
in
their
field
of
study
prior
to
beginning
course
work.

Table
of
Contents

Additionally,
under
the
HEA,
proprietary
schools
generally
are
eligible
to
participate
in
Title
IV
programs
in
respect
of
educational
programs
that
lead
to
"gainful
employment
in
a
recognized
occupation."
As
part
of
regulations
promulgated
by
the
DOE
to
more
specifically
define
"gainful
employment,"
which
became
effective
on
July
1,
2015
and
are
described
in
more
detail
below,
the
DOE
requires
each
of
our
U.S.
Institutions
to
certify
that
its
educational
programs
meet
the
applicable
requirements
for
graduates
to
be
professionally
or
occupationally
certified
in
the
state
in
which
the
institution
is
located.
Failure
to
provide
such
certification
may
result
in
such
programs
being
ineligible
for
Title
IV
program
funds.
It
is
possible
that
several
programs
offered
by
our
schools
may
be
adversely
affected
by
this
requirement
due
to
lack
of
specialized
program
accreditation
or
certification
in
the
states
in
which
such
institutions
are
based.

Accreditation

Accreditation
is
a
private,
non-governmental
process
for
evaluating
the
quality
of
educational
institutions
and
their
programs
in
areas,
including
student
performance,
governance,
integrity,
educational
quality,
faculty,
physical
resources,
administrative
capability
and
resources
and
financial
stability.
To
be
recognized
by
the
DOE,
accrediting
agencies
must
comply
with
DOE
regulations,
which
require,
among
other
things,
that
accrediting
agencies
adopt
specific
standards
for
their
review
of
educational
institutions,
conduct
peer
review
evaluations
of
institutions
and
publicly
designate
those
institutions
that
meet
their
criteria.
An
accredited
institution
is
subject
to
periodic
review
or
review
when
necessary
by
its
accrediting
agencies
to
determine
whether
it
continues
to
meet
the
performance,
integrity
and
quality
required
for
accreditation.
Kendall
College
and
Walden
University
are
institutionally
accredited
by
the
Higher
Learning
Commission,
a
regional
accrediting
agency
recognized
by
the
DOE.
NewSchool
of
Architecture
and
Design
and
St.
Augustine
are
institutionally
accredited
by
the
Accrediting
Commission
for
Senior
Colleges
and
Universities
of
the
Western
Association
of
Colleges
and
Schools
("WASC").
Accreditation
by
these
accrediting
agencies
is
important
to
us
for
several
reasons,
one
being
that
it
enables
eligible
students
at
our
U.S.
Institutions
to
receive
Title
IV
financial
aid.
In
addition,
other
colleges
and
universities
depend,
in
part,
on
an
institution's
accreditation
in
evaluating
transfers
of
credit
and
applications
to
graduate
schools.
Employers
also
rely
on
the
accredited
status
of
institutions
when
evaluating
candidates'
credentials,
and
students
and
corporate
and
government
sponsors
under
tuition
reimbursement
programs
consider
accreditation
as
assurance
that
an
institution
maintains
quality
educational
standards.
If
any
of
our
U.S.
Institutions
fails
to
satisfy
the
standards
of
its
respective
accrediting
agency,
that
institution
could
lose
its
accreditation
by
that
accrediting
agency,
which
would
cause
it
to
lose
its
eligibility
to
participate
in
Title
IV
programs.

The
HEA
and
regulations
issued
by
the
DOE
require
accrediting
agencies
to
monitor
the
growth
of
institutions
that
they
accredit.
Our
U.S.
Institutions'
respective
accrediting
agencies
require
all
affiliated
institutions,
including
us,
to
complete
an
annual
data
report.
If
the
non-financial
data,
particularly
enrollment
information,
and
any
other
information
submitted
by
the
institution
indicate
problems,
rapid
change
or
significant
growth,
the
staff
of
the
respective
accrediting
agency
may
require
that
the
institution
address
any
concerns
arising
from
the
data
report
in
the
next
self-study
and
visit
process
or
may
recommend
additional
monitoring.
In
addition,
DOE
regulations
require
the
Higher
Learning
Commission
to
notify
the
DOE
if
an
institution
it
accredits
that
offers
distance
learning
programs,
such
as
Kendall
College
and
Walden
University,
experiences
an
increase
in
its
headcount
enrollment
of
50%
or
more
in
any
fiscal
year.
The
DOE
may
consider
that
information
in
connection
with
its
own
regulatory
oversight
activities.

In
addition
to
institution-wide
accreditation,
there
are
numerous
specialized
accrediting
agencies
that
accredit
specific
programs
or
schools
within
their
jurisdiction,
many
of
which
are
in
healthcare
and
professional
fields.
Accreditation
of
specific
programs
by
one
of
these
specialized
accrediting
agencies
signifies
that
those
programs
have
met
the
additional
standards
of
those
agencies.
In
addition
to
being

Table
of
Contents

accredited
by
regional
and/or
national
accrediting
agencies,
our
U.S.
Institutions
also
have
the
following
specialized
accreditations:

•

the
American
Culinary
Federation
Education
Foundation
Accrediting
Commission
accredits
the
A.A.S.
in
Culinary
Arts
and
the
A.A.S.
in
Baking
&
Pastry
programs
in
the
School
of
Culinary
Arts
at
Kendall
College;

the
Council
for
Accreditation
of
Counseling
and
Related
Educational
Programs
accredits
the
M.S.
in
Clinical
Mental
Health
Counseling,
M.S.
in
Marriage,
Couple
and
Family
Counseling
and
Ph.D.
in
Counselor
Education
and
Supervision
programs
at
Walden
University;

the
Commission
on
Collegiate
Nursing
Education
accredits
the
B.S.
in
Nursing,
M.S.
in
Nursing
and
Doctor
of
Nursing
Practice
programs
at
Walden
University,
and
the
M.S.
in
Nursing
program
at
St.
Augustine
holds
new
applicant
status;

the
Accreditation
Council
for
Business
Schools
and
Programs
accredits
the
B.S.
in
Business
Administration,
Master
of
Business
Administration,
Doctor
of
Business
Administration
and
Ph.D.
in
Management
programs
at
Walden
University;

the
National
Architecture
Accrediting
Board
accredits
NewSchool
of
Architecture
and
Design's
architecture
programs;

the
National
Council
for
Accreditation
of
Teacher
Education
accredits
the
Richard
W.
Riley
College
of
Education
and
Leadership
at
Walden
University;

the
Project
Management
Institute
Global
Accreditation
Center
for
Project
Management
Education
Program
accredits
the
M.S.
in
Project
Management
program
at
Walden
University;

the
ABET
accredits
the
B.S.
in
Information
Technology
online
program
at
Walden
University;

the
Commission
for
Accreditation
of
Physical
Therapy
Education
accredits
the
first
professional
Physical
Therapy
programs
at
St.
Augustine;

the
Accreditation
Council
for
Occupational
Therapy
Education
accredits
the
first
professional
Occupational
Therapy
programs
at
St.
Augustine;

the
International
Association
for
Continuing
Education
and
Training
recognizes
the
St.
Augustine
as
an
Authorized
Provider
of
continuing
education
programs;
and

the
Council
on
Social
Work
Education
accredits
the
master's
in
social
work
program
at
Walden
University,
and
the
bachelor's
in
social
work
program
at
Walden
University
holds
candidacy
status.

If
we
fail
to
satisfy
the
standards
of
any
of
these
specialized
accrediting
agencies,
we
could
lose
the
specialized
accreditation
for
the
affected
programs,
which
could
result
in
materially
reduced
student
enrollments
in
those
programs.

Congressional Hearings and Related Actions

The
U.S.
Congress
must
authorize
and
appropriate
funding
for
Title
IV
programs
under
the
HEA
and
can
change
the
laws
governing
Title
IV
programs
at
any
time.
The
HEA
was
most
recently
reauthorized
in
August
2008
through
federal
fiscal
year
2014,
although
the
U.S.
Congress
has
taken
actions
required
to
extend
Title
IV
programs
while
a
HEA
reauthorization
remains
pending
and
the
Title
IV
programs
remain
authorized
and
functioning.
Congress
continues
to
engage
in
HEA
reauthorization
hearings,
with
such
hearings
examining
various
subjects
to
be
potentially
addressed
through
reauthorization,
including,
but
not
limited
to,
college
affordability,
the
role
of
consumer
information
in
college
choices
by
students
and
families,
whether
Title
IV
programs
should
include
institutional
risk-
sharing,
and
the
role
of
accrediting
agencies
in
ensuring
institutional
quality,
among

Table
of
Contents

other
items.
We
cannot
predict
the
timing
and
terms
of
any
eventual
HEA
reauthorization,
including
any
potential
changes
to
institutional
participation
or
student
eligibility
requirements
or
funding
levels
for
particular
Title
IV
programs.

In
addition
to
comprehensive
reauthorizations
of
the
HEA,
Congress
may
periodically
revise
the
law
and
other
statutory
requirements
governing
Title
IV
programs.
In
addition
to
Title
IV
programs,
eligible
veterans
and
military
personnel
may
receive
educational
benefits
under
other
federal
programs.
Congress
must
determine
the
funding
levels
for
Title
IV
programs,
and
programs
benefiting
eligible
veterans
and
military
personnel,
on
an
annual
basis
through
the
budget
and
appropriations
process.
A
reduction
in
federal
funding
levels
for
Title
IV
programs,
or
for
programs
providing
educational
benefits
to
veterans
and
military
personnel,
could
reduce
the
ability
of
some
students
to
finance
their
education.
The
loss
of,
or
a
significant
reduction
in,
Title
IV
program
funds
or
other
federal
education
benefits
available
to
students
at
our
U.S.
Institutions
could
reduce
our
enrollments
and
revenues
and
have
a
material
adverse
effect
on
our
business.

In
recent
years,
the
House
Education
and
Workforce
Committee
and
the
Senate
Committee
on
Health
Education
Labor
and
Pensions
(the
"HELP
Committee")
in
the
U.S.
Congress
have
increased
the
focus
on
the
role
of
the
for-profit
post-secondary
education
industry.
In
the
past,
these
and
other
congressional
committees
have
held
hearings
focused
on,
among
other
things,
the
standards
and
procedures
of
accrediting
agencies,
student
recruiting
and
admissions
and
outcomes
of
students,
credit
hours
and
program
length,
the
portion
of
federal
student
financial
aid
going
to
proprietary
institutions,
and
the
receipt
of
veterans
and
military
education
benefits
by
students
enrolled
at
proprietary
institutions.
This
activity
may
result
in
legislation,
further
rulemaking
affecting
participation
in
Title
IV
programs,
and
other
governmental
actions.
In
addition,
concerns
generated
by
congressional
activity
may
adversely
affect
enrollment
in
and
revenues
of
for-profit
educational
institutions.

Additionally,
the
U.S.
Congress
and
the
Department
of
Defense
(the
"DoD")
have
increased
their
focus
in
recent
years
on
DoD
tuition
assistance
that
is
used
for
distance
education
and
programs
at
proprietary
institutions.
On
multiple
occasions
since
2012,
the
DoD
has
revised
its
standard
Memorandum
of
Understanding
("MOU")
to
include
additional
provisions
applicable
to
all
higher
educational
institutions
providing
educational
programs
through
the
DoD
tuition
assistance
program.
Among
other
things,
the
MOU
requests
that
participating
institutions
provide
meaningful
information
to
students
about
the
financial
cost
and
attendance
at
an
institution
so
military
students
can
make
informed
decisions
on
where
to
attend
school,
will
not
use
unfair,
deceptive,
and
abusive
recruiting
practices
and
will
provide
academic
and
student
support
services
to
service
members
and
their
families.
The
revised
MOU
also
implements
rules
to
strengthen
existing
procedures
for
access
to
DoD
installations
by
educational
institutions,
a
DoD
Postsecondary
Education
Complaint
System
for
service
members,
spouses,
and
adult
family
members
to
register
student
complaints
and
established
authorization
for
the
military
departments
to
establish
service-specific
tuition
assistance
eligibility
criteria
and
management
controls.
Our
U.S.
Institutions
utilizing
tuition
assistance
have
signed
DoD's
standard
MOU.
The
DoD
has
begun
to
increase
its
enforcement
activity
in
connection
with
the
2012
Executive
Order.

Regulation of Federal Student Financial Aid Programs

To
be
eligible
to
participate
in
Title
IV
programs,
an
institution
must
comply
with
specific
requirements
contained
in
the
HEA
and
the
regulations
issued
thereunder
by
the
DOE.
An
institution
must,
among
other
things,
be
licensed
or
authorized
to
offer
its
educational
programs
by
the
state
or
states
in
which
it
is
located
and
maintain
institutional
accreditation
by
an
accrediting
agency
recognized
by
the
DOE.
The
substantial
amount
of
federal
funds
disbursed
to
schools
through
Title
IV
programs,
the
large
number
of
students
and
institutions
participating
in
these
programs
and
allegations
of
fraud
and
abuse
by
certain
for-profit
educational
institutions
have
caused
Congress
to
require
the
DOE
to
exercise
considerable
regulatory
oversight
over
for-profit
educational
institutions.
As
a
result,
for-profit

Table
of
Contents

educational
institutions,
including
ours,
are
subject
to
extensive
oversight
and
review.
Because
the
DOE
periodically
revises
its
regulations
and
changes
its
interpretations
of
existing
laws
and
regulations,
we
cannot
predict
with
certainty
how
the
Title
IV
program
requirements
will
be
applied
in
all
circumstances.

Significant
aspects
of
Title
IV
programs
include
the
following:

Eligibility and certification procedures.

Each
of
our
U.S.
Institutions
must
apply
periodically
to
the
DOE
for
continued
certification
to
participate
in
Title
IV
programs.
Such
recertification
generally
is
required
every
six
years,
but
may
be
required
earlier,
including
when
an
institution
undergoes
a
change
in
control.
An
institution
may
also
come
under
the
DOE's
review
when
it
expands
its
activities
in
certain
ways,
such
as
opening
an
additional
location,
adding
a
new
educational
program
or
modifying
the
academic
credentials
it
offers.
The
DOE
may
place
an
institution
on
provisional
certification
status
if
it
finds
that
the
institution
does
not
fully
satisfy
all
of
the
eligibility
and
certification
standards
and
in
certain
other
circumstances,
such
as
when
an
institution
is
certified
for
the
first
time
or
undergoes
a
change
in
control.
During
the
period
of
provisional
certification,
the
institution
must
comply
with
any
additional
conditions
included
in
the
institution's
program
participation
agreement
with
the
DOE.
In
addition,
the
DOE
may
more
closely
review
an
institution
that
is
provisionally
certified
if
it
applies
for
recertification
or
approval
to
open
a
new
location,
add
an
educational
program,
acquire
another
institution
or
make
any
other
significant
change.
If
the
DOE
determines
that
a
provisionally
certified
institution
is
unable
to
meet
its
responsibilities
under
its
program
participation
agreement,
it
may
seek
to
revoke
the
institution's
certification
to
participate
in
Title
IV
programs
without
advance
notice
or
opportunity
for
the
institution
to
challenge
the
action.
Students
attending
provisionally
certified
institutions
remain
eligible
to
receive
Title
IV
program
funds.
Each
of
our
U.S.
Institutions
currently
is
provisionally
certified
to
participate
in
Title
IV
programs.
They
are
also
subject
to
a
letter
of
credit
for
not
satisfying
the
DOE's
standards
of
financial
responsibility,
as
described
below.
In
addition,
they
are
subject
to
additional
cash
management
requirements
with
respect
to
their
disbursements
of
Title
IV
funds,
as
well
as
certain
additional
reporting
and
disclosure
requirements.

Gainful employment.

Under
the
HEA,
proprietary
schools
generally
are
eligible
to
participate
in
Title
IV
programs
in
respect
of
educational
programs
that
lead
to
"gainful
employment
in
a
recognized
occupation."
On
October
30,
2014,
the
DOE
published
final
regulations
to
define
"gainful
employment,"
which
become
effective
on
July
1,
2015.
Historically,
the
concept
of
"gainful
employment"
has
not
been
defined
in
detail.
The
final
regulations
require
each
educational
program
offered
by
a
proprietary
institution
to
achieve
threshold
rates
in
two
debt
measure
categories:
an
annual
debt-to-annual
earnings
("DTE")
ratio
and
an
annual
debt-to-discretionary
income
("DTI")
ratio.

The
ratios
are
calculated
under
complex
methodologies
and
definitions
outlined
in
the
final
regulations
and,
in
some
cases,
are
based
on
data
that
may
not
be
readily
accessible
to
us.
The
DTE
ratio
is
calculated
by
comparing
(i)
the
annual
loan
payment
required
on
the
median
student
loan
debt
incurred
by
students
receiving
Title
IV
program
funds
who
completed
a
particular
program
and
(ii)
the
higher
of
the
mean
or
median
of
those
students'
annual
earnings
approximately
two
to
four
years
after
they
graduate.
The
DTI
ratio
is
calculated
by
comparing
(x)
the
annual
loan
payment
required
on
the
median
student
loan
debt
incurred
by
students
receiving
Title
IV
program
funds
who
completed
a
particular
program
and
(y)
the
higher
of
the
mean
or
median
of
those
students'
discretionary
income
approximately
two
to
four
years
after
they
graduate.

An
educational
program
must
achieve
a
DTE
ratio
at
or
below
8%
or
a
DTI
ratio
at
or
below
20%
to
be
considered
"passing."
An
educational
program
with
a
DTE
ratio
greater
than
8%
but
less
than
or
equal
to
12%
or
a
DTI
ratio
greater
than
20%
but
less
than
or
equal
to
30%
is
considered
to
be
"in
the
zone."
An
educational
program
with
a
DTE
ratio
greater
than
12%
and
a
DTI
ratio
greater
than
30%
is
considered
"failing."
An
educational
program
will
cease
to
be
eligible
for
students
to
receive
Title
IV
program
funds
if
its
DTE
and
DTI
ratios
are
failing
in
two
out
of
any
three
consecutive
award
years
or
if
both
of
those
rates
are
failing
or
in
the
zone
for
four
consecutive
award
years.

Table
of
Contents

The
final
regulations
also
require
an
institution
to
provide
warnings
to
current
and
prospective
students
in
programs
which
may
lose
Title
IV
eligibility
at
the
end
of
an
award
or
fiscal
year.
If
an
educational
program
could
become
ineligible
based
on
its
ratios
for
the
next
award
year,
the
institution
must
(1)
deliver
a
warning
to
current
and
prospective
students
in
the
program
and
(2)
not
enroll,
register
or
enter
into
a
financial
commitment
with
a
prospective
student
until
three
business
days
after
the
warning
is
provided
or
a
subsequent
warning
is
provided,
if
more
than
thirty
days
have
passed
since
the
first
warning.
If
a
program
becomes
ineligible
for
students
to
receive
Title
IV
program
funds,
the
institution
cannot
seek
to
reestablish
eligibility
of
that
program,
or
establish
the
eligibility
of
a
similar
program
having
the
same
classification
of
instructional
program
("CIP")
code
with
the
same
first
four
digits
of
the
CIP
code
of
the
ineligible
program
for
three
years.

Additionally,
the
final
regulations
require
an
institution
to
certify
to
the
DOE
that
its
educational
programs
subject
to
the
gainful
employment
requirements,
which
include
all
programs
offered
by
our
U.S.
Institutions,
meet
the
applicable
requirements
for
graduates
to
be
professionally
or
occupationally
licensed
or
certified
in
the
state
in
which
the
institution
is
located.
If
we
are
unable
to
certify
that
our
programs
meet
the
applicable
state
requirements
for
graduates
to
be
professionally
or
occupationally
certified
in
that
state,
then
we
may
need
to
cease
offering
certain
programs
in
certain
states
or
to
students
who
are
residents
in
certain
states.

In
January
2017,
the
DOE
issued
to
institutions
final
DTE
rates.
Among
the
Classification
of
Instructional
Programs
reported
within
NewSchool
of
Architecture
and
Design,
Kendall
College
and
Walden
University,
the
DOE
has
indicated
that
we
had
one
that
failed
and
five
in
the
zone.
This
represents
a
total
of
one
educational
program
that
failed
and
10
in
the
zone.
St.
Augustine
had
no
programs
that
failed
or
were
in
the
zone.
The
percentage
of
students
enrolled
in
the
educational
program
that
failed
represents
approximately
1%
of
the
students
currently
enrolled
in
our
U.S.
Institutions.
The
percentage
of
students
enrolled
in
the
educational
programs
that
were
in
the
zone
represents
approximately
5.3%.
We
are
currently
examining
and
implementing
options
for
each
of
these
programs
and
their
students.
The
failure
of
any
program
or
programs
offered
by
any
of
our
U.S.
Institutions
to
satisfy
any
gainful
employment
regulations
could
render
that
program
or
programs
ineligible
for
Title
IV
program
funds.
If
a
particular
educational
program
ceased
to
become
eligible
for
Title
IV
program
funds,
either
because
it
fails
to
prepare
students
for
gainful
employment
in
a
recognized
occupation
or
due
to
other
factors,
we
may
choose
to
cease
offering
that
program.
It
is
possible
that
several
programs
offered
by
our
schools
may
be
adversely
affected
by
the
regulations
due
to
lack
of
specialized
program
accreditation
or
certification
in
the
states
in
which
such
institutions
are
based.
We
also
could
be
required
to
make
changes
to
certain
programs
at
our
U.S.
Institutions
or
to
increase
student
loan
repayment
efforts
in
order
to
comply
with
the
rule
or
to
avoid
the
uncertainty
associated
with
such
compliance.

Administrative capability.

DOE
regulations
specify
extensive
criteria
by
which
an
institution
must
establish
that
it
has
the
requisite
"administrative
capability"
to
participate
in
Title
IV
programs.
To
meet
the
administrative
capability
standards,
an
institution
must,
among
other
things:
comply
with
all
applicable
Title
IV
program
requirements;
have
an
adequate
number
of
qualified
personnel
to
administer
Title
IV
programs;
have
acceptable
standards
for
measuring
the
satisfactory
academic
progress
of
its
students;
not
have
student
loan
cohort
default
rates
above
specified
levels;
have
various
procedures
in
place
for
awarding,
disbursing
and
safeguarding
Title
IV
program
funds
and
for
maintaining
required
records;
administer
Title
IV
programs
with
adequate
checks
and
balances
in
its
system
of
internal
controls;
not
be,
and
not
have
any
principal
or
affiliate
who
is,
debarred
or
suspended
from
federal
contracting
or
engaging
in
activity
that
is
cause
for
debarment
or
suspension;
provide
financial
aid
counseling
to
its
students;
refer
to
the
DOE's
Office
of
Inspector
General
any
credible
information
indicating
that
any
student,
parent,
employee,
third-party
servicer
or
other
agent
of
the
institution
has
engaged
in
any
fraud
or
other
illegal
conduct
involving
Title
IV
programs;
submit
all
required
reports
and
financial
statements
in
a
timely
manner;
and
not
otherwise
appear
to
lack

Table
of
Contents

administrative
capability.
If
an
institution
fails
to
satisfy
any
of
these
criteria,
the
DOE
may
require
the
institution
to
repay
Title
IV
funds
its
students
previously
received,
change
the
institution's
method
of
receiving
Title
IV
program
funds,
which
in
some
cases
may
result
in
a
significant
delay
in
the
institution's
receipt
of
those
funds,
place
the
institution
on
provisional
certification
status
or
commence
a
proceeding
to
impose
a
fine
or
to
limit,
suspend
or
terminate
the
institution's
participation
in
Title
IV
programs.
If
the
DOE
determines
that
any
of
our
U.S.
Institutions
failed
to
satisfy
its
administrative
capability
requirements,
then
the
institution's
students
could
lose,
or
be
limited
in
their
access
to,
Title
IV
program
funding.

Financial responsibility.

The
HEA
and
DOE
regulations
establish
extensive
standards
of
financial
responsibility
that
institutions
such
as
ours
must
satisfy
to
participate
in
Title
IV
programs.
The
DOE
evaluates
institutions
for
compliance
with
these
standards
on
an
annual
basis
based
on
the
institution's
annual
audited
financial
statements
as
well
as
when
the
institution
applies
to
the
DOE
to
have
its
eligibility
to
participate
in
Title
IV
programs
recertified.
The
most
significant
financial
responsibility
standard
is
the
institution's
composite
score,
which
is
derived
from
a
formula
established
by
the
DOE
based
on
three
financial
ratios:
(1)
equity
ratio,
which
measures
the
institution's
capital
resources,
financial
viability
and
ability
to
borrow;
(2)
primary
reserve
ratio,
which
measures
the
institution's
ability
to
support
current
operations
from
expendable
resources;
and
(3)
net
income
ratio,
which
measures
the
institution's
ability
to
operate
at
a
profit
or
within
its
means.
The
DOE
assigns
a
strength
factor
to
the
results
of
each
of
these
ratios
on
a
scale
from
negative
1.0
to
positive
3.0,
with
negative
1.0
reflecting
financial
weakness
and
positive
3.0
reflecting
financial
strength.
The
DOE
then
assigns
a
weighting
percentage
to
each
ratio
and
adds
the
weighted
scores
for
the
three
ratios
together
to
produce
a
composite
score
for
the
institution.
The
composite
score
must
be
at
least
1.5
for
the
institution
to
be
deemed
financially
responsible
without
the
need
for
further
DOE
oversight.
In
addition
to
having
an
acceptable
composite
score,
an
institution
must,
among
other
things,
provide
the
administrative
resources
necessary
to
comply
with
Title
IV
program
requirements,
meet
all
of
its
financial
obligations
including
required
refunds
to
students
and
any
Title
IV
liabilities
and
debts,
be
current
in
its
debt
payments
and
not
receive
an
adverse,
qualified
or
disclaimed
opinion
by
its
accountants
in
its
audited
financial
statements.

If
the
DOE
determines
that
an
institution
does
not
meet
the
financial
responsibility
standards
due
to
a
failure
to
meet
the
composite
score
or
other
factors,
the
institution
is
able
to
establish
financial
responsibility
on
an
alternative
basis
permitted
by
the
DOE.
This
alternative
basis
could
include,
in
the
Department's
discretion,
posting
a
letter
of
credit,
accepting
provisional
certification,
complying
with
additional
DOE
monitoring
requirements,
agreeing
to
receive
Title
IV
program
funds
under
an
arrangement
other
than
the
DOE's
standard
advance
funding
arrangement,
such
as
the
reimbursement
method
of
payment
or
heightened
cash
monitoring,
or
complying
with
or
accepting
other
limitations
on
the
institution's
ability
to
increase
the
number
of
programs
it
offers
or
the
number
of
students
it
enrolls.

The
DOE
measures
the
financial
responsibility
of
several
of
our
U.S.
Institutions
on
the
basis
of
the
Laureate
consolidated
audited
financial
statements
and
not
at
the
individual
institution
level.
Based
on
Laureate's
composite
score
for
its
fiscal
year
ended
December
31,
2015,
the
DOE
determined
that
it
and,
consequently,
Walden
University,
NewSchool
of
Architecture
and
Design,
Kendall
College
and
St.
Augustine
fail
to
meet
the
standards
of
financial
responsibility.
As
a
result,
the
DOE
required
us
to
either:
1)
provide
a
letter
of
credit
in
an
amount
equal
to
50%
of
Title
IV
program
funds
received
by
Laureate
in
the
fiscal
year
ended
December
31,
2015
(calculated
by
the
DOE
to
be
$351,995,250)
and
have
our
U.S.
Institutions
qualify
as
financially
responsible;
or
2)
provide
a
letter
of
credit
in
an
amount
equal
to
15%
of
the
Title
IV
program
funds
received
by
Laureate
in
the
fiscal
year
ended
December
31,
2015
(calculated
by
the
DOE
to
be
$105,598,575)
and
for
our
U.S.
Institutions
to
remain
provisionally
certified
for
a
period
of
up
to
three
complete
Title
IV
program
award
years.
The
DOE
also
required
us
to
comply
with
additional
notification
and
reporting
requirements.
We
have
provided

Table
of
Contents

the
DOE
with
a
letter
of
credit
in
the
amount
of
$105,598,575
and
we
are
complying
with
the
additional
notification
and
reporting
requirements.

In
December
2015,
the
DOE
required
us
to
provide
a
letter
of
credit
in
the
amount
of
$14,967
for
St.
Augustine
(25%
of
the
total
Title
IV
program
refunds
the
institution
made
or
should
have
made
during
the
fiscal
year
ended
December
31,
2014).
This
requirement
was
due
to
the
fact
that
St.
Augustine
was
found
to
have
untimely
processed
returns
of
Title
IV
program
funds
for
withdrawn
students
for
more
than
5%
of
the
students
in
its
auditor's
sample
for
the
2014
fiscal
year.
We
have
obtained
this
letter
of
credit.
Any
requirement
to
provide
,
maintain
or
increase
a
letter
of
credit
or
other
sanctions
that
may
be
imposed
by
the
DOE
could
increase
our
cost
of
regulatory
compliance
and
could
affect
our
cash
flows.
The
DOE
has
the
discretion
to
increase
our
letter
of
credit
requirements
at
any
time.
If
our
U.S.
Institutions
are
unable
to
meet
the
minimum
composite
score
requirement
or
comply
with
the
other
standards
of
financial
responsibility,
and
could
not
post
a
required
letter
of
credit
or
comply
with
the
alternative
bases
for
establishing
financial
responsibility,
then
students
at
our
U.S.
Institutions
could
lose
their
access
to
Title
IV
program
funding.

On
November
1,
2016,
the
DOE
issued
a
final
rule
to
revise
its
general
standards
of
financial
responsibility
to
include
various
actions
and
events
that
would
require
institutions
to
provide
the
DOE
with
irrevocable
letters
of
credit.
For
additional
information
regarding
this
final
rule,
see
"—DOE
rulemaking
activities."
If
we
are
required
to
repay
the
DOE
for
any
successful
DTR
claims
by
students
who
attended
our
U.S.
Institutions,
or
we
are
required
to
obtain
additional
letters
of
credit
or
increase
our
current
letter
of
credit,
it
could
materially
affect
our
business,
financial
conditions
and
results
of
operations.
We
are
currently
assessing
the
impact
of
these
final
regulations
on
our
U.S.
Institutions.

Return of Title IV funds for students who withdraw.

When
a
student
who
has
received
Title
IV
funds
withdraws
from
school,
the
institution
must
determine
the
amount
of
Title
IV
program
funds
the
student
has
"earned."
The
institution
must
return
any
unearned
Title
IV
program
funds
to
the
appropriate
lender
or
the
DOE
in
a
timely
manner,
which
is
generally
no
later
than
45
days
after
the
date
the
institution
determined
that
the
student
withdrew.
If
such
payments
are
not
timely
made,
the
institution
will
be
required
to
submit
a
letter
of
credit
to
the
DOE
equal
to
25%
of
the
Title
IV
funds
that
the
institution
should
have
returned
for
withdrawn
students
in
its
most
recently
completed
fiscal
year.
Under
DOE
regulations,
late
returns
of
Title
IV
program
funds
for
5%
or
more
of
the
withdrawn
students
in
the
audit
sample
in
the
institution's
annual
Title
IV
compliance
audit
for
either
of
the
institution's
two
most
recent
fiscal
years
or
in
a
DOE
program
review
triggers
this
letter
of
credit
requirement.

A
final
program
review
determination
issued
by
the
DOE
on
March
3,
2015
found
that
Walden
University
failed
to
timely
return
Title
IV
program
funds
for
more
than
5%
of
the
withdrawn
students
during
its
fiscal
year
ended
December
31,
2012.
The
DOE
noted
that
such
a
finding
would
usually
require
Walden
to
post
a
letter
of
credit
to
the
DOE
equal
to
25%
of
the
Title
IV
funds
that
the
institution
should
have
returned
for
withdrawn
students
in
its
most
recently
completed
fiscal
year;
however,
such
an
additional
letter
of
credit
was
not
required
in
this
instance
because
of
the
letter
of
credit
that
was
previously
posted
to
the
DOE
based
on
our
consolidated
audited
financial
statements
failing
to
meet
the
DOE's
standards
of
financial
responsibility.

The "90/10 Rule."

A
requirement
of
the
HEA
commonly
referred
to
as
the
"90/10
Rule"
provides
that
an
institution
loses
its
eligibility
to
participate
in
Title
IV
programs,
if,
under
a
complex
regulatory
formula
that
requires
cash
basis
accounting
and
other
adjustments
to
the
calculation
of
revenue,
the
institution
derives
more
than
90%
of
its
revenues
for
any
fiscal
year
from
Title
IV
program
funds.
This
rule
applies
only
to
for-profit
post-secondary
educational
institutions,
including
our
U.S.
Institutions.
An
institution
is
subject
to
loss
of
eligibility
to
participate
in
Title
IV
programs
if
it
exceeds
the
90%
threshold
for
two
consecutive
fiscal
years,
and
an
institution
whose
rate
exceeds
90%
for
any
single
fiscal
year
will
be
placed
on
provisional
certification
and
may
be
subject
to
addition
conditions
or
sanctions
imposed
by
the
DOE.

Table
of
Contents

Using
the
DOE's
formula
under
the
"90/10
Rule,"
Kendall
College
derived
approximately
34%,
36%
and
35%
of
its
revenues
(calculated
on
a
cash
basis)
from
Title
IV
program
funds
in
fiscal
years
2016,
2015
and
2014,
respectively.
NewSchool
of
Architecture
and
Design
derived
approximately
37%,
43%
and
47%
of
its
revenues
(calculated
on
a
cash
basis)
from
Title
IV
program
funds
in
fiscal
years
2016,
2015
and
2014,
respectively.
St.
Augustine
derived
approximately
57%,
49%
and
46%
of
its
revenues
(calculated
on
a
cash
basis)
from
Title
IV
program
funds
in
fiscal
years
2016,
2015
and
2014,
respectively.
Walden
University
derived
approximately
73%,
73%
and
74%
of
its
revenues
(calculated
on
a
cash
basis)
from
Title
IV
program
funds
in
fiscal
years
2016,
2015
and
2014,
respectively.

The
ability
of
our
U.S.
Institutions
to
maintain
90/10
rates
below
90%
will
depend
on
our
enrollments,
any
increases
in
students
Title
IV
funding
eligibility
in
the
future,
and
other
factors
outside
of
our
control,
including
any
reduction
in
government
assistance
for
military
personnel,
including
veterans,
or
changes
in
the
treatment
of
such
funding
for
the
purposes
of
the
90/10
calculation.
In
recent
years,
several
members
of
Congress
have
introduced
proposals
and
legislation
that
would
modify
the
90/10
Rule.
One
such
proposal
would
revise
the
90/10
Rule
to
an
85/15
rule
and
would
count
DoD
tuition
assistance
and
GI
Bill
education
benefits
toward
that
limit.
We
cannot
predict
whether,
or
the
extent
to
which,
these
actions
could
result
in
legislation
or
further
rulemaking
affecting
the
90/10
Rule.
To
the
extent
that
any
such
laws
or
regulations
are
enacted,
our
U.S.
Institutions'
financial
condition
could
be
adversely
affected.

Student loan defaults.

Under
the
HEA,
an
educational
institution
may
lose
its
eligibility
to
participate
in
some
or
all
Title
IV
programs
if
defaults
by
its
students
on
the
repayment
of
federal
student
loans
received
under
Title
IV
programs
exceed
certain
levels.
For
each
federal
fiscal
year,
the
DOE
calculates
a
rate
of
student
defaults
on
such
loans
for
each
institution,
known
as
a
"cohort
default
rate."
Under
current
regulations,
an
institution
will
lose
its
eligibility
to
participate
in
Title
IV
programs
if
its
three-year
cohort
default
rate
equals
or
exceeds
30%
for
three
consecutive
cohort
years
or
40%
for
any
given
year.

The
Department
of
Education
generally
publishes
official
cohort
default
rates
annually
in
September
for
the
repayment
period
that
ended
the
prior
September
30.
Kendall
College's
official
cohort
default
rates
for
the
2013,
2012
and
2011
federal
fiscal
years
were
10.0%,
7.9%
and
11.3%,
respectively.
NewSchool
of
Architecture
and
Design's
official
cohort
default
rates
for
the
2013,
2012
and
2011
federal
fiscal
years
were
5.1%,
10.2%
and
11.2%,
respectively.
St.
Augustine's
official
cohort
default
rates
for
the
2013,
2012
and
2011
federal
fiscal
years
were
0.2%,
0.5%,
and
0.0%,
respectively.
Walden
University's
official
cohort
default
rates
for
the
2013,
2012
and
2011
federal
fiscal
years
were
6.7%,
6.8%
and
7.8%,
respectively.
The
average
national
student
loan
default
rates
published
by
the
DOE
for
all
institutions
that
participated
in
the
federal
student
aid
programs
for
2013,
2012
and
2011
were
11.3%,
11.8%
and
13.7%,
respectively,
and
for
all
proprietary
institutions
that
participated
in
the
federal
student
aid
programs
for
2013,
2012
and
2011
were
15.0%,
15.8%
and
19.1%,
respectively.

Incentive compensation rule.

Under
the
HEA,
an
educational
institution
that
participates
in
Title
IV
programs
may
not
make
any
commission,
bonus
or
other
incentive
payments
to
any
persons
or
entities
involved
in
recruitment
or
admissions
activities
or
in
the
awarding
of
financial
aid
pertaining
to
U.S.
citizens,
permanent
residents
and
others
temporarily
residing
in
the
United
States
with
the
intention
of
becoming
a
citizen
or
permanent
resident.
The
DOE
has
taken
the
position
that
any
commission,
bonus
or
other
incentive
compensation
based
in
any
part,
directly
or
indirectly,
or
securing
enrollment
or
awarding
financial
aid
is
inconsistent
with
the
statutory
prohibition
against
incentive
compensation.
The
DOE
has
maintained
that
institutions
may
make
merit-based
adjustments
to
employee
compensation,
provided
that
those
adjustments
are
not
based,
in
any
part,
directly
or
indirectly,
upon
securing
enrollments
or
awarding
financial
aid.
In
sub-regulatory
correspondence
to
institutions
regarding
its
regulatory
changes,
the
DOE
provided
additional
guidance
regarding
the
scope
of
the
prohibition
on
incentive
compensation
and
to
what
employees
and
types
of
activities
the
prohibition
applies.

Table
of
Contents

In
addition,
in
recent
years,
other
post-secondary
educational
institutions
have
been
named
as
defendants
to
whistleblower
lawsuits,
known
as
"
qui tam "
cases,
brought
by
current
or
former
employees
pursuant
to
the
Federal
False
Claims
Act,
alleging
that
their
institutions'
compensation
practices
did
not
comply
with
the
incentive
compensation
rule.
A
qui tam case
is
a
civil
lawsuit
brought
by
one
or
more
individuals
(a
"relator")
on
behalf
of
the
federal
government
for
an
alleged
submission
to
the
government
of
a
false
claim
for
payment.
The
relator,
often
a
current
or
former
employee,
is
entitled
to
a
share
of
the
government's
recovery
in
the
case,
including
the
possibility
of
treble
damages.
A
qui tam action
is
always
filed
under
seal
and
remains
under
seal
until
the
government
decides
whether
to
intervene
in
the
case.
If
the
government
intervenes,
it
takes
over
primary
control
of
the
litigation.
If
the
government
declines
to
intervene
in
the
case,
the
relator
may
nonetheless
elect
to
continue
to
pursue
the
litigation
at
his
or
her
own
expense
on
behalf
of
the
government.
Any
such
litigation
could
be
costly
and
could
divert
management's
time
and
attention
away
from
the
business,
regardless
of
whether
a
claim
has
merit.

Substantial misrepresentation.

An
institution
participating
in
Title
IV
programs
is
prohibited
from
making
misrepresentations
regarding
the
nature
of
its
educational
programs,
the
nature
of
financial
charges
and
availability
of
financial
assistance,
or
the
employability
of
graduates.
A
misrepresentation
is
defined
in
the
regulations
as
any
false,
erroneous
or
misleading
statement
to
any
student
or
prospective
student,
any
member
of
the
public,
an
accrediting
agency,
a
state
agency
or
the
DOE,
and,
significantly,
the
regulations
as
promulgated
by
the
DOE
define
misleading
statements
to
broadly
include
any
statements
that
have
a
likelihood
or
tendency
to
deceive.
If
any
of
our
U.S.
Institutions—or
any
entity,
organization,
or
person
with
whom
the
institution
has
an
agreement
to
provide
educational
programs
or
to
provide
marketing,
advertising,
recruiting,
or
admissions
services—committed
a
misrepresentation
for
which
a
person
could
reasonably
be
expected
to
rely,
or
has
reasonably
relied,
to
that
person's
detriment,
the
DOE
could
initiate
proceedings
to
revoke
the
institution's
Title
IV
eligibility,
deny
applications
made
by
the
institution,
impose
fines,
or
initiate
a
limitation,
suspension
or
termination
proceeding
against
the
institution.

Compliance reviews.

Our
U.S.
Institutions
are
subject
to
announced
and
unannounced
compliance
reviews
and
audits
by
various
external
agencies,
including
the
DOE,
its
Office
of
Inspector
General,
state
licensing
agencies,
various
state
approving
agencies
for
financial
assistance
to
veterans
and
accrediting
agencies.
In
general,
after
the
DOE
conducts
a
site
visit
and
reviews
data
supplied
by
an
institution,
the
DOE
sends
the
institution
a
program
review
report
and
affords
the
institution
with
an
opportunity
to
respond
to
any
findings.
The
DOE
then
issues
a
final
program
review
determination
letter,
which
identifies
any
liabilities.

On
March
3,
2015,
the
DOE
issued
a
final
program
review
determination
letter
to
Walden
University
for
a
September
2012
review
of
the
2011-2012
and
2012-2013
Title
IV
award
years.
The
letter
required
Walden
University
to
return
$34,281
in
Title
IV
funds,
and
also
found
that
Walden
University
failed
to
timely
return
Title
IV
program
funds
for
more
than
5%
of
the
withdrawn
students
during
its
fiscal
year
ended
December
31,
2012.
The
DOE
noted
that
such
a
finding
would
usually
require
Walden
to
post
a
letter
of
credit
to
the
DOE
equal
to
25%
of
the
Title
IV
funds
that
the
institution
should
have
returned
for
withdrawn
students
in
its
most
recently
completed
fiscal
year;
however,
such
an
additional
letter
of
credit
was
not
required
in
this
instance
because
of
the
letter
of
credit
that
was
previously
posted
to
the
DOE
based
on
our
consolidated
audited
financial
statements
failing
to
meet
the
DOE's
standards
of
financial
responsibility.
On
September
11,
2015,
the
DOE
issued
an
expedited
final
program
review
determination
letter
to
Kendall
College
regarding
a
March-April
2015
program
review.
The
letter
determined
that
Kendall
College
has
taken
corrective
actions
necessary
to
resolve
all
findings.
In
addition,
on
September
21,
2015,
the
Higher
Learning
Commission
notified
Kendall
College
that
the
Higher
Learning
Commission
placed
the
school
on
ongoing
financial
monitoring
over
the
next
24
months.
Such
action
was
primarily
due
to
concerns
over
the
school's
continued
reliance
upon
Laureate
to
provide
financial
support
to
sustain
its
operations.
In
May
2017,

Table
of
Contents

Kendall
College
and
Walden
University
are
scheduled
to
host
interim
site
visits
from
their
institutional
accreditor,
Higher
Learning
Commission,
as
a
condition
of
their
ongoing
accreditation.
On
September
8,
2016,
MOHE
sent
to
Walden
University
an
information
request
regarding
its
doctoral
programs
and
complaints
filed
by
doctoral
students,
as
part
of
a
program
review
that
MOHE
is
conducting.
We
have
been
informed
by
MOHE
that
in
an
effort
to
better
understand
the
context,
background
and
issues
related
to
doctoral
student
complaints
in
Minnesota,
MOHE
is
initiating
a
full
review
of
doctoral
programs
for
institutions
registered
in
Minnesota.

As
part
of
the
DOE's
ongoing
monitoring
of
institutions'
administration
of
Title
IV
programs,
the
HEA
also
requires
institutions
to
annually
submit
to
the
DOE
a
Title
IV
compliance
audit
conducted
by
an
independent
certified
public
accountant
in
accordance
with
applicable
federal
and
DOE
audit
standards.
In
addition,
to
enable
the
DOE
to
make
a
determination
of
an
institution's
financial
responsibility,
each
institution
must
annually
submit
audited
financial
statements
prepared
in
accordance
with
DOE
regulations.

DOE rulemaking activities.

On
October
30,
2015,
the
DOE
published
final
regulations
on
cash
management
and
debit
card
practices,
retaking
coursework,
and
clock-to-credit
hour
conversion.
A
majority
of
the
provisions
of
the
regulations
took
effect
on
July
1,
2016,
and
others
took
effect
on
later
dates
in
2016.
The
final
regulations
concerning
cash
management
require,
among
other
things,
that
institutions
subject
to
heightened
cash
monitoring
procedures
for
disbursements
of
Title
IV
funds
must,
effective
July
1,
2016,
pay
to
students
any
applicable
Title
IV
credit
balances
before
requesting
such
funds
from
the
DOE.
St.
Augustine,
Walden
University,
NewSchool
of
Architecture
and
Design
and
Kendall
College
are
currently
subject
to
heightened
cash
monitoring
procedures.
We
have
reviewed
the
regulations
and
made
appropriate
adjustments
in
our
business
operations
to
meet
those
requirements
effective
July
1,
2016.

On
October
31,
2016,
the
DOE
published
final
regulations
teacher
preparation
program
accountability
systems
under
the
HEA,
and
additionally
proposed
amendments
on
teacher
preparation
program
eligibility
for
TEACH
Grant
participation.
On
March
8,
2017,
the
U.S.
Congress
enacted
a
joint
resolution
disapproving
these
October
31,
2016
final
regulations
on
teacher
preparation
pursuant
to
the
Congressional
Review
Act.
On
March
27,
2017,
the
President
signed
the
joint
resolution
nullifying
these
final
regulations
on
teacher
preparation
and
prohibiting
the
DOE
from
reissuing
regulations
in
substantially
the
same
form,
or
from
issuing
new
regulations
that
are
substantially
the
same,
unless
such
reissued
or
new
regulations
are
specifically
authorized
by
the
U.S.
Congress
subsequent
to
its
joint
resolution
disapproving
the
October
31,
2016
final
regulations.

Table
of
Contents

On
November
1,
2016,
the
DOE
published
a
final
rule
that,
among
other
provisions,
establishes
new
standards
and
processes
for
determining
whether
a
Direct
Loan
Program
borrower
has
a
defense
to
repayment
("DTR")
on
a
loan
due
to
acts
or
omissions
by
the
institution
at
which
the
loan
was
used
by
the
borrower
for
educational
expenses.
The
final
regulations
take
effect
on
July
1,
2017.
Among
other
topics,
this
final
rule
establishes
permissible
borrower
defense
claims
for
discharge,
procedural
rules
under
which
claims
will
be
adjudicated,
time
limits
for
borrowers'
claims,
and
guidelines
for
recoupment
by
the
DOE
of
discharged
loan
amounts
from
institutions
of
higher
education.
It
also
prohibits
schools
from
using
any
pre-dispute
arbitration
agreements,
prohibits
schools
from
prohibiting
relief
in
the
form
of
class
actions
by
student
borrowers,
and
invalidates
clauses
imposing
requirements
that
students
pursue
an
internal
dispute
resolution
process
before
contacting
authorities
regarding
concerns
about
an
institution.
For
proprietary
institutions,
the
final
rule
describes
the
threshold
for
loan
repayment
rates
that
will
require
specific
disclosures
to
current
and
prospective
students
and
the
applicable
loan
repayment
rate
methodology.
The
final
rule
also
establishes
important
new
financial
responsibility
and
administrative
capacity
requirements
for
both
not-for-profit
and
for-profit
institutions
participating
in
the
Title
IV
programs.
For
example,
certain
events
would
automatically
trigger
the
need
for
a
school
to
obtain
a
letter
of
credit
including,
for
publicly
traded
institutions,
if
the
SEC
warns
the
school
that
it
may
suspend
trading
on
the
school's
stock,
the
school
failed
to
timely
file
a
required
annual
or
quarterly
report
with
the
SEC,
or
the
exchange
on
which
the
stock
is
traded
notifies
the
school
that
it
is
not
in
compliance
with
exchange
requirements
or
the
stock
is
delisted.
Other
events
would
require
a
recalculation
of
a
school's
composite
score
of
financial
responsibility,
including,
for
a
proprietary
institution
whose
score
is
less
than
1.5,
any
withdrawal
of
an
owner's
equity
by
any
means,
including
by
declaring
a
dividend,
unless
the
equity
is
transferred
within
the
affiliated
entity
group
on
whose
basis
the
composite
score
was
calculated.
The
final
rule
also
sets
forth
events
that
are
discretionary
triggers
for
letters
of
credit,
meaning
that
if
any
of
them
occur,
the
DOE
may
choose
to
require
a
letter
of
credit,
increase
an
existing
letter
of
credit
requirement
or
demand
some
other
form
of
surety
from
the
institution.
The
final
rule
provides
that
if
an
institution
fails
to
meet
the
composite
score
requirement
for
longer
than
three
years
under
provisional
certification,
the
DOE
may
mandate
additional
financial
protection
from
the
institution
or
any
party
with
"substantial
control"
over
the
institution.
Such
parties
with
"substantial
control"
must
agree
to
jointly
and
severally
guarantee
the
Title
IV
liabilities
of
the
institution
at
the
end
of
the
three-year
provisional
certification
period.
Under
current
regulations,
a
party
may
be
deemed
to
have
"substantial
control"
over
an
institution
if,
among
other
factors,
the
party
directly
or
indirectly
holds
an
ownership
interest
of
25%
or
more
of
an
institution,
or
is
a
member
of
the
board
of
directors,
a
general
partner,
the
chief
executive
officer
or
other
executive
officer
of
the
institution.
If
we
are
required
to
repay
the
DOE
for
any
successful
DTR
claims
by
students
who
attended
our
U.S.
Institutions,
or
we
are
required
to
obtain
additional
letters
of
credit
or
increase
our
current
letter
of
credit,
it
could
materially
affect
our
business,
financial
conditions
and
results
of
operations.
We
are
in
the
process
of
evaluating
the
final
regulations
and
cannot
predict
with
certainty
what
impact
the
final
regulations
will
have
on
our
business
and
the
educational
programs
offered
by
our
U.S.
Institutions.

Privacy of student records.

The
Family
Educational
Rights
and
Privacy
Act
of
1974
("FERPA"),
and
the
DOE's
FERPA
regulations
require
educational
institutions
to
protect
the
privacy
of
students'
educational
records
by
limiting
an
institution's
disclosure
of
a
student's
personally
identifiable
information
without
the
student's
prior
written
consent.
FERPA
also
requires
institutions
to
allow
students
to
review
and
request
changes
to
their
educational
records
maintained
by
the
institution,
to
notify
students
at
least
annually
of
this
inspection
right
and
to
maintain
records
in
each
student's
file
listing
requests
for
access
to
and
disclosures
of
personally
identifiable
information
and
the
interest
of
such
party
in
that
information.
If
an
institution
fails
to
comply
with
FERPA,
the
DOE
may
require
corrective
actions
by
the
institution
or
may
terminate
an
institution's
receipt
of
further
federal
funds.
In
addition,
our
U.S.
Institutions
are
obligated
to
safeguard
student
information
pursuant
to
the
Gramm-Leach-Bliley
Act
(the
"GLBA"),
a
federal
law
designed
to
protect
consumers'
personal
financial

Table
of
Contents

information
held
by
financial
institutions
and
other
entities
that
provide
financial
services
to
consumers.
The
GLBA
and
the
applicable
GLBA
regulations
require
an
institution
to,
among
other
things,
develop
and
maintain
a
comprehensive,
written
information
security
program
designed
to
protect
against
the
unauthorized
disclosure
of
personally
identifiable
financial
information
of
students,
parents
or
other
individuals
with
whom
such
institution
has
a
customer
relationship.
If
an
institution
fails
to
comply
with
the
applicable
GLBA
requirements,
it
may
be
required
to
take
corrective
actions,
be
subject
to
monitoring
and
oversight
by
the
FTC,
and
be
subject
to
fines
or
penalties
imposed
by
the
FTC.
For-profit
educational
institutions
are
also
subject
to
the
general
deceptive
practices
jurisdiction
of
the
FTC
with
respect
to
their
collection,
use
and
disclosure
of
student
information.
The
institution
must
also
comply
with
the
FTC
Red
Flags
Rule,
a
section
of
the
federal
Fair
Credit
Reporting
Act,
that
requires
the
establishment
of
guidelines
and
policies
regarding
identity
theft
related
to
student
credit
accounts.

Potential effect of regulatory violations.

If
any
of
our
U.S.
Institutions
fails
to
comply
with
the
regulatory
standards
governing
Title
IV
programs,
the
DOE
could
impose
one
or
more
sanctions,
including
requiring
us
to
repay
Title
IV
program
funds,
requiring
us
to
post
a
letter
of
credit
in
favor
of
the
DOE
as
a
condition
for
continued
Title
IV
certification,
taking
emergency
action
against
us,
initiating
proceedings
to
impose
a
fine
or
to
limit,
suspend
or
terminate
our
participation
in
Title
IV
programs
or
referring
the
matter
for
civil
or
criminal
prosecution.
Because
our
U.S.
Institutions
are
provisionally
certified
to
participate
in
Title
IV
programs,
the
DOE
may
revoke
the
certification
of
these
institutions
without
advance
notice
or
advance
opportunity
for
us
to
challenge
that
action.
If
such
sanctions
or
proceedings
were
imposed
against
us
and
resulted
in
a
substantial
curtailment
or
termination
of
our
participation
in
Title
IV
programs,
our
enrollments,
revenues
and
results
of
operations
could
be
materially
and
adversely
affected.

In
addition
to
the
actions
that
may
be
brought
against
us
as
a
result
of
our
participation
in
Title
IV
programs,
we
are
also
subject
to
complaints
and
lawsuits
relating
to
regulatory
compliance
brought
not
only
by
regulatory
agencies,
but
also
by
other
government
agencies
and
third
parties,
such
as
current
or
former
students
or
employees
and
other
members
of
the
public.

Regulatory
Standards
that
May
Restrict
Institutional
Expansion
or
Other
Changes
in
the
United
States

Many
actions
that
we
may
wish
to
take
in
connection
with
expanding
our
operations
or
other
changes
in
the
United
States
are
subject
to
review
or
approval
by
the
applicable
regulatory
agencies.

Adding teaching locations, implementing new educational programs and increasing enrollment.

The
requirements
and
standards
of
state
education
agencies,
accrediting
agencies
and
the
DOE
limit
our
ability
in
certain
instances
to
establish
additional
teaching
locations,
implement
new
educational
programs
or
increase
enrollment
in
certain
programs.
Many
states
require
review
and
approval
before
institutions
can
add
new
locations
or
programs.
Our
U.S.
Institutions'
state
educational
agencies
and
institutional
and
specialized
accrediting
agencies
that
authorize
or
accredit
our
U.S.
Institutions
and
their
programs
generally
require
institutions
to
notify
them
in
advance
of
adding
new
locations
or
implementing
new
programs,
and
upon
notification
may
undertake
a
review
of
the
quality
of
the
facility
or
the
program
and
the
financial,
academic
and
other
qualifications
of
the
institution.

With
respect
to
the
DOE,
if
an
institution
participating
in
Title
IV
programs
plans
to
add
a
new
location
or
educational
program,
the
institution
must
generally
apply
to
the
DOE
to
have
the
additional
location
or
educational
program
designated
as
within
the
scope
of
the
institution's
Title
IV
eligibility.
As
a
condition
for
an
institution
to
participate
in
Title
IV
programs
on
a
provisional
basis,
as
in
our
case,
the
DOE
can
require
prior
approval
of
such
programs
or
otherwise
restrict
the
number
of
programs
an
institution
may
add
or
the
extent
to
which
an
institution
can
modify
existing
educational
programs.
If
an
institution
that
is
required
to
obtain
the
DOE's
advance
approval
for
the
addition
of
a

Table
of
Contents

new
program
or
new
location
fails
to
do
so,
the
institution
may
be
liable
for
repayment
of
the
Title
IV
program
funds
received
by
the
institution
or
students
in
connection
with
that
program
or
enrolled
at
that
location.

Provisional certification.

Each
institution
must
apply
to
the
DOE
for
continued
certification
to
participate
in
Title
IV
programs
at
least
every
six
years
and
when
it
undergoes
a
change
in
control.
An
institution
may
also
come
under
the
DOE's
review
when
it
expands
its
activities
in
certain
ways,
such
as
opening
an
additional
location,
adding
an
educational
program
or
modifying
the
academic
credentials
that
it
offers.

The
DOE
may
place
an
institution
on
provisional
certification
status
if
it
finds
that
the
institution
does
not
fully
satisfy
all
of
the
eligibility
and
certification
standards.
In
addition,
if
a
company
acquires
an
institution
from
another
entity,
the
acquired
institution
will
automatically
be
placed
on
provisional
certification
when
the
DOE
approves
the
transaction.
During
the
period
of
provisional
certification,
the
institution
must
comply
with
any
additional
conditions
or
restrictions
included
in
its
program
participation
agreement
with
the
DOE.
Students
attending
provisionally
certified
institutions
remain
eligible
to
receive
Title
IV
program
funds,
but
if
the
DOE
finds
that
a
provisionally
certified
institution
is
unable
to
meet
its
responsibilities
under
its
program
participation
agreement,
it
may
seek
to
revoke
the
institution's
certification
to
participate
in
Title
IV
programs
without
advance
notice
or
advance
opportunity
for
the
institution
to
challenge
that
action.
In
addition,
the
DOE
may
more
closely
review
an
institution
that
is
provisionally
certified
if
it
applies
for
recertification
or
approval
to
open
a
new
location,
add
an
educational
program,
acquire
another
institution
or
make
any
other
significant
change.
All
of
our
U.S.
Institutions
currently
participate
in
Title
IV
programs
pursuant
to
provisional
participation
agreements
due
to
our
conversion
to
a
public
benefit
corporation
and
our
initial
public
offering,
as
well
as
because
we
do
not
meet
the
DOE's
standards
of
financial
responsibility.

Acquiring other institutions.

We
have
acquired
other
institutions
in
the
past,
and
we
may
seek
to
do
so
in
the
future.
The
DOE
and
virtually
all
state
education
agencies
and
accrediting
agencies
require
a
company
to
obtain
their
approval
if
it
wishes
to
acquire
another
institution.
The
level
of
review
varies
by
individual
state
and
accrediting
agency,
with
some
requiring
approval
of
such
an
acquisition
before
it
occurs
while
others
only
consider
approval
after
the
acquisition
has
occurred.
The
approval
of
the
applicable
state
education
agencies
and
accrediting
agencies
is
a
necessary
prerequisite
to
the
DOE
certifying
the
acquired
institution
to
participate
in
Title
IV
programs.
The
restrictions
imposed
by
any
of
the
applicable
regulatory
agencies
could
delay
or
prevent
our
acquisition
of
other
institutions
in
some
circumstances
or
could
delay
the
ability
of
an
acquired
institution
to
participate
in
Title
IV
programs.

Change in ownership resulting in a change in control.

The
DOE
and
many
states
and
accrediting
agencies
require
institutions
of
higher
education
to
report
or
obtain
approval
of
certain
changes
in
control
and
changes
in
other
aspects
of
institutional
organization
or
control.
Under
DOE's
regulations,
an
institution
that
undergoes
a
change
in
control
loses
its
eligibility
to
participate
in
Title
IV
programs
and
must
apply
to
the
DOE
to
reestablish
such
eligibility.
If
an
institution
files
the
required
application
and
follows
other
procedures,
the
DOE
may
temporarily
certify
the
institution
on
a
provisional
basis
following
the
change
in
control,
so
that
the
institution's
students
retain
continued
access
to
Title
IV
program
funds.
In
addition,
the
DOE
may
extend
such
temporary
provisional
certification
if
the
institution
timely
files
certain
required
materials,
including
the
approval
of
the
change
in
control
by
its
state
authorizing
agency
and
accrediting
agency
and
certain
financial
information
pertaining
to
the
financial
condition
of
the
institution
or
its
parent
corporation.

Table
of
Contents

the
DOE
on
behalf
of
Kendall
College,
NewSchool
of
Architecture
and
Design,
St.
Augustine
and
Walden
University
for
approval
of
these
institutions'
continued
participation
in
Title
IV
programs
in
connection
with
the
recent
conversion
to
a
Delaware
public
benefit
corporation.
The
DOE
completed
its
review
of
the
conversion
and
issued
provisional
program
participation
agreements
to
the
institutions
with
respect
to
the
conversion.
We
have
similarly
applied
to
the
DOE
on
behalf
of
Kendall
College,
NewSchool
of
Architecture
and
Design,
St.
Augustine
and
Walden
University
for
approval
of
these
institutions'
continued
participation
in
Title
IV
programs
in
connection
with
our
recent
initial
public
offering.
The
DOE's
review
of
the
initial
public
offering
remains
pending.
The
DOE
has
issued
temporary
program
participation
agreements
to
the
institutions,
which
will
expire
on
March
31,
2017.
If
certain
documents
are
submitted
to
DOE
before
the
expiration
of
the
temporary
program
participation
agreements,
the
eligibility
of
the
institutions
to
participate
in
the
Title
IV
programs
will
be
continued
on
a
month-to-month
basis
while
the
DOE
completes
its
review
of
the
initial
public
offering.
There
can
be
no
assurance
that
the
DOE
will
formally
approve
our
initial
public
offering
and
recertify
our
U.S.
Institutions
for
continued
Title
IV
program
eligibility.
If
the
DOE
fails
to
recertify
the
institutions
and
to
issue
provisional
program
participation
agreements
to
the
institutions
with
respect
to
the
initial
public
offering,
students
at
the
affected
institutions
would
no
longer
be
able
to
receive
Title
IV
program
funds.
The
DOE
could
also
recertify
our
U.S.
Institutions
with
respect
to
the
initial
public
offering,
but
restrict
or
delay
students'
receipt
of
Title
IV
program
funds,
limit
the
number
of
students
to
whom
an
institution
could
disburse
such
funds,
or
impose
other
restrictions.

The
types
of
and
thresholds
for
such
reporting
and
approval
vary
among
the
states
and
accrediting
agencies.
Certain
accrediting
agencies
may
require
that
an
institution
must
obtain
its
approval
in
advance
of
a
change
in
control,
structure
or
organization
for
the
institution
to
retain
its
accredited
status.
In
addition,
in
the
event
of
a
change
in
control,
structure
or
organization,
certain
accrediting
agencies
may
require
a
post-transaction
focused
visit
or
other
evaluation
to
review
the
appropriateness
of
its
approval
of
the
change
and
whether
the
institution
has
met
the
commitment
it
made
to
the
accrediting
agency
prior
to
the
approval.
Other
specialized
accrediting
agencies
also
require
an
institution
to
obtain
similar
approval
before
or
after
the
event
that
constitutes
a
change
in
control
under
their
standards.
Many
states
include
the
transfer
of
a
controlling
interest
of
common
stock
in
the
definition
of
a
change
in
control
requiring
approval.
Some
state
educational
agencies
that
regulate
us
may
require
us
to
obtain
approval
of
the
change
in
control
to
maintain
authorization
to
operate
in
that
state,
and
in
some
cases
such
states
could
require
us
to
obtain
advance
approval
of
a
change
in
control.

We
sought
confirmation
from
the
accrediting
agencies
for
Kendall
College,
NewSchool
of
Architecture
and
Design,
St.
Augustine
and
Walden
University,
as
well
as
from
the
U.S.
institutional
accrediting
agency
for
Universidad
Andrés
Bello,
whether
our
initial
public
offering
constitutes
a
change
of
control
under
their
respective
standards.
We
also
sought
guidance
from
applicable
state
educational
agencies
as
to
whether
the
recent
initial
public
offering
constitutes
a
change
of
control
requiring
approval
under
their
respective
regulations.

Many
states
and
accreditors
have
informed
us
that
our
initial
public
offering
did
not
constitute
a
change
of
control,
but
some
agencies
have
determined
that
the
offering
will
need
to
be
reviewed
under
their
respective
change
of
ownership
standards.
We
have
notified
each
agency
regarding
the
offering
and
some
have
requested
additional
information
in
connection
with
the
offering.
For
instance,
the
Florida
Commission
for
Independent
Education
has
determined
that
the
initial
public
offering
requires
its
review
and
approval
with
respect
to
St.
Augustine,
and
we
have
filed
the
required
applications
for
such
approval.
Our
failure
to
obtain
any
required
approval
of
our
initial
public
offering
from
the
DOE,
the
institutional
accrediting
agencies,
or
the
pertinent
state
educational
agencies
could
result
in
one
or
more
of
our
U.S.
Institutions
losing
continued
eligibility
to
participate
in
the
Title
IV
programs,
accreditation
or
state
licensure,
which
could
have
a
material
adverse
effect
on
our
U.S.
business,
financial
condition
and
results
of
operations.

In
addition,
we
increased
our
ownership
of
St.
Augustine
from
80%
to
100%
on
June
7,
2016.
The
20%
noncontrolling
interest
was
previously
held
by
Patris
of
St.
Augustine,
Inc.
and
subject
to
a
put
right,
which
Patris
of
St.
Augustine,
Inc.
elected
to
exercise.
We
have
notified
St.
Augustine's
applicable
regulators
regarding
the
increase
in
the
percentage
of
our
ownership
in
St.
Augustine.

Table
of
Contents

ITEM
1A.

RISK
FACTORS

The
following
are
certain
risks
that
could
affect
our
business
and
our
results
of
operations.
The
risks
identified
below
are
not
all
encompassing
but
should
be
considered
in
establishing
an
opinion
of
our
future
operations.

Risks
Relating
to
Our
Business

We are a global business with operations in 25 countries around the world and are subject to complex business, economic, legal, political, tax and foreign
currency risks, which risks may be difficult to adequately address.

In
each
of
2016,
2015
and
2014,
over
80%
of
our
revenues
were
generated
from
operations
outside
of
the
United
States.
We
own
or
control
58
institutions
and
manage
or
have
relationships
with
12
other
licensed
institutions
in
25
countries,
each
of
which
is
subject
to
complex
business,
economic,
legal,
political,
tax
and
foreign
currency
risks.
As
we
continue
to
expand
our
international
operations,
we
may
have
difficulty
managing
and
administering
a
globally
dispersed
business
and
we
may
need
to
expend
additional
funds
to,
among
other
things,
staff
key
management
positions,
obtain
additional
information
technology
infrastructure
and
successfully
implement
relevant
course
and
program
offerings
for
a
significant
number
of
international
markets,
which
may
materially
adversely
affect
our
business,
financial
condition
and
results
of
operations.

Additional
challenges
associated
with
the
conduct
of
our
business
overseas
that
may
materially
adversely
affect
our
operating
results
include:

•

the
large
size
of
our
network
and
diverse
range
of
institutions
present
numerous
challenges,
including
difficulty
in
staffing
and
managing
foreign
operations
as
a
result
of
distance,
language,
legal
and
other
differences;

each
of
our
institutions
is
subject
to
unique
business
risks
and
challenges
including
competitive
pressures
and
diverse
pricing
environments
at
the
local
level;

difficulty
maintaining
quality
standards
consistent
with
our
brands
and
with
local
accreditation
requirements;

potential
economic
and
political
instability
in
the
countries
in
which
we
operate,
including
student
unrest;

fluctuations
in
exchange
rates,
possible
currency
devaluations,
inflation
and
hyperinflation;

difficulty
selecting,
monitoring
and
controlling
partners
outside
of
the
United
States;

compliance
with
a
wide
variety
of
domestic
and
foreign
laws
and
regulations;

expropriation
of
assets
by
governments;

political
elections
and
changes
in
government
policies;

difficulty
protecting
our
intellectual
property
rights
overseas
due
to,
among
other
reasons,
the
uncertainty
of
laws
and
enforcement
in
certain
countries
relating
to
the
protection
of
intellectual
property
rights;

lower
levels
of
availability
or
use
of
the
Internet,
through
which
our
online
programs
are
delivered;

limitations
on
the
repatriation
and
investment
of
funds,
foreign
currency
exchange
restrictions
and
inability
to
transfer
cash
back
to
the
United
States
without
taxation;

Table
of
Contents

•

limitations
on
our
ability
to
realize
economic
benefits
from
certain
institutions
that
are
organized
as
not-for-profit
or
non-stock
entities
and
that
we
account
for
as
variable
interest
entities;
and

acts
of
terrorism,
public
health
risks,
crime
and
natural
disasters,
particularly
in
areas
in
which
we
have
significant
operations.

Our
success
in
growing
our
business
will
depend,
in
part,
on
the
ability
to
anticipate
and
effectively
manage
these
and
other
risks
related
to
operating
in
various
countries.
Any
failure
by
us
to
effectively
manage
the
challenges
associated
with
the
international
expansion
of
our
operations
could
materially
adversely
affect
our
business,
financial
condition
and
results
of
operations.

If we do not effectively manage our growth and business, our results of operations may be materially adversely affected.

We
have
expanded
our
business
over
the
past
eight
years
through
the
expansion
of
existing
institutions
and
the
acquisition
of
higher
education
institutions,
and
we
intend
to
continue
to
do
so
in
the
future.
We
also
have
established
and
intend
to
establish
new
institutions
in
certain
markets.
Planned
growth
will
require
us
to
add
management
personnel
and
upgrade
our
financial
and
management
systems
and
controls
and
information
technology
infrastructure.
There
is
no
assurance
that
we
will
be
able
to
maintain
or
accelerate
the
current
growth
rate,
effectively
manage
expanding
operations,
build
expansion
capacity,
integrate
new
institutions
or
achieve
planned
growth
on
a
timely
or
profitable
basis.
If
our
revenue
growth
is
less
than
projected,
the
costs
incurred
for
these
additions
and
upgrades
could
have
a
material
adverse
effect
on
our
business,
financial
condition
and
results
of
operations.

If we cannot maintain student enrollments in our institutions and maintain tuition levels, our results of operations may be materially adversely affected.

Our
strategy
for
growth
and
profitability
depends,
in
part,
upon
maintaining
and,
subsequently,
increasing
student
enrollments
in
our
institutions
and
maintaining
tuition
levels.
Attrition
rates
are
often
due
to
factors
outside
our
control.
Students
sometimes
face
financial,
personal
or
family
constraints
that
require
them
to
drop
out
of
school.
They
also
are
affected
by
economic
and
social
factors
prevalent
in
their
countries.
In
some
markets
in
which
we
operate,
transfers
between
universities
are
not
common
and,
as
a
result,
we
are
less
likely
to
fill
spaces
of
students
who
drop
out.
In
addition,
our
ability
to
attract
and
retain
students
may
require
us
to
discount
tuition
from
published
levels,
and
may
prevent
us
from
increasing
tuition
levels
at
a
rate
consistent
with
inflation
and
increases
in
our
costs.
If
we
are
unable
to
control
the
rate
of
student
attrition,
our
overall
enrollment
levels
are
likely
to
decline
or
if
we
are
unable
to
charge
tuition
rates
that
are
both
competitive
and
cover
our
rising
expenses,
our
business,
financial
condition,
cash
flows
and
results
of
operations
may
be
materially
adversely
affected.
In
addition,
student
enrollment
may
be
negatively
affected
by
our
reputation
and
any
negative
publicity
related
to
us.

We have incurred net losses in two of the last three fiscal years.

We
had
net
income
of
$366.2
million
in
2016
and
net
losses
of
$315.8
million
and
$162.5
million
in
2015
and
2014,
respectively.
Our
operating
expenses
may
increase
in
the
foreseeable
future
as
we
continue
to
expand
our
operations
and
the
Laureate International Universities network.
These
efforts
may
prove
more
expensive
than
we
currently
anticipate,
and
we
may
not
succeed
in
increasing
our
revenues
sufficiently
to
offset
any
higher
expenses.
Any
failure
to
increase
our
revenues
could
prevent
us
from
attaining
profitability.
We
cannot
be
certain
that
we
will
be
able
to
attain
profitability
on
a
quarterly
or
annual
basis.
If
we
are
unable
to
manage
these
risks
and
difficulties
effectively
as
we
encounter
them,
our
business,
financial
condition
and
results
of
operations
may
be
materially
adversely
affected.

Table
of
Contents

We may not be able to identify, acquire or establish control of, and integrate additional higher education institutions, or effectively integrate previously
acquired institutions, which could materially adversely affect our growth.

We
have
previously
relied
on,
and
we
expect
to
continue
to
rely
on,
acquisitions
as
an
element
of
our
growth.
In
2016,
we
made
no
acquisitions,
in
2015,
we
made
two
acquisitions
totaling
$11.6
million,
in
2014,
we
made
three
acquisitions
totaling
$469.2
million,
in
2013,
we
made
four
acquisitions
totaling
$321.7
million,
in
2012,
we
made
two
acquisitions
totaling
$8.6
million
and
in
2011,
we
made
six
acquisitions
totaling
$58.9
million,
including
debt
assumed.
However,
there
is
no
assurance
that
we
will
be
able
to
continue
to
identify
suitable
acquisition
candidates
or
that
we
will
be
able
to
acquire
or
establish
control
of
any
acquisition
candidate
on
favorable
terms,
or
at
all.
In
addition,
in
many
countries,
the
approval
of
a
regulatory
agency
is
needed
to
acquire
or
operate
a
higher
education
institution,
which
we
may
not
be
able
to
obtain.
Furthermore,
there
is
no
assurance
that
any
acquired
institution
can
be
integrated
into
our
operations
successfully
or
be
operated
profitably.
Acquisitions
involve
a
number
of
risks,
including:

•

diversion
of
management's
time
and
resources;

adverse
short-term
effects
on
reported
operating
results;

competition
from
other
acquirors,
which
could
lead
to
higher
prices
and
lost
opportunities;

cultural
issues
related
to
acquisition
of
closely
held
institutions
in
countries
around
the
world;

failures
of
due
diligence
during
the
acquisition
process;

integration
of
acquired
institutions'
operations,
including
reporting
systems
and
internal
controls;
and

loss
of
key
employees
of
the
acquired
business.

If
we
do
not
make
acquisitions
or
make
fewer
acquisitions
than
we
have
historically,
or
if
our
acquisitions
are
not
managed
successfully,
our
growth
and
results
of
operations
may
be
materially
adversely
affected.

We may not be able to successfully establish new higher education institutions, which could materially adversely affect our growth.

We
have
entered
new
markets
primarily
through
acquisitions.
As
part
of
our
expansion
strategy,
we
may
establish
new
higher
education
institutions
in
some
markets
where
there
are
no
suitable
acquisition
targets.
We
have
only
limited
experience
in
establishing
new
institutions,
such
as
the
establishment
of
our
universities
in
Morocco
and
Australia,
and
there
is
no
assurance
that
we
will
be
able
to
do
this
successfully
or
profitably.
Establishing
new
institutions
poses
unique
challenges
and
will
require
us
to
make
investments
in
management,
capital
expenditures,
marketing
activities
and
other
resources
that
are
different,
and
in
some
cases
may
be
greater,
than
those
made
to
acquire
and
then
operate
an
existing
institution.
To
open
a
new
institution,
we
will
also
be
required
to
obtain
appropriate
governmental
approvals,
including
a
new
license,
which
may
take
a
substantial
period
of
time
to
obtain.
If
we
are
unable
to
establish
new
higher
education
institutions
successfully,
our
growth
may
be
materially
adversely
affected.

Our success depends substantially on the value of the local brands of each of our institutions as well as the Laureate International Universities network brand,
which may be materially adversely affected by changes in current and prospective students' perception of our reputation and the use of social media.

Each
of
our
institutions
has
worked
hard
to
establish
the
value
of
its
individual
brand.
Brand
value
may
be
severely
damaged,
even
by
isolated
incidents,
particularly
if
the
incidents
receive
considerable

Table
of
Contents

negative
publicity.
There
has
been
a
marked
increase
in
use
of
social
media
platforms,
including
weblogs
(blogs),
social
media
websites,
and
other
forms
of
Internet-based
communications
that
allow
individuals
access
to
a
broad
audience
of
interested
persons.
We
believe
students
and
prospective
employers
value
readily
available
information
about
our
institutions
and
often
act
on
such
information
without
further
investigation
or
authentication,
and
without
regard
to
its
accuracy.
In
addition,
many
of
our
institutions
use
the
Laureate
name
in
promoting
their
institutions
and
our
success
is
dependent
in
large
part
upon
our
ability
to
maintain
and
enhance
the
value
of
the
Laureate
and
Laureate International Universities brands.
Social
media
platforms
and
devices
immediately
publish
the
content
their
subscribers
and
participants
post,
often
without
filters
or
checks
on
the
accuracy
of
the
content
posted.
Information
concerning
our
company
and
our
institutions
may
be
posted
on
such
platforms
and
devices
at
any
time.
Information
posted
may
be
materially
adverse
to
our
interests,
it
may
be
inaccurate,
and
it
may
harm
our
performance,
prospects
and
business.

Our reputation may be negatively influenced by the actions of other for-profit and private institutions.

In
recent
years,
there
have
been
a
number
of
regulatory
investigations
and
civil
litigation
matters
targeting
post-secondary
for-profit
education
institutions
in
the
United
States
and
private
higher
education
institutions
in
other
countries,
such
as
Chile.
These
investigations
and
lawsuits
have
alleged,
among
other
things,
deceptive
trade
practices,
false
claims
against
the
United
States
and
noncompliance
with
state
and
DOE
regulations,
and
breach
of
the
requirement
that
universities
in
Chile
be
operated
as
not-for-profit
institutions.
These
allegations
have
attracted
adverse
media
coverage
and
have
been
the
subject
of
federal
and
state
legislative
hearings
and
investigations
in
the
United
States
and
in
other
countries.
Allegations
against
the
post-secondary
for-profit
and
private
education
sectors
may
affect
general
public
perceptions
of
for-profit
and
private
educational
institutions,
including
institutions
in
the
Laureate International Universities network
and
us,
in
a
negative
manner.
Adverse
media
coverage
regarding
other
for-profit
or
private
educational
institutions
or
regarding
us
directly
or
indirectly
could
damage
our
reputation,
reduce
student
demand
for
our
programs,
materially
adversely
affect
our
revenues
and
operating
profit
or
result
in
increased
regulatory
scrutiny.

Growing our online academic programs could be difficult for us.

We
anticipate
significant
future
growth
from
online
courses
we
offer
to
students,
particularly
in
emerging
markets.
The
expansion
of
our
existing
online
programs,
the
creation
of
new
online
programs
and
the
development
of
new
fully
online
or
hybrid
programs
may
not
be
accepted
by
students
or
employers,
or
by
government
regulators
or
accreditation
agencies.
In
addition,
our
efforts
may
be
materially
adversely
affected
by
increased
competition
in
the
online
education
market
or
because
of
problems
with
the
performance
or
reliability
of
our
online
program
infrastructure.
There
is
also
increasing
development
of
online
programs
by
traditional
universities,
both
in
the
public
and
private
sectors,
which
may
have
more
consumer
acceptance
than
programs
we
develop,
because
of
lower
pricing
or
greater
perception
of
value
of
their
degrees
in
the
marketplace,
which
may
materially
adversely
affect
our
business,
financial
condition
and
results
of
operations.

Our success depends, in part, on the effectiveness of our marketing and advertising programs in recruiting new students.

In
order
to
maintain
and
increase
our
revenues
and
margins,
we
must
continue
to
develop
our
admissions
programs
and
attract
new
students
in
a
cost-effective
manner.
Over
the
last
several
years,
in
support
of
our
admissions
efforts
in
all
the
countries
in
which
we
operate,
we
have
spent
significant
amounts
globally
on
marketing
and
advertising.
We
spent
$290.8
million
in
2014,
$278.3
million
in
2015,
and
$274.9
million
in
2016,
and
we
anticipate
that
significant
spending
on
marketing
and
advertising
will
continue.
As
part
of
our
marketing
and
advertising,
we
also
subscribe
to
lead-generating
databases
in
certain
markets,
the
cost
of
which
is
expected
to
increase.
The
level
of
marketing
and
advertising

Table
of
Contents

and
types
of
strategies
used
are
affected
by
the
specific
geographic
markets,
regulatory
compliance
requirements
and
the
specific
individual
nature
of
each
institution
and
its
students.
The
complexity
of
these
marketing
efforts
contributes
to
their
cost.
If
we
are
unable
to
advertise
and
market
our
institutions
and
programs
successfully,
our
ability
to
attract
and
enroll
new
students
could
be
materially
adversely
affected
and,
consequently,
our
financial
performance
could
suffer.
We
use
marketing
tools
such
as
the
Internet,
radio,
television
and
print
media
advertising
to
promote
our
institutions
and
programs.
Our
representatives
also
make
presentations
at
upper
secondary
schools.
Additionally,
we
rely
on
the
general
reputation
of
our
institutions
and
referrals
from
current
students,
alumni
and
employers
as
a
source
of
new
enrollment.
Among
the
factors
that
could
prevent
us
from
marketing
and
advertising
our
institutions
and
programs
successfully
are
the
failure
of
our
marketing
tools
and
strategies
to
appeal
to
prospective
students,
regulatory
constraints
on
marketing,
current
student
and/or
employer
dissatisfaction
with
our
program
offerings
or
results
and
diminished
access
to
upper
secondary
campuses.
In
addition,
in
certain
instances,
local
regulatory
authorities
set
quotas
each
year
for
how
many
students
we
may
enroll,
which
may
further
limit
our
ability
to
recruit
new
students
or
maintain
our
present
enrollment
level.
In
some
of
the
countries
in
which
we
operate,
enrollment
growth
in
degree-granting,
higher
education
institutions
is
slowing
or
is
expected
to
slow.
In
order
to
maintain
current
growth
rates,
we
will
need
to
attract
a
larger
percentage
of
students
in
existing
markets
and
increase
our
addressable
market
by
adding
locations
in
new
markets
and
rolling
out
new
academic
programs.
Any
failure
to
accomplish
this
may
have
a
material
adverse
effect
on
our
future
growth.

Our institutions are subject to uncertain and varying laws and regulations, and any changes to these laws or regulations or their application to us may
materially adversely affect our business, financial condition and results of operations.

Higher
education
is
regulated
to
varying
degrees
and
in
different
ways
in
each
of
the
countries
in
which
we
operate
an
institution.
In
general,
our
institutions
must
have
licenses,
approvals,
authorizations,
or
accreditations
from
various
governmental
authorities
and
accrediting
bodies.
These
licenses,
approvals,
authorizations,
and
accreditations
must
be
renewed
periodically,
usually
after
an
evaluation
of
the
institution
by
the
relevant
governmental
authorities
or
accrediting
bodies.
These
periodic
evaluations
could
result
in
limitations,
restrictions,
conditions,
or
withdrawal
of
such
licenses,
approvals,
authorizations
or
accreditations,
which
could
have
a
material
adverse
effect
on
our
business,
financial
condition
and
results
of
operations.
In
some
countries
in
which
we
operate,
there
is
a
trend
toward
making
continued
licensure
or
accreditation
based
on
successful
student
outcomes,
such
as
employment,
which
may
be
affected
by
many
factors
outside
of
our
control.
Once
licensed,
approved,
authorized
or
accredited,
some
of
our
institutions
may
need
approvals
for
new
campuses
or
to
add
new
degree
programs.

All
of
these
regulations
and
their
applicable
interpretations
are
subject
to
change.
Moreover,
regulatory
agencies
may
scrutinize
our
institutions
because
they
are
owned
or
controlled
by
a
U.S.-based
for-profit
corporation.
Outside
the
United
States,
we
may
be
particularly
susceptible
to
such
treatment
because,
in
several
of
the
countries
in
which
we
operate,
our
institutions
are
among
the
largest
private
institutions
and
have
a
substantial
share
of
the
higher
education
market.
Changes
in
applicable
regulations
may
cause
a
material
adverse
effect
on
our
business,
financial
condition
and
results
of
operations.

Changes
in
laws
governing
student
financing
could
affect
the
availability
of
government-sponsored
financing
programs
for
our
non-U.S.
students,
such
as
the
CAE
Program,
a
government-sponsored
student
loan
program
in
Chile,
FIES,
a
government-sponsored
loan
program
in
Brazil,
and
PROUNI
in
Brazil,
all
of
which
are
offered
by
governments
as
a
means
of
increasing
student
access
to
post-secondary
education
programs.
If
those
programs
are
changed,
or
if
our
institutions
or
our
students
are
no
longer
permitted
to
participate
in
those
programs,
it
could
cause
a
material
adverse

Table
of
Contents

effect
on
our
business,
financial
condition
and
results
of
operations.
For
example,
in
December
2014,
the
Brazilian
government
announced
a
number
of
changes
to
FIES
beginning
in
2015.
These
changes
limit
the
number
of
new
participants
and
the
amount
spent
on
the
program,
and
delay
payments
to
the
post-secondary
institutions
that
would
otherwise
have
been
due
in
2015.
For
more
information
on
the
CAE
Program,
FIES
and
PROUNI,
see
"—If
students
who
avail
themselves
of
government-sponsored
student
financing
programs
in
certain
countries
do
not
graduate
and
subsequently
default
on
their
loans,
we
may
be
responsible
for
repaying
a
significant
portion
of
their
loans"
and
"Item
1—Business—Our
Operating
Segments—LatAm—Government-Sponsored
Student
Financing
Programs."
As
another
example,
in
October
2013,
one
of
our
institutions
in
Chile,
UDLA
Chile
was
notified
by
the
National
Accreditation
Commission
that
its
institutional
accreditation
would
not
be
renewed.
UDLA
Chile
appealed
this
decision
but
received
a
final
determination
that
the
appeal
was
denied
on
January
22,
2014.
UDLA
Chile
filed
a
new
application
for
accreditation
in
October
2015
and
was
notified
in
March
2016
that
it
had
been
accredited
for
three
years
until
March
2019.
Institutional
accreditation
is
required
for
new
students
to
be
eligible
to
participate
in
the
CAE
Program
and
new
students
at
UDLA
Chile
were
not
eligible
to
participate
in
the
CAE
Program
during
the
period
that
UDLA
Chile
was
not
accredited.
For
more
information
about
possible
changes
in
government
regulation
of
higher
education
in
Chile,
including
possible
changes
to
student
financing
programs,
see
"—Political
and
regulatory
developments
in
Chile
may
materially
adversely
affect
our
operations"
and
"Item
1—Business—Industry
Regulation—Chilean
Regulation—Recent
Developments."
In
December
2016,
the
Australian
government
introduced
a
new
student
loan
scheme
for
vocational
courses.
These
changes,
among
other
things,
require
relevant
vocational
education
providers
to
demonstrate
a
minimum
of
50%
completion
rates,
provide
for
payment
of
fees
monthly
in
arrears
and
impose
caps
on
the
amounts
of
loans
available
for
particular
categories
of
courses
(see
"Item
1—Business—Our
Operating
Segments—AMEA—Government
Sponsored
Student
Financing
Programs").
The
Australian
vocational
operations
comply
with
these
requirements
but
the
changes
may
affect
the
results
of
those
operations.

The
laws
of
the
countries
where
we
own
or
control
institutions
and
expect
to
acquire
ownership
or
control
of
institutions
in
the
future
must
permit
both
private
higher
education
institutions
and
foreign
ownership
or
control
of
them.
For
political,
economic
or
other
reasons,
a
country
could
decide
to
change
its
laws
or
regulations
to
prohibit
or
limit
private
higher
education
institutions
or
foreign
ownership
or
control
or
prohibit
or
limit
our
ability
to
enter
into
contracts
or
agreements
with
these
institutions.
If
this
change
occurred,
it
could
have
a
material
adverse
effect
on
our
business,
financial
condition
and
results
of
operations
and
we
could
be
forced
to
sell
an
institution
at
a
price
that
could
be
lower
than
its
fair
market
value
or
relinquish
control
of
an
institution.
A
forced
sale
or
relinquishment
of
control
could
materially
adversely
affect
our
business,
financial
condition
and
results
of
operations.

Istanbul
Bilgi
University,
a
member
of
the
Laureate International Universities network
located
in
Turkey,
is
established
as
a
Foundation
University
under
the
Turkish
higher
education
law,
sponsored
the
Bilgi
Foundation.
As
such,
it
is
subject
to
regulation,
supervision
and
inspection
by
the
YÖK.
In
2014,
the
Turkish
parliament
amended
the
higher
education
law
to
provide
expanded
authority
to
the
YÖK
with
respect
to
Foundation
Universities,
including
authorizing
additional
remedies
for
violations
of
the
higher
education
law
and
of
regulations
adopted
by
the
YÖK.
On
November
19,
2015,
the
YÖK
promulgated
the
Ordinance
the
principal
effects
of
which
relate
to
the
supervision
and
inspection
of
Foundation
Universities
by
the
YÖK.
Under
the
Ordinance,
the
YÖK
has
expanded
authority
to
inspect
accounts,
transactions,
activities
and
assets
of
Foundation
Universities,
as
well
as
their
academic
units,
programs,
projects
and
subjects.
The
Ordinance
establishes
a
progressive
series
of
five
remedies
that
the
YÖK
can
take
in
the
event
it
finds
a
violation
of
the
Ordinance,
ranging
from
(1)
a
warning
and
request
for
correction
to
(2)
the
suspension
of
the
Foundation
University's
ability
to
establish
new
academic
units
or
programs
to
(3)
limiting
the
number
of
students
the
Foundation
University
can
admit,
including
ceasing
new
admissions,
to
(4)
provisional
suspension
of
the
Foundation
University's
license
to
(5)
cancellation
of
the
Foundation
University's
license.
Since
the
promulgation
of
the
Ordinance,
the
YÖK
has
cancelled
the
licenses
of
15
Foundation
Universities.

Table
of
Contents

The
Ordinance
specifies
that
Foundation
Universities
cannot
be
established
by
foundations
in
order
to
gain
profit
for
themselves,
and
prohibits
specified
types
of
fund
transfers
from
Foundation
Universities
to
their
sponsoring
foundation,
with
certain
exceptions
for
payments
made
under
contractual
arrangements
for
various
goods
and
services
that
are
provided
at
or
below
current
market
rates.
Istanbul
Bilgi
University
has
entered
into
contractual
arrangements
with
a
subsidiary
of
Laureate
that
is
a
member
of
the
board
of
trustees
of
the
Bilgi
Foundation,
and
has
affiliates
that
are
also
members
of
that
board,
to
provide
Istanbul
Bilgi
University
with
management,
operational
and
student
services
and
certain
intellectual
property
at
fair
market
rates.
The
YÖK
conducts
annual
audits
of
the
operations
of
Istanbul
Bilgi
University
and
currently
is
in
the
process
of
completing
its
most
recent
audit.
If
the
YÖK
were
to
determine
that
any
of
these
contracts
or
the
payments
made
by
Istanbul
Bilgi
University
to
this
Laureate
subsidiary,
or
any
other
activities
of
Istanbul
Bilgi
University,
including
the
donation
of
40.0
million
Turkish
Liras
made
by
the
university
to
a
charitable
foundation
that
was
subsequently
reimbursed
to
the
university
by
certain
Laureate-owned
entities,
violate
the
Ordinance
or
other
applicable
law,
the
YÖK
could
take
actions
against
Istanbul
Bilgi
University
up
to
and
including
cancellation
of
its
license.
See
"—
We
are
conducting
an
internal
investigation
of
one
of
our
network
institutions
for
violations
of
the
Company's
policies,
and
possible
violations
of
the
U.S.
Foreign
Corrupt
Practices
Act
(the
"FCPA")
and
other
applicable
laws.
A
violation
of
these
laws
and
regulations
could
subject
us
to
penalties,
harm
our
reputation
and
materially
adversely
affect
our
business,
financial
condition
and
results
of
operations."
Further,
if
the
YÖK
were
to
determine
that
any
administrators
of
Istanbul
Bilgi
University
have
directly
taken
any
actions
or
supported
any
activities
that
are
intended
to
harm
the
integrity
of
the
state,
the
license
of
the
university
could
be
cancelled.
In
July
2016,
a
coup
attempt
increased
political
instability
in
Turkey,
and
the
uncertainties
arising
from
the
failed
coup
in
Turkey
could
lead
to
changes
in
laws
affecting
Istanbul
Bilgi
University
or
result
in
modifications
to
the
current
interpretations
and
enforcement
of
the
Ordinance
or
other
laws
and
regulations
by
the
YÖK.
Any
such
actions
by
the
YÖK,
including
actions
in
relation
to
the
conduct
of
the
annual
audit,
could
have
a
material
adverse
impact
on
Istanbul
Bilgi
University's
future
growth
or
its
ability
to
remain
in
operation,
and
could
have
a
material
adverse
effect
on
our
business,
financial
condition
and
results
of
operations.

For
a
full
description
of
the
laws
and
regulations
affecting
our
U.S.
Institutions,
and
the
impact
of
those
laws
and
regulations
on
the
operations
of
our
U.S.
Institutions,
including
the
ability
of
our
U.S.
Institutions
to
continue
to
access
U.S.
federal
student
aid
funding
sources,
see
"—Risks
Relating
to
Our
Highly
Regulated
Industry
in
the
United
States"
and
"Item
1—Business—Industry
Regulation—U.S.
Regulation."
Our
institutions
located
outside
the
United
States
also
participate
in
various
student
financial
aid
programs
offered
by
the
countries
in
which
they
operate.

Political and regulatory developments in Chile may materially adversely affect our operations.

As
a
consequence
of
student
protests
and
political
disturbances,
during
2011
and
2012,
the
former
Chilean
government
announced
several
proposed
reforms
to
the
higher
education
system.
The
reforms,
if
they
had
been
adopted,
could
have
included
changing
the
current
accreditation
system
to
make
it
more
demanding,
revising
the
student
financing
system
to
provide
a
single
financing
system
for
students
in
all
higher
education
institutions
(replacing
the
CAE
Program),
establishing
a
system
of
information
transparency
for
higher
education,
creating
an
agency
to
promote
accountability
by
higher
education
institutions,
changing
certain
corporate
governance
rules
for
universities
(such
as
the
need
for
a
minimum
number
of
independent
directors),
and
establishing
procedures
for
the
approval
of,
or
otherwise
limiting,
transactions
between
higher
education
institutions
and
related
parties.
Other
legislative
reforms
were
promoted
by
members
of
the
Chilean
Congress
but
were
not
supported
by
the
previous
Chilean
government,
including
proposals
to
restrict
related
party
transactions
between
higher
education
institutions
and
entities
that
control
them.
In
November
and
December
2013,
Chile
held
national
elections.
The
presidential
election
was
won
by
former
president
Michelle
Bachelet,
who
assumed
office
on
March
11,
2014,
and
a
political
coalition
led
by
Ms.
Bachelet
won
the
elections
for

Table
of
Contents

both
houses
of
the
Chilean
Congress,
in
each
case
for
four
years
beginning
on
March
11,
2014.
Although
the
election
platform
of
the
new
government
mentioned
that
stronger
regulation
of
higher
education
was
required,
it
did
not
contain
specific
commitments
with
respect
to
the
abovementioned
reforms,
other
than
the
creation
of
a
special
agency
to
oversee
higher
education
institutions'
compliance
with
law
and
regulations.
In
the
second
quarter
of
2014,
the
new
government
announced
the
withdrawal
of
all
of
the
prior
administration's
higher
education
proposals
and
its
intent
to
submit
new
bills
to
the
Chilean
Congress.

On
July
4,
2016,
the
Chilean
President
submitted
to
the
Chilean
Congress
the
Higher
Education
Bill
that,
if
approved,
would
change
the
entire
regulatory
landscape
of
higher
education
in
Chile,
as
it
would
amend
and/or
replace
most
of
the
currently
applicable
legislation,
including
repealing
the
current
laws
governing
universities,
professional
institutes
and
technical
training
centers.
Among
other
things,
the
Higher
Education
Bill
would
create
the
Undersecretary
of
Higher
Education,
which
would
propose
policies
on
higher
education
to
the
Ministry
of
Education,
including
policies
on
access,
inclusion,
retention
and
graduation
of
higher
education
students.
The
Undersecretary
of
Higher
Education
would
also
develop
policies
relating
to
the
promotion
development,
support
and
continuous
improvement
of
the
quality
of
higher
education
institutions
and
their
relationship
with
the
needs
of
the
country.
The
Undersecretary
of
Higher
Education
would
also
manage
the
new
Common
Access
System
for
Higher
Education
Institutions,
which
would
establish
the
process
and
mechanisms
for
the
application,
admission
and
selection
of
undergraduate
students,
and
which
would
be
mandatory
at
all
higher
education
institutions
that
receive
public
funding
through
the
Ministry
of
Education.

The
Higher
Education
Bill
also
includes
new
regulations
applicable
to
not-for-profit
educational
institutions
that
would:
(i)
provide
that
their
controllers
and
members
can
only
be
individuals,
other
not-for-profits
or
state-owned
entities;
(ii)
create
the
obligation
to
use
their
resources
and
reinvest
their
surplus
or
profits
in
the
pursuit
of
their
objectives
and
in
enhancing
the
quality
of
the
education
they
provide;
(iii)
create
the
obligation
to
have
a
board
of
directors,
which
cannot
delegate
its
functions,
and
whose
members
cannot
be
removed
unless
approved
by
the
majority
of
the
board
and
for
serious
reasons;
and
(iv)
prohibit
related
party
transactions
with
their
founders,
controllers,
members
of
the
board,
rector
and
their
relatives
or
related
entities,
unless
the
counterparty
to
the
transaction
is
another
not-for-profit
entity,
and
establish
regulations
for
other
related
party
transactions
which
include
the
need
for
them
to
be
under
market
conditions
and
approved
by
the
board.
For
more
information
about
possible
changes
in
government
regulation
of
higher
education
in
Chile
as
a
result
of
the
Higher
Education
Bill,
see
"Item
1
—Business—Industry
Regulation—Chilean
Regulation—Recent
Developments."
See
also,
"—Student
protests
may
disrupt
our
ability
to
hold
classes
as
well
as
our
ability
to
attract
and
retain
students,
which
could
materially
adversely
affect
our
operations."

Table
of
Contents

While
we
believe
that
all
of
our
institutions
in
Chile
are
operating
in
full
compliance
with
Chilean
law,
we
cannot
predict
the
extent
or
outcome
of
any
educational
reforms
that
may
be
implemented
in
Chile.
Depending
upon
how
these
reforms
are
defined
and
implemented,
there
could
be
a
material
adverse
effect
on
our
financial
condition
and
results
of
operations.
Any
disruption
to
our
operations
in
Chile
would
have
a
material
adverse
effect
on
our
financial
condition
and
results
of
operations.
Similar
reforms
in
other
countries
in
which
we
operate
could
also
have
a
material
adverse
effect
on
our
financial
condition
and
results
of
operations.

Regulatory changes in Chile may reduce access to student financing for some of our students in Chile, which could reduce enrollments at our Chilean
institutions.

On
November
27,
2015,
the
Chilean
Congress
passed
the
2016
Budget
Law.
By
means
of
the
2016
Budget
Law,
the
administration
sought
to
implement
a
policy
to
grant
free
access
to
higher
education
to
students
from
the
first
five
income
deciles
who
attend
certain
universities
or
technical
vocational
("tech/voc")
institutions.
For
university
students,
the
2016
Budget
Law
would
have
required
them
to
be
enrolled
in
universities
that
either
are
members
of
the
CRUCh
or
are
private
universities
that
are
not
members
of
the
CRUCh
that,
on
September
30,
2015,
met
the
following
requirements:
(a)
being
accredited
for
four
years
or
more;
(b)
not
being
related
to
for-profit
legal
entities;
and
(c)
having
a
representative
of
the
students
or
non-academic
personnel
as
a
member
of
their
governing
body.
For
tech/voc
students,
the
Budget
Law
would
have
required
them
to
be
enrolled
in
institutions
organized
as
not-for-profit
legal
entities
that
were
accredited
for
four
or
more
years.

On
December
21,
2015,
the
CT
declared
portions
of
the
2016
Budget
Law
dealing
with
higher
education
institutions
to
be
unconstitutional,
in
particular
those
portions
that
would
require
students
to
attend
institutions
with
specific
characteristics
in
order
to
obtain
free
tuition
as,
under
the
Chilean
Constitution,
that
would
constitute
arbitrary
discrimination
affecting
students
who
are
in
the
same
economic
condition.

Before
the
CT
published
the
text
of
its
decision,
the
administration
submitted
to
the
Chilean
Congress
the
Short
Law.
The
Short
Law
was
approved
by
Congress
two
days
after
its
submission,
on
December
23,
2015,
and
published
on
December
26,
2015.
The
Short
Law
is
effective
only
during
2016
and
was
not
subject
to
a
constitutional
challenge.

Table
of
Contents

students
and
the
institution
in
which
they
enroll
meet
the
requirements
for
NMS
II
and
the
tech/voc
institution
was,
on
December
31,
2015,
accredited
for
four
years
or
more.

On
November
11,
2016,
the
Chilean
Congress
passed
the
2017
Budget
Law.
The
2017
Budget
Law
included
changes
to
the
policies
for
granting
free
access
to
higher
education
and
scholarships
to
students
from
the
first
five
and
seven
income
deciles
who
attend
certain
universities
or
tech/voc
institutions.

For
university
students,
the
2017
Budget
Law
provides
for
free
access
to
higher
education
with
the
same
requirements
as
were
in
the
2016
Budget
Law
but
adds
the
requirement
that
eligible
universities
have
a
minimum
of
80%
of
their
newly
enrolled
students
with
an
average
result
from
the
national
university
admissions
examination,
high
school
grades
and
high
school
rankings
above
a
specified
level,
and
have
a
transparent
admission
system
that
must
have
been
published
on
the
institution's
website
by
December
1,
2016.
For
tech/voc
institutions,
the
2017
Budget
Law
provides
for
eligibility
for
free
access
for
students
if
they
are
enrolled
in
institutions
(i)
organized
as
not-for-profit
legal
entities
or
as
for-profit
legal
entities
that
have
filed
for
transformation
to
not-for-profit
legal
entities
under
the
"Transformation
Law"
passed
by
the
Chilean
Congress
on
November
16,
2016,
before
December
15,
2016,
(ii)
accredited
for
four
years
or
more
as
of
December
23,
2016,
(iii)
having
as
controllers
not-for-profit
legal
entities
or
natural
persons,
(iv)
having
stated
their
intention
to
participate
in
the
free
access
system
before
December
15,
2016,
and
(v)
having
a
transparent
admission
system
that
must
have
been
published
on
the
institution's
website
by
December
1,
2016.

The
2017
Budget
Law
also
modified
the
allocations
of
the
BS
Program.
The
BS
Program
supports
access
to
higher
education
for
university
students
coming
from
one
of
the
first
seven
income
deciles
and
covers
the
full
amount
of
tuition
up
to
an
amount
authorized
by
the
government.
Historically,
the
BS
Program
solely
benefited
students
of
CRUCh
universities.
The
2017
Budget
Law
terminated
the
differentiation
between
CRUCh
and
non-CRUCh
universities
for
eligibility
for
the
BS
Program.
Thus,
for
2017,
3,500
BS
Program
scholarships
will
be
granted
to
students
at
non-CRUCh
universities
and
3,500
additional
BS
Program
scholarships
will
be
granted
to
students
at
non-CRUCh
universities
in
2018.
By
2019,
the
government
promises
to
have
an
equal
BS
Program
scholarship
policy
for
all
universities,
whether
CRUCh
or
non-CRUCh.
Students
may
apply
for
a
BS
Program
scholarship
if
their
university
is
accredited
for
at
least
four
years
and
if
80%
of
the
university's
newly
enrolled
students
have
an
average
result
from
the
national
university
admissions
examination,
high
school
grades
and
high
school
rankings
above
a
specified
level.

Finally,
under
the
2017
Budget
Law,
the
Comptroller
General
will
be
in
charge
of
overseeing
the
use
of
the
public
resources
in
higher
education.

100

Table
of
Contents

We
cannot
predict
the
effect
that
the
student
financing
reforms
may
have
on
our
operations
in
Chile.
Any
material
limitations
on
the
access
of
our
students
in
Chile
to
government-sponsored
financing
may
have
a
material
adverse
effect
on
our
financial
condition
and
results
of
operations.
Similar
limitations
on
government-sponsored
student
financing
in
other
countries
in
which
we
operate
could
also
have
a
material
adverse
effect
on
our
financial
condition
and
results
of
operations.

We are subject to investigations by Chilean regulators, which could individually or in the aggregate, materially adversely affect our business, financial
condition and results of operations.

In
December
2014,
the
Chilean
Congress
approved
the
Provisional
Administrator
Law.
If
the
Ministry
of
Education
were
to
determine
that
one
of
the
universities
in
Chile
that
is
part
of
the
Laureate International Universities network
had
violated
its
bylaws,
it
could
appoint
a
provisional
administrator
for
that
university
causing
us
to
lose
our
rights
to
control
that
institution,
which
could
have
a
material
adverse
effect
on
our
results
of
operations
and
financial
condition.

In
June
2012,
an
investigative
committee
of
the
Chilean
Chamber
of
Deputies
issued
a
preliminary
report
on
the
Chilean
higher
education
system
alleging
that
certain
universities,
including
the
three
universities
that
Laureate
controls
in
Chile,
have
not
complied
with
the
requirements
of
Chilean
law
that
universities
be
not-
for-profit.
Among
the
irregularities
cited
in
the
report
are
high
salaries
to
board
members
or
top
executives,
outsourcing
of
services
to
related
parties,
and
that
universities
are
being
bought
and
sold
by
foreign
and
economic
groups.
The
investigative
committee
referred
its
report
to
the
Ministry
of
Education
and
to
the
Public
Prosecutor
of
Chile
to
determine
whether
there
has
been
any
violation
of
the
law.
The
Public
Prosecutor
has
appointed
a
regional
prosecutor
to
investigate
whether
any
criminal
charges
should
be
brought
for
alleged
violations
of
the
laws
on
higher
education.
On
July
19,
2012,
the
Chilean
Chamber
of
Deputies
rejected
the
report
of
the
investigative
committee.
In
December
2012,
in
light
of
the
criminal
prosecution
of
the
former
president
of
the
National
Accreditation
Commission
for
alleged
bribery,
the
Chilean
Chamber
of
Deputies
mandated
its
Education
Commission
to
be
an
investigative
committee
regarding
the
functioning
of
the
National
Accreditation
Commission,
especially
with
respect
to
compliance
with
the
National
Accreditation
Commission's
duty
to
oversee
higher
education
entities.
The
Education
Commission
delivered
a
report,
which
was
approved
by
the
Chamber
of
Deputies
on
October
1,
2013,
containing
several
recommendations
to
improve
regulation
of
the
higher
education
accreditation
system.
Additionally,
the
Chilean
Chamber
of
Deputies
approved
the
creation
of
a
special
investigative
committee
to
resume
the
investigation
of
higher
education
performed
by
the
investigative
committee
that
issued
the
June
2012
report
that
was
previously
rejected
by
the
Chamber
of
Deputies.
On
January
15,
2014,
that
investigative
committee
approved
a
new
report
recommending,
among
other
things,
improvements
to
the
Chilean
higher
education
system
regulations,
amendments
to
the
higher
education
financing
system,
particularly
the
CAE
Program,
imposition
of
criminal
penalties
for
violation
of
the
requirement
that
universities
be
not-for-profit,
and
support
of
legislation
that
would
prohibit
related
party
transactions,
prohibit
the
transfer
of
control
of
universities,
and
require
universities
to
have
independent
board
members.
The
report
was
approved
by
the
full
Chamber
of
Deputies
on
April
1,
2014.
If
the
Chilean
Congress
were
to
approve
legislation
implementing
the
recommendations
in
this
report,
it
could
have
a
material
adverse
effect
on
our
results
of
operations
and
financial
condition.

On
February
18,
2014,
the
Ministry
of
Education
disclosed
that
on
November
15,
2013
and
February
11,
2014,
it
had
initiated
internal
investigations
into
UDLA
Chile
and
UNAB,
respectively.
The
investigations
were
initiated
upon
referrals
from
the
National
Education
Council
and
the
National
Accreditation
Commission,
which
had
conveyed
to
the
Ministry
of
Education
their
concerns
regarding
certain
agreements
entered
into
by
UDLA
Chile
and
UNAB
with
their
controlling
entities,
including
concerns
about
the
amount
and
real
use
made
by
the
universities
of
the
services
provided
under
those
agreements.
The
investigations
are
an
initial
step
by
the
Ministry
of
Education
to
determine
whether
the
Ministry
should
begin
formal
sanction
proceedings
against
the
universities.
The
Ministry
of

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Table
of
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Education
also
disclosed
that
it
had
delivered
relevant
documentation
on
the
matter
to
the
Public
Prosecutor.
In
January
2016,
the
Ministry
of
Education
announced
that
it
had
closed
the
investigation
into
UNAB.

In
May
2014,
SII,
the
Chilean
tax
authority,
instituted
an
audit
of
Universidad
Viña
del
Mar,
UNAB
and
UDLA
Chile
questioning
whether
they
had
regularly
paid
their
taxes
as
non-profit
entities
for
the
period
from
2011
to
2014,
specifically
in
relation
to
their
financial
dealings
with
Laureate
for-profit
entities.
Any
non-
compliance
with
the
non-profit
laws
would
subject
them
to
the
payment
of
additional
taxes
and
penalties.
As
of
August
2015,
SII
had
notified
all
three
institutions
that
its
audit
detected
"no
differences"
in
the
taxes
paid
and
the
taxes
owed,
and
provided
a
written
closure
letter
to
each
of
the
institutions.
In
December
2016,
SII
notified
separately
UDLA
Chile
and
UNAB
that
as
part
of
the
general
audit
program
called
"Auditoria
Integral
a
Universidades,"
it
was
requesting
supporting
documentation
from
them
for
the
tax
periods
between
November
2013
and
October
2016.
On
March
21,
2017,
SII
sent
a
similar
notification
to
UVM
Chile
regarding
the
tax
periods
from
May
2014
to
October
2016.
Each
institution
will
submit
responsive
documents
that
support
taxes
paid
related
to
its
revenues
and
expenses,
including
to
the
extent
such
revenues
and
expenses
involve
financial
dealings
with
Laureate
for-profit
entities.

In
June
2016,
the
Ministry
of
Education
notified
UNAB
that
it
was
opening
an
investigation
into
possible
violations
of
the
not-for-profit
nature
of
UNAB.
In
September
2016,
the
Ministry
of
Education
notified
UVM
Chile
that
it
was
opening
a
similar
investigation
of
UVM
Chile.
Each
of
the
institutions
continues
to
be
responsive
to
the
Ministry
of
Education's
requests
as
part
of
these
investigations.
Each
investigation
will
be
conducted
by
an
investigator
appointed
by
the
Ministry
of
Education
under
the
Provisional
Administrator
Law,
and
both
UNAB
and
UVM
Chile
have
been
advised
that
the
investigation
will
last
at
least
six
months.
Under
the
Provisional
Administrator
Law,
at
the
end
of
the
investigation
the
Ministry
of
Education
can
either
close
the
investigation
or
issue
a
report
imposing
one
of
the
following
measures:
(i)
ordering
a
recovery
plan
for
the
investigated
institution,
should
the
Ministry
verify
severe
breaches
of
the
institution's
financial,
administrative,
labor
or
academic
commitments;
(ii)
with
the
prior
consent
of
the
National
Education
Council,
naming
a
provisional
administrator
for
the
institution
if
the
Ministry
determines
that
(a)
there
are
serious
risks
to
the
administrative
or
financial
viability
of
the
institution
that
may
affect
the
continuity
of
its
educational
programs,
(b)
there
are
serious
and
recurring
breaches
of
the
academic
commitments
of
the
institution
to
its
students
due
to
a
lack
of
educational
or
teaching
resources
available
to
grant
professional
or
technical
degrees,
(c)
it
is
impossible
for
the
institution
to
maintain
its
academic
functions
due
to
sanctions,
injunctions
or
foreclosures
affecting
the
institution,
its
campuses
or
its
assets,
(d)
the
institution
is
declared
bankrupt
or
(e)
a
recovery
plan
pursuant
to
(i)
above
has
not
been
presented,
has
been
rejected
or
has
been
breached
by
the
institution;
or
(iii)
initiating
a
process
to
revoke
the
institution's
license,
in
which
case
it
would
name
a
closing
administrator.

While
we
believe
that
all
of
our
institutions
in
Chile
are
operating
in
full
compliance
with
Chilean
law,
we
cannot
predict
whether
the
Ministry
of
Education
or
the
Public
Prosecutor
will
take
any
action
in
response
to
the
reports
of
the
Chamber
of
Deputies
investigative
committees,
or
what
outcome
may
result
from
any
investigations
undertaken
by
the
Ministry
of
Education,
the
Public
Prosecutor
or
the
SII
in
response
to
the
referrals
from
the
National
Education
Council
and
National
Accreditation
Commission,
or
by
the
Ministry
of
Education
as
a
result
of
its
investigation
under
the
Provisional
Administrator
Law.
Depending
upon
the
outcome
of
any
investigation
by
the
Chilean
authorities,
there
could
be
a
material
adverse
effect
on
our
business.
Any
disruption
to
our
operations
in
Chile
would
have
a
material
adverse
effect
on
our
financial
condition
and
results
of
operations.

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Our right to receive economic benefits from certain of the institutions that are organized as not-for-profit or non-stock entities, and that we account for as
variable interest entities, may be limited.

We
have
obtained
board
and
operating
control
and
controlling
financial
interests
in
entities
outside
the
United
States
that
are
educational
institutions
similar
to
U.S.
not-for-profit,
non-stock
universities.
Under
applicable
law,
these
institutions
do
not
have
recognized
"owners"
or
shareholders,
and
generally
cannot
declare
dividends
or
distribute
their
net
assets
to
us.
For
accounting
purposes,
we
have
determined
that
these
institutions
are
Variable
Interest
Entities
("VIEs")
under
GAAP
and
that
we
are
the
primary
beneficiary
of
these
VIEs.
Maintenance
of
our
interest
in
the
VIE
institutions,
and
our
ability
to
receive
economic
benefits
from
these
entities,
is
based
on
a
combination
of
(1)
service
agreements
that
other
Laureate
entities
have
with
the
VIE
institutions,
allowing
the
institutions
to
access
the
benefits
of
the
Laureate International Universities network
and
allowing
us
to
recognize
economies
of
scale
throughout
the
network,
(2)
our
ability
to
provide
these
entities
with
opportunities
to
invest
for
market
returns
in
education-related
real
estate
entities
globally
and
(3)
our
ability
to
transfer
our
rights
to
govern
the
VIE
institutions,
or
the
entities
that
possess
those
rights,
to
other
parties,
which
would
yield
a
return
if
and
when
these
rights
are
transferred.
In
limited
circumstances,
we
may
have
rights
to
the
residual
assets
in
liquidation.
Under
the
mutually
agreed
service
agreements,
we
are
paid
at
market
rates
for
providing
services
to
institutions
such
as
access
to
content,
support
with
curriculum
design,
professional
development,
student
exchange,
access
to
dual
degree
programs,
affiliation
and
access
to
the
Laureate International Universities network,
and
management,
legal,
tax,
finance,
accounting,
treasury,
use
of
real
estate
and
other
services.
While
we
believe
these
arrangements
conform
to
applicable
law,
the
VIE
institutions
are
subject
to
regulation
by
various
agencies
based
on
the
requirements
of
local
jurisdictions.
These
agencies,
as
well
as
local
legislative
bodies,
review
and
update
laws
and
regulations
as
they
deem
necessary
or
appropriate.
We
cannot
predict
the
form
of
any
laws
that
may
be
enacted,
or
regulations
that
ultimately
may
be
adopted
in
the
future,
or
what
effects
they
might
have
on
our
results
of
operations,
financial
condition
and
cash
flows.
If
local
laws
or
regulations
were
to
change,
the
VIE
institutions
were
found
to
be
in
violation
of
existing
local
laws
or
regulations,
or
regulators
were
to
question
the
financial
sustainability
of
the
VIE
institutions
and/or
whether
the
contractual
arrangements
were
at
fair
value,
local
government
agencies
could,
among
other
actions:

•

revoke
the
business
licenses
and/or
accreditations
of
the
VIE
institutions;

void
or
restrict
related
party
transactions,
such
as
the
contractual
arrangements
between
us
and
the
VIE
institutions;

impose
fines
that
significantly
impact
business
performance
or
other
requirements
with
which
the
VIE
institutions
may
not
be
able
to
comply;

require
us
to
change
the
governance
structures
of
the
VIE
institutions,
such
that
we
would
no
longer
maintain
control
of
the
VIE
institutions;
or

disallow
a
transfer
of
our
rights
to
govern
the
VIE
institutions,
or
the
entities
that
possess
those
rights,
to
a
third
party
for
consideration.

If
we
are
unable
to
receive
economic
benefits
from
these
institutions,
it
would
have
a
material
adverse
effect
on
our
results
of
operations
and
financial
condition.
In
addition,
if
we
are
unable
or
limited
in
our
ability
to
receive
economic
benefits
from
these
institutions,
we
may
be
unable
to
consolidate
the
VIE
institutions
into
our
consolidated
financial
statements
or
we
may
be
limited
in
our
ability
to
recognize
all
of
the
institutions'
earnings
in
our
consolidated
statements
of
operations.

Our ability to control our institutions may be materially adversely affected by changes in laws affecting higher education in certain countries in which we
operate.

Our
institutions
are
governed
by
the
higher
education
laws
of
the
various
countries
in
which
we
operate,
which
may
be
amended
or
interpreted
in
ways
that
affect
our
ability
to
maintain
control
over

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the
institutions
through
our
ability
to
appoint
the
members
of
the
institutions'
governing
bodies.
If
we
are
unable
to
maintain
our
rights
of
control
of
appointments
to
those
governing
bodies,
our
ability
to
realize
economic
benefits
from
these
institutions
may
be
severely
limited,
including
not
being
able
to
transfer
control
of
the
institutions
in
a
way
that
would
yield
us
a
return
on
our
investment
or
not
being
able
to
implement
or
maintain
service
agreements
with
those
institutions.

It
is
possible
that
the
governance
and
control
structures
that
we
implement
at
a
specific
institution
to
comply
with
local
laws
and
regulations
would
not
allow
us
to
meet
the
standards
for
consolidation
of
that
institution's
financial
statements
into
our
own
consolidated
financial
statements.
If
we
determine
that
we
do
not
control
an
institution
or
otherwise
meet
the
standards
for
consolidation,
deconsolidation
of
that
institution
would
be
required.
In
that
event,
or
if
our
controlling
financial
interest
in
that
institution
is
impaired,
it
could
have
a
material
adverse
effect
on
our
business,
financial
condition
and
results
of
operations.

For
example,
in
the
second
half
of
2010,
Ecuador
adopted
a
new
higher
education
law
that,
upon
its
implementation,
required
us
to
modify
the
governance
structure
of
our
institution
in
that
country.
While
the
constitutionality
of
certain
provisions
of
the
higher
education
law
is
currently
being
challenged
in
Ecuador's
court
system,
the
law
has
been
implemented.
In
the
fourth
quarter
of
2012,
the
Consejo
de
Educación
Superior
(the
"CES"),
the
relevant
regulatory
body,
commenced
reviewing
and
issuing
comments
on
bylaws
submitted
by
other
Ecuadorian
higher
education
institutions,
implementing
and
enforcing
the
co-
governance
provisions
of
the
new
law.
In
accordance
with
ASC
810-10-15-10,
we
believed
that
control
no
longer
resided
with
Laureate
given
the
governmentally
imposed
uncertainties.
As
a
result,
UDLA
Ecuador
was
deconsolidated
in
the
fourth
quarter
of
2012
and
a
loss
of
$43.7
million
was
recorded
in
loss
from
regulatory
changes
in
the
consolidated
statement
of
operations.
This
loss
represented
our
initial
investment
on
the
leveraged
buyout
date
in
the
Ecuadorian
institution
of
$17.9
million,
as
well
as
$25.8
million
of
accumulated
earnings
from
the
leveraged
buyout
date
to
the
date
of
deconsolidation.
The
CES
approved
UDLA
Ecuador's
new
bylaws
complying
with
the
2010
law
in
September
2014
and
we
no
longer
control
UDLA
Ecuador,
although
we
maintain
contractual
arrangements
with
the
institution.
See
also
"Item
1—Business—Industry
Regulation—Chilean
Regulation—Recent
Developments."

Our business may be materially adversely affected by a general economic slowdown or recession.

Many
countries
around
the
world
have
recently
experienced
reduced
economic
activity,
increased
unemployment,
substantial
uncertainty
about
their
financial
services
markets
and,
in
some
cases,
economic
recession.
These
events
may
reduce
the
demand
for
our
programs
among
students,
which
could
materially
adversely
affect
our
business,
financial
condition,
results
of
operations
and
cash
flows.
These
adverse
economic
developments
also
may
result
in
a
reduction
in
the
number
of
jobs
available
to
our
graduates
and
lower
salaries
being
offered
in
connection
with
available
employment
which,
in
turn,
may
result
in
declines
in
our
placement
and
retention
rates.
For
example,
in
the
United
States,
our
professional-oriented
graduate
programs,
such
as
master's
degrees
in
teaching,
are
directly
affected
by
the
employment
and
promotion
prospects
for
persons
with
advanced
degrees.
Efforts
by
states
in
recent
years
to
reduce
education
funding
by
laying
off
younger
teachers
and
curtailing
pay
increases
for
remaining
teachers
may
have
a
material
adverse
effect
on
our
ability
to
attract
and
retain
students
in
our
graduate
education
programs.
In
addition,
in
2015
we
generated
approximately
83%
of
our
revenues
outside
the
United
States,
including
approximately
56%
of
our
revenues
from
our
LatAm
segment.
As
a
result,
any
general
economic
slowdown
or
recession
that
disproportionately
impacts
the
countries
in
which
our
institutions
operate
could
have
a
material
adverse
effect
on
our
business,
financial
condition,
results
of
operations
and
cash
flows.

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The higher education market is very competitive, and we may not be able to compete effectively.

Higher
education
markets
around
the
world
are
highly
fragmented
and
are
very
competitive
and
dynamic.
Our
institutions
compete
with
traditional
public
and
private
colleges
and
universities
and
other
proprietary
institutions,
including
those
that
offer
online
professional-oriented
programs.
In
each
of
the
countries
where
we
operate
a
private
institution,
our
primary
competitors
are
public
and
other
private
universities,
some
of
which
are
larger,
more
widely
known
and
have
more
established
reputations
than
our
institutions.
Some
of
our
competitors
in
both
the
public
and
private
sectors
may
have
greater
financial
and
other
resources
than
we
have
and
have
operated
in
their
markets
for
many
years.
We
also
face
potential
competition
from
alternative
education
providers
that
prioritize
open
access
education
to
students.
A
number
of
these
providers
have
been
formed
recently
to
provide
online
curriculum
from
leading
academics
at
little
or
no
cost
to
the
student.
If
this
new
modality
is
successful,
it
could
disrupt
the
economics
of
the
current
education
model
(both
for-profit
and
not-for-profit
institutions).
Other
competitors
may
include
large,
well-capitalized
companies
that
may
pursue
a
strategy
similar
to
ours
of
acquiring
or
establishing
for-profit
institutions.
Public
institutions
receive
substantial
government
subsidies,
and
public
and
private
not-for-profit
institutions
have
access
to
government
and
foundation
grants,
tax-
deductible
contributions
and
other
financial
resources
generally
not
available
to
for-profit
institutions.
Accordingly,
public
and
private
not-for-profit
institutions
may
have
instructional
and
support
resources
superior
to
those
in
the
for-profit
sector,
and
public
institutions
can
offer
substantially
lower
tuition
prices
or
other
advantages
that
we
cannot
match.

Any
of
these
large,
well-capitalized
competitors
may
make
it
more
difficult
for
us
to
acquire
institutions
as
part
of
our
growth
strategy.
They
may
also
be
able
to
charge
lower
tuitions
or
attract
more
students,
which
would
adversely
affect
our
growth
and
the
profitability
of
our
competing
institutions.
There
is
also
an
increased
ability
of
traditional
universities
to
offer
online
programs
and
we
expect
competition
to
increase
as
the
online
market
matures.
This
may
create
greater
pricing
or
operating
pressure
on
us,
which
could
have
a
material
adverse
effect
on
our
institutions'
enrollments,
revenues
and
profit
margins.
We
may
not
be
able
to
compete
successfully
against
current
or
future
competitors
and
may
face
competitive
pressures
that
could
have
a
material
adverse
effect
on
our
business,
financial
condition
and
results
of
operations.

If our graduates are unable to obtain professional licenses or certifications required for employment in their chosen fields of study, our reputation may suffer
and we may face declining enrollments and revenues or be subject to student litigation.

Certain
of
our
students
require
or
desire
professional
licenses
or
certifications
after
graduation
to
obtain
employment
in
their
chosen
fields.
Their
success
in
obtaining
such
licensure
depends
on
several
factors,
including
the
individual
merits
of
the
student,
whether
the
institution
and
the
program
were
approved
by
the
relevant
government
or
by
a
professional
association,
whether
the
program
from
which
the
student
graduated
meets
all
governmental
requirements
and
whether
the
institution
is
accredited.
If
one
or
more
governmental
authorities
refuses
to
recognize
our
graduates
for
professional
licensure
in
the
future
based
on
factors
relating
to
us
or
our
programs,
the
potential
growth
of
our
programs
would
be
negatively
affected,
which
could
have
a
material
adverse
effect
on
our
business,
financial
condition
and
results
of
operations.
In
addition,
we
could
be
exposed
to
litigation
that
would
force
us
to
incur
legal
and
other
expenses
that
could
have
a
material
adverse
effect
on
our
business,
financial
condition
and
results
of
operations.
For
example,
in
2013,
2015
and
2016,
several
groups
of
current
and
former
students
filed
five
separate
lawsuits
against
St.
Augustine
relating
to
matters
arising
before
we
acquired
that
institution
in
November
2013.
The
allegations
relate
to
a
program
that
was
launched
in
May
2011
and,
at
the
time,
offered
a
"Master
of
Orthopaedic
Physician's
Assistant
Program"
degree.
The
plaintiffs
in
these
matters
allege
that
the
university
misrepresented
their
ability
to
practice
as
licensed
Physician
Assistants
with
a
heightened
specialty
in
orthopaedics.
One
of
the
lawsuits
was
resolved
in
October
2015,
another
was
resolved
in
March
2016,
and
another
was
resolved
in
June
2016
and
all
have

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been
dismissed.
See
"Item
3—Legal
Proceedings"
for
more
information.
See
also
"—Risks
Relating
to
Our
Highly
Regulated
Industry
in
the
United
States—The
inability
of
our
graduates
to
obtain
licensure
or
other
specialized
outcomes
in
their
chosen
professional
fields
of
study
could
reduce
our
enrollments
and
revenues,
and
potentially
lead
to
litigation
that
could
be
costly
to
us."

Our business may be materially adversely affected if we are not able to maintain or improve the content of our existing academic programs or to develop new
programs on a timely basis and in a cost-effective manner.

We
continually
seek
to
maintain
and
improve
the
content
of
our
existing
academic
programs
and
develop
new
programs
in
order
to
meet
changing
market
needs.
Revisions
to
our
existing
academic
programs
and
the
development
of
new
programs
may
not
be
accepted
by
existing
or
prospective
students
or
employers
in
all
instances.
If
we
cannot
respond
effectively
to
market
changes,
our
business
may
be
materially
adversely
affected.
Even
if
we
are
able
to
develop
acceptable
new
programs,
we
may
not
be
able
to
introduce
these
new
programs
as
quickly
as
students
or
employers
require
or
as
quickly
as
our
competitors
are
able
to
introduce
competing
programs.
Our
efforts
to
introduce
a
new
academic
program
may
be
conditioned
or
delayed
by
requirements
to
obtain
foreign,
federal,
state
and
accrediting
agency
approvals.
The
development
of
new
programs
and
courses,
both
conventional
and
online,
is
subject
to
requirements
and
limitations
imposed
by
the
governmental
regulatory
bodies
of
the
various
countries
in
which
our
institutions
are
located,
including
the
DOE,
state
licensing
agencies
and
the
relevant
accrediting
bodies.
The
imposition
of
restrictions
on
the
initiation
of
new
educational
programs
by
regulatory
agencies
may
delay
such
expansion
plans.
If
we
do
not
respond
adequately
to
changes
in
market
requirements,
our
ability
to
attract
and
retain
students
could
be
impaired
and
our
financial
results
could
suffer.

Establishing
new
academic
programs
or
modifying
existing
academic
programs
also
may
require
us
to
make
investments
in
specialized
personnel
and
capital
expenditures,
increase
marketing
efforts
and
reallocate
resources
away
from
other
uses.
We
may
have
limited
experience
with
the
subject
matter
of
new
programs
and
may
need
to
modify
our
systems
and
strategy.
If
we
are
unable
to
increase
the
number
of
students,
offer
new
programs
in
a
cost-effective
manner
or
otherwise
manage
effectively
the
operations
of
newly
established
academic
programs,
our
business,
financial
condition
and
results
of
operations
could
be
materially
adversely
affected.

Failure to keep pace with changing market needs and technology could harm our ability to attract students.

The
success
of
our
institutions
depends
to
a
significant
extent
on
the
willingness
of
prospective
employers
to
hire
our
students
upon
graduation.
Increasingly,
employers
demand
that
their
employees
possess
appropriate
technological
skills
and
also
appropriate
"soft"
skills,
such
as
communication,
critical
thinking
and
teamwork
skills.
These
skills
can
evolve
rapidly
in
a
changing
economic
and
technological
environment.
Accordingly,
it
is
important
that
our
educational
programs
evolve
in
response
to
those
economic
and
technological
changes.
The
expansion
of
existing
academic
programs
and
the
development
of
new
programs
may
not
be
accepted
by
current
or
prospective
students
or
by
the
employers
of
our
graduates.
Students
and
faculty
increasingly
rely
on
personal
communication
devices
and
expect
that
we
will
be
able
to
adapt
our
information
technology
platforms
and
our
educational
delivery
methods
to
support
these
devices
and
any
new
technologies
that
may
develop.
Even
if
our
institutions
are
able
to
develop
acceptable
new
programs
and
adapt
to
new
technologies,
our
institutions
may
not
be
able
to
begin
offering
those
new
programs
and
technologies
as
quickly
as
required
by
prospective
students
and
employers
or
as
quickly
as
our
competitors
begin
offering
similar
programs.
If
we
are
unable
to
adequately
respond
to
changes
in
market
requirements
due
to
regulatory
or
financial
constraints,
unusually
rapid
technological
changes
or
other
factors,
our
ability
to
attract
and
retain
students
could
be
impaired,
the
rates
at
which
our
graduates
obtain
jobs
involving
their
fields
of
study
could
suffer
and
our
results
of
operations
and
cash
flows
could
be
materially
adversely
affected.

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If students who avail themselves of government-sponsored student financing programs in certain countries do not graduate and subsequently default on their
loans, we may be responsible for repaying a significant portion of their loans.

Our
accredited
Chilean
institutions
participate
in
a
Chilean
government-sponsored
student
financing
program
known
as
the
CAE
Program.
The
program
was
implemented
by
the
Chilean
government
in
2006
to
promote
higher
education
in
Chile
for
lower
socio-economic
level
students
with
good
academic
standing.
The
CAE
Program
involves
tuition
financing
and
guarantees
that
are
shared
by
our
institutions
and
the
government.
As
part
of
the
program,
our
institutions
provide
guarantees
resulting
in
contingent
liabilities
to
third-party
financing
institutions,
beginning
at
90%
of
the
tuition
loans
made
directly
to
qualified
students
enrolled
through
the
CAE
Program
and
declining
to
60%.
The
guarantees
by
our
institutions
are
for
the
period
in
which
the
student
is
enrolled,
and
the
guarantees
are
assumed
entirely
by
the
government
upon
the
student's
graduation.
Additionally,
when
a
student
leaves
one
of
our
institutions
and
enrolls
in
another
CAE-qualified
institution,
our
institution
will
remain
the
guarantor
of
the
tuition
loans
that
have
been
granted
to
the
student
up
to
such
date,
and
until
the
student's
graduation
from
the
new
CAE-qualified
institution.
Assuming
that
all
students
at
our
institutions
who
are
in
the
CAE
Program,
and
all
students
who
left
our
institutions
and
were
part
of
the
CAE
Program,
do
not
graduate,
and
that
all
of
those
students
default
on
the
full
amount
of
the
CAE-qualified
loan
balances,
the
maximum
potential
amount
of
payments
our
institutions
could
be
required
to
make
under
the
CAE
Program
was
approximately
$479
million
at
December
31,
2016.
As
of
December
31,
2016,
we
had
recorded
$20.6
million
as
estimated
guarantee
liabilities
for
these
obligations.
If
a
significant
portion
of
our
students
who
participate
in
the
CAE
Program
were
to
default,
the
financial
condition
and
results
of
operations
of
each
participating
institution
would
be
materially
adversely
affected.

Similarly,
students
at
substantially
all
of
our
Brazilian
institutions
are
participating
in
a
Brazilian
government
program
known
as
FIES.
FIES
is
a
federal
program
established
to
provide
financing
to
students
enrolled
in
private
institutions
of
higher
education
that
meet
certain
academic
standards
and
whose
household
incomes
per
capita
relative
to
the
cost
of
tuition
are
below
a
certain
level.
Under
FIES,
the
government
loans
a
portion
of
the
tuition
to
eligible
students,
some
of
whom
are
required
to
name
a
guarantor
to
underwrite
their
loan.
The
government
then
pays
the
corresponding
loan
amount
to
the
higher
education
institution
in
special
bonds
that
the
institution
may
use
to
pay
its
national
social
security
tax
and
certain
other
federal
taxes
or,
if
the
institution
has
a
tax
clearance
certificate,
that
the
institution
can
sell
for
cash
in
a
public
auction
conducted
by
a
government-sponsored
bank.
Under
FIES,
if
a
student
defaults
on
his
or
her
repayment
of
a
FIES
loan,
and
the
guarantor
does
not
fulfill
its
guarantee,
the
higher
education
institution
is
responsible
for
repaying
up
to
15%
of
the
related
delinquency
(30%
if
an
institution
has
one
or
more
open
tax
disputes
that
are
not
being
defended
in
compliance
with
the
applicable
security/bond
requirements).
However,
since
February
2014,
all
new
students
who
participate
in
FIES
must
also
enroll
in
the
FGEDUC,
which
is
a
government-mandated,
private
guarantee
fund
that
allows
participating
educational
institutions
to
insure
themselves
for
90%
(or
13.5%
of
15%)
of
their
losses
related
to
student
defaults
under
the
FIES
program.
See
"Item
1—Business—Our
Operating
Segments—LatAm—Government-Sponsored
Financing
Programs."
If
participation
by
our
Brazilian
students
in
FIES
increases,
and
a
significant
portion
of
our
participating
students
in
the
program
were
to
default
and
their
respective
guarantors
were
to
fail
to
fulfill
the
terms
of
their
guarantee,
or
if
the
defaulting
student
was
not
required
to
provide
a
guarantor,
our
financial
condition
and
results
of
operations
could
be
materially
adversely
affected.
In
addition,
if
any
institution
were
involved
in
a
tax
dispute
with
the
Brazilian
government,
and
such
institution
were
not
defending
the
suit
in
compliance
with
the
applicable
security/bond
requirements,
the
amount
of
the
guarantee
would
increase
to
30%,
which
could
materially
adversely
affect
our
business,
financial
condition
and
results
of
operations.

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Regulatory changes that affect the timing of government-sponsored student aid payments or receipt of government-sponsored financial aid could materially
adversely affect our liquidity.

New
regulations
may
change
the
timing
for
the
collection
of
government-sponsored
student
aid
payments
from
our
students.
For
example,
in
December
2014,
regulators
in
Brazil
announced
several
significant
rule
changes
to
FIES
beginning
in
2015;
additional
regulations
were
issued
in
December
2015.
These
changes
raise
the
eligibility
requirements,
reduce
the
annual
budget
for
the
program
and
delay
payments
to
the
post-secondary
institutions
that
would
otherwise
have
been
due
in
2015
and
2016.
Such
a
delay
in
tuition
payments
from
government-sponsored
programs
may
negatively
affect
our
liquidity
and
we
may
require
additional
working
capital
or
third-party
funding
to
finance
our
operations.
See
"Item
7—Management's
Discussion
and
Analysis
of
Financial
Condition
and
Results
of
Operations—Liquidity
and
Capital
Resources—Liquidity
Sources—FIES
Payment
Plan,"
"Item
1—Business—Our
Operating
Segments—LatAm—Government—
Sponsored
Student
Financing
Programs"
and
"Item
1—Business—Industry
Regulation—Brazil
Regulation—Student
Financing
Program."
See
also
"—Risks
Relating
to
our
Highly
Regulated
Industry
in
the
United
States—The
DOE
may
change
our
U.S.
Institutions'
method
of
receiving
Title
IV
program
funds,
which
could
materially
affect
our
liquidity."

We may have exposure to greater-than-anticipated tax liabilities.

As
a
multinational
corporation,
we
are
subject
to
income
taxes
as
well
as
non-income
based
taxes
in
the
United
States
and
various
foreign
jurisdictions.

Our
future
income
taxes
could
be
materially
adversely
affected
by
earnings
being
lower
than
anticipated
in
jurisdictions
where
we
have
lower
statutory
tax
rates
and
higher
than
anticipated
in
jurisdictions
where
we
have
higher
statutory
tax
rates.
In
addition,
changes
in
the
valuation
of
our
deferred
tax
assets
and
liabilities,
or
changes
in
tax
laws,
regulations
and
accounting
principles,
could
have
a
material
adverse
effect
on
our
future
income
taxes.
The
determination
of
our
worldwide
provision
for
income
taxes
and
other
tax
liabilities
requires
significant
judgment,
and
there
are
many
transactions
and
calculations
where
the
ultimate
tax
determination
is
uncertain.
We
have
not
recorded
any
deferred
tax
liabilities
for
undistributed
foreign
earnings
either
because
of
legal
restrictions
on
distributions
or
because
our
historical
strategy
was
to
reinvest
these
earnings
outside
the
United
States.
As
circumstances
change
and
if
some
or
all
of
these
undistributed
foreign
earnings
are
remitted
to
the
United
States,
we
may
be
required
to
recognize
deferred
tax
liabilities
on
those
amounts.

We
earn
a
significant
amount
of
our
income
from
subsidiaries
located
in
countries
outside
the
United
States,
and
any
repatriation
of
funds
currently
held
in
foreign
jurisdictions
may
result
in
higher
effective
tax
rates
for
our
company.
In
addition,
there
have
been
proposals
to
change
U.S.
tax
laws
that
would
significantly
impact
how
U.S.
multinational
corporations
are
taxed
on
foreign
earnings.
Although
we
cannot
predict
whether
or
in
what
form
this
proposed
legislation
may
pass,
if
enacted
it
could
have
a
material
adverse
effect
on
our
tax
expense
and
cash
flows.

Additionally,
in
certain
countries
in
which
we
operate,
higher
education
institutions
are
either
exempt
from
paying
certain
taxes,
including
income
taxes,
or
pay
taxes
at
significantly
reduced
rates.
This
includes
certain
of
our
higher
education
institutions
that
are
organized
as
VIEs,
similar
to
not-for-profit
institutions
in
the
United
States.
If
we
were
to
lose
this
favorable
tax
treatment,
either
because
a
VIE
institution
is
converted
into
a
for-profit
shareholder-owned
entity,
or
because
of
a
change
in
local
tax
laws,
our
tax
liabilities
could
increase
materially.

We
are
subject
to
regular
review
and
audit
by
both
domestic
and
foreign
tax
authorities.
Any
adverse
outcome
of
such
a
review
or
audit
could
have
a
negative
effect
on
our
operating
results
and
financial
condition.
We
are
also
subject
to
non-income
based
taxes,
such
as
payroll,
sales,
use,
value-added,
net
worth,
property
and
goods
and
services
taxes,
in
both
the
United
States
and
various
foreign
jurisdictions.
We
are
under
regular
audit
by
tax
authorities
with
respect
to
these
non-
income
based

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Table
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taxes
and
may
have
exposure
to
additional
non-income
based
tax
liabilities.
Our
acquisition
activities
have
increased
the
volume
and
complexity
of
laws
and
regulations
that
we
are
subject
to
and
with
which
we
must
comply.

During
2010,
we
were
notified
by
the
Spanish
Taxing
Authorities
("STA")
(in
this
case,
by
the
Regional
Inspection
Office
of
the
Special
Madrid
Tax
Unit)
that
an
audit
of
some
of
our
Spanish
subsidiaries
was
being
initiated
for
2006
and
2007.
On
June
29,
2012,
the
STA
issued
a
final
assessment
to
Iniciativas
Culturales
de
España,
S.L.
("ICE"),
our
Spanish
holding
company,
for
approximately
EUR
11.1
million
($11.5
million
at
December
31,
2016),
including
interest,
for
those
two
years
based
on
its
rejection
of
the
tax
deductibility
of
financial
expenses
related
to
certain
intercompany
acquisitions
and
the
application
of
the
Spanish
ETVE
regime.
On
July
25,
2012,
we
filed
a
claim
with
the
Regional
Economic-Administrative
Court
challenging
this
assessment
and,
in
the
same
month,
we
issued
a
cash-collateralized
letter
of
credit
for
the
assessment
amount,
in
order
to
suspend
the
payment
of
the
tax
due.
Further,
in
July
2013,
we
were
notified
by
the
STA
(in
this
case,
by
the
Central
Inspection
Office
for
Large
Taxpayers)
that
an
audit
of
ICE
was
also
being
initiated
for
2008
through
2010.
On
October
19,
2015,
the
STA
issued
a
final
assessment
to
ICE
for
approximately
EUR
17.2
million
($17.9
million
at
December
31,
2016),
including
interest,
for
those
three
years.
We
have
appealed
this
assessment
and,
in
order
to
suspend
the
payment
of
the
tax
assessment
until
the
court
decision,
we
issued
a
cash-collateralized
letter
of
credit
for
the
assessment
amount
plus
interest
and
surcharges.
We
believe
the
assessments
in
this
case
are
without
merit
and
intend
to
defend
vigorously
against
them.
During
the
second
quarter
of
2016,
we
were
notified
by
the
STA
that
tax
audits
of
the
Spanish
subsidiaries
were
also
being
initiated
for
2011
and
2012;
no
assessments
have
yet
been
issued
for
these
years.
Also
during
the
second
quarter
of
2016,
the
Regional
Administrative
Court
issued
a
decision
against
the
Company
on
its
appeal.
The
Company
has
further
appealed
at
the
Highest
Administrative
Court
level.
The
Company
plans
to
continue
the
appeals
process
for
the
periods
already
audited
and
assessed.

During
the
quarter
ended
June
30,
2015,
we
reassessed
our
position
regarding
the
ICE
tax
audit
matters
as
a
result
of
recent
adverse
decisions
from
the
Spanish
Supreme
Court
and
Spanish
National
Court
on
cases
for
taxpayers
with
similar
facts,
and
determined
that
we
could
no
longer
support
a
more-likely-than-
not
position.
As
a
result,
during
the
second
quarter
of
2015,
we
recorded
a
provision
totaling
EUR
37.6
million
($42.1
million)
for
the
period
from
January
1,
2006
through
December
31,
2016.
We
plan
to
continue
the
appeals
process
for
the
periods
already
audited
and
assessed.

Although
we
believe
our
estimates
are
reasonable,
the
ultimate
tax
outcome
may
differ
from
the
amounts
recorded
in
our
financial
statements
and
may
materially
adversely
affect
our
financial
results
in
the
period
or
periods
for
which
such
determination
is
made.

Market perceptions concerning the instability of the euro, the potential reintroduction of individual currencies within the Eurozone, or the potential dissolution
of the euro entirely, could adversely affect our business and financial position.

As
a
result
of
the
credit
crisis
in
Europe,
in
particular
in
Cyprus,
Greece,
Italy,
Ireland,
Portugal
and
Spain,
the
European
Commission
created
the
European
Financial
Stability
Facility
(the
"EFSF")
and
the
European
Financial
Stability
Mechanism
(the
"EFSM")
to
provide
funding
to
Eurozone
countries
in
financial
difficulties
that
seek
such
support.
Throughout
2011,
the
EFSF
and
EFSM
undertook
a
series
of
interventions
to
provide
direct
financing
or
other
credit
support
to
European
governments.
In
2012,
certain
Eurozone
states
announced
austerity
programs
and
other
cost-cutting
initiatives,
and
the
EFSF
was
permitted
to
further
expand
its
powers
to
provide
direct
loans
to
certain
Eurozone
financial
institutions.
Despite
these
measures,
there
can
be
no
assurance
that
the
recent
market
disruptions
in
Europe
related
to
sovereign
debt,
including
the
increased
cost
of
funding
for
certain
governments
and
financial
institutions,
will
not
continue,
nor
can
there
be
any
assurance
that

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future
assistance
packages
will
be
available
or,
even
if
provided,
will
be
sufficient
to
stabilize
the
affected
countries
and
markets
in
Europe
or
elsewhere.

Uncertainty
persists
regarding
the
debt
burden
of
certain
Eurozone
countries,
including
those
in
which
we
have
higher
education
institutions,
and
the
solvency
of
certain
European
financial
institutions
and
their
respective
ability
to
meet
future
financial
obligations.
In
2015,
Greece
entered
into
extended
negotiations
with
its
international
creditor
institutions
as
to
its
request
for
additional
assistance
or
relief
in
meeting
its
financial
obligations.
Uncertainty
regarding
this
financial
assistance
and
Greece's
ability
to
meet
its
financial
obligations
led
to
the
imposition
of
capital
controls
within
Greece
and
the
closing
of
the
country's
banks
and
stock
exchanges
for
an
extended
period
of
time,
all
of
which
has
caused
a
significant
negative
impact
on
the
Greek
economy.
While
we
do
not
have
any
institutions
in
Greece,
our
institution
in
Cyprus
(European
University
Cyprus)
draws
a
significant
proportion
of
its
students
from
Greece,
and
may
be
adversely
affected
by
the
current
and
any
future
economic
turmoil
in
Greece.

In
general,
the
protracted
adverse
market
conditions
in
Europe
have
created
doubts
as
to
the
overall
stability
of
the
euro
and
the
suitability
of
the
euro
as
a
single
currency
given
the
diverse
economic
and
political
circumstances
in
individual
member
states.
These
and
other
concerns
could
lead
to
the
reintroduction
of
individual
currencies
in
one
or
more
member
states
or,
in
more
extreme
circumstances,
the
possible
dissolution
of
the
euro
entirely.
Should
the
euro
dissolve
entirely,
the
legal
and
contractual
consequences
for
holders
of
euro-denominated
obligations
would
be
determined
by
laws
in
effect
at
such
time.
These
potential
developments,
or
market
perceptions
concerning
these
and
related
issues,
could
materially
adversely
affect
our
business,
financial
condition
and
results
of
operations.

Our reported revenues and earnings may be negatively affected by the strengthening of the U.S. dollar and currency exchange rates.

We
report
revenues,
costs
and
earnings
in
U.S.
dollars,
while
our
institutions
generally
collect
tuition
in
the
local
currency.
Exchange
rates
between
the
U.S.
dollar
and
the
local
currency
in
the
countries
where
we
operate
institutions
are
likely
to
fluctuate
from
period
to
period.
In
2016,
approximately
83%
of
our
revenues
originated
outside
the
United
States.
We
translate
revenues
and
other
results
denominated
in
foreign
currencies
into
U.S.
dollars
for
our
consolidated
financial
statements.
This
translation
is
based
on
average
exchange
rates
during
a
reporting
period.
The
U.S.
dollar
has
been
strengthening
against
many
international
currencies,
including
the
Brazilian
real,
euro
and
Mexican
peso.
For
example,
the
Brazilian
dollar-to-real
spot
exchange
rate
increased
from
1:2.3621
on
December
31,
2013
to
1:2.6576
on
December
31,
2014,
1:3.9180
on
December
31,
2015
and
1:3.2695
on
December
31,
2016.
As
the
exchange
rate
of
the
U.S.
dollar
strengthens,
our
reported
international
revenues
and
earnings
are
reduced
because
foreign
currencies
translate
into
fewer
U.S.
dollars.
For
the
year
ended
December
31,
2016,
a
hypothetical
10%
adverse
change
in
average
annual
foreign
currency
exchange
rates,
excluding
the
impacts
of
our
derivatives,
would
have
decreased
our
operating
income
and
our
Adjusted
EBITDA
by
$26.2
million
and
$78.1
million,
respectively.
For
more
information,
see
"Item
7A—Quantitative
and
Qualitative
Disclosures
About
Market
Risk—Foreign
Currency
Exchange
Risk."

To
the
extent
that
foreign
revenues
and
expense
transactions
are
not
denominated
in
the
local
currency
and/or
to
the
extent
foreign
earnings
are
reinvested
in
a
currency
other
than
their
functional
currency,
we
are
also
subject
to
the
risk
of
transaction
losses.
We
occasionally
enter
into
foreign
exchange
forward
contracts
or
other
hedging
arrangements
to
reduce
the
earnings
impact
of
non-functional
currency
denominated
non-trade
receivables
and
debt
and
to
protect
the
U.S.
dollar
value
of
our
assets
and
future
cash
flows
with
respect
to
exchange
rate
fluctuations.
Given
the
volatility
of
exchange
rates,
there
is
no
assurance
that
we
will
be
able
to
effectively
manage
currency
transaction
and/or
translation
risks.
Therefore,
volatility
in
currency
exchange
rates
may
have
a
material
adverse
effect
on
our
business,
financial
condition,
results
of
operations
and
cash
flows.

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Currency
exchange
rates
and
our
reported
revenues
and
earnings
may
also
be
negatively
affected
by
inflation
or
hyperinflation.
If
a
country
in
which
we
operate
is
designated
as
a
highly
inflationary
economy
in
the
future
under
GAAP,
the
U.S.
dollar
would
become
the
functional
currency
for
our
operations
in
that
country.
As
a
result,
all
gains
and
losses
resulting
from
the
remeasurement
of
the
financial
results
of
operations
in
such
country
and
other
transactional
foreign
exchange
gains
and
losses
would
be
reflected
in
our
earnings,
which
could
result
in
volatility
within
our
earnings,
rather
than
as
a
component
of
our
comprehensive
income
within
stockholders'
equity.
Hyperinflation
in
any
of
the
countries
in
which
we
operate
may
have
a
material
adverse
effect
on
our
business,
financial
condition,
results
of
operations
and
cash
flows.

Goodwill and indefinite-lived intangibles make up a significant portion of our total assets, and if we determine that goodwill or indefinite-lived intangibles
become impaired in the future, net income and operating income in such years may be materially and adversely affected.

As
of
December
31,
2016,
the
net
carrying
value
of
our
goodwill
and
other
intangible
assets
totaled
approximately
$3,288.8
million.
Goodwill
represents
the
excess
of
cost
over
the
fair
market
value
of
net
assets
acquired
in
business
combinations.
Due
to
the
revaluation
of
our
assets
at
the
time
of
the
LBO
and
acquisitions
we
have
completed
historically,
goodwill
makes
up
a
significant
portion
of
our
total
assets.
In
accordance
with
generally
accepted
accounting
principles,
we
periodically
review
goodwill
and
indefinite-lived
intangibles
for
impairment
and
any
excess
in
carrying
value
over
the
estimated
fair
value
is
charged
to
the
results
of
operations.
Our
review
of
goodwill
and
indefinite-lived
intangibles
at
December
31,
2016
resulted
in
an
aggregate
reduction
of
$23.5
million
in
the
value
of
such
assets
in
our
financial
statements.
Future
reviews
of
goodwill
and
indefinite-lived
intangibles
could
result
in
reductions.
Any
reduction
in
net
income
and
operating
income
resulting
from
the
write
down
or
impairment
of
goodwill
and
indefinite-lived
intangibles
could
adversely
affect
our
financial
results.
If
economic
or
industry
conditions
deteriorate
or
if
market
valuations
decline,
including
with
respect
to
our
Class
A
common
stock,
we
may
be
required
to
impair
goodwill
and
indefinite-lived
intangibles
in
future
periods.

We experience seasonal fluctuations in our results of operations.

Most
of
the
institutions
in
our
network
have
a
summer
break,
during
which
classes
are
generally
not
in
session
and
minimal
revenues
are
recognized.
In
addition
to
the
timing
of
summer
breaks,
holidays
such
as
Easter
also
have
an
impact
on
our
academic
calendar.
Operating
expenses,
however,
do
not
fully
correlate
to
the
enrollment
and
revenue
cycles,
as
the
institutions
continue
to
incur
expenses
during
summer
breaks.
Given
the
geographic
diversity
of
our
institutions
and
differences
in
timing
of
summer
breaks,
our
second
and
fourth
quarters
are
stronger
revenue
quarters
as
the
majority
of
our
institutions
are
in
session
for
most
of
these
respective
quarters.
Our
first
and
third
fiscal
quarters
are
weaker
revenue
quarters
because
the
majority
of
our
institutions
have
summer
breaks
for
some
portion
of
one
of
these
two
quarters.
Because
a
significant
portion
of
our
expenses
do
not
vary
proportionately
with
the
fluctuations
in
our
revenues,
our
results
in
a
particular
fiscal
quarter
may
not
indicate
accurately
the
results
we
will
achieve
in
a
subsequent
quarter
or
for
the
full
fiscal
year.

Connectivity constraints or system disruptions to our computer networks could have a material adverse effect on our ability to attract and retain students.

We
run
the
online
operations
of
our
institutions
on
different
platforms,
which
are
in
various
stages
of
development.
The
performance
and
reliability
of
these
online
operations
are
critical
to
the
reputation
of
our
institutions
and
our
ability
to
attract
and
retain
students.
Any
computer
system
error
or
failure,
or
a
sudden
and
significant
increase
in
traffic
on
our
institutions'
computer
networks
may
result
in
the
unavailability
of
these
computer
networks.
In
addition,
any
significant
failure
of
our
computer
networks
could
disrupt
our
on-campus
operations.
Individual,
sustained
or
repeated

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occurrences
could
significantly
damage
the
reputation
of
our
institutions'
operations
and
result
in
a
loss
of
potential
or
existing
students.
Additionally,
the
computer
systems
and
operations
of
our
institutions
are
vulnerable
to
interruption
or
malfunction
due
to
events
beyond
our
control,
including
natural
disasters
and
other
catastrophic
events
and
network
and
telecommunications
failures.
The
disaster
recovery
plans
and
backup
systems
that
we
have
in
place
may
not
be
effective
in
addressing
a
natural
disaster
or
catastrophic
event
that
results
in
the
destruction
or
disruption
of
any
of
our
critical
business
or
information
technology
and
infrastructure
systems.
As
a
result
of
any
of
these
events,
we
may
not
be
able
to
conduct
normal
business
operations
and
may
be
required
to
incur
significant
expenses
in
order
to
resume
normal
business
operations.
As
a
result,
our
revenues
and
results
of
operations
may
be
materially
adversely
affected.

We rely on computer systems for financial reporting and other operations and any disruptions in our systems would materially adversely affect us.

We
rely
on
computer
systems
to
support
our
financial
reporting
capabilities,
including
our
SSOs,
and
other
operations.
As
with
any
computer
systems,
unforeseen
issues
may
arise
that
could
affect
our
ability
to
receive
adequate,
accurate
and
timely
financial
information,
which
in
turn
could
inhibit
effective
and
timely
decisions.
Furthermore,
it
is
possible
that
our
information
systems
could
experience
a
complete
or
partial
shutdown.
If
such
a
shutdown
occurred,
it
could
materially
adversely
affect
our
ability
to
report
our
financial
results
in
a
timely
manner
or
to
otherwise
operate
our
business.

The personal information that we collect may be vulnerable to breach, theft or loss that could materially adversely affect our reputation and operations.

Possession
and
use
of
personal
information
in
our
operations
subjects
us
to
risks
and
costs
that
could
harm
our
business.
Our
institutions
collect,
use
and
retain
large
amounts
of
personal
information
regarding
our
students
and
their
families,
including
social
security
numbers,
tax
return
information,
personal
and
family
financial
data
and
credit
card
numbers.
We
also
collect
and
maintain
personal
information
of
our
employees
in
the
ordinary
course
of
our
business.
In
addition,
we
collect
and
maintain
other
types
of
information,
such
as
leads,
that
may
include
personal
information
of
our
business
contacts
in
the
ordinary
course
of
our
business.
Our
computer
networks
and
the
networks
of
certain
of
our
vendors
that
hold
and
manage
confidential
information
on
our
behalf
may
be
vulnerable
to
unauthorized
access,
computer
hackers,
computer
viruses,
cyber-attacks
and
other
security
threats.
Confidential
information
also
may
become
available
to
third
parties
inadvertently
when
we
integrate
or
convert
computer
networks
into
our
network
following
an
acquisition
of
an
institution
or
in
connection
with
upgrades
from
time
to
time.

Due
to
the
sensitive
nature
of
the
information
contained
on
our
networks,
such
as
students'
grades,
our
networks
may
be
targeted
by
hackers.
A
user
who
circumvents
security
measures
could
misappropriate
proprietary
information
or
cause
interruptions
or
malfunctions
in
our
operations.
Although
we
use
security
and
business
controls
to
limit
access
and
use
of
personal
information,
a
third
party
may
be
able
to
circumvent
those
security
and
business
controls,
which
could
result
in
a
breach
of
student
or
employee
privacy.
In
addition,
errors
in
the
storage,
use
or
transmission
of
personal
information
could
result
in
a
breach
of
student
or
employee
privacy.
Possession
and
use
of
personal
information
in
our
operations
also
subjects
us
to
legislative
and
regulatory
burdens
that
could
require
notification
of
data
breaches
and
restrict
our
use
of
personal
information.
As
a
result,
we
may
be
required
to
expend
significant
resources
to
protect
against
the
threat
of
these
security
breaches
or
to
alleviate
problems
caused
by
these
breaches.
A
major
breach,
theft
or
loss
of
personal
information
regarding
our
students
and
their
families,
our
employees,
or
other
persons
that
is
held
by
us
or
our
vendors
could
have
a
material
adverse
effect
on
our
reputation
and
results
of
operations
and
could
result
in
further
regulation
and
oversight
by
governmental
authorities
and
could
violate
the
laws
of
one

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or
more
countries
in
which
we
operate,
which
could
subject
us
to
civil
or
criminal
penalties
and
increased
costs
of
compliance.

We may lose the right to license certain intellectual property which is integral to our online course offerings.

With
our
mandate
that
all
of
our
institutions
offer
a
certain
percentage
of
online
course
offerings,
we
rely
heavily
upon
the
licensing
of
third
party
materials,
including
e-textbooks,
graphic,
video
and
audio
media,
which
are
incorporated
into
our
globally-offered
course
content.
Our
institutions
contract
with
large
vendors
which
offer
volumes
of
such
course
content.
We
could
lose
the
right
to
license
some
percentage
or
all
of
those
third
party
materials
for
several
reasons,
including
our
licensors'
infringement
of
third-party
materials,
going
out
of
business
and
terminating
our
content
licenses
for
one
or
more
business
reasons.
We
rely
on
the
negotiation
of
extensive
licensing
rights
to
mitigate
this
eventuality
and
contract
with
known,
reliable
vendors.
If
we
lose
the
right
to
a
significant
percentage
of
such
content,
our
course
offerings
and
programs
could
be
negatively
impacted
because
those
materials
must
be
removed
from
our
course
offerings,
resulting
in
significant
cost
to
us
to
revise
those
impacted
courses
and
a
poor
educational
experience
for
our
students,
which
could
negatively
affect
our
reputation
and
our
financial
condition
and
results
of
operations
may
be
materially
adversely
affected.

We may infringe the intellectual property rights of one or more of our third-party licensors.

All
of
our
institutions
offer
a
certain
percentage
of
online
course
offerings.
The
educational
content
contained
in
such
online
course
offerings
is
inherently
more
susceptible
to
infringement
than
campus-based
learning
materials
because
it
is
easier
to
make
many
digital
copies
of
an
online
text,
picture,
video
or
audio
file
than
it
is
to
reproduce
hard-copy
materials.
Also,
intellectual
property
laws
can
vary
from
country-to-country,
resulting
in
additional
risk
of
infringement
when
licensing
the
same
materials
in
multiple
countries.
Our
institutions
take
reasonable
precautions
to
ensure
that
all
course
content
offerings
used
by
them
are
properly
licensed
and
distributed;
however,
there
is
no
assurance
that
all
of
our
course
content
offerings
are
properly
licensed.
Additionally,
we
create
universally
applicable
course
and
program
offerings
which
are
licensed
throughout
our
institutions,
meaning
that
a
single
act
of
infringement
could
adversely
affect
multiple
institutions
around
the
world.
Intellectual
property
infringement
by
us
and
our
institutions
can
result
in
damaged
vendor
relationships,
legal
proceedings,
loss
of
course
content,
and
reputational
loss,
which
could
negatively
affect
our
reputation
and
our
financial
condition
and
results
of
operations
may
be
materially
adversely
affected.

We may be unable to bring the Laureate brand into new markets due to preexisting trademark owners.

We
file
for
and
seek
trademark
protection
for
at
least
one
of
the
Laureate
brands,
including
"Laureate,"
"Laureate
Education,
Inc.,"
"Laureate
Online
Education,"
"Laureate
Online
International,"
and
"Laureate
International
Universities"
in
all
jurisdictions
in
which
it
operates.
Our
business
model
includes
expanding
into
new
markets
through
the
creation
and/or
acquisition
of
new
institutions
in
new
or
existing
countries.
Preexisting
trademark
owners
already
have
rights
to
some
variant
of
the
Laureate
trademark
in
the
education
industry
in
these
new
countries
and
this
would
prevent
Laureate
from
introducing
its
brand
to
emerging
markets.
This
could
prevent
Laureate
from
achieving
a
comprehensively
global
educational
brand.

Our trademarks are subject to infringement.

As
a
global
education
services
brand,
we
are
subject
to
infringement
by
third
parties
attempting
to
trade
on
the
Laureate
brand's
goodwill.
We
have
spent
considerable
time
and
resources
over
the
years
in
defending
its
trademark
rights
in
the
United
States
and
abroad.
It
is
difficult
to
assess
the
cost
and
likelihood
of
success
in
any
legal
proceeding
related
to
trademark
infringement,
but
we
have
implemented
a
policy
of
obtaining
trademark
rights
for
all
of
our
brands
in
all
countries
in
which
we
operate
or
plan
to
operate
in
the
future.
For
example,
in
2014,
we
filed
a
trademark
infringement
suit

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against
an
alleged
infringer
of
the
Laureate
trademark
located
in
Georgia.
The
alleged
infringer
has
formed
several
companies
which
incorporate
the
name
"Laureate"
and
which
purport
to
operate
in
the
field
of
educational
services.
While
the
litigation
is
ongoing,
we
expect
to
prevail,
and,
to
date,
the
alleged
infringer
has
not
presented
evidence
to
date
that
its
use
predates
our
use
of
the
trademark
"Laureate"
in
the
field
of
educational
service.
An
unfavorable
result
in
a
trademark
infringement
case
such
as
this
could
lead
to
us
being
barred
from
using
our
trademark
in
certain
jurisdictions
around
the
world
and
negatively
affect
our
reputation.

Student protests and strikes may disrupt our ability to hold classes as well as our ability to attract and retain students, which could materially adversely affect
our operations.

Political,
social
and
economic
developments
in
the
countries
in
which
we
operate
may
cause
protests
and
disturbances
against
conditions
in
those
countries,
including
policies
relating
to
the
operation
and
funding
of
higher
education
institutions.
These
disturbances
may
involve
protests
on
university
campuses,
including
the
occupation
of
university
buildings
and
the
disruption
of
classes.
For
example,
during
the
second
quarter
of
2016,
students
in
Chile
engaged
in
a
mobilization
that
included
the
occupation
of
buildings
and
disruption
of
classes
on
their
respective
campuses
to
protest,
among
other
things,
the
failure
of
the
Chilean
government
to
enact
proposed
reforms
of
the
higher
education
system
that
had
been
promised
by
President
Bachelet
in
her
2013
presidential
campaign,
as
well
as
to
call
attention
to
their
belief
that
there
should
not
be
any
role
or
involvement
of
for-profit
companies
in
the
operation
of
private
universities
in
Chile,
including
the
universities
that
are
part
of
the
Laureate International Universities network.
During
May
and
June
2016,
approximately
30
universities
as
well
as
over
100
high
schools
had
their
buildings
occupied
or
classes
disrupted
due
to
the
student
mobilizations.
Students
occupied
buildings
on
five
of
UNAB's
campuses
and
one
campus
at
Universidad
Viña
del
Mar
and
over
70%
of
students
enrolled
at
those
universities,
representing
approximately
22%
of
the
total
number
of
students
enrolled
in
Laureate International Universities institutions
in
Chile,
were
not
able
to
attend
classes
during
that
time
as
a
result
of
such
protests,
although
classes
returned
to
normal
in
July
2016.
We
are
unable
to
predict
whether
students
at
institutions
in
the
Laureate International Universities network
in
Chile
or
other
countries
will
engage
in
various
forms
of
protest
in
the
future.
Should
we
sustain
student
strikes,
protests
or
occupations
in
Chile
or
other
countries
in
the
future,
it
could
have
a
material
adverse
effect
on
our
results
of
operations
and
on
our
overall
financial
condition.
Further,
we
may
need
to
make
additional
investments
in
security
infrastructure
and
personnel
on
our
campuses
in
order
to
prevent
future
student
protests
from
disrupting
the
ability
of
our
institutions
to
hold
classes.
If
we
are
required
to
make
substantial
additional
investments
in
security,
or
if
we
are
unable
to
identify
security
enhancements
that
would
prevent
future
disruptions
of
classes,
that
could
cause
an
adverse
effect
on
our
results
of
operations
and
financial
condition.
In
addition,
we
may
need
to
pay
overtime
compensation
to
certain
of
our
faculty
and
staff,
which
may
increase
our
overall
costs.

We may be unable to operate one or more of our institutions or suffer liability or loss due to a natural or other disaster.

Our
institutions
are
vulnerable
to
natural
or
other
disasters,
including
fires,
floods,
earthquakes,
hurricanes
and
other
events
beyond
our
control.
A
number
of
our
institutions
are
located
in
areas
such
as
Mexico
and
Central
America
that
are
prone
to
hurricane
damage,
which
may
be
substantial.
A
number
of
our
institutions
are
also
located
in
areas,
such
as
Chile,
Mexico,
Peru
and
Turkey,
that
are
prone
to
earthquake
damage.
For
example,
in
2010,
a
magnitude
8.8
earthquake
struck
Chile
and
a
magnitude
7.2
earthquake
struck
Mexico.
Many
of
our
locations
in
Chile
and
several
locations
in
Mexico
sustained
damage
in
these
earthquakes.
Also
in
2010,
we
experienced
a
fire
in
a
dormitory
at
one
of
our
institutions
in
Switzerland.
In
2017,
Peru's
normally
arid
regions
experienced
historic,
torrential
rainfall
and
subsequent
flooding.
At
least
one
of
our
campuses
located
there
suffered
flood-related
damage.
There,
as
elsewhere
in
the
country,
flood-
related
damage
caused
a
range
of

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disruptions,
including
in
our
case
a
delay
in
the
regularly
scheduled
start
of
classes
for
the
semester,
which
may
cause
revenue
anticipated
to
occur
in
the
first
quarter
of
2017
not
to
be
recognized
until
the
second
quarter.
It
is
possible
that
one
or
more
of
our
institutions
would
be
unable
to
operate
for
an
extended
period
of
time
in
the
event
of
a
hurricane,
earthquake
or
other
disaster
which
does
substantial
damage
to
the
area
in
which
an
institution
is
located.
The
failure
of
one
or
more
of
our
institutions
to
operate
for
a
substantial
period
of
time
could
have
a
material
adverse
effect
on
our
results
of
operations.
In
the
event
of
a
major
natural
or
other
disaster,
we
could
also
experience
loss
of
life
of
students,
faculty
members
and
administrative
staff,
or
liability
for
damages
or
injuries.

If there is an outbreak of disease in one or more of our locations, our ability to recruit new students or hold classes may be interrupted.

In
recent
years,
there
have
been
numerous
outbreaks
of
infectious
diseases,
such
as
Zika,
SARS
and
the
H1N1
virus,
that
have
spread
quickly
through
populations
in
countries
in
which
we
operate,
and
have
had
serious
impact
on
businesses
that
operate
in
those
countries.
Concentrated
populations,
such
as
students
in
upper
secondary
schools
and
universities,
may
be
particularly
susceptible
to
these
diseases,
requiring
local
governments
to
take
various
measures,
including
suspension
of
business
and
quarantines,
to
control
their
spread.
If
there
is
an
outbreak
of
disease
in
a
country
in
which
we
operate,
our
recruiters
may
be
prevented
from
visiting
local
upper
secondary
schools
during
the
student
recruitment
season,
which
could
have
a
material
adverse
effect
on
our
new
student
enrollments
during
the
following
academic
term.
In
addition,
an
outbreak
during
the
academic
year
could
result
in
a
shutdown
of
one
or
more
campuses,
or
a
quarantine
that
could
prevent
students
and
faculty
from
entering
a
campus
or,
in
the
case
of
a
residential
campus,
a
quarantine
of
students
on
campus
without
faculty
access,
resulting
in
a
material
adverse
effect
on
our
results
of
operations.

We intend to increase the number of international students at many of our institutions, which presents multiple risks.

A
significant
portion
of
students
at
several
of
our
institutions
come
from
other
countries.
We
intend
to
increase
international
student
representation
at
our
institutions,
including
increased
dual
degree
programs
between
universities
and
increased
study
abroad
programs.
The
ability
of
foreign
students
to
register
at
our
institutions
is
subject
to
various
obstacles
over
which
we
have
no
control,
including
their
ability
to
obtain
student
visas,
the
financial
stability
of
the
countries
from
which
they
come,
their
families'
ability
to
afford
our
programs,
and
quarantines
and
other
travel
restrictions
in
the
event
of
the
outbreak
of
epidemics.
For
example,
during
the
SARS
epidemic
in
Asia
in
2003,
Switzerland
effectively
prevented
students
from
Asia,
who
made
up
a
large
proportion
of
the
students
at
the
hospitality
institutions
that
we
then
owned
in
Switzerland,
from
traveling
to
Switzerland.
Any
restrictions
on
the
ability
of
international
students
to
obtain
visas
to
study
at
our
institutions,
or
any
restrictions
on
their
ability
to
travel,
could
have
a
material
adverse
effect
on
our
results
of
operations.

We may be unable to recruit, train and retain qualified and experienced faculty and administrative staff at our institutions.

Our
success
and
ability
to
grow
depend
on
the
ability
to
hire
and
retain
large
numbers
of
talented
people.
The
process
of
hiring
employees
with
the
combination
of
skills
and
attributes
required
to
implement
our
business
strategy
can
be
difficult
and
time-consuming.
Our
faculty
members
in
particular
are
key
to
the
success
of
our
institutions.
Our
rapid
global
expansion
has
presented
challenges
for
recruiting
talented
people
with
the
right
experience
and
skills
for
our
needs.
We
face
competition
in
attracting
and
retaining
faculty
members
who
possess
the
necessary
experience
and
accreditation
to
teach
at
our
institutions.
As
we
expand
and
add
personnel,
it
may
be
difficult
to
maintain
consistency
in
the
quality
of
our
faculty
and
administrative
staff.
If
we
are
unable
to,
or
are
perceived
to
be
unable
to,
attract
and
retain
experienced
and
qualified
faculty,
our
business,
financial
condition
and
results
of
operations
may
be
materially
adversely
affected.

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High crime levels in certain countries and regions in which we operate institutions may have an impact on our ability to attract and retain students and may
increase our operating expenses.

Many
of
our
institutions
are
located
in
countries
and
regions
that
have
high
rates
of
violent
crime,
drug
trafficking
and
vandalism.
If
we
are
unable
to
maintain
adequate
security
levels
on
our
campuses,
and
to
work
with
local
authorities
to
maintain
adequate
security
in
the
areas
adjacent
to
our
campuses,
we
may
not
be
able
to
continue
to
attract
and
retain
students,
or
we
may
have
to
close
a
campus
either
temporarily
or
permanently.
For
example,
in
2014
we
closed
a
small
campus
of
one
of
our
universities
in
Mexico
because
of
threats
from
a
local
drug
cartel.
In
addition,
high
crime
rates
may
require
us
to
make
additional
investments
in
security
infrastructure
and
personnel,
which
may
cause
us
to
increase
our
tuition
rates
in
order
to
maintain
operating
margins.
Certain
security
measures
may
materially
adversely
affect
the
campus
experience
by
making
access
by
students
more
cumbersome,
which
may
be
viewed
negatively
by
some
of
our
existing
or
prospective
students.
If
we
are
not
able
to
attract
and
retain
students
because
of
our
inability
to
provide
them
with
a
safe
environment,
or
if
we
are
required
to
make
substantial
additional
investments
in
security,
that
could
cause
a
material
adverse
effect
on
our
business,
financial
condition
and
results
of
operations.

If we are unable to upgrade our campuses, they may become less attractive to parents and students and we may fail to grow our business.

All
of
our
institutions
require
periodic
upgrades
to
remain
attractive
to
parents
and
students.
Upgrading
the
facilities
at
our
institutions
could
be
difficult
for
a
number
of
reasons,
including
the
following:

•

our
properties
may
not
have
the
capacity
or
configuration
to
accommodate
proposed
renovations;

construction
and
other
costs
may
be
prohibitive;

we
may
fail
to
obtain
regulatory
approvals;

it
may
be
difficult
and
expensive
to
comply
with
local
building
and
fire
codes,
especially
as
to
properties
that
we
acquired
as
part
of
past
acquisitions;

we
may
be
unable
to
finance
construction
and
other
costs;
and

we
may
not
be
able
to
negotiate
reasonable
terms
with
our
landlords
or
developers
or
complete
the
work
within
acceptable
timeframes.

Our
failure
to
upgrade
the
facilities
of
our
institutions
could
lead
to
lower
enrollment
and
could
cause
a
material
adverse
effect
on
our
business,
financial
condition
and
results
of
operations.

Our planned growth will require occupying increasing amounts of real estate that can be difficult to obtain and are subject to local regulation and control by
landlords.

In
order
to
continue
to
expand,
we
must
continue
to
buy
or
lease
additional
real
estate
and
construct
new
campus
buildings.
Construction
of
new
campus
buildings
requires
us
to
obtain
permits
from
local
authorities
and
to
manage
complex
construction
projects,
which
may
result
in
unanticipated
delays
or
expenditures.
In
2013,
the
opening
of
a
new
campus
building
at
UNAB
was
delayed,
resulting
in
the
need
to
relocate
students
to
temporary
facilities
while
the
building
was
completed.
UNAB
incurred
expenses
to
rent
temporary
facilities
and
provided
tuition
discounts
to
those
students
affected
by
the
delay.
The
real
estate
that
institutions
in
the
Laureate International Universities network
occupy
is
subject
to
local
regulations,
some
of
which
may
affect
their
ability
to
expand
their
operations.
For
example,
in
some
locations,
institutions
are
required
by
local
regulations
to
provide
a
specific
number
of
parking
spaces
per
student
enrolled
or
per
area
constructed.
Even
if
there
were
adequate
space
in
the
academic
facilities
to
expand
the
number
of
programs
offered
or
students
enrolled,
we
may
not
be

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able
to
expand
if
we
are
not
able
to
provide
adequate
parking
at
a
reasonable
cost.
The
majority
of
the
real
estate
that
institutions
in
the
Laureate International
Universities network
occupy
is
leased
and
may
be
subject
to
lease
provisions
that
give
the
landlord
the
ability
to
affect
the
operation
of
the
academic
programs.
For
example,
in
certain
jurisdictions,
the
landlord
may
be
responsible
for
obtaining
and
maintaining
occupancy
permits
or
licenses,
without
which
we
cannot
operate.
If
the
landlord
does
not
maintain
the
required
permits
or
licenses,
the
institution
may
be
required
to
suspend
operations,
which
could
have
a
material
adverse
effect
on
our
results
of
operations.
In
Brazil,
real
estate
laws
provide
that
rent
terms
under
certain
types
of
leases
are
subject
to
periodic
adjustments
to
reflect
local
economic
conditions.
These
rent
increases
can
be
substantial,
which
could
have
a
material
adverse
effect
on
our
results
of
operations.
We
currently
have
leases
with
various
expiration
dates,
some
of
which
have
renewal
options.
Our
ability
to
renegotiate
favorable
terms
on
an
expiring
lease
or
to
negotiate
favorable
terms
for
a
suitable
alternate
location,
and
our
ability
to
negotiate
favorable
lease
terms
for
additional
locations,
will
depend
on
conditions
in
the
real
estate
market,
competition
for
desirable
properties
and
our
relationships
with
current
and
prospective
landlords
or
may
depend
on
other
factors
that
are
not
within
our
control.
Any
or
all
of
these
factors
and
conditions
could
negatively
affect
our
growth.

Our success depends on the skills of our executive officers, particularly our Chairman and Chief Executive Officer. If we lose key personnel or are unable to
hire additional qualified personnel, our business may be harmed.

Our
future
success
depends
to
a
significant
degree
on
the
skills,
experience
and
efforts
of
Douglas
L.
Becker,
our
Chairman,
Chief
Executive
Officer
and
founder,
who
has
always
played
and
continues
to
play
an
integral
role
in
developing
and
executing
our
growth
strategy.
We
cannot
assure
you
that
we
will
have
an
internal
candidate
to
take
on
the
role
of
Chairman
and
Chief
Executive
Officer
should
Mr.
Becker
become
unable
or
unwilling
to
serve.
We
also
have
other
very
experienced
and
valuable
executives
in
senior
management
roles
who
would
be
extremely
difficult
to
replace,
the
loss
of
whose
services
could
affect
the
growth
or
results
of
our
company.
As
our
competitors
expand
their
operations,
they
may
have
the
resources
to
hire
away
members
of
our
management
team.
There
is
no
assurance
that
we
will
be
able
to
retain
our
existing
key
personnel,
particularly
in
light
of
increased
competition
in
the
higher
education
industry,
or
that
we
will
be
able
to
attract,
assimilate
or
retain
the
additional
personnel
needed
to
support
our
business.
If
we
cannot,
we
may
not
be
able
to
grow
our
business
as
planned,
and
we
may
not
be
able
to
operate
our
existing
business
effectively.
In
addition,
we
may
not
have
identified
clear
successors
to
our
management
team
and
other
key
employees,
which
could
result
in
lost
opportunities
and
disruptions
to
our
operations
in
the
event
of
an
unexpected
departure.
This
could
have
a
material
adverse
effect
on
our
business,
financial
condition
and
results
of
operations.

Our status as a Certified B Corporation may not result in the benefits that we anticipate.

While
not
required
by
Delaware
law
or
the
terms
of
our
certificate
of
incorporation,
we
have
elected
to
have
our
social
and
environmental
performance,
accountability
and
transparency
assessed
against
the
proprietary
criteria
established
by
an
independent
non-profit
organization.
As
a
result
of
this
assessment,
we
have
been
designated
as
a
"Certified
B
Corporation
TM
,"
which
refers
to
companies
that
are
certified
as
meeting
certain
levels
of
social
and
environmental
performance,
accountability
and
transparency.
The
standards
for
Certified
B
Corporation
certification
are
set
by
an
independent
organization
and
may
change
over
time.
See
"Item
1—Business—Certified
B
Corporation."
Our
reputation
could
be
harmed
if
we
lose
our
status
as
a
Certified
B
Corporation,
whether
by
our
choice
or
by
our
failure
to
continue
to
meet
the
certification
requirements,
if
that
failure
or
change
were
to
create
a
perception
that
we
are
more
focused
on
financial
performance
and
are
no
longer
as
committed
to
the
values
shared
by
Certified
B
Corporations.
Likewise,
our
reputation
could
be
harmed
if
our
publicly
reported
Certified
B
Corporation
score
declines.

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The minority owners of our institutions may disagree with the way we operate the institutions or plan to expand the institutions, which could materially
adversely affect our business and results of operations.

Although
we
control
all
of
our
institutions,
we
share
ownership
or
control
of
several
of
our
institutions
with
minority
stockholders.
We
currently
do
not
have
the
right
to
buy
out
all
of
these
minority
interests.
The
minority
owners
could
assert
that
our
business
decisions
at
the
institution
adversely
affected
the
value
of
their
investment.
In
certain
of
our
institutions,
minority
owners
continue
to
occupy
key
management
positions
and
may
have
the
ability
to
enter
into
agreements
with
third
parties
or
take
other
actions
that
are
inconsistent
with
our
corporate
policies,
which
could
create
legal
burdens
and
additional
expense
for
us.
In
addition,
disagreements
with
the
minority
owners
may
distract
management
and
may
materially
adversely
affect
our
business,
financial
condition
and
results
of
operations.

Litigation may materially adversely affect our business, financial condition and results of operations.

Our
business
is
subject
to
the
risk
of
litigation
by
employees,
students,
suppliers,
competitors,
minority
partners,
stockholders,
government
agencies
or
others
through
private
actions,
class
actions,
administrative
proceedings,
regulatory
actions
or
other
litigation.
The
outcome
of
litigation,
particularly
class
action
lawsuits,
regulatory
actions
and
intellectual
property
claims,
is
difficult
to
assess
or
quantify.
Plaintiffs
in
these
types
of
lawsuits
may
seek
recovery
of
very
large
or
indeterminate
amounts,
and
the
magnitude
of
the
potential
loss
relating
to
these
lawsuits
may
remain
unknown
for
substantial
periods
of
time.
In
addition,
certain
of
these
lawsuits,
if
decided
adversely
to
us
or
settled
by
us,
may
result
in
liability
material
to
our
financial
statements
as
a
whole
or
may
negatively
affect
our
operating
results
if
changes
to
our
business
operation
are
required.
The
cost
to
defend
future
litigation
may
be
significant.
There
also
may
be
adverse
publicity
associated
with
litigation
that
could
negatively
affect
customer
perception
of
our
business,
regardless
of
whether
the
allegations
are
valid
or
whether
we
are
ultimately
found
liable.
As
a
result,
litigation
may
materially
adversely
affect
our
business,
financial
condition
and
results
of
operations.

We are subject to anti-corruption laws in the jurisdictions in which we operate, including the U.S. Foreign Corrupt Practices Act (the "FCPA"), as well as
trade compliance and economic sanctions laws and regulations. Our failure to comply with these laws and regulations could subject us to civil and criminal
penalties, harm our reputation and materially adversely affect our business, financial condition and results of operations.

Doing
business
on
a
worldwide
basis
requires
us
to
comply
with
the
laws
and
regulations
of
numerous
jurisdictions.
These
laws
and
regulations
place
restrictions
on
our
operations
and
business
practices.
In
particular,
we
are
subject
to
the
FCPA,
which
generally
prohibits
companies
and
their
intermediaries
from
providing
anything
of
value
to
foreign
officials
for
the
purpose
of
obtaining
or
retaining
business
or
securing
any
improper
business
advantage,
along
with
various
other
anti-corruption
laws.
As
a
result
of
doing
business
in
foreign
countries
and
with
foreign
partners,
we
are
exposed
to
a
heightened
risk
of
violating
anti-
corruption
laws.
Although
we
have
implemented
policies
and
procedures
designed
to
ensure
that
we,
our
employees
and
other
intermediaries
comply
with
the
FCPA
and
other
anti-corruption
laws
to
which
we
are
subject,
there
is
no
assurance
that
such
policies
or
procedures
will
work
effectively
all
of
the
time
or
protect
us
against
liability
under
the
FCPA
or
other
laws
for
actions
taken
by
our
employees
and
other
intermediaries
with
respect
to
our
business
or
any
businesses
that
we
may
acquire.
We
cannot
assure
you
that
all
of
our
local
partners
will
comply
with
these
laws,
in
which
case
we
could
be
held
liable
for
actions
taken
inside
or
outside
of
the
United
States,
even
though
our
partners
may
not
be
subject
to
these
laws.
Our
continued
international
expansion,
and
any
development
of
new
partnerships
and
joint
venture
relationships
worldwide,
increase
the
risk
of
FCPA
violations
in
the
future.

Violations
of
anti-corruption
laws,
export
control
laws
and
regulations,
and
economic
sanctions
laws
and
regulations
are
punishable
by
civil
penalties,
including
fines,
as
well
as
criminal
fines
and
imprisonment.
If
we
fail
to
comply
with
the
FCPA
or
other
laws
governing
the
conduct
of
international

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operations,
we
may
be
subject
to
criminal
and
civil
penalties
and
other
remedial
measures,
which
could
materially
adversely
affect
our
business,
financial
condition,
results
of
operations
and
liquidity.
Any
investigation
of
any
potential
violations
of
the
FCPA
or
other
anti-corruption
laws,
export
control
laws
and
regulations,
and
economic
sanctions
laws
and
regulations
by
the
United
States
or
foreign
authorities
could
also
materially
adversely
affect
our
business,
financial
condition,
results
of
operations
and
liquidity,
regardless
of
the
outcome
of
the
investigation.

We may not generate anticipated savings from our EiP program or our SSOs.

We
anticipate
making
an
investment
of
approximately
$180
million
in
our
EiP
program
from
2015
to
2017
to
optimize
and
standardize
our
processes
with
a
goal
of
enabling
sustained
growth
and
margin
expansion,
and
we
have
developed
and
begun
to
deploy
SSOs
around
the
world
with
the
goal
of
processing
most
back-office
and
non-student
facing
transactions
for
the
institutions
in
the
Laureate International Universities network,
such
as
accounting,
finance
and
procurement.
While
we
expect
these
programs
to
generate
approximately
$100
million
in
annual
cost
savings
when
fully
realized
in
2019,
there
can
be
no
assurance
that
we
will
achieve
these
savings
goals
or
that
we
will
not
have
to
make
additional
investments
in
these
programs
to
do
so.
In
addition,
our
ability
to
implement
these
programs
successfully
and
timely
could
be
adversely
affected
by
many
factors
including,
among
others,
lack
of
acceptance
by
local
regulators
and
institutions,
inability
to
identify
and
hire
qualified
personnel
to
staff
SSOs
and
unanticipated
technical
difficulties.
If
we
are
not
able
to
implement
the
EiP
program
and
the
SSOs
successfully
and
timely,
at
the
costs
that
we
currently
anticipate,
these
initiatives
may
not
generate
their
intended
operating
efficiencies
which
could
hamper
our
ability
to
grow
in
a
scalable
manner,
and
this
could
have
a
material
adverse
effect
on
our
business,
financial
condition
and
results
of
operations.

We are conducting an internal investigation of one of our network institutions for violations of the Company's policies, and possible violations of the U.S.
Foreign Corrupt Practices Act (the "FCPA") and other applicable laws. A violation of these laws and regulations could subject us to penalties, harm our
reputation and materially adversely affect our business, financial condition and results of operations.

In
June
2016,
the
Audit
Committee
of
the
Board
of
Directors
initiated
an
internal
investigation
into
this
matter
with
the
assistance
of
external
counsel.
The
investigation
concerns
the
facts
surrounding
the
donation,
violations
of
the
Company's
policies,
and
possible
violations
of
the
FCPA
and
other
applicable
laws
in
what
appears
to
be
a
fraud
perpetrated
by
the
former
senior
executive
at
our
network
institution
in
Turkey
and
other
external
individuals.
This
includes
an
investigation
to
determine
if
the
diversion
was
part
of
a
scheme
to
misappropriate
the
funds
and
whether
any
portion
of
the
funds
was
paid
to
government
officials.
As
of
the
date
of
this
Form
10-K,
we
have
not
identified
that
any
other
officers
or
employees
outside
of
Turkey
were
involved
in
the
diversion
of
the
intended
donation.
Although
we
are
pursuing
efforts
to
recover
the
diverted
funds,
including
through
legal
proceedings,
there
is
no
assurance
that
we
will
be
successful.

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regulatory
issues
in
Turkey
relating
to
the
donation,
certain
Laureate-owned
entities
that
are
members
of
the
foundation
that
controls
our
network
institution
in
Turkey
have
contributed
an
amount
of
approximately
$13.0
million
(the
value
of
40.0
million
Turkish
Liras
on
November
4,
2016,
the
date
of
contribution)
to
our
network
institution
in
Turkey
to
reimburse
it
for
the
donation.

In
September
2016,
we
voluntarily
disclosed
the
investigation
to
the
DOJ
and
the
SEC.
The
Company
is
fully
cooperating
with
these
agencies
in
their
investigations
and
inquiries
relating
to
this
matter.
The
Company
has
internal
controls
and
compliance
policies
and
procedures
that
are
designed
to
prevent
misconduct
of
this
nature
and
support
compliance
with
laws
and
best
practices
throughout
its
global
operations.
The
Company
is
taking
steps
to
enhance
these
internal
controls
and
compliance
policies
and
procedures.
The
investigations
relating
to
the
donation
are
ongoing,
and
we
cannot
predict
the
outcome
at
this
time,
or
the
impact,
if
any,
to
the
Company's
consolidated
financial
statements
or
predict
how
the
resulting
consequences,
if
any,
may
impact
our
internal
controls
and
compliance
policies
and
procedures,
business,
ability
or
right
to
operate
in
Turkey,
results
of
operations
or
financial
position.
If
we
are
found
to
have
violated
the
FCPA
or
other
laws
applicable
to
us,
we
may
be
subject
to
criminal
and
civil
penalties
and
other
remedial
measures,
which
could
materially
adversely
affect
our
business,
financial
condition,
results
of
operations
and
liquidity.

See
"—We
currently
have
four
material
weaknesses
in
our
internal
control
over
financial
reporting
that,
if
not
corrected,
could
result
in
material
misstatements
of
our
financial
statements"
and
"—Our
institutions
are
subject
to
uncertain
and
varying
laws
and
regulations,
and
any
changes
to
these
laws
or
regulations
or
their
application
to
us
may
materially
adversely
affect
our
business,
financial
condition
and
result
of
operations."

We currently have four material weaknesses in our internal control over financial reporting that, if not corrected, could result in material misstatements of our
financial statements.

In
the
course
of
preparing
our
consolidated
financial
statements
as
of
and
for
the
year
ended
December
31,
2013,
we
identified
certain
material
weaknesses
in
our
internal
control
over
financial
reporting.
A
material
weakness
is
a
deficiency,
or
a
combination
of
deficiencies,
in
internal
control
over
financial
reporting,
such
that
there
is
a
reasonable
possibility
that
a
material
misstatement
of
our
annual
or
interim
consolidated
financial
statements
will
not
be
prevented
or
detected
on
a
timely
basis.
The
material
weaknesses
related
to
(1)
an
inadequate
contract
management
process,
(2)
inadequate
accounting
for
tax
matters,
(3)
inadequate
knowledge
of
GAAP
in
the
non-U.S.
finance
organization,
(4)
inadequate
journal
entry
review
processes
and
(5)
inadequate
controls
over
key
reports
and
spreadsheets.
We
have
remediated
four
of
the
five
material
weaknesses;
however,
the
material
weakness
related
to
inadequate
controls
over
key
reports
and
spreadsheets
remained
at
December
31,
2015
and
2016.

As
of
December
31,
2015,
we
identified
a
material
weakness
in
our
internal
control
over
financial
reporting
related
to
inadequate
controls
over
key
reports
and
spreadsheets,
as
discussed
above.
Specifically,
we
did
not
design
adequate
controls
to
address
the
completeness
and
accuracy
of
key
reports
and
key
spreadsheets.
This
material
weakness,
in
combination
with
other
prior
material
weaknesses,
contributed
to
a
revision
to
our
audited
financial
statements
for
the
year
ended
December
31,
2013.
This
material
weakness
could
result
in
additional
misstatements
to
the
accounts

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and
disclosures
that
would
result
in
a
material
misstatement
of
our
consolidated
financial
statements
that
would
not
be
prevented
or
detected.

As
of
December
31,
2016,
we
identified
three
additional
material
weaknesses,
as
follows:

•

We
identified
a
material
weakness
in
our
risk
assessment
process,
which
we
determined
was
not
operating
adequately
to
identify
and
address
the
risks
to
our
business
and
to
establish
appropriate
control
objectives
given
the
environment
in
which
we
operate
and
the
decentralized
structure
used
to
manage
our
operating
activities.
This
material
weakness
in
our
risk
assessment
process
was
a
factor
contributing
to
two
additional
material
weaknesses
which
we
have
further
described
below:

•

We
identified
a
material
weakness
in
that
we
did
not
appropriately
assess
the
risks
relating
to
our
contracting
processes
and
did
not
have
controls
that
were
properly
designed
or
operating
effectively
to
detect
and
prevent
fraud.
Specifically,
our
controls
over
contracting
processes
were
not
designed
or
operating
effectively
to
incorporate
appropriate
levels
of
due
diligence,
requisite
management
approvals,
segregation
of
duties
or
ongoing
monitoring.
This
material
weakness
allowed
for
the
occurrence
of
the
incident
in
our
network
institution
in
Turkey
as
discussed
in
"Item
1—Business—Industry
Regulation—Turkish
Regulation
and
Internal
Investigation,"
as
well
as
certain
other
contracting
irregularities
at
other
network
institutions
that
also
necessitated
an
internal
investigation.
This
control
deficiency
could
result
in
material
misstatements
of
the
accounts
and
disclosures
that
would
result
in
a
material
misstatement
of
our
consolidated
financial
statements
that
would
not
be
prevented
or
detected.

We
identified
a
material
weakness
in
that
we
did
not
maintain
effective
controls
over
the
operating
effectiveness
of
information
technology
("IT")
general
controls
for
information
systems
that
are
relevant
to
the
preparation
of
our
financial
statements.
Specifically
we
did
not:

(i)

(ii)

(iii)

maintain
program
change
management
controls
to
ensure
that
IT
program
and
data
changes
affecting
financial
IT
applications
and
underlying
accounting
records
are
identified,
tested,
authorized
and
implemented
appropriately;

maintain
user
access
controls
to
ensure
appropriate
segregation
of
duties
and
that
access
to
financial
applications
and
data
is
adequately
restricted
to
appropriate
personnel;
and

maintain
computer
operations
controls
to
ensure
that
privileges
are
appropriately
granted,
and
data
backups
are
authorized
and
monitored.

These
IT
deficiencies
did
not
result
in
a
material
misstatement
to
the
financial
statements,
however,
the
deficiencies,
when
aggregated,
could
impact
the
effectiveness
of
IT-dependent
controls
(such
as
automated
controls
that
address
the
risk
of
material
misstatement
to
one
or
more
assertions,
along
with
the
IT
controls
and
underlying
data
that
support
the
effectiveness
of
system-generated
data
and
reports)
that
could
result
in
misstatements
potentially
affecting
all
financial
statement
accounts
and
disclosures
that
would
not
be
prevented
or
detected
in
a
timely
manner.

We
have
commenced
the
remediation
of
these
material
weaknesses.
Our
efforts
to
remediate
these
material
weaknesses
may
not
be
effective.
If
our
efforts
to
remediate
these
material
weaknesses
are
not
successful,
the
remediated
material
weaknesses
may
reoccur,
the
current
material
weaknesses
may
not
be
remediated
in
a
timely
manner,
or
other
material
weaknesses
could
occur
in
the
future.

As
a
result
of
these
material
weaknesses,
we
may
be
unable
to
report
our
financial
results
accurately
on
a
timely
basis,
which
could
cause
our
reported
financial
results
to
be
materially
misstated
and
result
in
the
loss
of
investor
confidence
or
delisting
of
our
Class
A
common
stock
and
could
cause
the
market
price
of
our
Class
A
common
stock
to
decline.
As
a
result
of
such
failures,
we
could
also

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become
subject
to
investigations
by
the
stock
exchange
on
which
our
Class
A
common
stock
is
listed,
the
SEC
or
other
regulatory
authorities,
and
become
subject
to
litigation
from
investors,
which
could
harm
our
reputation,
business,
financial
condition
and
results
of
operations,
and
divert
financial
and
management
resources
from
our
core
business.

Further,
if
as
a
result
of
these
material
weaknesses
we
are
unable
to
provide
the
DOE
with
required
financial
statements
by
specified
deadlines,
the
DOE
could
take
action
to
materially
limit
or
terminate
our
U.S.
Institutions'
participation
in
the
Title
IV
federal
student
aid
programs,
which
could
result
in
a
material
or
adverse
decline
in
revenues,
financial
condition
or
results
of
operations.
Furthermore,
the
U.S.
Institutions
would
then
be
unable
to
continue
their
business
as
currently
conducted,
which
could
be
expected
to
have
a
material
adverse
effect
on
our
U.S.
Institutions'
ability
to
continue
as
going
concerns.

See
"—We
are
conducting
an
internal
investigation
of
one
of
our
network
institutions
for
violations
of
the
Company's
policies,
and
possible
violations
of
the
U.S.
Foreign
Corrupt
Practices
Act
and
other
applicable
laws.
A
violation
of
these
laws
and
regulations
could
subject
us
to
penalties,
harm
our
reputation
and
materially
adversely
affect
our
business,
financial
condition
and
results
of
operations."

If we fail to maintain proper and effective internal controls, our ability to produce accurate financial statements on a timely basis could be materially adversely
affected.

Commencing
with
our
fiscal
year
ending
December
31,
2017,
we
must
perform
system
and
process
evaluation
and
testing
of
our
internal
controls
over
financial
reporting
to
allow
management
to
report
on
the
effectiveness
of
our
internal
controls
over
financial
reporting
in
our
Form
10-K
filing
for
that
year,
as
required
by
Section
404
of
the
Sarbanes-Oxley
Act
of
2002
(the
"Sarbanes-Oxley
Act").
This
will
require
that
we
incur
substantial
additional
professional
fees
and
internal
costs
to
expand
our
accounting
and
finance
functions
and
that
we
expend
significant
management
efforts
and
we
may
need
to
make
further
investments
in
order
to
become
compliant.
Prior
to
our
initial
public
offering,
we
have
not
been
required
to
test
our
internal
controls
within
a
specified
period
and,
as
a
result,
we
may
experience
difficulty
in
meeting
these
reporting
requirements
in
a
timely
manner.

We
may
in
the
future
discover
areas
of
our
internal
financial
and
accounting
controls
and
procedures
that
need
improvement.
Our
internal
control
over
financial
reporting
will
not
prevent
or
detect
all
errors
and
all
fraud.
A
control
system,
regardless
of
how
well
designed
and
operated,
can
provide
only
reasonable,
not
absolute,
assurance
that
the
control
system's
objectives
will
be
met.
Because
of
the
inherent
limitations
in
all
control
systems,
no
evaluation
of
controls
can
provide
absolute
assurance
that
misstatements
due
to
error
or
fraud
will
not
occur
or
that
all
control
issues
and
instances
of
fraud
will
be
detected.

If
we
are
not
able
to
comply
with
the
requirements
of
Section
404
of
the
Sarbanes-Oxley
Act
in
a
timely
manner,
or
if
we
are
unable
to
maintain
proper
and
effective
internal
controls,
we
may
not
be
able
to
produce
timely
and
accurate
financial
statements,
and
we
or
our
independent
registered
public
accounting
firm
may
conclude
that
our
internal
controls
over
financial
reporting
are
not
effective
or
our
independent
registered
public
accounting
firm
may
not
be
able
to
provide
us
with
an
unqualified
opinion
as
required
by
Section
404
of
the
Sarbanes-Oxley
Act.
If
that
were
to
happen,
investors
could
lose
confidence
in
our
reported
financial
information,
which
could
lead
to
a
decline
in
the
market
price
of
our
Class
A
common
stock
and
we
could
be
subject
to
sanctions
or
investigations
by
the
stock
exchange
on
which
our
Class
A
common
stock
is
listed,
the
SEC
or
other
regulatory
authorities.

Additionally,
the
existence
of
any
material
weakness
could
require
management
to
devote
significant
time
and
incur
significant
expense
to
remediate
any
such
material
weakness
and
management
may
not
be
able
to
remediate
any
such
material
weakness
in
a
timely
manner.
The
existence
of
any
material
weakness
in
our
internal
control
over
financial
reporting
could
also
result
in

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errors
in
our
financial
statements
that
could
require
us
to
restate
our
financial
statements,
cause
us
to
fail
to
meet
our
reporting
obligations
and
cause
the
holders
of
our
Class
A
common
stock
to
lose
confidence
in
our
reported
financial
information,
all
of
which
could
materially
adversely
affect
our
business
and
share
price.

Risks
Relating
to
Our
Highly
Regulated
Industry
in
the
United
States

Failure of any of our U.S. Institutions to comply with extensive regulatory requirements could result in significant monetary liabilities, fines and penalties,
restrictions on our operations, limitations on our growth, or loss of access to federal student loans and grants for our students, on which we are substantially
dependent.

Our
U.S.
Institutions
are
subject
to
extensive
regulatory
requirements,
including
at
the
federal,
state,
and
accrediting
agency
levels.
Many
students
at
our
U.S.
Institutions
rely
on
the
availability
of
federal
student
financial
aid
programs,
known
as
Title
IV
programs,
which
are
administered
by
the
DOE,
to
finance
their
cost
of
attending
our
institutions.
For
the
fiscal
year
ended
December
31,
2016,
Kendall
College,
NewSchool
of
Architecture
and
Design,
St.
Augustine
and
Walden
University
derived
approximately
34%,
37%,
57%
and
73%,
respectively,
of
their
revenues
(calculated
on
a
cash
basis)
from
Title
IV
program
funds.
In
the
aggregate,
our
U.S.
Institutions
derived
approximately
$484
million
of
revenues
(calculated
on
a
cash
basis)
from
Title
IV
programs
during
the
year
ended
December
31,
2016.

To
participate
in
Title
IV
programs,
our
U.S.
Institutions
must
be
authorized
by
the
appropriate
state
education
agency
or
agencies,
be
accredited
by
an
accrediting
agency
recognized
by
the
DOE,
and
be
certified
as
an
eligible
institution
by
the
DOE.
As
a
result,
our
U.S.
Institutions
are
subject
to
extensive
regulation
and
review
by
these
agencies
and
commissions
which
cover
the
vast
majority
of
our
U.S.
operations,
including
our
educational
programs,
instructional
and
administrative
staff,
administrative
procedures,
marketing,
student
recruiting
and
admissions,
and
financial
operations.
These
regulations
also
affect
our
ability
to
acquire
or
open
additional
institutions,
add
new
educational
programs,
substantially
change
existing
programs
or
change
our
corporate
or
ownership
structure.
The
agencies
and
commissions
that
regulate
our
operations
periodically
revise
their
requirements
and
modify
their
interpretations
of
existing
requirements.
Regulatory
requirements
are
not
always
precise
and
clear,
and
regulatory
agencies
may
sometimes
disagree
with
the
way
we
interpret
or
apply
these
requirements.
If
we
misinterpret
or
are
found
to
have
not
complied
with
any
of
these
regulatory
requirements,
our
U.S.
Institutions
could
suffer
financial
penalties,
limitations
on
their
operations,
loss
of
accreditation,
termination
of
or
limitations
on
their
ability
to
grant
degrees
and
certificates,
or
limitations
on
or
termination
of
their
eligibility
to
participate
in
Title
IV
programs,
each
of
which
could
materially
adversely
affect
our
business,
financial
condition
and
results
of
operations.
In
addition,
if
we
are
charged
with
regulatory
violations,
our
reputation
could
be
damaged,
which
could
have
a
negative
impact
on
our
enrollments
and
materially
adversely
affect
our
business,
financial
condition
and
results
of
operations.
We
cannot
predict
with
certainty
how
all
of
these
regulatory
requirements
will
be
applied,
or
whether
we
will
be
able
to
comply
with
all
of
the
applicable
requirements
in
the
future.

If
any
of
our
U.S.
Institutions
were
to
lose
its
eligibility
to
participate
in
Title
IV
programs,
we
would
experience
a
material
and
adverse
decline
in
revenues,
financial
condition,
results
of
operations,
and
future
growth
prospects.
Furthermore,
the
affected
U.S.
Institution
would
be
unable
to
continue
its
business
as
it
is
currently
conducted,
which
could
have
a
material
adverse
effect
on
the
institution's
ability
to
continue
as
a
going
concern.

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If any of the U.S. education regulatory agencies or commissions that regulate us do not approve or delay any required approvals of transactions involving a
change of control, including our recent conversion to a Delaware public benefit corporation and our initial public offering, our ability to operate or participate
in Title IV programs may be impaired.

If
we
or
one
of
our
U.S.
Institutions
experiences
a
change
of
ownership
or
control
under
the
standards
of
the
DOE,
any
applicable
accrediting
agency,
any
applicable
state
educational
licensing
agency,
or
any
specialized
accrediting
agency,
we
must
notify
or
seek
approval
of
each
such
agency
or
commission.
These
agencies
do
not
have
uniform
criteria
for
what
constitutes
a
change
of
ownership
or
control.
Transactions
or
events
that
typically
constitute
a
change
of
ownership
or
control
include
significant
acquisitions
or
dispositions
of
shares
of
the
voting
stock
of
an
institution
or
its
parent
company,
and
significant
changes
in
the
composition
of
the
board
of
directors
of
an
institution
or
its
parent
company.
The
occurrence
of
some
of
these
transactions
or
events
may
be
beyond
our
control.
Our
failure
to
obtain,
or
a
delay
in
receiving,
approval
of
any
change
of
control
from
the
DOE
or
any
applicable
accrediting
agency
or
state
educational
licensing
agency,
could
impair
our
U.S.
Institutions'
ability
to
operate
or
participate
in
Title
IV
programs,
which
could
have
a
material
adverse
effect
on
our
business,
financial
condition
and
results
of
operations.
Failure
to
obtain,
or
a
delay
in
receiving,
approval
of
any
change
of
control
from
any
state
in
which
our
U.S.
Institutions
are
currently
licensed
or
authorized,
or
from
any
applicable
accrediting
agency,
could
require
us
to
suspend
our
activities
in
that
state
or
suspend
offering
applicable
programs
until
we
receive
the
required
approval,
or
could
otherwise
impair
our
operations.

The
DOE
previously
notified
us
that
it
considers
our
recent
initial
public
offering
and
our
recent
conversion
to
a
Delaware
public
benefit
corporation
to
be
changes
of
ownership
resulting
in
changes
in
control
under
the
DOE's
regulations.
Also,
the
DOE
will
only
formally
review
and
approve
change
of
ownerships
resulting
in
changes
in
control
after
such
changes
have
occurred.
Accordingly,
we
applied
to
the
DOE
on
behalf
of
Kendall
College,
NewSchool
of
Architecture
and
Design,
St.
Augustine
and
Walden
University
for
approval
of
these
institutions'
continued
participation
in
Title
IV
programs
in
connection
with
the
recent
conversion
to
a
Delaware
public
benefit
corporation.
The
DOE
completed
its
review
of
the
conversion
and
issued
provisional
program
participation
agreements
to
the
institutions
with
respect
to
the
conversion.
We
have
similarly
applied
to
the
DOE
on
behalf
of
Kendall
College,
NewSchool
of
Architecture
and
Design,
St.
Augustine
and
Walden
University
for
approval
of
these
institutions'
continued
participation
in
Title
IV
programs
in
connection
with
our
recent
initial
public
offering.
The
DOE's
review
of
our
initial
public
offering
remains
pending.
The
DOE
has
issued
temporary
program
participation
agreements
to
the
institutions,
which
will
expire
on
March
31,
2017.
If
certain
documents
are
submitted
to
DOE
before
the
expiration
of
the
temporary
program
participation
agreements,
the
eligibility
of
the
institutions
to
participate
in
the
Title
IV
programs
will
be
continued
on
a
month-to-month
basis
while
the
DOE
completes
its
review
of
our
initial
public
offering.
There
can
be
no
assurance
that
the
DOE
will
formally
approve
our
initial
public
offering
and
recertify
our
U.S.
Institutions
for
continued
Title
IV
program
eligibility.
If
the
DOE
fails
to
recertify
the
institutions
and
to
issue
provisional
program
participation
agreements
to
the
institutions
with
respect
to
the
initial
public
offering,
students
at
the
affected
institutions
would
no
longer
be
able
to
receive
Title
IV
program
funds.
The
DOE
could
also
recertify
our
U.S.
Institutions
with
respect
to
the
initial
public
offering,
but
restrict
or
delay
students'
receipt
of
Title
IV
program
funds,
limit
the
number
of
students
to
whom
an
institution
could
disburse
such
funds,
or
impose
other
restrictions
that
could
materially
adversely
affect
our
U.S.
business.

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requiring
approval
under
their
respective
regulations.
Many
states
and
accreditors
have
informed
us
that
our
initial
public
offering
did
not
constitute
a
change
of
control,
but
some
agencies
have
determined
that
the
offering
will
need
to
be
reviewed
under
their
respective
change
of
ownership
standards.
We
have
notified
each
agency
regarding
the
offering
and
some
have
requested
additional
information
in
connection
with
the
offering.
For
instance,
the
Florida
Commission
for
Independent
Education
has
determined
that
the
initial
public
offering
requires
its
review
and
approval
with
respect
to
St.
Augustine,
and
we
have
filed
the
required
applications
for
such
approval.

Our
failure
to
obtain
any
required
approval
of
our
initial
public
offering
from
the
DOE,
the
institutional
accrediting
agencies,
or
the
pertinent
state
educational
agencies
could
result
in
one
or
more
of
our
U.S.
Institutions
losing
continued
eligibility
to
participate
in
the
Title
IV
programs,
accreditation
or
state
licensure,
which
could
have
a
material
adverse
effect
on
our
U.S.
business,
financial
condition
and
results
of
operations.

Congress may revise the laws governing Title IV programs or reduce funding for those and other student financial assistance programs, and the DOE may
revise its regulations administering Title IV programs, any of which could reduce our enrollment and revenues and increase costs of operations.

The
HEA
is
a
federal
law
that
governs
Title
IV
programs.
The
U.S.
Congress
must
authorize
and
appropriate
funding
for
Title
IV
programs
under
the
HEA
and
can
change
the
laws
governing
Title
IV
programs
at
any
time.
The
HEA
was
most
recently
reauthorized
in
August
2008
through
federal
fiscal
year
2014,
although
the
U.S.
Congress
has
taken
actions
required
to
extend
Title
IV
programs
while
an
HEA
reauthorization
remains
pending
and
the
Title
IV
programs
remain
authorized
and
functioning.
Congress
continues
to
engage
in
HEA
reauthorization
hearings,
with
such
hearings
examining
various
subjects
to
be
potentially
addressed
through
reauthorization,
including,
but
not
limited
to,
college
affordability,
the
role
of
consumer
information
in
college
choices
by
students
and
families,
whether
Title
IV
programs
should
include
institutional
risk-sharing,
and
the
role
of
accrediting
agencies
in
ensuring
institutional
quality,
among
other
items.
We
cannot
predict
the
timing
and
terms
of
any
eventual
HEA
reauthorization,
including
any
potential
changes
to
institutional
participation
or
student
eligibility
requirements
or
funding
levels
for
particular
Title
IV
programs,
which
terms
may
materially
adversely
affect
our
business,
financial
condition
and
results
of
operations.

Apart
from
Title
IV
programs,
eligible
veterans
and
military
personnel
may
receive
educational
benefits
for
the
pursuit
of
higher
education.
A
reduction
in
federal
funding
levels
for
Title
IV
programs,
or
for
programs
providing
educational
benefits
to
veterans
and
military
personnel,
could
reduce
the
ability
of
some
students
to
finance
their
education.
We
cannot
predict
with
certainty
the
future
funding
levels
for
Title
IV
programs,
or
for
programs
providing
educational
benefits
to
veterans
and
military
personnel,
or
the
nature
of
any
future
revisions
to
the
law
or
regulations
related
to
these
programs.
Because
a
significant
percentage
of
the
revenues
of
our
U.S.
Institutions
is
and
is
expected
to
be
derived
from
Title
IV
programs,
any
action
by
the
U.S.
Congress
that
significantly
reduces
Title
IV
program
funding
or
the
ability
of
our
U.S.
students
to
participate
in
Title
IV
programs
could
have
a
material
adverse
effect
on
our
U.S.
Institutions'
enrollments,
business,
financial
condition
and
results
of
operations.
Congressional
action
also
may
require
our
U.S.
Institutions
to
modify
their
practices
in
ways
that
could
increase
administrative
costs
and
reduce
profit
margins,
which
could
have
a
material
adverse
effect
on
our
business,
financial
condition
and
results
of
operations.

In
recent
years,
the
DOE
has
promulgated
a
substantial
number
of
new
regulations
that
impact
our
U.S.
Institutions,
including,
but
not
limited
to,
state
authorization,
standards
regarding
the
payment

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of
incentive
compensation,
the
definition
of
a
credit
hour
for
the
purpose
of
determining
program
eligibility
for
Title
IV
student
financial
aid,
and
the
scope
of
the
prohibition
and
potential
sanctions
for
substantial
misrepresentations.
On
October
30,
2014,
the
DOE
published
final
regulations
to
define
"gainful
employment"
for
the
purposes
of
the
Title
IV
program
requirement
that
educational
programs
offered
by
proprietary
institutions
prepare
students
for
gainful
employment
in
recognized
occupations,
which
became
effective
on
July
1,
2015.

On
October
30,
2015,
the
DOE
published
final
regulations
regarding
cash
management
and
debit
card
practices,
retaking
coursework
and
clock-to-credit
hour
conversion.
A
majority
of
the
provisions
of
the
regulations
took
effect
on
July
1,
2016,
and
others
took
effect
on
later
dates
in
2016.
The
final
regulations
concerning
cash
management
require,
among
other
things,
that
institutions
subject
to
heightened
cash
monitoring
procedures
for
disbursements
of
Title
IV
funds
must,
effective
July
1,
2016,
pay
to
students
any
applicable
Title
IV
credit
balances
before
requesting
such
funds
from
the
DOE.
St.
Augustine,
Walden
University,
NewSchool
of
Architecture
and
Design
and
Kendall
College
are
currently
subject
to
heightened
cash
monitoring
procedures.
We
have
reviewed
the
regulations
and
made
appropriate
adjustments
in
our
business
operations
to
meet
those
requirements
effective
July
1,
2016.

On
December
19,
2016,
the
DOE
published
final
regulations
regarding
state
authorization
for
programs
offered
through
distance
education
and
state
authorization
for
foreign
locations
of
institutions.
Among
other
provisions,
these
final
regulations
require
that
an
institution
participating
in
the
Title
IV
federal
student
aid
programs
and
offering
post-secondary
education
through
distance
education
be
authorized
by
each
state
in
which
the
institution
enrolls
students,
if
such
authorization
is
required
by
the
state.
The
DOE
would
recognize
authorization
through
participation
in
a
state
authorization
reciprocity
agreement,
if
the
agreement
does
not
prevent
a
state
from
enforcing
its
own
laws.
The
final
regulations
also
require
that
foreign
additional
locations
and
branch
campuses
be
authorized
by
the
appropriate
foreign
government
agency
and,
if
at
least
50%
of
a
program
can
be
completed
at
the
location/branch,
be
approved
by
the
institution's
accrediting
agency
and
be
reported
to
the
state
where
the
main
campus
is
located.
The
final
regulations
would
also
require
institutions
to:
document
the
state
process
for
resolving
complaints
from
students
enrolled
in
programs
offered
through
distance
education
or
correspondence
courses;
and
make
certain
public
and
individualized
disclosures
to
enrolled
and
prospective
students
about
their
distance
education
programs.
These
final
regulations
are
effective
July
1,
2018.

Also,
on
November
1,
2016,
the
DOE
published
a
final
rule
to
clarify
how
Direct
Loan
Program
borrowers
who
believe
they
were
defrauded
by
their
institutions
can
seek
relief,
to
strengthen
provisions
to
hold
institutions
accountable
for
their
wrongdoing
that
results
in
loan
discharges
and
to
expand
circumstances
under
which
the
DOE
may
request
letters
of
credit.
For
additional
information
regarding
this
final
rule,
see
"—The
DOE
may
adopt
regulations
governing
federal
student
loan
debt
forgiveness
that
could
result
in
liability
for
amounts
based
on
borrower
defenses
or
affect
the
DOE's
assessment
of
our
institutional
capability."
We
cannot
predict
the
outcome
or
related
impact
of
any
of
these
items.
As
described
in
more
detail
under
"Item
1—Business—Industry
Regulation—U.S.
Regulation,"
our
U.S.
Institutions
or
certain
of
their
educational
programs
may
lose
eligibility
to
participate
in
Title
IV
programs
if
they
or
certain
of
their
educational
programs
cannot
maintain
compliance
with
applicable
regulations
of
the
DOE.

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The DOE may adopt regulations governing federal student loan debt forgiveness that could result in liability for amounts based on borrower defenses or affect
the DOE's assessment of our institutional capability.

On
November
1,
2016,
the
DOE
published
a
final
rule
that,
among
other
provisions,
establishes
new
standards
and
processes
for
determining
whether
a
Direct
Loan
Program
borrower
has
a
DTR
on
a
loan
due
to
acts
or
omissions
by
the
institution
at
which
the
loan
was
used
by
the
borrower
for
educational
expenses.
The
final
regulations
will
take
effect
on
July
1,
2017.
Among
other
topics,
this
final
rule
establishes
permissible
borrower
defense
claims
for
discharge,
procedural
rules
under
which
claims
will
be
adjudicated,
time
limits
for
borrowers'
claims,
and
guidelines
for
recoupment
by
the
DOE
of
discharged
loan
amounts
from
institutions
of
higher
education.
It
also
prohibits
schools
from
using
any
pre-dispute
arbitration
agreements,
prohibits
schools
from
prohibiting
relief
in
the
form
of
class
actions
by
student
borrowers,
and
invalidates
clauses
imposing
requirements
that
students
pursue
an
internal
dispute
resolution
process
before
contacting
authorities
regarding
concerns
about
an
institution.
For
proprietary
institutions,
the
final
rule
describes
the
threshold
for
loan
repayment
rates
that
will
require
specific
disclosures
to
current
and
prospective
students
and
the
applicable
loan
repayment
rate
methodology.
The
final
rule
also
establishes
important
new
financial
responsibility
and
administrative
capacity
requirements
for
both
not-for-profit
and
for-profit
institutions
participating
in
the
Title
IV
programs.
For
example,
certain
events
would
automatically
trigger
the
need
for
a
school
to
obtain
a
letter
of
credit
including,
for
publicly
traded
institutions,
if
the
SEC
warns
the
school
that
it
may
suspend
trading
on
the
school's
stock,
the
school
failed
to
timely
file
a
required
annual
or
quarterly
report
with
the
SEC,
or
the
exchange
on
which
the
stock
is
traded
notifies
the
school
that
it
is
not
in
compliance
with
exchange
requirements
or
the
stock
is
delisted.
Other
events
would
require
a
recalculation
of
a
school's
composite
score
of
financial
responsibility,
including,
for
a
proprietary
institution
whose
score
is
less
than
1.5,
any
withdrawal
of
an
owner's
equity
by
any
means,
including
by
declaring
a
dividend,
unless
the
equity
is
transferred
within
the
affiliated
entity
group
on
whose
basis
the
composite
score
was
calculated.
The
final
rule
also
sets
forth
events
that
are
discretionary
triggers
for
letters
of
credit,
meaning
that
if
any
of
them
occur,
the
DOE
may
choose
to
require
a
letter
of
credit,
increase
an
existing
letter
of
credit
requirement
or
demand
some
other
form
of
surety
from
the
institution.
The
final
rule
provides
that
if
an
institution
fails
to
meet
the
composite
score
requirement
for
longer
than
three
years
under
provisional
certification,
the
DOE
may
mandate
additional
financial
protection
from
the
institution
or
any
party
with
"substantial
control"
over
the
institution.
Such
parties
with
"substantial
control"
must
agree
to
jointly
and
severally
guarantee
the
Title
IV
liabilities
of
the
institution
at
the
end
of
the
three-year
provisional
certification
period.
Under
current
regulations,
a
party
may
be
deemed
to
have
"substantial
control"
over
an
institution
if,
among
other
factors,
the
party
directly
or
indirectly
holds
an
ownership
interest
of
25%
or
more
of
an
institution,
or
is
a
member
of
the
board
of
directors,
a
general
partner,
the
chief
executive
officer
or
other
executive
officer
of
the
institution.
If
we
are
required
to
repay
the
DOE
for
any
successful
DTR
claims
by
students
who
attended
our
U.S.
Institutions,
or
we
are
required
to
obtain
additional
letters
of
credit
or
increase
our
current
letter
of
credit,
it
could
materially
affect
our
business,
financial
conditions
and
results
of
operations.
We
are
currently
assessing
the
impact
of
these
final
regulations
on
our
U.S.
Institutions.

Hearings and examinations of the for-profit educational industry could result in negative publicity, additional legislation, rulemaking by the DOE and other
federal regulatory agencies, and other restrictions on our business.

In
recent
years,
the
House
Education
and
Workforce
Committee
and
the
Senate
HELP
Committee
in
the
U.S.
Congress
have
increased
the
focus
on
the
role
of
the
for-profit
post-secondary
education
industry.
In
the
past,
these
and
other
congressional
committees
have
held
hearings
focused
on,
among
other
things,
the
standards
and
procedures
of
accrediting
agencies,
student
recruiting
and
admissions
and
outcomes
of
students,
credit
hours
and
program
length,
the
portion
of
federal
student
financial
aid
going
to
proprietary
institutions,
and
the
receipt
of
veterans
and
military
education
benefits
by
students
enrolled
at
proprietary
institutions.
This
activity
may
result
in
legislation,
further
rulemaking
affecting

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participation
in
Title
IV
programs,
and
other
governmental
actions.
In
addition,
concerns
generated
by
congressional
activity
may
adversely
affect
enrollment
in
and
revenues
of
for-profit
educational
institutions.

Additionally,
the
U.S.
Congress
and
DoD
have
increased
their
focus
in
recent
years
on
DoD
tuition
assistance
that
is
used
for
distance
education
and
programs
at
proprietary
institutions.
On
multiple
occasions
since
an
April
2012
Executive
Order,
the
DoD
has
revised
its
standard
MOU
to
include
additional
provisions
applicable
to
all
higher
educational
institutions
providing
educational
programs
through
the
DoD
tuition
assistance
program.
Among
other
things,
the
MOU
requests
that
participating
institutions
provide
meaningful
information
to
students
about
the
financial
cost
and
attendance
at
an
institution
so
military
students
can
make
informed
decisions
on
where
to
attend
school,
will
not
use
unfair,
deceptive,
and
abusive
recruiting
practices
and
will
provide
academic
and
student
support
services
to
service
members
and
their
families.
The
revised
MOU
also
implements
rules
to
strengthen
existing
procedures
for
access
to
DoD
installations
by
educational
institutions,
a
DoD
Postsecondary
Education
Complaint
System
for
service
members,
spouses,
and
adult
family
members
to
register
student
complaints
and
established
authorization
for
the
military
departments
to
establish
service-specific
tuition
assistance
eligibility
criteria
and
management
controls.
Our
U.S.
Institutions
utilizing
tuition
assistance
have
signed
DoD's
standard
MOU.
The
DoD
has
begun
to
increase
its
enforcement
activity
in
connection
with
the
2012
Executive
Order.

In
September
2015,
the
DOE
announced
its
launch
of
a
revised
"College
Scorecard"
website
that
provides
access
to
national
data
on
college
costs,
graduation
rates,
debt
and
post-college
earnings,
including
data
regarding
our
U.S.
Institutions.
This
data
was
updated
in
September
2016.
In
addition,
in
November
2015,
the
DOE
issued
comparative
data
regarding
DOE-recognized
accreditation
agencies
and
the
institutions
they
accredit,
which
include
median
debt,
repayment
rates,
completion
rates
and
median
earnings.
To
the
extent
such
data
gives
rise
to
negative
perceptions
of
our
U.S.
Institutions
or
of
proprietary
educational
institutions
generally,
our
reputation
and
business
could
be
materially
adversely
affected.

We
cannot
predict
whether,
or
the
extent
to
which,
this
scrutiny
will
result
in
legislation
or
further
rulemaking
affecting
our
participation
in
Title
IV
programs,
or
in
programs
providing
educational
benefits
to
veterans
and
military
personnel.
To
the
extent
that
any
laws
or
regulations
are
adopted
that
limit
our
participation
in
Title
IV
programs,
programs
providing
educational
benefits
to
veterans
and
military
personnel,
or
the
amount
of
student
financial
aid
for
which
the
students
at
our
U.S.
Institutions
are
eligible,
those
institutions'
enrollments,
revenues
and
results
of
operations
could
be
materially
adversely
affected.

Our U.S. Institutions must periodically seek recertification to participate in Title IV programs and, if the DOE does not recertify the institutions to continue
participating in Title IV programs, our students would lose their access to Title IV program funds, or the institutions could be recertified but required to accept
significant limitations as a condition of continued participation in Title IV programs.

DOE
certification
to
participate
in
Title
IV
programs
lasts
a
maximum
of
six
years,
and
institutions
are
required
to
seek
recertification
from
the
DOE
on
a
regular
basis
to
continue
their
participation
in
Title
IV
programs.
An
institution
must
also
apply
for
recertification
by
the
DOE
if
it
undergoes
a
change
in
control,
as
defined
by
DOE
regulations,
and
may
be
subject
to
similar
review
if
it
expands
its
operations
or
educational
programs
in
certain
ways.
Generally,
the
recertification
process
includes
a
review
by
the
DOE
of
the
institution's
educational
programs
and
locations,
administrative
capability,
financial
responsibility
and
other
oversight
categories.
The
DOE
could
limit,
suspend
or
terminate
an
institution's
participation
in
Title
IV
programs
for
violations
of
the
HEA
or
Title
IV
regulations.
As
discussed
in
more
detail
under
"Item
1—Business—Industry
Regulation—U.S.
Regulation,"
each
of
our
U.S.
Institutions
currently
participates
in
the
Title
IV
programs
pursuant
to
the
DOE's
provisional
form
of
certification.

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There
can
be
no
assurance
that
the
DOE
will
recertify
our
U.S.
Institutions
after
its
review
of
the
U.S.
Institutions'
applications
for
continued
certification,
which
were
filed
in
connection
with
our
initial
public
offering.
If
the
DOE
does
not
renew
or
withdraws
any
of
our
U.S.
Institutions'
certifications
to
participate
in
Title
IV
programs
at
any
time,
students
in
the
affected
institution(s)
would
no
longer
be
able
to
receive
Title
IV
program
funds.
Similarly,
the
DOE
could
renew
our
U.S.
Institutions'
certifications,
but
restrict
or
delay
Title
IV
funding,
limit
the
number
of
students
to
whom
it
could
disburse
such
funds
or
impose
other
restrictions.
In
addition,
the
DOE
may
take
emergency
action
to
suspend
any
of
our
U.S.
Institutions'
certifications
without
advance
notice
if
it
receives
reliable
information
that
an
institution
is
violating
Title
IV
requirements
and
it
determines
that
immediate
action
is
necessary
to
prevent
misuse
of
Title
IV
funds.
Any
of
these
outcomes
could
have
a
material
adverse
effect
on
our
U.S.
Institutions'
enrollments
and
our
business,
financial
condition
and
results
of
operations.

Our U.S. Institutions would lose their ability to participate in Title IV programs if they fail to maintain their institutional accreditation, and our student
enrollments could decline if we fail to maintain any of our accreditations or approvals.

An
institution
must
be
accredited
by
an
accrediting
agency
recognized
by
the
DOE
to
participate
in
Title
IV
programs.
Each
of
our
U.S.
Institutions
is
so
accredited,
and
such
accreditation
is
subject
to
renewal
or
review
periodically
or
when
necessary.
If
any
of
our
U.S.
Institutions
fails
to
satisfy
any
of
its
respective
accrediting
commissions'
standards,
that
institution
could
lose
its
accreditation
by
its
respective
accrediting
commission,
which
would
cause
the
institution
to
lose
eligibility
to
participate
in
Title
IV
programs
and
experience
a
significant
decline
in
total
student
enrollments.
In
addition,
many
of
our
U.S.
Institutions'
individual
educational
programs
are
accredited
by
specialized
accrediting
commissions
or
approved
by
specialized
state
agencies.
If
any
of
our
U.S.
Institutions
fails
to
satisfy
the
standards
of
any
of
those
specialized
accrediting
commissions
or
state
agencies,
that
institution
could
lose
the
specialized
accreditation
or
approval
for
the
affected
programs,
which
could
result
in
materially
reduced
student
enrollments
in
those
programs
and
have
a
material
adverse
effect
on
our
business,
financial
condition
and
results
of
operations.
In
addition,
if
an
accrediting
body
of
one
of
our
U.S.
Institutions
loses
recognition
by
the
DOE,
that
institution
could
lose
its
ability
to
participate
in
Title
IV
programs.

If any of our U.S. Institutions fail to obtain or maintain any of its state authorizations in states where such authorization is required, that institution may not
be able to operate or enroll students in that state, and may not be able to award Title IV program funds to students.

The
DOE
requires
that
an
educational
institution
be
authorized
in
each
state
where
it
physically
operates
in
order
to
participate
in
Title
IV
programs.
The
level
of
regulatory
oversight
varies
substantially
from
state
to
state.
Our
campus-based
U.S.
Institutions
are
authorized
by
applicable
state
educational
licensing
agencies
to
operate
and
to
grant
degrees
or
diplomas,
which
authorizations
are
required
for
students
at
these
institutions
to
be
eligible
to
receive
funding
under
Title
IV
programs.
If
any
of
our
U.S.
Institutions
fail
to
continuously
satisfy
applicable
standards
for
maintaining
its
state
authorization
in
a
state
in
which
that
institution
is
physically
located,
that
institution
could
lose
its
authorization
from
the
applicable
state
educational
agency
to
offer
educational
programs
and
could
be
forced
to
cease
operations
in
that
state.
Such
a
loss
of
authorization
would
also
cause
that
institution's
location
in
the
state
to
lose
eligibility
to
participate
in
Title
IV
programs,
which
could
have
a
material
adverse
effect
on
our
business,
financial
condition
and
results
of
operations.

Many
states
also
have
sought
to
assert
jurisdiction,
whether
through
adoption
of
new
laws
and
regulations
or
new
interpretations
of
existing
laws
and
regulations,
over
out-of-state
educational
institutions
offering
online
degree
programs
that
have
no
physical
location
or
other
presence
in
the
state
but
that
have
some
activity
in
the
state,
such
as
enrolling
or
offering
educational
services
to

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students
who
reside
in
the
state,
employing
faculty
who
reside
in
the
state
or
advertising
to
or
recruiting
prospective
students
in
the
state.
State
regulatory
requirements
for
online
education
are
inconsistent
between
states
and
not
well
developed
in
many
jurisdictions.
As
such,
these
requirements
change
frequently
and,
in
some
instances,
are
not
clear
or
are
left
to
the
discretion
of
state
employees
or
agents.
State
regulatory
agencies
may
sometimes
disagree
with
the
way
we
have
interpreted
or
applied
these
requirements.
Any
misinterpretation
by
us
of
these
regulatory
requirements
or
adverse
changes
in
regulations
or
interpretations
of
these
regulations
by
state
licensing
agencies
could
have
a
material
adverse
effect
on
our
business,
financial
condition
and
results
of
operations.

Our
online
educational
programs
offered
by
our
U.S.
Institutions
and
the
constantly
changing
regulatory
environment
require
us
to
continually
evaluate
our
state
regulatory
compliance
activities.
We
review
the
licensure
requirements
of
other
states
when
appropriate
to
determine
whether
our
activities
in
those
states
constitute
a
presence
or
otherwise
require
licensure
or
authorization
by
the
respective
state
education
agencies.
Therefore,
in
addition
to
the
states
where
we
maintain
physical
facilities,
we
have
obtained,
or
are
in
the
process
of
obtaining,
approvals
or
exemptions
that
we
believe
are
necessary
in
connection
with
our
activities
that
may
constitute
a
presence
in
such
other
states
requiring
licensure
or
authorization
by
the
state
educational
agency
based
on
the
laws,
rules
or
regulations
of
that
state.
Some
of
our
approvals
are
pending
or
are
in
the
renewal
process.
St.
Augustine
does
not
have
current
approvals
or
exemptions
from
the
state
educational
agencies
of
12
states
in
which
St.
Augustine
does
not
maintain
physical
locations
but
has
enrolled
a
small
number
of
students.
For
each
such
state,
St.
Augustine
is
either
in
the
process
of
applying
for
such
approval/exemption
or
has
plans
to
submit
such
applications
in
2017.
In
recent
years,
several
states
have
voluntarily
entered
into
SARA
that
establish
standards
for
interstate
offering
of
post-secondary
distance
education
courses
and
programs.
If
an
institution's
home
state
participates
in
SARA
and
authorizes
the
institution
to
provide
distance
education
in
accordance
with
SARA
standards,
then
the
institution
need
not
obtain
additional
authorizations
for
distance
education
from
any
other
SARA
member
state.
None
of
our
U.S.
Institutions
are
approved
to
participate
in
SARA.
If
any
of
our
U.S.
Institutions
fail
to
comply
with
state
licensure
or
authorization
requirements,
we
could
be
subject
to
various
sanctions,
including
restrictions
on
recruiting
students,
providing
educational
programs
and
other
activities
in
that
state,
and
fines
and
penalties.
Additionally,
new
laws,
regulations
or
interpretations
related
to
providing
online
educational
programs
and
services
could
increase
our
cost
of
doing
business
and
affect
our
ability
to
recruit
students
in
particular
states,
which
could,
in
turn,
negatively
affect
enrollments
and
revenues
and
otherwise
have
a
material
adverse
effect
on
our
business,
financial
condition
and
results
of
operations.

The
failure
to
maintain
any
required
state
licensure
or
authorization
for
our
distance
education
programs
in
the
United
States
could
prohibit
us
from
recruiting
prospective
students
or
offering
educational
services
to
current
students
in
one
or
more
states,
which
could
significantly
reduce
enrollments
and
revenues
and
have
a
material
adverse
effect
on
our
business,
financial
condition
and
results
of
operations
in
the
United
States.
Additionally,
on
December
19,
2016,
the
DOE
published
final
regulations
regarding
state
authorization
for
programs
offered
through
distance
education
and
state
authorization
for
foreign
locations
of
institutions.
For
additional
information
regarding
these
final
regulations,
see
"—Congress
may
revise
the
laws
governing
Title
IV
programs
or
reduce
funding
for
those
and
other
student
financial
assistance
programs,
and
the
DOE
may
revise
its
regulations
administering
Title
IV
programs,
any
of
which
could
reduce
our
enrollment
and
revenues
and
increase
costs
of
operations."
Any
failure
to
comply
with
state
requirements,
or
any
new
or
modified
regulations
at
the
federal
or
state
level,
could
result
in
our
inability
to
enroll
students
or
receive
Title
IV
funds
for
students
in
those
states
and
could
result
in
restrictions
on
our
growth
and
enrollments.

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Increased regulatory and enforcement effort aimed at proprietary education institutions could be a catalyst for legislative or regulatory restrictions,
investigations, enforcement actions and claims that could, individually or in the aggregate, materially adversely affect our business, financial condition, results
of operations and cash flows.

In
the
event
that
any
of
our
past
or
current
business
practices
are
found
to
violate
applicable
consumer
protection
laws,
or
if
we
are
found
to
have
made
misrepresentations
to
our
current
or
prospective
students
about
our
educational
programs,
we
could
be
subject
to
monetary
fines
or
penalties
and
possible
limitations
on
the
manner
in
which
we
conduct
our
business,
which
could
materially
adversely
affect
our
business,
financial
condition,
results
of
operations
and
cash
flows.
To
the
extent
that
more
states
or
government
agencies
commence
investigations,
act
in
concert,
or
direct
their
focus
on
our
U.S.
Institutions,
the
cost
of
responding
to
these
inquiries
and
investigations
could
increase
significantly,
and
the
potential
impact
on
our
business
would
be
substantially
greater.

Our failure to comply with the laws and regulations of various states could result in actions that would have a material adverse effect on our enrollments,
revenues and results of operations.

We
are
subject
to
extensive
laws
and
regulations
by
the
states
in
which
we
are
authorized
or
licensed
to
operate.
State
laws
typically
establish
standards
for
instruction,
qualifications
of
faculty,
administrative
procedures,
marketing,
recruiting,
financial
operations
and
other
operational
matters.
State
laws
and
regulations
may
limit
our
ability
to
offer
educational
programs
and
to
award
degrees
and
may
limit
the
ability
of
our
students
to
sit
for
certification
exams
in
their
chosen
fields
of
study.
In
addition,
as
mentioned
above,
attorneys
general
in
several
states
have
become
more
active
in
enforcing
consumer
protection
laws,
and
in
some
instances
have
partnered
with
the
CFPB.
In
addition,
we
may
be
subject
to
litigation
by
private
parties
alleging
that
we
violated
state
laws
regarding
the
educational
programs
provided
by
our
U.S.
Institutions
and
their
operations.
For
more
information
on
these
lawsuits,
see
"Item
3—Legal
Proceedings."

On
September
8,
2016,
as
part
of
a
program
review
that
MOHE
is
conducting
of
Walden
University's
doctoral
programs,
MOHE
sent
to
Walden
University
an
information
request
regarding
its
doctoral
programs
and
complaints
filed
by
doctoral
students.
We
have
been
informed
by
MOHE
that
in
an
effort
to
better
understand
the
context,
background
and
issues
related
to
doctoral
student
complaints
in
Minnesota,
MOHE
is
initiating
a
full
review
of
doctoral
programs
for
institutions
registered
in
Minnesota.
We
cannot
predict
the
outcome
of
this
matter.
However,
if
MOHE
makes
an
adverse
determination,
it
could
have
a
material
adverse
effect
on
our
business,
financial
condition
and
results
of
operations.

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The inability of our graduates to obtain licensure or other specialized outcomes in their chosen professional fields of study could reduce our enrollments and
revenues, and potentially lead to litigation that could be costly to us.

Certain
of
our
graduates
seek
professional
licensure
or
other
specialized
outcomes
in
their
chosen
fields
following
graduation.
Their
success
in
obtaining
these
outcomes
depends
on
several
factors,
including
the
individual
merits
of
the
learner,
but
also
may
depend
on
whether
the
institution
and
the
program
were
approved
by
the
state
or
by
a
professional
association,
whether
the
program
from
which
the
learner
graduated
meets
all
state
requirements
and
whether
the
institution
is
accredited.
In
addition,
professional
associations
may
refuse
to
certify
specialized
outcomes
for
our
learners
for
similar
reasons.
The
state
requirements
for
licensure
are
subject
to
change,
as
are
the
professional
certification
standards,
and
we
may
not
immediately
become
aware
of
changes
that
may
impact
our
learners
in
certain
instances.
Also,
as
described
below,
the
final
gainful
employment
regulations
require
an
institution
to
certify
to
the
DOE
that
its
educational
programs
subject
to
the
gainful
employment
requirements,
which
include
all
programs
offered
by
our
U.S.
Institutions,
meet
the
applicable
requirements
for
graduates
to
be
professionally
or
occupationally
certified
in
the
state
in
which
the
institution
is
located.
In
the
event
that
one
or
more
states
refuses
to
recognize
our
learners
for
professional
licensure,
and/or
professional
associations
refuse
to
certify
specialized
outcomes
for
our
learners,
based
on
factors
relating
to
our
institution
or
programs,
the
potential
growth
of
our
programs
would
be
negatively
affected,
which
could
have
a
material
adverse
effect
on
our
business,
financial
condition,
results
of
operations
and
cash
flows.
In
addition,
we
could
be
exposed
to
litigation
that
would
force
us
to
incur
legal
and
other
expenses
that
could
have
a
material
adverse
effect
on
our
business,
financial
condition,
results
of
operations
and
cash
flows.

If any of our U.S. Institutions do not comply with the DOE's "administrative capability" standards, we could suffer financial penalties, be required to accept
other limitations to continue participating in Title IV programs or lose our eligibility to participate in Title IV programs.

DOE
regulations
specify
extensive
criteria
an
institution
must
satisfy
to
establish
that
it
has
the
requisite
"administrative
capability"
to
participate
in
Title
IV
programs.
These
criteria
require,
among
other
things,
that
we
comply
with
all
applicable
Title
IV
program
regulations;
have
capable
and
sufficient
personnel
to
administer
the
federal
student
financial
aid
programs;
not
have
student
loan
cohort
default
rates
in
excess
of
specified
levels;
have
acceptable
methods
of
defining
and
measuring
the
satisfactory
academic
progress
of
our
students;
have
various
procedures
in
place
for
safeguarding
federal
funds;
not
be,
and
not
have
any
principal
or
affiliate
who
is,
debarred
or
suspended
from
federal
contracting
or
engaging
in
activity
that
is
cause
for
debarment
or
suspension;
provide
financial
aid
counseling
to
our
students;
refer
to
the
DOE's
Office
of
Inspector
General
any
credible
information
indicating
that
any
applicant,
student,
employee
or
agent
of
the
institution
has
been
engaged
in
any
fraud
or
other
illegal
conduct
involving
Title
IV
programs;
submit
in
a
timely
manner
all
reports
and
financial
statements
required
by
Title
IV
regulations;
and
not
otherwise
appear
to
lack
administrative
capability.
If
an
institution
fails
to
satisfy
any
of
these
criteria
or
comply
with
any
other
DOE
regulations,
the
DOE
may
change
the
institution's
method
of
receiving
Title
IV
program
funds,
which
in
some
cases
may
result
in
a
significant
delay
in
the
institution's
receipt
of
those
funds;
place
the
institution
on
provisional
certification
status;
or
commence
a
proceeding
to
impose
a
fine
or
to
limit,
suspend
or
terminate
the
participation
of
the
institution
in
Title
IV
programs.
Thus,
if
any
of
our
U.S.
Institutions
were
found
not
to
have
satisfied
the
DOE's
"administrative
capability"
requirements,
we
could
be
limited
in
our
access
to,
or
lose,
Title
IV
program
funding,
which
could
significantly
reduce
our
enrollments
and
have
a
material
adverse
effect
on
our
business,
financial
condition
and
results
of
operations.

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If any of our U.S. Institutions do not meet specific financial responsibility standards established by the DOE, that institution may be required to post a letter of
credit or accept other limitations to continue participating in Title IV programs, or that institution could lose its eligibility to participate in Title IV programs.

To
participate
in
Title
IV
programs,
our
U.S.
Institutions
must
satisfy
specific
measures
of
financial
responsibility
prescribed
by
the
DOE,
or
post
a
letter
of
credit
in
favor
of
the
DOE
and
possibly
accept
other
conditions
on
its
participation
in
Title
IV
programs.
These
financial
responsibility
tests
are
applied
on
an
annual
basis
based
on
an
institution's
audited
financial
statements,
and
may
be
applied
at
other
times,
such
as
if
an
institution
undergoes
a
change
in
control.
The
DOE
may
also
apply
such
measures
of
financial
responsibility
to
an
eligible
institution's
operating
company
and
ownership
entities
and,
if
such
measures
are
not
satisfied
by
the
operating
company
or
ownership
entities,
require
the
institution
to
post
a
letter
of
credit
in
favor
of
the
DOE
and
possibly
accept
other
conditions
on
its
participation
in
Title
IV
programs.
The
operating
restrictions
that
may
be
placed
on
an
institution
that
does
not
meet
the
quantitative
standards
of
financial
responsibility
include
changes
to
the
method
of
receiving
Title
IV
program
funds,
which
in
some
cases
may
result
in
a
significant
delay
in
the
institution's
receipt
of
those
funds.
Limitations
on,
or
termination
of,
our
participation
in
Title
IV
programs
as
a
result
of
our
failure
to
demonstrate
financial
responsibility
would
limit
our
students'
access
to
Title
IV
program
funds,
which
could
significantly
reduce
enrollments
and
have
a
material
adverse
effect
on
our
business,
financial
condition
and
results
of
operations.

As
described
in
more
detail
under
"Item
1—Business—Industry
Regulation—U.S.
Regulation,"
the
DOE
annually
assesses
our
U.S.
Institutions'
financial
responsibility
through
a
composite
score
determination
based
on
the
Laureate
consolidated
audited
financial
statements
and
not
at
the
individual
institutional
level.
Based
on
Laureate's
composite
score
for
its
fiscal
year
ended
December
31,
2015,
the
DOE
determined
that
it
and,
consequently,
Walden
University,
NewSchool
of
Architecture
and
Design,
Kendall
College
and
St.
Augustine
fail
to
meet
the
standards
of
financial
responsibility.
As
a
result,
the
DOE
required
us
to
either:
1)
provide
a
letter
of
credit
in
an
amount
equal
to
50%
of
the
Title
IV
program
funds
received
by
Laureate
in
the
fiscal
year
ended
December
31,
2015
(calculated
by
the
DOE
to
be
$351,995,250)
and
have
our
U.S.
Institutions
qualify
as
financially
responsible;
or
2)
provide
a
letter
of
credit
in
an
amount
equal
to
15%
of
the
Title
IV
program
funds
received
by
Laureate
in
the
fiscal
year
ended
December
31,
2015
(calculated
by
the
DOE
to
be
$105,598,575)
and
for
our
U.S.
Institutions
to
remain
provisionally
certified
for
a
period
of
up
to
three
complete
Title
IV
program
award
years.
The
DOE
also
required
us
to
comply
with
additional
notification
and
reporting
requirements.
We
have
provided
the
DOE
with
a
letter
of
credit
in
the
amount
of
$105,598,575,
and
we
are
complying
with
the
additional
notification
and
reporting
requirements

In
December
2015,
the
DOE
sent
us
a
letter
requiring
us
to
post
a
letter
of
credit
in
the
amount
of
$14,967
for
St.
Augustine
(25%
of
the
total
Title
IV
program
refunds
the
institution
made
or
should
have
made
during
the
fiscal
year
ended
December
31,
2014).
This
requirement
was
due
to
the
fact
that
St.
Augustine
was
found
to
have
untimely
processed
refunds
of
Title
IV
program
funds
for
withdrawn
students
for
more
than
5%
of
the
students
in
its
auditor's
sample
for
the
2014
fiscal
year.
We
have
obtained
this
letter
of
credit.
Any
obligation
to
post,
maintain
or
increase
a
letter
of
credit
could
materially
adversely
affect
our
liquidity
or
increase
our
costs
of
regulatory
compliance.
The
DOE
has
the
discretion
to
increase
our
letter
of
credit
requirements
at
any
time.
If
we
are
unable
to
secure
any
required
letter
of
credit,
our
U.S.
Institutions
would
lose
their
eligibility
to
participate
in
Title
IV
programs,
which
could
have
a
material
adverse
effect
on
our
business,
financial
condition
and
results
of
operations.

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amounts
based
on
borrower
defenses
or
affect
the
DOE's
assessment
of
our
institutional
capability."
If
we
are
required
to
repay
the
DOE
for
any
successful
DTR
claims
by
students
who
attended
our
U.S.
Institutions,
or
we
are
required
to
obtain
additional
letters
of
credit
or
increase
our
current
letter
of
credit,
it
could
materially
affect
our
business,
financial
conditions
and
results
of
operations.
We
are
currently
assessing
the
impact
of
these
final
regulations
on
our
U.S.
Institutions.

The DOE may change our U.S. Institutions' method of receiving Title IV program funds, which could materially adversely affect our liquidity.

The
DOE
can
impose
sanctions
for
violating
the
statutory
and
regulatory
requirements
of
Title
IV
programs,
including
transferring
one
or
more
of
our
U.S.
Institutions
from
the
advance
method
or
the
heightened
cash
monitoring
level
one
method
of
Title
IV
payment,
each
of
which
permits
an
institution
to
receive
Title
IV
funds
before
or
concurrently
with
disbursing
them
to
students,
to
the
heightened
cash
monitoring
level
two
method
of
payment
or
to
the
reimbursement
method
of
payment,
each
of
which
may
significantly
delay
an
institution's
receipt
of
Title
IV
funds
until
student
eligibility
has
been
verified
by
the
DOE.
Any
such
delay
in
our
U.S.
Institutions'
receipt
of
Title
IV
program
funds
may
materially
adversely
affect
our
cash
flows
and
we
may
require
additional
working
capital
or
third-party
funding
to
finance
our
operations.

Our U.S. Institutions may lose eligibility to participate in Title IV programs if the percentage of our U.S. Institutions revenues derived from Title IV programs
is too high.

A
provision
of
the
HEA
commonly
referred
to
as
the
"90/10
Rule"
provides
that
a
for-profit
educational
institution
loses
its
eligibility
to
participate
in
Title
IV
programs
if,
under
a
complex
regulatory
formula
that
requires
cash
basis
accounting
and
other
adjustments
to
the
calculation
of
revenues,
the
institution
derives
more
than
90%
of
its
revenues
from
Title
IV
program
funds
for
any
two
consecutive
fiscal
years.
If
any
of
our
U.S.
Institutions
were
to
violate
the
90/10
Rule,
that
institution
would
become
ineligible
to
participate
in
Title
IV
programs
as
of
the
first
day
of
the
fiscal
year
following
the
second
consecutive
fiscal
year
in
which
the
institution
exceeded
the
90%
threshold
and
would
be
unable
to
regain
eligibility
for
two
fiscal
years
thereafter.
In
addition,
an
institution
that
derives
more
than
90%
of
its
revenue
(on
a
cash
basis)
from
Title
IV
programs
for
any
single
fiscal
year
will
be
placed
on
provisional
certification
for
at
least
two
fiscal
years
and
may
be
subject
to
additional
conditions
or
sanctions
imposed
by
the
DOE.
Using
the
DOE's
formula
under
the
"90/10
Rule,"
Kendall
College,
NewSchool
of
Architecture
and
Design,
St.
Augustine
and
Walden
University
derived
approximately
34%,
37%,
57%
and
73%
of
their
revenues
(calculated
on
a
cash
basis),
respectively,
from
Title
IV
program
funds
for
the
fiscal
year
ended
December
31,
2016.

Our
U.S.
Institutions'
ratios
could
increase
in
the
future.
Congressional
increases
in
students'
Title
IV
grant
and
loan
limits
may
result
in
an
increase
in
the
revenues
we
receive
from
Title
IV
programs.
In
recent
years,
legislation
has
been
introduced
in
Congress
that
would
revise
the
90/10
Rule
to
consider
educational
benefits
for
veterans
and
military
personnel
from
the
Department
of
Veteran
Affairs
and
Department
of
Defense,
respectively,
in
the
same
manner
as
Title
IV
funds
for
purposes
of
the
rule,
to
prohibit
institutions
from
participating
in
Title
IV
programs
for
one
year
if
they
derive
more
than
90%
of
their
total
revenues
(calculated
on
a
cash
basis)
from
the
Title
IV
programs
and
these
other
federal
programs
in
a
single
fiscal
year
rather
than
the
current
rule
of
two
consecutive
fiscal
years,
and
to
revise
the
90/10
Rule
to
an
85/15
rule.
We
cannot
predict
whether,
or
the
extent
to
which,
any
of
these
proposed
revisions
could
be
enacted
into
law
or
result
in
further
rulemaking.
In
addition,
reductions
in
state
appropriations
in
a
number
of
areas,
including
with
respect
to
the
amount
of
financial
assistance
provided
to
post-secondary
students,
could
further
increase
our
U.S.
Institutions'
percentages
of
revenues
derived
from
Title
IV
program
funds.
The
employment
circumstances
of
our
students
or
their
parents
could
also
increase
reliance
on
Title
IV
program
funds.
If
any
of
our
U.S.
Institutions
become
ineligible
to
participate
in
Title
IV
programs
as
a
result
of
noncompliance
with
the

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Table
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90/10
Rule,
it
could
have
a
material
adverse
effect
on
our
business,
financial
condition
and
results
of
operations.

Any of our U.S. Institutions may lose eligibility to participate in Title IV programs if their respective student loan default rates are too high.

An
educational
institution
may
lose
eligibility
to
participate
in
Title
IV
programs
if,
for
three
consecutive
years,
30%
or
more
of
its
students
who
were
required
to
begin
repayment
on
their
federal
student
loans
in
the
relevant
fiscal
year
default
on
their
payment
by
the
end
of
the
next
federal
fiscal
year.
In
addition,
an
institution
may
lose
its
eligibility
to
participate
in
Title
IV
programs
if
the
default
rate
as
determined
by
the
DOE
of
its
students
exceeds
40%
for
any
single
year.
The
Department
of
Education
generally
publishes
official
cohort
default
rates
annually
in
September
for
the
repayment
period
that
ended
the
prior
September
30.

Kendall
College's
official
cohort
default
rates
for
the
2013,
2012
and
2011
federal
fiscal
years
were
10.0%,
7.9%
and
11.3%,
respectively.
NewSchool
of
Architecture
and
Design's
official
cohort
default
rates
for
the
2013,
2012
and
2011
federal
fiscal
years
were
5.1%,
10.2%
and
11.2%,
respectively.
St.
Augustine's
official
cohort
default
rates
for
the
2013,
2012
and
2011
federal
fiscal
years
were
0.2%,
0.5%,
and
0.0%,
respectively.
Walden
University's
official
cohort
default
rates
for
the
2013,
2012
and
2011
federal
fiscal
years
were
6.7%,
6.8%
and
7.8%,
respectively.
The
average
national
student
loan
default
rates
published
by
the
DOE
for
all
institutions
that
participated
in
the
federal
student
aid
programs
for
2013,
2012
and
2011
were
11.3%,
11.8%
and
13.7%,
respectively,
and
for
all
proprietary
institutions
that
participated
in
the
federal
student
aid
programs
for
2013,
2012
and
2011
were
15.0%,
15.8%
and
19.1%,
respectively.

While
we
believe
our
U.S.
Institutions
are
not
in
danger
of
exceeding
the
regulatory
default
rate
thresholds
for
other
Title
IV
programs,
we
cannot
provide
any
assurance
that
this
will
continue
to
be
the
case.
Any
increase
in
interest
rates
or
reliance
on
"self-pay"
students,
as
well
as
declines
in
income
or
job
losses
for
our
students,
could
contribute
to
higher
default
rates
on
student
loans.
Exceeding
the
student
loan
default
rate
thresholds
and
losing
eligibility
to
participate
in
Title
IV
programs
would
have
a
material
adverse
effect
on
our
business,
financial
condition
and
results
of
operations.
Any
future
changes
in
the
formula
for
calculating
student
loan
default
rates,
economic
conditions
or
other
factors
that
cause
our
default
rates
to
increase,
could
place
our
U.S.
Institutions
in
danger
of
losing
their
eligibility
to
participate
in
Title
IV
programs,
which
would
have
a
material
adverse
effect
on
our
business,
financial
condition
and
results
of
operations.

We could be subject to sanctions or other adverse legal actions if any of our U.S. Institutions were to pay impermissible commissions, bonuses or other
incentive payments to individuals involved in or with responsibility for certain recruiting, admission or financial aid activities.

Under
the
HEA,
an
educational
institution
that
participates
in
Title
IV
programs
may
not
make
any
commission,
bonus
or
other
incentive
payments
to
any
persons
or
entities
involved
in
recruitment
or
admissions
activities
or
in
the
awarding
of
financial
aid.
The
requirement
only
pertains
to
the
recruitment
of
students
who
are
U.S.
citizens,
permanent
residents
and
others
temporarily
residing
in
the
United
States
with
the
intention
of
becoming
a
citizen
or
permanent
resident.
Under
regulations
that
took
effect
on
July
1,
2011,
the
DOE
effectively
has
taken
the
position
that
any
commission,
bonus
or
other
incentive
compensation
payment
based
in
any
part,
directly
or
indirectly,
or
securing
enrollment
or
awarding
financial
aid
is
inconsistent
with
the
statutory
prohibition
against
incentive
compensation.
The
DOE
has
maintained
that
institutions
may
make
merit-based
adjustments
to
employee
compensation,
provided
that
those
adjustments
are
not
based,
in
any
part,
directly
or
indirectly,
upon
securing
enrollments
or
awarding
financial
aid.
In
sub-regulatory
correspondence
to
institutions,
the
DOE
provided
additional
guidance
regarding
the
scope
of
the
prohibition
on
incentive
compensation
and
to
what
employees
and
types
of
activities
the
prohibition
applies.
Based
on
these

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Table
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regulatory
changes,
we
modified
some
of
our
compensation
practices,
which
could
make
it
more
difficult
to
attract
and
retain
key
employees
and
executives,
and
affect
our
ability
to
grow
and
maintain
our
business
and
enrollments.

In
addition,
in
recent
years,
several
for-profit
education
companies
have
been
faced
with
whistleblower
lawsuits
under
the
Federal
False
Claims
Act,
known
as
"qui
tam"
cases,
by
current
or
former
employees
alleging
violations
of
the
prohibition
against
incentive
compensation.
In
such
cases,
the
whistleblower's
claims
are
reviewed
under
seal
by
the
Department
of
Justice
for
potential
intervention.
If
the
Department
of
Justice
elects
to
intervene,
it
assumes
primary
control
over
the
litigation.
If
the
DOE
were
to
determine
that
we
or
any
of
our
U.S.
Institutions
violated
this
requirement
of
Title
IV
programs,
or
if
we
were
to
be
found
liable
in
a
False
Claims
action
alleging
a
violation
of
this
law,
or
if
any
third
parties
we
have
engaged
were
to
violate
this
law,
we
could
be
fined
or
sanctioned
by
the
DOE,
or
subjected
to
other
monetary
liability
or
penalties
that
could
be
substantial,
including
the
possibility
of
treble
damages
under
a
False
Claims
action,
any
of
which
could
harm
our
reputation,
impose
significant
costs
and
have
a
material
adverse
effect
on
our
business,
financial
condition
and
results
of
operations.

We could be subject to sanctions if any of our U.S. Institutions fails to correctly calculate and timely return Title IV program funds for students who withdraw
before completing their educational program.

An
institution
participating
in
Title
IV
programs
must
calculate
the
amount
of
unearned
Title
IV
program
funds
that
it
has
disbursed
to
students
who
withdraw
from
their
educational
programs
before
completing
such
programs
and
must
return
those
unearned
funds
to
the
appropriate
lender
or
the
DOE
in
a
timely
manner,
generally
within
45
days
of
the
date
the
institution
determines
that
the
student
has
withdrawn.
If
any
of
our
U.S.
Institutions
does
not
properly
calculate
and
timely
return
the
unearned
funds
for
a
sufficient
percentage
of
students,
that
institution
may
have
to
post
a
letter
of
credit
in
favor
of
the
DOE
equal
to
25%
of
Title
IV
program
funds
that
should
have
been
returned
for
such
students
in
the
prior
fiscal
year.
Additionally,
if
any
of
our
U.S.
Institutions
does
not
correctly
calculate
and
timely
return
unearned
Title
IV
program
funds,
that
institution
may
be
liable
for
repayment
of
Title
IV
funds
and
related
interest
and
may
be
fined,
sanctioned,
or
otherwise
subject
to
adverse
actions
by
the
DOE,
including
termination
of
that
institution's
participation
in
Title
IV
programs.
Any
of
these
adverse
actions
could
increase
our
cost
of
regulatory
compliance
and
have
a
material
adverse
effect
on
our
business,
financial
condition
and
results
of
operations.

We
could
also
be
subject
to
fines
or
penalties
related
to
findings
cited
in
our
regulatory
compliance
reviews.
For
more
information,
see
"—Government,
regulatory
agencies,
accrediting
bodies
and
third
parties
may
conduct
compliance
reviews,
bring
claims
or
initiate
litigation
against
us."

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We or certain of our educational programs at our U.S. Institutions may lose eligibility to participate in Title IV programs if any of our U.S. Institutions or
certain of their educational programs cannot satisfy the DOE's "gainful employment" requirements.

Under
the
HEA,
proprietary
schools
generally
are
eligible
to
participate
in
Title
IV
programs
in
respect
of
educational
programs
that
lead
to
"gainful
employment
in
a
recognized
occupation."
Historically,
the
concept
of
"gainful
employment"
has
not
been
defined
in
detail.
On
October
30,
2014,
the
DOE
published
final
regulations
to
define
"gainful
employment,"
which
became
effective
on
July
1,
2015.
The
final
regulations
define
this
concept
using
two
ratios,
one
based
on
annual
DTE
and
another
based
on
DTI
ratio.
Under
the
final
regulations,
an
educational
program
with
a
DTE
ratio
at
or
below
8%
or
a
DTI
ratio
at
or
below
20%
is
considered
"passing."
An
educational
program
with
a
DTE
ratio
greater
than
8%
but
less
than
or
equal
to
12%
or
a
DTI
ratio
greater
than
20%
but
less
than
or
equal
to
30%
is
considered
to
be
"in
the
zone."
An
educational
program
with
a
DTE
ratio
greater
than
12%
and
a
DTI
ratio
greater
than
30%
is
considered
"failing."
An
educational
program
will
cease
to
be
eligible
for
students
to
receive
Title
IV
program
funds
if
its
DTE
and
DTI
ratios
are
failing
in
two
out
of
any
three
consecutive
award
years
or
if
both
of
those
rates
are
failing
or
in
the
zone
for
four
consecutive
award
years.
In
January
2017,
the
DOE
issued
to
institutions
final
DTE
rates.
Among
the
Classification
of
Instructional
Programs
reported
within
NewSchool
of
Architecture
and
Design,
Kendall
College
and
Walden
University,
the
DOE
has
indicated
that
we
had
one
that
failed
and
five
in
the
zone.
This
represents
a
total
of
one
educational
program
that
failed
and
ten
in
the
zone.
St.
Augustine
had
no
programs
that
failed
or
were
in
the
zone.
The
percentage
of
students
enrolled
in
the
educational
program
that
failed
represents
approximately
1%
of
the
students
currently
enrolled
in
our
U.S.
Institutions.
The
percentage
of
students
enrolled
in
the
educational
programs
that
were
in
the
zone
represents
approximately
5.3%.
We
are
currently
examining
and
implementing
options
for
each
of
these
programs
and
their
students.
Additionally,
the
final
regulations
require
an
institution
to
certify
to
the
DOE
that
its
educational
programs
subject
to
the
gainful
employment
requirements,
which
include
all
programs
offered
by
our
U.S.
Institutions,
meet
the
applicable
requirements
for
graduates
to
be
professionally
or
occupationally
licensed
or
certified
in
the
state
in
which
the
institution
is
located.
If
we
are
unable
to
certify
that
our
programs
meet
the
applicable
state
requirements
for
graduates
to
be
professionally
or
occupationally
certified
in
that
state,
then
we
may
need
to
cease
offering
certain
programs
in
certain
states
or
to
students
who
are
residents
in
certain
states.
The
final
regulations
further
include
requirements
for
the
reporting
of
student
and
program
data
by
institutions
to
the
DOE
and
expand
the
disclosure
requirements
that
have
been
in
effect
since
July
1,
2011.

The
failure
of
any
program
or
programs
offered
by
any
of
our
U.S.
Institutions
to
satisfy
any
gainful
employment
regulations
could
render
that
program
or
programs
ineligible
for
Title
IV
program
funds.
Additionally,
any
gainful
employment
data
released
by
the
DOE
about
our
U.S.
Institutions
or
warnings
provided
under
the
final
regulations
could
influence
current
students
not
to
continue
their
studies,
discourage
prospective
students
from
enrolling
in
our
programs
or
negatively
impact
our
reputation.
If
a
particular
educational
program
ceased
to
become
eligible
for
Title
IV
program
funds,
either
because
it
fails
to
prepare
students
for
gainful
employment
in
a
recognized
occupation
or
due
to
other
factors,
we
may
choose
to
cease
offering
the
program.
It
is
possible
that
several
programs
offered
by
our
schools
may
be
adversely
affected
by
the
regulations
due
to
lack
of
specialized
program
accreditation
or
certification
or
in
the
states
in
which
such
institutions
are
based.
We
also
could
be
required
to
make
changes
to
certain
programs
in
the
future
in
order
to
comply
with
the
rule
or
to
avoid
the
uncertainty
associated
with
such
compliance.
Any
of
these
factors
could
reduce
enrollments,
impact
tuition
prices,
and
have
a
material
adverse
effect
on
our
U.S.
Institutions'
business,
financial
condition
and
results
of
operations.

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If we fail to maintain adequate systems and processes to detect and prevent fraudulent activity in student enrollment and financial aid, our business could be
materially adversely affected

Higher
educational
institutions
are
susceptible
to
an
increased
risk
of
fraudulent
activity
by
outside
parties
with
respect
to
student
enrollment
and
student
financial
aid
programs.
The
DOE's
regulations
require
institutions
that
participate
in
Title
IV
programs
to
refer
to
the
Office
of
Inspector
General
credible
information
indicating
that
any
applicant,
employee,
third-party
servicer
or
agent
of
the
institution
that
acts
in
a
capacity
that
involves
administration
of
the
Title
IV
programs
has
been
engaged
in
any
fraud
or
other
illegal
conduct
involving
Title
IV
programs.
We
cannot
be
certain
that
our
systems
and
processes
will
always
be
adequate
in
the
face
of
increasingly
sophisticated
and
ever-changing
fraud
schemes.
The
potential
for
outside
parties
to
perpetrate
fraud
in
connection
with
the
award
and
disbursement
of
Title
IV
program
funds,
including
as
a
result
of
identity
theft,
may
be
heightened
due
to
our
U.S.
Institutions
offering
various
educational
programs
via
distance
education.
Any
significant
failure
by
one
or
more
of
our
U.S.
Institutions
to
adequately
detect
fraudulent
activity
related
to
student
enrollment
and
financial
aid
could
result
in
loss
of
accreditation
at
the
discretion
of
the
institutions'
accrediting
agency,
which
would
result
in
the
institution
losing
eligibility
for
Title
IV
programs,
or
in
direct
action
by
the
DOE
to
limit
or
terminate
the
institution's
Title
IV
program
participation.
Any
of
these
outcomes
could
have
a
material
adverse
effect
on
our
business,
financial
condition
and
results
of
operations.

Any substantial misrepresentation regarding our U.S. Institutions could have a material adverse effect on our business, financial condition and results of
operations.

The
DOE's
regulation
regarding
substantial
misrepresentations
includes
statements
about
the
nature
of
its
educational
programs,
its
financial
charges
or
the
employability
of
its
graduates.
Under
the
regulation
as
promulgated
by
the
DOE,
any
false,
erroneous,
or
misleading
statement,
or
statement
that
has
the
likelihood
or
tendency
to
deceive,
that
an
institution,
one
of
its
representatives,
or
person
or
entity
with
whom
the
institution
has
an
agreement
to
provide
educational
programs,
marketing,
advertising,
recruiting
or
admissions
services,
makes
directly
or
indirectly
to
a
student,
prospective
student,
any
member
of
the
public,
an
accrediting
agency,
a
state
licensing
agency
or
the
DOE
could
be
deemed
a
misrepresentation
by
the
institution.
In
the
event
that
the
DOE
determines
that
an
institution
engaged
in
a
substantial
misrepresentation,
it
can
revoke
the
institution's
program
participation
agreement,
impose
limitations
on
the
institution's
participation
in
Title
IV
programs,
deny
participation
applications
on
behalf
of
the
institution,
or
seek
to
fine,
suspend
or
terminate
the
institution's
participation
in
Title
IV
programs.
These
regulations
create
broad
grounds
for
the
DOE
to
monitor
and
enforce
violations
of
the
regulations
on
substantial
misrepresentation,
and
the
DOE
has
recently
taken
actions
to
terminate
the
Title
IV
Program
participation
of,
and
impose
significant
financial
penalties
on
other
institutions
based
on
its
determination
of
such
violations.
These
regulations
also
provide
grounds
for
private
litigants
to
seek
to
enforce
the
expanded
regulations
through
False
Claims
Act
litigation,
which
could
have
a
material
adverse
effect
on
our
business,
financial
condition
and
results
of
operations.

The requirement to notify the DOE in advance of introducing new programs, and to obtain approvals for new programs, could delay the introduction of such
programs and negatively impact growth.

All
of
our
U.S.
Institutions
are
currently
provisionally
certified
by
the
DOE
and
remain
subject
to
certain
program
approval
requirements
otherwise
applicable
to
provisionally
certified
institutions.
Any
delay
in
obtaining
a
required
DOE
approval
could
delay
the
introduction
of
the
program,
which
could
negatively
impact
our
enrollment
growth.

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A bankruptcy filing by us, or by any of our subsidiaries that operate our U.S. Institutions or a closure of one of our U.S. Institutions or their affiliates, would
lead to an immediate loss of the institution's eligibility to participate in Title IV programs.

In
the
event
of
a
bankruptcy
filing
by
us,
or
by
any
of
our
subsidiaries
that
operate
our
U.S.
Institutions,
the
U.S.
Institutions
owned
by
us
or
the
bankrupt
subsidiary
would
lose
its
eligibility
to
participate
in
Title
IV
programs,
pursuant
to
statutory
provisions
of
the
HEA
and
notwithstanding
the
automatic
stay
provisions
of
federal
bankruptcy
law,
which
would
make
any
reorganization
difficult
to
implement.
Additionally,
in
the
event
of
any
bankruptcy
affecting
one
or
more
of
our
U.S.
Institutions,
the
DOE
could
hold
our
other
U.S.
Institutions
jointly
liable
for
any
Title
IV
program
liabilities,
whether
asserted
or
unasserted
at
the
time
of
such
bankruptcy,
of
our
U.S.
Institutions
whose
Title
IV
program
eligibility
was
terminated.

Further,
in
the
event
that
an
institution
closes
and
fails
to
pay
liabilities
or
other
amounts
owed
to
the
DOE,
the
DOE
can
attribute
the
liabilities
of
that
institution
to
other
institutions
under
common
ownership.
If
any
one
of
our
U.S.
Institutions
or
affiliates
were
to
close
or
have
unpaid
DOE
liabilities,
the
DOE
could
seek
to
have
those
liabilities
repaid
by
one
of
our
other
U.S.
Institutions.
In
addition,
the
ultimate
controlling
owner
of
SFUAD
is
Wengen,
which
is
also
the
ultimate
controlling
owner
of
Laureate.
As
a
result,
it
is
possible
that
the
DOE
could
attempt
to
attribute
any
unpaid
Title
IV
related
liabilities
of
SFUAD
to
our
other
U.S.
Institutions,
or
determine
that
our
U.S.
Institutions
do
not
meet
the
DOE
financial
responsibility
regulations,
due
to
their
common
ownership.

Government, regulatory agencies, accrediting bodies and third parties may conduct compliance reviews, bring claims or initiate litigation against us.

Because
we
operate
in
a
highly
regulated
industry,
we
may
be
subject
to
compliance
reviews
and
claims
of
noncompliance
and
lawsuits
by
government
agencies,
regulatory
agencies
and
third
parties,
including
claims
brought
by
third
parties
on
behalf
of
the
federal
government.
On
February
3,
2015,
the
DOE
issued
a
final
program
review
determination
letter
to
National
Hispanic
University
regarding
a
December
2013
review
covering
the
2012-2013
and
2013-2014
Title
IV
award
years.
The
letter
determined
that
National
Hispanic
University
has
taken
corrective
actions
necessary
to
resolve
all
findings
noted
in
the
preliminary
report,
except
for
certain
findings
related
to
drug
and
alcohol
abuse
prevention
program
requirements.
With
respect
to
those
findings,
the
DOE
did
not
require
any
further
action
due
to
the
fact
that
the
National
Hispanic
University
closed
on
August
23,
2015.
On
September
11,
2015,
the
DOE
issued
an
expedited
final
program
review
determination
letter
to
Kendall
College
regarding
a
March-April
2015
program
review.
The
letter
determined
that
Kendall
College
has
taken
corrective
actions
necessary
to
resolve
all
findings
noted
in
the
preliminary
report.
In
addition,
on
September
21,
2015,
the
Higher
Learning
Commission
notified
Kendall
College
that
the
Higher
Learning
Commission
placed
the
school
on
ongoing
financial
monitoring
over
the
next
24
months.
Such
action
was
primarily
due
to
concerns
over
the
school's
continued
reliance
upon
Laureate
to
provide
financial
support
to
sustain
its
operations.
See
also
"—We
could
be
subject
to
sanctions
if
any
of
our
U.S.
Institutions
fails
to
correctly
calculate
and
timely
return
Title
IV
program
funds
for
students
who
withdraw
before
completing
their
educational
program."

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In
May
2017,
Kendall
College
and
Walden
University
are
scheduled
to
host
interim
site
visits
from
their
institutional
accreditor,
Higher
Learning
Commission,
as
a
condition
of
their
ongoing
accreditation.

If
the
results
of
these
or
other
reviews
or
proceedings
are
unfavorable
to
us,
or
if
we
are
unable
to
defend
successfully
against
lawsuits
or
claims,
we
may
be
required
to
pay
money
damages
or
be
subject
to
fines,
limitations,
loss
of
eligibility
for
Title
IV
program
funding
at
our
U.S.
Institutions,
injunctions
or
other
penalties.
We
may
also
lose
or
have
limitations
imposed
on
our
accreditations,
licensing
or
Title
IV
program
participation,
be
required
to
pay
monetary
damages
or
be
limited
in
our
ability
to
open
new
institutions
or
add
new
program
offerings.
Even
if
we
adequately
address
issues
raised
by
an
agency
review
or
successfully
defend
a
lawsuit
or
claim,
we
may
have
to
divert
significant
financial
and
management
resources
from
our
ongoing
business
operations
to
address
issues
raised
by
those
reviews
or
to
defend
against
those
lawsuits
or
claims.
Additionally,
we
may
experience
adverse
collateral
consequences,
including
declines
in
the
number
of
students
enrolling
at
our
institutions
and
the
willingness
of
third
parties
to
deal
with
us
or
our
institutions,
as
a
result
of
any
negative
publicity
associated
with
such
reviews,
claims
or
litigation.
Claims
and
lawsuits
brought
against
us
may
damage
our
reputation
or
cause
us
to
incur
expenses,
even
if
such
claims
and
lawsuits
are
without
merit,
which
could
have
a
material
adverse
effect
on
our
business,
financial
condition,
results
of
operations
and
cash
flows.

Risks
Relating
to
Our
Indebtedness

The fact that we have substantial debt could materially adversely affect our ability to raise additional capital to fund our operations and limit our ability to
pursue our growth strategy or to react to changes in the economy or our industry.

We
have
substantial
debt.
As
of
December
31,
2016
we
had
(a)
a
$1.50
billion
senior
secured
credit
facility
(the
"Senior
Secured
Credit
Facilities")
of
which
(1)
$325.0
million
is
a
multi-currency
revolving
credit
facility
scheduled
to
mature
in
June
2019,
of
which
$0
million
was
outstanding
at
December
31,
2016,
(2)
$281.8
million
is
a
senior
secured
term
loan
facility
scheduled
to
mature
in
June
2018
and
(3)
$1.22
billion
is
a
senior
secured
term
loan
facility
scheduled
to
mature
in
March
2021
(the
"2021
Extended
Term
Loan"),
(b)
$1.39
billion
aggregate
principal
amount
of
senior
notes
and
(c)
$1.18
billion
of
other
long-term
indebtedness,
consisting
of
capital
lease
obligations,
notes
payable,
seller
notes
and
borrowings
against
certain
lines
of
credit.
During
2016,
our
total
cash
interest
payments
on
our
debt
were
approximately
67%
of
our
net
cash
provided
by
operating
activities
of
continuing
operations
(excluding
such
cash
interest
expense).
Our
debt
could
have
important
negative
consequences
to
our
business,
including:

•

increasing
the
difficulty
of
our
ability
to
make
payments
on
our
outstanding
debt;

increasing
our
vulnerability
to
general
economic
and
industry
conditions
because
our
debt
payment
obligations
may
limit
our
ability
to
use
our
cash
to
respond
to
or
defend
against
changes
in
the
industry
or
the
economy;

requiring
a
substantial
portion
of
our
cash
flow
from
operations
to
be
dedicated
to
the
payment
of
principal
and
interest
on
our
indebtedness,
therefore
reducing
our
ability
to
use
our
cash
flow
to
fund
our
operations,
capital
expenditures
and
future
business
opportunities
or
to
pay
dividends;

limiting
our
ability
to
obtain
additional
financing
for
working
capital,
capital
expenditures,
debt
service
requirements,
acquisitions
and
general
corporate
or
other
purposes;

limiting
our
ability
to
pursue
our
growth
strategy;

limiting
our
ability
to
adjust
to
changing
market
conditions;
and

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•

placing
us
at
a
competitive
disadvantage
compared
to
our
competitors
who
are
less
highly
leveraged.

We
and
our
subsidiaries
may
be
able
to
incur
substantial
additional
indebtedness
in
the
future,
subject
to
the
restrictions
contained
in
the
senior
secured
credit
agreement
governing
our
Senior
Secured
Credit
Facilities
and
the
indenture
governing
our
outstanding
notes.
If
new
indebtedness
is
added
to
our
current
debt
levels,
the
related
risks
that
we
now
face
could
intensify.

We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to satisfy our obligations under our
indebtedness, which may not be successful.

Our
ability
to
make
scheduled
payments
on
or
to
refinance
our
debt
obligations
depends
on
our
financial
condition
and
operating
performance,
which
is
subject
to
prevailing
economic
and
competitive
conditions
and
to
certain
financial,
business
and
other
factors
beyond
our
control.
We
may
be
unable
to
maintain
a
level
of
cash
flows
from
operating
activities
sufficient
to
permit
us
to
pay
the
principal,
premium,
if
any,
and
interest
on
our
indebtedness.

If
our
cash
flows
and
capital
resources
are
insufficient
to
fund
our
debt
service
obligations,
we
may
be
forced
to
reduce
or
delay
investments
and
capital
expenditures,
or
to
sell
assets,
seek
additional
capital
or
restructure
or
refinance
our
indebtedness.
These
alternative
measures
may
not
be
successful
and
may
not
permit
us
to
meet
our
scheduled
debt
service
obligations.
In
the
absence
of
such
operating
results
and
resources,
we
could
face
substantial
liquidity
problems
and
might
be
required
to
dispose
of
material
assets
or
operations
to
meet
our
debt
service
and
other
obligations.
Our
senior
secured
credit
agreement
governing
our
Senior
Secured
Credit
Facilities
and
the
indenture
governing
our
outstanding
Senior
Notes
restrict
our
ability
to
dispose
of
assets
and
use
the
proceeds
from
the
disposition.
We
may
not
be
able
to
consummate
those
dispositions
or
to
obtain
the
proceeds
that
we
could
realize
from
them
and
these
proceeds
may
not
be
adequate
to
meet
any
debt
service
obligations
then
due.

Repayment of our debt is dependent on cash flow generated by our subsidiaries and their ability to make distributions to us or return cash via other
repatriation strategies.

Our
subsidiaries
own
a
significant
portion
of
our
assets
and
conduct
a
significant
portion
of
our
operations.
Accordingly,
repayment
of
our
indebtedness
is
dependent,
to
a
significant
extent,
on
the
generation
of
cash
flow
by
our
subsidiaries
and
their
ability
to
make
such
cash
available
to
us,
by
dividend,
debt
repayment
or
otherwise.
Because
the
majority
of
our
indebtedness
is
denominated
in
U.S.
dollars,
the
strengthening
of
the
U.S.
dollar
against
the
local
currencies
in
countries
where
we
have
significant
operations
has
an
adverse
impact
on
our
cash
flows
when
translated
into
U.S.
dollars
and,
accordingly,
could
have
a
material
adverse
impact
on
our
ability
to
repay
the
obligations
under
our
outstanding
indebtedness.
Unless
they
are
guarantors
of
our
Senior
Secured
Credit
Facilities
or
our
outstanding
notes,
our
subsidiaries
do
not
have
any
obligation
to
pay
amounts
due
on
our
indebtedness
or
to
make
funds
available
for
that
purpose.
Our
subsidiaries
may
not
be
able
to,
or
may
not
be
permitted
to,
make
distributions
to
enable
us
to
make
payments
in
respect
of
our
indebtedness.
Each
subsidiary
is
a
distinct
legal
entity
and,
under
certain
circumstances,
legal
and
contractual
restrictions
may
limit
our
ability
to
obtain
cash
from
our
subsidiaries.
Our
non-guarantor
subsidiaries
include
foreign
subsidiaries
and
they
may
be
prohibited
by
law
or
other
regulations
from
distributing
funds
to
us
and/or
we
may
be
subject
to
payment
of
repatriation
taxes
and
withholdings.
Our
non-guarantor
subsidiaries
account
for
substantially
all
of
our
total
revenue,
our
total
Adjusted
EBITDA,
and
our
total
assets
and
our
total
liabilities
(other
than
our
Senior
Secured
Credit
Facilities
and
our
outstanding
notes).
While
the
senior
secured
credit
agreement
governing
our
Senior
Secured
Credit
Facilities
and
the
indenture
governing
our
outstanding
Senior
Notes
limit
the
ability
of
our
subsidiaries
to
incur
consensual
restrictions
on
their
ability
to
pay
dividends
or
make
other
intercompany
payments
to
us,
these
limitations
are
subject
to
certain
qualifications
and
exceptions.
In
the
event
that
we
do
not
receive
distributions
from
our
subsidiaries
or
receive
cash
via
other
cash
repatriation
strategies
for

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services
rendered
and
intellectual
property,
or
if
the
strengthening
of
the
U.S.
dollar
against
local
currencies
significantly
reduces
the
amount
of
such
distributions
when
translated
into
U.S.
dollars,
we
may
be
unable
to
make
required
principal
and
interest
payments
on
our
indebtedness.

Our debt agreements contain, and future debt agreements may contain, restrictions that may limit our flexibility in operating our business.

The
senior
secured
credit
agreement
governing
our
Senior
Secured
Credit
Facilities
and
the
indenture
governing
our
outstanding
Senior
Notes
contain
various
covenants
that
may
limit
our
ability
to
engage
in
specified
types
of
transactions.
These
covenants
limit
our
and
our
restricted
subsidiaries'
ability
to,
among
other
things:

•

pay
dividends
and
make
certain
distributions,
investments
and
other
restricted
payments;

incur
additional
indebtedness,
issue
disqualified
stock
or
issue
certain
preferred
shares;

sell
assets;

enter
into
transactions
with
affiliates;

create
certain
liens
or
encumbrances;

preserve
our
corporate
existence;

merge,
consolidate,
sell
or
otherwise
dispose
of
all
or
substantially
all
of
our
assets;
and

designate
our
subsidiaries
as
unrestricted
subsidiaries.

In
addition,
the
senior
secured
credit
agreement
governing
our
Senior
Secured
Credit
Facilities
provides
for
compliance
with
the
Consolidated
Senior
Secured
Debt
to
Consolidated
EBITDA
Ratio,
as
defined
in
the
senior
secured
credit
agreement,
solely
with
respect
to
the
revolving
line
of
credit
facility,
which
is
tested
quarterly.
The
maximum
ratio,
as
defined,
is
5.3x,
4.5x
and
3.5x
at
December
31,
2015,
2016
and
2017,
respectively.
The
ratio
as
of
December
31,
2016
was
2.79x.

The
senior
secured
credit
agreement
governing
our
Senior
Secured
Credit
Facilities
and
the
indenture
governing
our
outstanding
Senior
Notes
also
include
cross-default
provisions
applicable
to
other
agreements.
A
breach
of
any
of
these
covenants
could
result
in
a
default
under
the
agreement
governing
such
indebtedness,
including
as
a
result
of
cross-default
provisions.
In
addition,
failure
to
make
payments
or
observe
certain
covenants
on
the
indebtedness
of
our
subsidiaries
may
cause
a
cross
default
on
our
Senior
Secured
Credit
Facilities
and
our
outstanding
Senior
Notes.
Upon
our
failure
to
maintain
compliance
with
these
covenants,
the
lenders
could
elect
to
declare
all
amounts
outstanding
to
be
immediately
due
and
payable
and
terminate
all
commitments
to
extend
further
credit.
If
the
lenders
under
such
indebtedness
accelerate
the
repayment
of
borrowings,
we
cannot
assure
you
that
we
will
have
sufficient
assets
to
repay
those
borrowings,
as
well
as
our
other
indebtedness.
We
have
pledged
a
significant
portion
of
our
assets
as
collateral
under
our
Senior
Secured
Credit
Facilities.
If
we
were
unable
to
repay
those
amounts,
the
lenders
under
our
Senior
Secured
Credit
Facilities
could
proceed
against
the
collateral
granted
to
them
to
secure
that
indebtedness.

We rely on contractual arrangements and other payments, advances and transfers of funds from our operating subsidiaries to meet our debt service and other
obligations.

We
conduct
all
of
our
operations
through
certain
of
our
subsidiaries,
and
we
have
no
significant
assets
other
than
cash
of
$36.5
million
as
of
December
31,
2016
held
domestically
at
corporate
entities
and
the
capital
stock
or
other
control
rights
of
our
subsidiaries.
As
a
result,
we
rely
on
payments
from
contractual
arrangements,
such
as
intellectual
property
royalty,
network
fee
and
management
services
agreements.
In
addition,
we
also
rely
upon
intercompany
loan
repayments
and
other
payments
from
our
operating
subsidiaries
to
meet
any
existing
or
future
debt
service
and
other
obligations,
a

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substantial
portion
of
which
are
denominated
in
U.S.
dollars.
The
ability
of
our
operating
subsidiaries
to
pay
dividends
or
to
make
distributions
or
other
payments
to
their
parent
companies
or
directly
to
us
will
depend
on
their
respective
operating
results
and
may
be
restricted
by,
among
other
things,
the
laws
of
their
respective
jurisdictions
of
organization,
regulatory
requirements,
agreements
entered
into
by
those
operating
subsidiaries
and
the
covenants
of
any
existing
or
future
outstanding
indebtedness
that
we
or
our
subsidiaries
may
incur.
For
example,
our
VIE
institutions
generally
are
not
permitted
to
pay
dividends.
Further,
because
most
of
our
income
is
generated
by
our
operating
subsidiaries
in
non-U.S.
dollar
denominated
currencies,
our
ability
to
service
our
U.S.
dollar
denominated
debt
obligations
may
be
affected
by
any
strengthening
of
the
U.S.
dollar
compared
to
the
functional
currencies
of
our
operating
subsidiaries.

Disruptions of the credit and equity markets worldwide may impede or prevent our access to the capital markets for additional funding to expand our business
and may affect the availability or cost of borrowing under our existing senior secured credit facilities.

The
credit
and
equity
markets
of
both
mature
and
developing
economies
have
historically
experienced
extraordinary
volatility,
asset
erosion
and
uncertainty,
leading
to
governmental
intervention
in
the
banking
sector
in
the
United
States
and
abroad.
If
these
market
disruptions
occur
in
the
future,
we
may
not
be
able
to
access
the
capital
markets
to
obtain
funding
needed
to
refinance
our
existing
indebtedness
or
expand
our
business.
In
addition,
changes
in
the
capital
or
other
legal
requirements
applicable
to
commercial
lenders
may
affect
the
availability
or
increase
the
cost
of
borrowing
under
our
Senior
Secured
Credit
Facilities.
If
we
are
unable
to
obtain
needed
capital
on
terms
acceptable
to
us,
we
may
need
to
limit
our
growth
initiatives
or
take
other
actions
that
materially
adversely
affect
our
business,
financial
condition,
results
of
operations
and
cash
flows.

Failure to obtain additional capital in the future could materially adversely affect our ability to grow.

We
believe
that
our
cash
flows
from
operations,
cash,
investments
and
borrowings
under
our
multi-currency
revolving
credit
facility
will
be
adequate
to
fund
our
current
operating
plans
for
the
foreseeable
future.
However,
we
may
need
additional
debt
or
equity
financing
in
order
to
finance
our
continued
growth
and
to
fund
the
put/call
arrangements
with
certain
minority
stockholders.
In
addition,
we
may
be
required
to
buy
additional
interests
in
certain
higher
education
institutions
and
redeem
the
shares
of
our
Series
A
Preferred
Stock
at
specified
times
in
the
future.
The
amount
and
timing
of
such
additional
financing
will
vary
principally
depending
on
the
timing
and
size
of
acquisitions
and
new
institution
openings,
the
willingness
of
sellers
to
provide
financing
for
future
acquisitions
and
the
cash
flows
from
our
operations.
Given
current
global
macro
conditions,
companies
with
emerging
market
exposure
have
been
more
affected
by
recent
market
volatility,
and
during
the
past
year
this
has
been
reflected
in
the
trading
level
of
our
Senior
Notes,
which
have
at
various
times
traded
at
a
significant
discount
to
par.
During
the
second
quarter
of
2015,
one
of
the
leading
U.S.
credit
rating
agencies
downgraded
our
credit
rating
one
notch
and
during
the
second
quarter
of
2016,
another
of
the
leading
U.S.
credit
rating
agencies
downgraded
our
credit
rating
one
notch.
A
significantly
discounted
trading
price
for
our
notes,
as
well
as
the
reduced
credit
rating,
could
materially
and
adversely
affect
our
ability
to
obtain
additional
debt
financing
in
the
future.
To
the
extent
that
we
require
additional
financing
in
the
future
and
are
unable
to
obtain
such
additional
financing,
we
may
not
be
able
to
fully
implement
our
growth
strategy.

Our variable rate debt exposes us to interest rate risk which could materially adversely affect our cash flow.

Borrowings
under
our
Senior
Secured
Credit
Facilities
and
certain
local
credit
facilities
bear
interest
at
variable
rates
and
other
debt
we
incur
also
could
be
variable-rate
debt.
If
market
interest
rates
increase,
variable-rate
debt
will
create
higher
debt
service
requirements,
which
could
materially
adversely
affect
our
cash
flow.
If
these
rates
were
to
increase
significantly,
the
risks
related
to
our

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substantial
debt
would
intensify.
While
we
have
and
may
in
the
future
enter
into
agreements
limiting
our
exposure
to
higher
interest
rates,
any
such
agreements
may
not
offer
complete
protection
from
this
risk.
Based
on
our
outstanding
variable-rate
debt
as
of
December
31,
2016,
after
factoring
in
the
interest
rate
floor
in
our
Senior
Secured
Credit
Facilities,
an
increase
of
1%
in
interest
rates
would
result
in
an
increase
in
interest
expense
of
approximately
$15.7
million
on
an
annual
basis.

Risks
Relating
to
Investing
in
Our
Class
A
Common
Stock

Our status as a public benefit corporation may not result in the benefits that we anticipate.

We
are
a
public
benefit
corporation
under
Delaware
law.
As
a
public
benefit
corporation
we
are
required
to
balance
the
financial
interests
of
our
stockholders
with
the
best
interests
of
those
stakeholders
materially
affected
by
our
conduct,
including
particularly
those
affected
by
the
specific
benefit
purpose
relating
to
education
set
forth
in
our
certificate
of
incorporation.
In
addition,
there
is
no
assurance
that
the
expected
positive
impact
from
being
a
public
benefit
corporation
will
be
realized.
Accordingly,
being
a
public
benefit
corporation
and
complying
with
our
related
obligations
could
negatively
impact
our
ability
to
provide
the
highest
possible
return
to
our
stockholders.

As
a
public
benefit
corporation,
we
are
required
to
publicly
disclose
a
report
at
least
biennially
on
our
overall
public
benefit
performance
and
on
our
assessment
of
our
success
in
achieving
our
specific
public
benefit
purpose.
If
we
are
not
timely
or
are
unable
to
provide
this
report,
or
if
the
report
is
not
viewed
favorably
by
parties
doing
business
with
us
or
regulators
or
others
reviewing
our
credentials,
our
reputation
and
status
as
a
public
benefit
corporation
may
be
harmed.

As a public benefit corporation, our focus on a specific public benefit purpose and producing a positive effect for society may negatively influence our
financial performance.

As
a
public
benefit
corporation,
since
we
do
not
have
a
fiduciary
duty
solely
to
our
stockholders,
we
may
take
actions
that
we
believe
will
benefit
our
students
and
the
surrounding
communities,
even
if
those
actions
do
not
maximize
our
short-
or
medium-term
financial
results.
While
we
believe
that
this
designation
and
obligation
will
benefit
the
Company
given
the
importance
to
our
long-term
success
of
our
commitment
to
education,
it
could
cause
our
board
of
directors
to
make
decisions
and
take
actions
not
in
keeping
with
the
short-term
or
more
narrow
interests
of
our
stockholders.
Any
longer-term
benefits
may
not
materialize
within
the
timeframe
we
expect
or
at
all
and
may
have
an
immediate
negative
effect.
For
example:

•

we
may
choose
to
revise
our
policies
in
ways
that
we
believe
will
be
beneficial
to
our
students
and
their
communities
in
the
long
term,
even
though
the
changes
may
be
costly
in
the
short-
or
medium-term;

we
may
take
actions,
such
as
modernizing
campuses
to
provide
students
with
the
latest
technology,
even
though
these
actions
may
be
more
costly
than
other
alternatives;

we
may
be
influenced
to
pursue
programs
and
services
to
demonstrate
our
commitment
to
our
students
and
communities
even
though
there
is
no
immediate
return
to
our
stockholders;
or

in
responding
to
a
possible
proposal
to
acquire
the
Company,
our
board
of
directors
may
be
influenced
by
the
interests
of
our
employees,
students,
teachers
and
others
whose
interests
may
be
different
from
the
interests
of
our
stockholders.

We
may
be
unable
or
slow
to
realize
the
long-term
benefits
we
expect
from
actions
taken
to
benefit
our
students
and
communities
in
which
we
operate,
which
could
materially
adversely
affect
our
business,
financial
condition
and
results
of
operations,
which
in
turn
could
cause
our
stock
price
to
decline.

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Table
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Contents

An active, liquid trading market for our Class A common stock may not develop or be sustained.

Prior
to
our
initial
public
offering,
which
was
completed
on
February
6,
2017,
there
was
not
a
public
market
for
our
Class
A
common
stock.
We
cannot
predict
the
extent
to
which
investor
interest
in
our
company
will
lead
to
the
development
of
a
trading
market
on
Nasdaq
or
elsewhere,
or
how
active
and
liquid
that
market
may
become.
If
an
active
and
liquid
trading
market
does
not
develop
or
is
not
maintained,
you
may
have
difficulty
selling
any
of
our
Class
A
common
stock
that
you
purchase.
The
initial
public
offering
price
for
the
shares
was
determined
by
negotiations
between
us
and
the
underwriters
and
may
not
be
indicative
of
prices
that
will
prevail
in
the
open
market
following
our
initial
public
offering.
The
market
price
of
our
Class
A
common
stock
may
decline
below
the
initial
offering
price,
and
you
may
be
unable
to
sell
your
shares
of
our
Class
A
common
stock
at
or
above
the
price
you
paid,
or
at
all.

Purchasers of our Class A Common Stock will suffer immediate and substantial dilution in the net tangible book value of the shares of Class A common stock
they purchase.

The
purchasers
of
our
Class
A
common
stock
in
our
initial
public
offering
suffered
immediate
dilution
of
approximately
$(27.24)
per
share
in
net
tangible
book
value
after
giving
effect
to
the
sale
of
35,000,000
shares
of
our
Class
A
common
stock
at
the
initial
public
offering
price,
after
deducting
estimated
underwriting
discounts
and
commissions
and
estimated
offering
expenses
payable
by
us.
We
also
have
a
large
number
of
outstanding
options
to
purchase
Class
B
common
stock
with
exercise
prices
that
are
below
the
initial
public
offering
price
of
our
Class
A
common
stock.
In
addition,
shares
of
our
Series
A
Preferred
Stock
are
convertible,
in
certain
circumstances,
into
shares
of
our
Class
A
common
stock.
To
the
extent
that
these
options
are
exercised
or
the
shares
of
Series
A
Preferred
Stock
are
converted,
holders
of
our
Class
A
common
stock
will
experience
further
dilution.

The price of our Class A common stock may be volatile, and you could lose all or part of your investment.

The
trading
price
of
our
Class
A
common
stock
may
fluctuate
substantially
and
may
be
higher
or
lower
than
the
initial
public
offering
price.
The
trading
price
of
our
Class
A
common
stock
will
depend
on
a
number
of
factors,
including
those
described
in
this
"Item
1A—Risk
Factors"
section,
many
of
which
are
beyond
our
control
and
may
not
be
related
to
our
operating
performance.
These
fluctuations
could
cause
you
to
lose
all
or
part
of
your
investment
in
our
Class
A
common
stock
as
you
may
be
unable
to
sell
your
shares
at
or
above
the
price
you
paid,
or
at
all.
Factors
that
could
cause
fluctuations
in
the
trading
price
of
our
Class
A
common
stock
include
the
following:

•

quarterly
variations
in
our
results
of
operations;

results
of
operations
that
vary
from
the
expectations
of
securities
analysts
and
investors;

results
of
operations
that
vary
from
those
of
our
competitors;

changes
in
expectations
as
to
our
future
financial
performance,
including
financial
estimates
by
securities
analysts
and
investors;

our
or
our
competitors'
introduction
of
new
institutions,
new
programs,
concepts
or
pricing
policies;

announcements
by
us,
our
competitors
or
our
vendors
of
significant
acquisitions,
joint
marketing
relationships,
joint
ventures
or
capital
commitments;

changes
in
conditions
in
the
education
industry,
the
financial
markets
or
the
economy
as
a
whole;

failure
of
any
of
our
institutions
to
secure
or
maintain
accreditation
or
licensure;

145

Table
of
Contents

•

announcements
of
regulatory
or
other
investigations,
adverse
regulatory
action
by
any
regulatory
body
including
those
overseas
or
the
DOE,
state
agencies
or
accrediting
agencies,
regulatory
scrutiny
of
our
operations
or
operations
of
our
competitors
or
lawsuits
filed
against
us
or
our
competitors;

announcements
by
third
parties
of
significant
claims
or
proceedings
against
us;

the
size
of
our
public
float;

changes
in
senior
management
or
key
personnel;

changes
in
our
dividend
policy;

adverse
resolution
of
new
or
pending
litigation
against
us;

issuances,
exchanges
or
sales,
or
expected
issuances,
exchanges
or
sales
of
our
capital
stock;
and

general
domestic
and
international
economic
conditions.

In
the
past,
following
periods
of
market
volatility,
stockholders
have
instituted
securities
class
action
litigation.
We
may
be
the
target
of
this
type
of
litigation
in
the
future.
If
we
were
to
become
involved
in
securities
litigation,
it
could
have
a
substantial
cost
and
divert
resources
and
the
attention
of
our
management
team
from
our
business
regardless
of
the
outcome
of
such
litigation.

In
addition,
price
volatility
may
be
greater
if
the
public
float
and
trading
volume
of
our
Class
A
common
stock
is
low.
As
a
result,
you
may
suffer
a
loss
on
your
investment.

If we or our existing investors sell additional shares of our Class A common stock or shares of our Series A Preferred Stock are converted into shares of our
Class A common stock, the market price of our Class A common stock could decline.

The
market
price
of
our
Class
A
common
stock
could
decline
as
a
result
of
sales
of
a
large
number
of
shares
of
Class
A
common
stock
in
the
market,
or
the
perception
that
such
sales
could
occur.
These
sales,
or
the
possibility
that
these
sales
may
occur,
also
might
make
it
more
difficult
for
us
to
raise
capital
through
future
sales
of
equity
securities
at
a
time
and
at
a
price
that
we
deem
appropriate,
or
at
all.

We,
our
directors
and
executive
officers
and
holders
of
substantially
all
of
our
outstanding
common
stock
(including
Wengen
and
the
IFC
Investors
(other
than
the
Korean
Investment
Corporation,
which
holds
1,390,902
shares
of
our
common
stock))
have
agreed
not
to
(i)
offer,
pledge,
sell,
contract
to
sell,
sell
any
option
or
contract
to
purchase,
purchase
any
option
or
contract
to
sell,
grant
any
option,
right
or
warrant
to
purchase,
lend
or
otherwise
transfer
or
dispose
of,
directly
or
indirectly,
any
shares
of
Class
A
common
stock
or
any
securities
convertible
into
or
exercisable
or
exchangeable
for
shares
of
Class
A
common
stock;
(ii)
file
any
registration
statement
with
the
SEC
relating
to
the
offering
of
any
shares
of
Class
A
common
stock
or
any
securities
convertible
into
or
exercisable
or
exchangeable
for
Class
A
common
stock
or
(iii)
enter
into
any
swap
or
other
arrangement
that
transfers
to
another,
in
whole
or
in
part,
any
of
the
economic
consequences
of
ownership
of
Class
A
common
stock,
without
the
consent
of
the
representatives
of
the
underwriters
for
a
period
of
180
days
from
the
date
of
the
consummation
of
our
initial
public
offering,
subject
to
certain
exceptions.
On
an
as
converted
basis,
these
shares
represent
approximately
81.1%
of
our
outstanding
Class
A
common
stock.
Our
Class
A
common
stock
that
is
issued
upon
conversion
of
our
Class
B
common
stock
also
may
be
sold
pursuant
to
Rule
144
under
the
Securities
Act,
depending
on
their
holding
period
and
subject
to
restrictions
in
the
case
of
shares
held
by
persons
deemed
to
be
our
affiliates.
As
restrictions
on
resale
end
or
if
these
stockholders
exercise
their
registration
rights,
the
market
price
of
our
stock
could
decline
if
the
holders
of
restricted
shares
sell
them
or
are
perceived
by
the
market
as
intending
to
sell
them.
See

146

Table
of
Contents

"Item
13—Certain
Relationships
and
Related
Transactions,
and
Director
Independence—Registration
Rights
Agreement."

In
addition,
pursuant
to
the
Note
Exchange
Agreements,
we
will
exchange
$250.0
million
in
aggregate
principal
amount
of
Senior
Notes
for
shares
of
our
Class
A
common
stock.
We
expect
the
exchange
to
be
completed
within
one
year
and
one
day
after
the
consummation
of
our
initial
public
offering,
subject
to
certain
exceptions
that
could
result
in
the
exchange
being
completed
prior
to
that
time.
The
number
of
shares
of
Class
A
common
stock
issuable
will
equal
104.625%
of
the
aggregate
principal
amount
of
Senior
Notes
to
be
exchanged,
or
$261.6
million,
divided
by
$14.00,
the
initial
public
offering
price
per
share
of
Class
A
common
stock.
Assuming
the
completion
of
the
exchange
transaction
on
the
one-year
anniversary
of
our
initial
public
offering,
we
expect
to
issue
an
aggregate
of
18,683,036
shares
of
Class
A
common
stock.
The
shares
of
Class
A
common
stock
issued
upon
completion
of
the
exchange
will
not
be
subject
to
any
lock
up
agreements
and
may
be
sold
pursuant
to
Rule
144
under
the
Securities
Act,
depending
on
their
holding
period
and
subject
to
restrictions
in
the
case
of
shares
held
by
persons
deemed
to
be
our
affiliates.
As
restrictions
on
resale
end,
the
market
price
of
our
Class
A
common
stock
could
decline
if
the
holders
of
restricted
shares
sell
them
or
are
perceived
by
the
market
as
intending
to
sell
them.

In
addition,
the
holders
of
the
shares
of
Series
A
Preferred
Stock
may
convert
their
shares
of
Series
A
Preferred
Stock
into
shares
of
our
Class
A
common
stock
within
one
year
and
one
day
after
the
consummation
of
our
initial
public
offering,
subject
to
certain
exceptions
that
could
result
in
the
holders
being
able
to
convert
their
shares
of
Series
A
Preferred
Stock
prior
to
that
time.
The
number
of
shares
of
Class
A
common
stock
issuable
upon
conversion
will
depend
upon,
among
other
things,
the
number
of
shares
of
Class
A
common
stock
sold
and
the
initial
public
offering
price
per
share
of
Class
A
common
stock.
At
the
initial
public
offering
price
of
$14.00
per
share,
and
assuming
all
interest
is
paid
in
cash
through
the
conversion
date
and
the
completion
of
the
exchange
transaction
on
the
one-year
anniversary
of
our
initial
public
offering,
we
expect
to
issue
an
aggregate
of
33,613,446
shares
of
Class
A
common
stock.
Depending
on
when
and
in
what
manner
the
shares
of
Series
A
Preferred
Stock
are
converted,
the
shares
of
Class
A
common
stock
issued
upon
conversion
may
or
may
not
be
subject
to
any
lock
up
agreements
and
may
be
sold
pursuant
to
Rule
144
under
the
Securities
Act,
depending
on
their
holding
period
and
subject
to
restrictions
in
the
case
of
shares
held
by
persons
deemed
to
be
our
affiliates.
As
restrictions
on
resale
end,
the
market
price
of
our
Class
A
common
stock
could
decline
if
the
holders
of
restricted
shares
sell
them
or
are
perceived
by
the
market
as
intending
to
sell
them.

As
of
December
31,
2016,
after
giving
effect
to
the
recapitalization
of
our
existing
common
stock
into
an
equivalent
number
of
shares
of
our
Class
B
common
stock
and
the
authorization
of
our
Class
A
common
stock
in
connection
with
the
consummation
of
our
initial
public
offering,
133,376,074
shares
of
our
Class
B
common
stock
were
outstanding,
in
addition
to
28,406
shares
of
Class
B
common
stock
that
are
subject
to
forfeiture
and
substantial
restrictions
on
transfer
(the
"restricted
shares").
Such
amount
excludes
5,413,654
shares
of
Class
B
common
stock
issuable
upon
the
exercise
of
outstanding
vested
stock
options
under
the
2007
Stock
Incentive
Plan
(the
"2007
Plan"),
91,000
shares
of
Class
B
common
stock
subject
to
outstanding
unvested
stock
options
under
the
2007
Plan,
3,289,961
shares
of
Class
B
common
stock
issuable
upon
the
exercise
of
outstanding
vested
stock
options
under
the
2013
Long-Term
Incentive
Plan
(the
"2013
Plan"),
2,133,528
shares
of
Class
B
common
stock
subject
to
outstanding
unvested
stock
options
under
the
2013
Plan,
4,888,529
shares
of
Class
A
common
stock
and/or
Class
B
common
stock
reserved
for
future
issuance
under
the
2013
Plan,
7,432
shares
of
Class
B
common
stock
reserved
for
future
issuance
under
the
Post-2004
DCP,
2,773,098
shares
of
Class
B
common
stock
issuable
upon
exercise
of
options
granted
to
Mr.
Becker
in
exchange
for
the
liquidation
of
certain
of
his
Executive
Profits
Interests,
and
all
shares
of
Class
A
common
stock
issuable
upon
conversion
of
the
Series
A
Preferred
Stock.
See
"Item
11—Executive
Compensation"
for
information
relating
to
the
terms
of
the
restricted
shares,
the
Post-2004
DCP,
Mr.
Becker's
Executive

147

Table
of
Contents

DCP
and
Mr.
Becker's
Executive
Profits
Interests.
All
of
our
outstanding
shares
of
Class
B
common
stock
(other
than
the
restricted
shares)
will
first
become
eligible
for
resale
180
days
after
the
date
of
the
consummation
of
our
initial
public
offering.
Sales
of
a
substantial
number
of
shares
of
our
Class
B
common
stock,
which
will
automatically
convert
into
Class
A
common
stock
upon
sale,
could
cause
the
market
price
of
our
Class
A
common
stock
to
decline.

Because we have no current plans to pay cash dividends on our common stock for the foreseeable future, and our debt arrangements and the Series A
Preferred Stock place certain restrictions on our ability to do so, you may not receive any return on investment unless you sell your Class A common stock for
a price greater than that which you paid for it.

We
may
retain
future
earnings,
if
any,
for
future
operation,
expansion,
debt
repayment
and
the
possible
mandatory
redemption
of
the
shares
of
Series
A
Preferred
Stock
pursuant
to
the
terms
of
the
certificate
of
designations
governing
our
Series
A
Preferred
Stock
(the
"Certificate
of
Designations")
and
have
no
current
plans
to
pay
any
cash
dividends
for
the
foreseeable
future.
Any
decision
to
declare
and
pay
dividends
in
the
future
will
be
made
at
the
discretion
of
our
board
of
directors
and
will
depend
on,
among
other
things,
our
results
of
operations,
financial
condition,
cash
requirements,
contractual
restrictions,
restrictions
on
dividends
imposed
by
the
Certificate
of
Designations
and
other
factors
that
our
board
of
directors
may
deem
relevant.
In
addition,
our
ability
to
pay
dividends
may
be
limited
by
covenants
of
any
existing
and
future
outstanding
indebtedness
we
or
our
subsidiaries
incur,
including
our
Senior
Secured
Credit
Facilities
and
the
indenture
governing
our
outstanding
notes,
and
the
terms
of
our
Series
A
Preferred
Stock.
In
addition,
we
are
permitted
under
the
terms
of
our
debt
instruments
to
incur
additional
indebtedness,
which
may
restrict
or
prevent
us
from
paying
dividends
on
our
common
stock.
Furthermore,
our
ability
to
declare
and
pay
dividends
may
be
limited
by
instruments
governing
future
outstanding
indebtedness
we
may
incur.
As
a
result,
you
may
not
receive
any
return
on
an
investment
in
our
Class
A
common
stock
unless
you
sell
your
Class
A
common
stock
for
a
price
greater
than
that
which
you
paid
for
it.

The dual class structure of our common stock as contained in our certificate of incorporation has the effect of concentrating voting control with those
stockholders who held our stock prior to our initial public offering, including Wengen and our executive officers, employees and directors and their affiliates,
and limiting your ability to influence corporate matters.

Each
share
of
our
Class
B
common
stock
has
ten
votes
per
share,
and
each
share
of
our
Class
A
common
stock
has
one
vote
per
share.
Stockholders
who
hold
shares
of
Class
B
common
stock,
including
Wengen,
and
our
executive
officers,
employees
and
directors
and
their
affiliates,
together
hold
approximately
97.4%
of
the
voting
power
of
our
outstanding
capital
stock,
and
therefore
have
significant
influence
over
the
management
and
affairs
of
the
Company
and
control
over
all
matters
requiring
stockholder
approval,
including
election
of
directors
and
significant
corporate
transactions,
such
as
a
merger
or
other
sale
of
our
company
or
its
assets,
for
the
foreseeable
future.
Because
of
the
10-to-1
voting
ratio
between
our
Class
B
and
Class
A
common
stock,
the
holders
of
our
Class
B
common
stock
collectively
will
continue
to
control
a
majority
of
the
combined
voting
power
of
our
common
stock
even
when
the
shares
of
Class
B
common
stock
represent
less
than
a
majority
of
the
outstanding
shares
of
our
Class
A
and
Class
B
common
stock.

The
Wengen
Investors
have
control
over
our
decisions
to
enter
into
any
corporate
transaction
and
the
ability
to
prevent
any
transaction
that
requires
stockholder
approval
regardless
of
whether
others
believe
that
the
transaction
is
in
our
best
interests.
So
long
as
the
Wengen
Investors
continue
to
have
an
indirect
interest
in
a
majority
of
our
outstanding
Class
B
common
stock,
they
have
the
ability
to
control
the
vote
in
any
election
of
directors.
This
concentrated
control
limits
your
ability
to
influence
corporate
matters
for
the
foreseeable
future
and,
as
a
result,
the
market
price
of
our
Class
A
common
stock
could
be
materially
adversely
affected.
In
addition,
in
connection
with
the
completion
of
our

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Table
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initial
public
offering,
we
entered
into
an
amendment
and
restatement
of
the
Wengen
Securityholders'
Agreement
dated
as
of
July
11,
2007,
by
and
among
Wengen
and
the
other
parties
thereto
(as
amended
and
restated
from
time
to
time,
the
"Wengen
Securityholders'
Agreement"),
pursuant
to
which
certain
of
the
Wengen
Investors
have
certain
rights
to
appoint
directors
to
our
board
of
directors
and
its
committees.
See
"Item
13—Certain
Relationships
and
Related
Transactions,
and
Director
Independence—Agreements
with
Wengen."

In
addition,
the
Wengen
Investors
are
in
the
business
of
making
or
advising
on
investments
in
companies
and
may
hold,
and
may
from
time
to
time
in
the
future
acquire,
interests
in
or
provide
advice
to
businesses
that
directly
or
indirectly
compete
with
certain
portions
of
our
business
or
are
suppliers
or
customers
of
ours.

The Certificate of Designations governing the terms of our Series A Preferred Stock contains rights and privileges that may adversely affect the holders of our
Class A common stock, and, if we are unable to redeem the shares of Series A Preferred Stock when required, the holders of the shares of Series A Preferred
Stock could take control of our board of directors and force a sale of the Company.

So
long
as
there
are
shares
of
Series
A
Preferred
Stock
outstanding,
the
holders
of
such
security
are
entitled
to
annual
dividends
and
have
seniority
upon
any
distribution
of
the
Company's
cash
and
other
assets.
The
holders
of
Series
A
Preferred
Stock
also
have
veto
power
over
certain
corporate
matters,
such
as
(i)
amending
or
repealing
any
provision
of
our
certificate
of
incorporation
or
bylaws
that
would
adversely
affect
the
rights,
preferences,
privileges
or
voting
powers
of
the
Series
A
Preferred
Stock,
including
any
amendment
that
would
increase
or
decrease
the
authorized
number
of
shares
of
Series
A
Preferred
Stock,
and
(ii)
if
it
is
not
a
follow-on
public
offering
after
our
initial
public
offering
in
which
the
holders
of
the
Series
A
Preferred
Stock
receive
net
proceeds
not
less
than
the
Priority
Amount,
the
first
public
offering
of
our
common
stock
following
a
QPO
(as
defined
below)
or
an
initial
public
offering
that
is
not
a
QPO.
The
holders
of
shares
of
the
Series
A
Preferred
Stock
may
have
interests
adverse
to
holders
of
our
Class
A
common
stock
and
the
exercise
of
such
rights
may
have
a
negative
impact
on
the
value
of
Class
A
common
stock
or
the
amount
of
cash
or
other
assets
the
holders
of
our
common
stock
may
receive
in
connection
with
a
distribution
or
merger,
consolidation
or
share
exchange.

In
addition,
if
we
fail
to
redeem
the
shares
of
Series
A
Preferred
Stock
when
required
after
the
fifth
anniversary
of
the
issue
date,
the
holders
of
the
Series
A
Preferred
Stock
are
entitled
to
appoint
two
members
to
our
board
of
directors
and
the
dividend
rate
increases
to
18.0%
per
annum.
For
a
period
of
120
days
following
the
appointment
of
such
directors,
we
must
work
in
good
faith
with
the
holders
of
the
Series
A
Preferred
Stock
to
structure
a
mutually
agreeable
capital
fundraising
transaction
to
redeem
the
then
outstanding
shares
of
Series
A
Preferred
Stock.
If,
after
such
120
day
period,
any
shares
of
Series
A
Preferred
Stock
remain
outstanding,
the
holders
of
the
Series
A
Preferred
Stock
may
nominate
a
number
of
individuals
to
our
board
of
directors
such
that
after
such
nomination
the
holders
of
the
Series
A
Preferred
Stock
control
a
majority
of
our
board
of
directors
and,
after
which,
the
holders
of
Series
A
Preferred
Stock
may
cause
a
sale
of
the
Company
and/or
cause
the
Company
to
raise
debt
or
equity
capital
in
an
amount
sufficient
to
redeem
the
remaining
outstanding
shares
of
Series
A
Preferred
Stock.

We will incur increased costs as a result of being a public company, and the requirements of being a public company may divert management's attention from
our business and materially adversely affect our financial results.

As
a
public
company,
we
are
subject
to
a
number
of
requirements,
including
the
reporting
requirements
of
the
Securities
Exchange
Act
of
1934,
as
amended
(the
"Exchange
Act"),
the
Sarbanes-Oxley
Act,
the
Dodd-Frank
Wall
Street
Reform
and
Consumer
Protection
Act
of
2010
and
the
Nasdaq
listing
standards.
These
requirements
will
cause
us
to
incur
increased
costs
and
might
place
a
strain
on

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our
systems
and
resources.
The
Exchange
Act
requires,
among
other
things,
that
we
file
annual,
quarterly
and
current
reports
with
respect
to
our
business
and
financial
condition.
The
Sarbanes-Oxley
Act
requires,
among
other
things,
that
we
maintain
effective
disclosure
controls
and
procedures
and
internal
control
over
financial
reporting.
In
order
to
maintain
and
improve
the
effectiveness
of
our
disclosure
controls
and
procedures
and
internal
control
over
financial
reporting,
significant
resources
and
management
oversight
will
be
required.
As
a
result,
our
management's
attention
might
be
diverted
from
other
business
concerns,
which
could
have
a
material
adverse
effect
on
our
business,
results
of
operations
and
financial
condition.
We
may
not
be
successful
in
implementing
these
requirements
and
implementing
them
could
materially
adversely
affect
our
business,
results
of
operations
and
financial
condition.
Furthermore,
we
might
not
be
able
to
retain
our
independent
directors
or
attract
new
independent
directors
for
our
committees.

In
addition,
the
need
to
establish
the
corporate
infrastructure
demanded
of
a
public
company
may
direct
management's
attention,
from
implementing
our
business
strategy,
which
could
prevent
us
from
improving
our
business,
financial
condition
and
results
of
operations.
We
have
made,
and
will
continue
to
make,
changes
to
our
internal
controls,
including
information
technology
controls,
and
procedures
for
financial
reporting
and
accounting
systems
to
meet
our
reporting
obligations
as
a
public
company.
However,
the
measures
we
take
may
not
be
sufficient
to
satisfy
our
obligations
as
a
public
company.
If
we
do
not
continue
to
develop
and
implement
the
right
processes
and
tools
to
manage
our
changing
enterprise
and
maintain
our
culture,
our
ability
to
compete
successfully
and
achieve
our
business
objectives
could
be
impaired,
which
could
materially
adversely
affect
our
business,
financial
condition
and
results
of
operations.
In
addition,
we
cannot
predict
or
estimate
the
amount
of
additional
costs
we
may
incur
to
comply
with
these
requirements.
We
anticipate
that
these
costs
will
materially
increase
our
general
and
administrative
expenses.

We are a "controlled company" within the meaning of the Nasdaq rules and, as a result, qualify for, and rely on, exemptions from certain corporate
governance requirements. Our stockholders do not have the same protections afforded to stockholders of companies that are subject to such requirements.

Wengen
controls
a
majority
of
the
voting
power
of
our
outstanding
common
stock.
As
a
result,
we
are
a
"controlled
company"
within
the
meaning
of
the
Nasdaq
corporate
governance
standards.
Under
these
rules,
a
company
of
which
more
than
50%
of
the
voting
power
is
held
by
an
individual,
group
or
another
company
is
a
"controlled
company"
and
may
elect
not
to
comply
with
certain
corporate
governance
requirements,
including:

•

the
requirement
that
a
majority
of
the
board
of
directors
consist
of
independent
directors;

the
requirement
that
we
have
a
nominating/corporate
governance
committee
that
is
composed
entirely
of
independent
directors
with
a
written
charter
addressing
the
committee's
purpose
and
responsibilities;

the
requirement
that
we
have
a
compensation
committee
that
is
composed
entirely
of
independent
directors
with
a
written
charter
addressing
the
committee's
purpose
and
responsibilities;
and

the
requirement
for
an
annual
performance
evaluation
of
the
nominating/corporate
governance
and
compensation
committees.

We
utilize
these
exemptions
and
intend
to
continue
to
do
so.
As
a
result,
we
do
not
have
a
majority
of
independent
directors,
our
nominating
and
corporate
governance
committee
and
our
compensation
committee
do
not
consist
entirely
of
independent
directors
and
such
committees
are
not
be
subject
to
annual
performance
evaluations.
Accordingly,
for
so
long
as
we
are
a
"controlled
company,"
you
will
not
have
the
same
protections
afforded
to
stockholders
of
companies
that
are
subject
to
all
of
the
corporate
governance
requirements
of
Nasdaq.

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Provisions in our certificate of incorporation, Certificate of Designations and bylaws and the Delaware General Corporation Law could make it more difficult
for a third party to acquire us and could discourage a takeover and adversely affect the holders of our Class A common stock.

Provisions
of
our
amended
and
restated
certificate
of
incorporation
and
amended
and
restated
bylaws,
as
well
as
provisions
of
Delaware
law
could
discourage,
delay
or
prevent
a
merger,
acquisition
or
other
change
in
control
of
the
Company,
even
if
such
change
in
control
would
be
beneficial
to
the
holders
of
our
Class
A
common
stock.
These
provisions
include:

•

the
dual
class
structure
of
our
common
stock;

authorizing
the
issuance
of
"blank
check"
preferred
stock
that
could
be
issued
by
our
board
of
directors
to
increase
the
number
of
outstanding
shares
and
thwart
a
takeover
attempt;

prohibiting
the
use
of
cumulative
voting
for
the
election
of
directors;

as
a
public
benefit
corporation,
requiring
a
two-thirds
majority
vote
of
the
outstanding
stock
to
effect
a
non-cash
merger
with
an
entity
that
is
not
a
public
benefit
corporation
with
an
identical
public
benefit;

limiting
the
ability
of
stockholders
to
call
special
meetings
or
amend
our
bylaws;

following
the
conversion
of
all
of
our
Class
B
common
stock
into
Class
A
common
stock,
requiring
all
stockholder
actions
to
be
taken
at
a
meeting
of
our
stockholders;

establishing
advance
notice
and
duration
of
ownership
requirements
for
nominations
for
election
to
the
board
of
directors
or
for
proposing
matters
that
can
be
acted
upon
by
stockholders
at
stockholder
meetings;
and

certain
protective
provisions
in
favor
of
the
holders
of
Series
A
Preferred
Stock.

These
provisions
could
also
discourage
proxy
contests
and
make
it
more
difficult
for
you
and
other
stockholders
to
elect
directors
of
your
choosing
and
cause
us
to
take
other
corporate
actions
you
desire.
In
addition,
because
our
board
of
directors
is
responsible
for
appointing
the
members
of
our
management
team,
these
provisions
could
in
turn
affect
any
attempt
by
our
stockholders
to
replace
current
members
of
our
management
team.

We may issue additional shares of preferred stock in the future, which could make it difficult for another company to acquire us or could otherwise adversely
affect holders of our Class A common stock, which could depress the price of our Class A common stock.

Our
amended
and
restated
certificate
of
incorporation
authorizes
us
to
issue
one
or
more
additional
series
of
preferred
stock.
Our
board
of
directors
has
the
authority
to
determine
the
preferences,
limitations
and
relative
rights
of
any
additional
shares
of
preferred
stock
and
to
fix
the
number
of
shares
constituting
any
series
and
the
designation
of
such
series,
without
any
further
vote
or
action
by
our
stockholders.
Additional
series
of
preferred
stock
could
be
issued
with
voting,
liquidation,
dividend
and
other
rights
superior
to
the
rights
of
our
Class
A
common
stock.
The
potential
issuance
of
an
additional
series
of
preferred
stock
may
delay
or
prevent
a
change
in
control
of
us,
discourage
bids
for
our
Class
A
common
stock
at
a
premium
to
the
market
price,
and
materially
adversely
affect
the
market
price
and
the
voting
and
other
rights
of
the
holders
of
our
Class
A
common
stock.

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The provision of our certificate of incorporation requiring exclusive venue in the Court of Chancery in the State of Delaware for certain types of lawsuits may
have the effect of discouraging lawsuits against our directors and officers.

Our
amended
and
restated
certificate
of
incorporation
requires,
to
the
fullest
extent
permitted
by
law,
that
(a)
any
derivative
action
or
proceeding
brought
on
our
behalf,
(b)
any
action
asserting
a
claim
of
breach
of
a
fiduciary
duty
owed
by
any
of
our
directors,
officers
or
other
employees
to
us
or
our
stockholders,
(c)
any
action
asserting
a
claim
against
us
arising
pursuant
to
any
provision
of
the
Delaware
General
Corporation
Law
(the
"DGCL")
or
our
amended
and
restated
certificate
of
incorporation
or
the
bylaws
or
(d)
any
action
asserting
a
claim
against
us
governed
by
the
internal
affairs
doctrine
will
have
to
be
brought
only
in
the
Court
of
Chancery
in
the
State
of
Delaware.
Any
person
or
entity
purchasing
or
otherwise
acquiring
any
interest
in
shares
of
our
capital
stock
is
deemed
to
have
notice
of
and
to
have
consented
to
the
provisions
of
our
amended
and
restated
certificate
of
incorporation
described
above.
This
choice
of
forum
provision
many
limit
a
stockholder's
ability
to
bring
a
claim
in
a
judicial
forum
that
it
finds
favorable
for
disputes
with
us
or
any
of
our
directors,
officers,
other
employees
or
stockholders,
which
may
discourage
lawsuits
with
respect
to
such
claims.
Alternatively,
if
a
court
were
to
find
the
choice
of
forum
provision
contained
in
our
certificate
of
incorporation
to
be
inapplicable
or
unenforceable
in
an
action,
we
may
incur
additional
costs
associated
with
resolving
such
action
in
other
jurisdictions,
which
could
materially
adversely
affect
our
business,
financial
condition,
results
of
operations
and
cash
flows.

If securities analysts do not publish research or reports about our business or if they publish unfavorable commentary about us or our industry or downgrade
our Class A common stock, the trading price of our Class A common stock could decline.

We
expect
that
the
trading
price
for
our
Class
A
common
stock
will
be
affected
by
any
research
or
reports
that
securities
analysts
publish
about
us
or
our
business.
If
one
or
more
of
the
analysts
who
may
elect
to
cover
us
or
our
business
downgrade
their
evaluations
of
our
Class
A
common
stock,
the
price
of
our
Class
A
common
stock
would
likely
decline.
We
may
be
unable
or
slow
to
attract
research
coverage
and
if
one
or
more
analysts
cease
coverage
of
our
company,
we
could
lose
visibility
in
the
market
for
our
Class
A
common
stock,
which
in
turn
could
cause
our
stock
price
to
decline.

ITEM
1B.

UNRESOLVED
STAFF
COMMENTS

None.

ITEM
2.

PROPERTIES

Laureate
is
headquartered
in
Baltimore,
Maryland.
As
of
December
31,
2016,
there
were
more
than
200
Laureate
locations
around
the
world.
These
locations
include
buildings
and
land
comprising
a
total
of
approximately
124.4
million
square
feet,
of
which,
approximately
62.4
million
square
feet
were
under
lease
and
approximately
62.0
million
square
feet
were
owned.
The
following
table
summarizes
the
properties
leased
and
owned
by
segment
prior
to
the
segment
change,
as
the
effects
were
not
significant:

Segment
LatAm
Europe
AMEA
GPS
Corporate
(including
headquarters)
Total

Square
feet

leased
space

52,990,277

3,055,751

3,024,277

3,129,925

202,947

62,403,177

Square
feet

owned
space

25,888,759

5,994,282

30,053,487

109,104

—

62,045,632

Total

square
feet
78,879,036

9,050,033

33,077,764

3,239,029

202,947

124,448,809

152

Table
of
Contents

Our
LatAm,
Europe
and
AMEA
segments
lease
and
own
various
sites
that
may
include
a
local
headquarters
and
all
or
some
of
the
facilities
of
a
campus
or
location.
In
many
countries,
our
facilities
are
subject
to
mortgages.

Our
GPS
segment
has
offices
at
our
headquarters
location
in
Baltimore
and
leases
eight
additional
facilities
in
Columbia,
Maryland;
Los
Angeles,
California;
Minneapolis,
Minnesota;
Tempe,
Arizona;
San
Antonio,
Texas;
Gdansk,
Poland;
Liverpool,
England
and
Amsterdam,
Netherlands.
Our
headquarters
consists
of
two
leased
facilities
in
Baltimore,
Maryland,
which
are
used
primarily
for
office
space.

We
monitor
the
capacity
of
our
higher
education
institutions
on
a
regular
basis
and
make
decisions
to
expand
capacity
based
on
expected
enrollment
and
other
factors.
Our
leased
facilities
are
occupied
under
leases
whose
remaining
terms
range
from
one
month
to
24
years.
A
majority
of
these
leases
contain
provisions
giving
us
the
right
to
renew
the
lease
for
additional
periods
at
various
rental
rates,
although
generally
at
rates
higher
than
we
are
currently
paying.

ITEM
3.

LEGAL
PROCEEDINGS

We
are
party
to
various
claims
and
legal
proceedings
from
time
to
time.
Except
as
described
below,
we
are
not
aware
of
any
legal
proceedings
that
we
believe
could
have,
individually
or
in
the
aggregate,
a
material
adverse
effect
on
our
business,
results
of
operations
or
financial
condition.

On
October
5,
2016,
a
student
filed
suit
against
us
and
Walden
University
in
the
United
States
District
Court
for
the
Southern
District
of
Ohio
in
the
matter
of
Latonya Thornhill v. Walden University, et. al., claiming
that
her
progress
in
her
program
was
delayed
by
Walden
University
and
seeking
class
action
status
to
represent
a
nationwide
class
of
purportedly
similarly
situated
doctoral
students.
The
claims
include
fraud
in
the
inducement,
breach
of
contract,
consumer
fraud
under
the
laws
of
Maryland
and
Ohio,
and
unjust
enrichment.
We
and
Walden
University
were
served
on
October
17,
2016.
On
December
16,
2016,
we
and
Walden
University
filed
a
motion
to
dismiss
the
claims
and
a
motion
to
strike
the
class
action
certification
request.
On
January
12,
2017,
the
plaintiff
filed
an
amended
complaint,
making
modifications
to
supplement
some
of
the
factual
allegations
and
seeking
to
change
the
governing
law
of
the
case
to
the
law
of
Minnesota.
A
substantive
response
to
the
amended
complaint
was
filed
on
February
9,
2017.
The
Thornhill court
has
temporarily
stayed
this
case
in
its
entirety
until
May
1,
2017,
pending
the
outcome
of
the
Multi-District
Litigation
proceeding
discussed
below.
Walden
University
and
we
intend
to
defend
against
this
case
vigorously,
including
the
request
to
certify
a
nationwide
class.

On
October
18,
2016,
a
former
student
filed
suit
against
us
and
Walden
University
pro se in
the
United
States
District
Court
for
the
District
of
Maryland
in
the
matter
of
Eric D. Streeter v. Walden University, et. al. (Case No. 1CCB6-CV-3460), claiming
that
his
progress
in
his
program
was
delayed
by
Walden
University
and
Laureate.
The
claims
include
unjust
enrichment,
breach
of
contract,
violation
of
the
Maryland
Consumer
Protection
Act,
violation
of
the
Due
Process
Clause
in
the
Fourteenth
Amendment,
libel,
and
violation
of
the
False
Claims
Act.
While
we
and
Walden
University
have
not
yet
been
served
in
this
matter,
Walden
University
and
we
intend
to
defend
against
this
case
vigorously.
After
plaintiff
filed
a
certificate
of
service
claiming
to
have
served
us
and
Walden,
on
February
9,
2017
we
filed
a
motion
to
dismiss
for
insufficient
service
of
process.
That
motion
is
currently
pending.

On
December
1,
2016,
five
students
filed
suit
against
us
and
Walden
University
in
the
United
States
District
Court
for
the
District
of
Minnesota
in
the
matter
of
Jennifer Wright, et al v. Walden University, et. al., claiming
that
their
progress
in
their
programs
was
delayed
by
Walden
University
and
seeking
class
action
status
to
represent
a
nationwide
class
of
purportedly
similarly
situated
doctoral
students.
The
claims
include
fraud
in
the
inducement,
breach
of
contract,
consumer
fraud,
and
breach
of
implied
covenant
of
fair
dealing
under
the
laws
of
Minnesota,
California,
Georgia,
Washington
and
Michigan,
and
unjust
enrichment.
Walden
University
and
we
were
served
in
this
matter
on
December
8,

153

Table
of
Contents

2016,
Walden
University
and
we
intend
to
defend
against
this
case
vigorously,
including
the
request
to
certify
a
nationwide
class.
On
January
13,
2017,
we
filed
a
motion
to
dismiss,
or
in
the
alternative
to
stay
proceedings,
pursuant
to
the
first-filed
rule,
based
upon
the
fact
that
the
Thornhill case
was
filed
first
in
Ohio.
The
Wright court
has
stayed
the
proceedings
pending
a
ruling
on
the
motion
to
dismiss,
for
which
a
hearing
is
scheduled
on
March
22,
2017.

On
December
20,
2016,
a
former
student
filed
suit
against
Walden
University,
in
the
Bexar
County
District
Court
in
Texas
in
the
matter
of
Dianna Medellin v.
Walden University, LLC (Cause
No.
2016C121637),
claiming
that
Walden
University
intentionally
deceived
her
by
praising
her
and
allowing
her
to
successfully
complete
her
coursework
in
her
doctoral
program,
only
to
then
prolong
the
dissertation
writing
process
as
much
as
possible.
The
case
alleges
causes
of
action
for
violations
of
the
Texas
Deceptive
Trade
Practices
Act
and
fraud
and
includes
certain
factual
allegations
that
are
identical
to
the
other
purported
class
action
lawsuits.
Laureate
has
not
been
sued
in
this
matter
and
Walden
University
was
served
on
January
26,
2017.
Walden
removed
the
case
to
US
federal
district
court
in
Texas
on
February
21,
2017.
This
matter
has
been
resolved
and
the
case
was
dismissed
on
March
15,
2017.

On
December
29,
2016,
a
former
student
filed
suit
against
us
and
Walden
University
in
the
United
States
District
Court
for
the
District
of
Minnesota
in
the
matter
of
Aaron Bleess, et al v. Walden University, et. al (Case No. 16-CV-4402), claiming
that
his
progress
in
his
program
was
delayed
by
Walden
University
and
seeking
class
action
status
to
represent
a
nationwide
class
of
purportedly
similarly
situated
doctoral
students.
The
claims
include,
under
the
laws
of
Minnesota,
breach
of
contract,
consumer
fraud,
breach
of
implied
covenant
of
fair
dealing,
fraudulent
inducement,
unjust
enrichment,
and
violation
of
the
Deceptive
Trade
Practices
Act
and
Consumer
Protection
Fraud
Act.
Laureate
and
Walden
University
were
served
on
January
5
and
January
6,
2017,
respectively.
On
January
17,
2017,
we
filed
a
motion
to
dismiss,
or
in
the
alternative
to
stay
proceedings,
pursuant
to
the
first-filed
rule,
based
upon
the
fact
that
the
Thornhill case
was
filed
first
in
Ohio.
The
Bleess court
has
stayed
the
proceedings
pending
a
ruling
on
this
motion
to
dismiss.
Walden
University
and
we
intend
to
defend
against
this
case
vigorously,
including
the
request
to
certify
a
nationwide
class.
This
case
appears
to
be
nearly
identical
in
allegations,
including
the
same
alleged
class,
as
Thornhill
and
Wright.

On
December
23,
2016,
counsel
for
the
plaintiffs
in
Thornhill and
Wright filed
a
motion
to
consolidate
pretrial
proceedings
in
these
matters,
as
well
as
the
Streeter and
Medellin matters,
to
the
United
States
Judicial
Panel
on
Multi-District
Litigation
(MDL).
Bleess' counsel
has
filed
a
notice
of
intent
to
participate
as
an
interested
party
of
the
consolation
motion.
Laureate
and
Walden
University
filed
a
motion
in
opposition
to
transfer
to
MDL
on
January
17,
2017,
which
was
opposed
on
January
24,
2017.
A
hearing
is
scheduled
for
March
30,
2017.

In
addition,
several
groups
of
current
and
former
students
filed
five
separate
law
suits
in
the
Seventh
Judicial
Circuit
in
and
for
St.
Johns
County,
Florida
against
St.
Augustine
relating
to
matters
arising
before
we
acquired
that
institution
in
November
2013.
The
suits
are
Hemingway et al. v. University of St. Augustine
for Health Sciences, Inc. filed
on
August
12,
2013;
Jennings v. University of St. Augustine for Health Sciences, LLC et al. filed
on
March
26,
2015,
which
was
resolved
in
March
2016
and
dismissed;
Albritton et al. v. University of St. Augustine for Health Sciences, LLC filed
on
April
9,
2015,
which
was
resolved
in
October
2015
and
dismissed;
Stephens v. University of St. Augustine for Health Sciences, LLC filed
on
November
11,
2015
which
was
resolved
in
June
2016
and
dismissed;
and
Johnson v. University of St. Augustine for Health Sciences, LLC filed
on
June
16,
2016.
The
allegations
in
the
remaining
cases
relate
to
a
program
that
was
launched
in
May
2011
and,
at
the
time,
offered
a
"Master
of
Orthopaedic
Physician's
Assistant
Program"
degree.
The
plaintiffs
in
these
matters
allege
that
the
university
misrepresented
their
ability
to
practice
as
licensed
Physician
Assistants
with
a
heightened
specialty
in
orthopaedics.
The
plaintiffs
in
the
remaining
cases
are
seeking
relief
including
refund
of
tuition
paid
to
St.
Augustine,
as
well
as
loan
debt
incurred
by
the
plaintiffs
while
attending
St.
Augustine,
loss
of
future
earnings
and
litigation
costs.
The
Hemingway matter
is
awaiting
a
trial

154

Table
of
Contents

date.
The
Johnson matter
is
at
a
preliminary
stage
of
discovery.
We
believe
the
claims
in
these
cases
are
without
merit
and
intend
to
defend
vigorously
against
the
allegations.
With
respect
to
the
two
pending
St.
Augustine
cases,
under
the
terms
of
the
acquisition
agreement
for
St.
Augustine,
we
expect
to
be
indemnified
by
the
seller
for
substantially
all
of
the
liability
with
respect
to
any
claims
in
these
cases.
We
also
have
a
right
of
set-off
against
the
seller
for
such
amounts.

On
November
16,
2016,
Michael
S.
Ryan,
the
former
chief
accounting
officer
of
the
Company,
filed
a
complaint
with
the
Occupational
Safety
and
Health
Administration
of
the
U.S.
Department
of
Labor
alleging
retaliatory
employment
practices
in
violation
of
the
whistleblower
provisions
of
the
Sarbanes-Oxley
Act
(
Michael S. Ryan vs. Laureate Education, Inc., Case No. 3-0050-17-011 ).
The
complaint
also
alleges
a
lack
of
compliance
with
U.S.
GAAP
and
violations
of
certain
SEC
rules
and
regulations.
The
complaint
does
not
seek
any
specified
amount
of
damages.
The
Company
has
investigated
the
allegations
made
in
the
complaint
with
the
assistance
of
outside
legal
and
accounting
advisers
and
believes
that
its
consolidated
financial
statements
are
in
compliance
with
U.S.
GAAP
and
SEC
rules
and
regulations
in
all
material
respects
and
that
the
allegations
are
baseless
and
without
merit.
The
Company
intends
to
assert
all
appropriate
defenses
to
these
allegations
and
filed
a
statement
of
position
with
the
U.S.
Department
of
Labor
on
December
13,
2016.
On
March
13,
2017
Mr.
Ryan
submitted
a
reply
to
the
Company's
statement
of
position.
The
Company
intends
to
continue
to
defend
itself
vigorously.

During
2010,
we
were
notified
by
the
STA
(in
this
case,
by
the
Regional
Inspection
Office
of
the
Special
Madrid
Tax
Unit)
that
an
audit
of
some
of
our
Spanish
subsidiaries
was
being
initiated
for
2006
and
2007.
On
June
29,
2012,
the
STA
issued
a
final
assessment
to
ICE,
our
Spanish
holding
company,
for
approximately
EUR
11.1
million
($11.5
million
at
December
31,
2016),
including
interest,
for
those
two
years
based
on
its
rejection
of
the
tax
deductibility
of
financial
expenses
related
to
certain
intercompany
acquisitions
and
the
application
of
the
Spanish
ETVE
regime.
On
July
25,
2012
we
filed
a
claim
with
the
Regional
Economic-Administrative
Court
challenging
this
assessment
and,
in
the
same
month,
we
issued
a
cash-collateralized
letter
of
credit
for
the
assessment
amount,
in
order
to
suspend
the
payment
of
the
tax
due.
Further,
in
July
2013,
we
were
notified
by
the
STA
(in
this
case,
by
the
Central
Inspection
Office
for
Large
Taxpayers)
that
an
audit
of
ICE
was
also
being
initiated
for
2008
through
2010.
On
October
19,
2015,
the
STA
issued
a
final
assessment
to
ICE
for
approximately
EUR
17.2
million
($17.9
million
at
December
31,
2016),
including
interest,
for
those
three
years.
We
have
appealed
this
assessment
and,
in
order
to
suspend
the
payment
of
the
tax
assessment
until
the
court
decision,
we
issued
a
cash-collateralized
letter
of
credit
for
the
assessment
amount
plus
interest
and
surcharges.
We
believe
the
assessments
in
this
case
are
without
merit
and
intend
to
defend
vigorously
against
them.
During
the
second
quarter
of
2016,
we
were
notified
by
the
STA
that
tax
audits
of
the
Spanish
subsidiaries
were
also
being
initiated
for
2011
and
2012;
no
assessments
have
yet
been
issued
for
these
years.
Also
during
the
second
quarter
of
2016,
the
Regional
Administrative
Court
issued
a
decision
against
the
Company
on
its
appeal.
The
Company
has
further
appealed
at
the
Highest
Administrative
Court
level.
The
Company
plans
to
continue
the
appeals
process
for
the
periods
already
audited
and
assessed.

ITEM
4.

MINE
SAFETY
DISCLOSURES

Not
applicable.

155

Table
of
Contents

PART
II

ITEM
5.

MARKET
FOR
REGISTRANT'S
COMMON
EQUITY,
RELATED
STOCKHOLDER
MATTERS
AND
ISSUER
PURCHASES
OF
EQUITY
SECURITIES

Market
Information

Our
Class
A
common
stock
has
traded
on
the
Nasdaq
under
the
symbol
"LAUR"
since
February
1,
2017.
Prior
to
that
date,
there
was
no
public
trading
market
for
our
Class
A
common
stock.
As
a
result,
we
have
not
set
forth
quarterly
information
with
respect
to
the
high
and
low
prices
for
our
Class
A
common
stock
or
provided
a
performance
graph.
On
March
28,
2017,
the
last
reported
sale
price
of
our
common
stock
was
$13.90.
There
is
currently
no
established
public
trading
market
for
our
Class
B
common
stock.

Holders
of
Record

There
were
1
holder
of
record
of
our
Class
A
common
stock
and
324
holders
of
record
of
our
Class
B
common
stock
as
of
March
15,
2017.
The
number
of
beneficial
owners
of
our
Class
A
common
stock
is
substantially
greater
than
the
number
of
record
holders,
because
substantially
all
of
our
Class
A
common
stock
is
held
in
"street
name"
by
banks
and
brokers.

Dividend
Policy

We
currently
do
not
anticipate
paying
any
cash
dividends
on
our
Class
A
common
stock
or
Class
B
common
stock
in
the
foreseeable
future.
We
expect
to
retain
our
future
earnings,
if
any,
for
use
in
the
operation
and
expansion
of
our
business.
The
terms
of
our
senior
secured
credit
agreement
governing
our
Senior
Secured
Credit
Facilities,
the
indenture
governing
our
outstanding
Senior
Notes
and
the
Certificate
of
Designations
governing
our
Series
A
Preferred
Stock
limit
our
ability
to
pay
cash
dividends
in
certain
circumstances.
Furthermore,
if
we
are
in
default
under
the
senior
secured
credit
agreement
governing
our
Senior
Secured
Credit
Facilities
or
the
indenture
governing
our
outstanding
Senior
Notes,
our
ability
to
pay
cash
dividends
will
be
limited
in
the
absence
of
a
waiver
of
that
default
or
an
amendment
to
such
agreement
or
such
indenture.
In
addition,
our
ability
to
pay
cash
dividends
on
shares
of
our
Class
A
common
stock
may
be
limited
by
restrictions
on
our
ability
to
obtain
sufficient
funds
through
dividends
from
our
subsidiaries.
For
more
information
on
our
senior
secured
credit
agreement
governing
our
Senior
Secured
Credit
Facilities
and
the
indenture
governing
our
outstanding
Senior
Notes,
see
"Item
7—Management's
Discussion
and
Analysis
of
Financial
Condition
and
Results
of
Operations"
and
Note
9,
Debt.
Subject
to
the
foregoing,
the
payment
of
cash
dividends
in
the
future,
if
any,
will
be
at
the
discretion
of
our
board
of
directors
and
will
depend
upon
such
factors
as
earnings
levels,
capital
requirements,
our
overall
financial
condition
and
any
other
factors
deemed
relevant
by
our
board
of
directors.

We
made
cash
distributions
on
our
common
stock
in
an
aggregate
amount
of
$0
and
$19.0
million,
in
2016
and
2015,
respectively,
prior
to
the
reclassification
of
our
common
stock
in
connection
with
our
initial
public
offering.

Equity
Compensation
Plan
Information

See
"Item
12—Security
Ownership
of
Certain
Beneficial
Owners
and
Management
and
Related
Stockholder
Matters—Securities
Authorized
for
Issuance
Under
Equity
Compensation
Plans."

Use
of
Proceeds

On
February
6,
2017,
we
completed
our
initial
public
offering
pursuant
to
a
registration
statement
on
Form
S-1
(File
No.
333-207243)
(the
"IPO
Registration
Statement"),
which
the
SEC
declared
effective
on
January
31,
2017,
and
a
registration
statement
on
Form
S-1MEF
(File
No.
333-215845),

156

Table
of
Contents

which
became
effective
on
January
31,
2017.
We
registered
a
total
of
40,250,000
shares
of
our
Class
A
common
stock.
In
our
initial
public
offering,
we
issued
and
sold
35,000,000
shares
of
our
Class
A
common
stock
to
the
public
at
a
price
of
$14.00
per
share,
for
aggregate
gross
offering
proceeds
of
$490.0
million.
The
managing
underwriters
for
our
initial
public
offering
were
Credit
Suisse
Securities
(USA)
LLC,
Morgan
Stanley
&
Co.
LLC
and
Barclays
Capital
Inc.

The
aggregate
proceeds
received
by
us
from
our
initial
public
offering
were
$456.5
million,
net
of
$33.5
million
in
underwriting
discounts
and
commissions
and
offering
expenses
payable
by
us.
No
offering
expenses
were
paid
directly
or
indirectly
to
any
of
our
directors
or
officers
(or
their
associates)
or
persons
owning
10%
or
more
of
any
class
of
our
equity
securities
or
to
any
other
affiliates.

On
March
1,
2017,
in
accordance
with
the
Note
Exchange
Agreements,
we
redeemed
Senior
Notes
with
an
aggregate
principal
amount
of
$22,556,000
at
a
repurchase
price
of
104.625%
of
the
aggregate
principal
amount
for
a
total
payment
of
$23,599,215,
which
is
consistent
with
the
use
of
proceeds
from
our
initial
public
offering
as
described
in
our
final
prospectus
filed
with
the
Securities
and
Exchange
Commission
pursuant
to
Rule
424(b)(4)
on
February
2,
2017
(the
"Final
Prospectus").
The
remainder
of
the
funds
have
been
invested
in
cash
and
cash
equivalents.
No
payments
were
paid
in
such
redemption
directly
or
indirectly
to
any
of
our
directors
or
officers
(or
their
associates)
or
persons
owning
10%
or
more
of
any
class
of
our
equity
securities
or
to
any
other
affiliates.
We
intend
to
use
the
remaining
proceeds
from
our
initial
public
offering
as
described
in
the
Final
Prospectus.

Recent
Sales
of
Unregistered
Securities

During
the
fiscal
year
ended
December
31,
2016,
we
sold
the
following
securities
which
were
not
registered
under
the
Securities
Act
of
1933,
as
amended:

On
December
30,
2016,
we
issued
$10.453
million
aggregate
principal
amount
of
our
Senior
Notes
to
the
participants
in
stock-based
deferred
compensation
arrangements
in
final
settlement
of
the
deferred
compensation
obligations.
The
Senior
Notes
were
issued
pursuant
to
Section
4(a)(2)
of
the
Securities
Act
as
transactions
by
an
issuer
not
involving
any
public
offering.

On
December
20,
2016,
we
sold
343,000
shares
of
Series
A
Preferred
Stock,
consisting
of
23,000
shares
of
Convertible
Redeemable
Preferred
Stock
Series
A-
1
sold
to
one
purchaser
and
320,000
shares
of
Convertible
Redeemable
Preferred
Stock
Series
A-2
sold
to
22
purchasers.
See
"Item
1—Business—Recent
Developments—Series
A
Preferred
Stock
Offering."
The
securities
were
offered
and
sold
in
a
private
placement
offering
in
reliance
upon
exemptions
from
registration
pursuant
to
Section
4(2)
of
the
Securities
Act
and
Rule
506
of
Regulation
D
promulgated
under
the
Securities
Act.

On
February
10,
2016,
we
granted
to
two
of
our
officers,
employees
or
other
service
providers
options
to
purchase
an
aggregate
of
5,322
shares
of
common
stock
at
an
exercise
price
of
$22.40
per
share.
The
options
were
issued
pursuant
to
Rule
701
promulgated
under
Section
3(b)
of
the
Securities
Act
as
transactions
by
an
issuer
not
involving
any
public
offering
or
pursuant
to
benefit
plans
and
contracts
relating
to
compensation
as
provided
under
Rule
701.

On
May
2,
2016,
we
granted
to
114
of
our
officers,
employees
or
other
service
providers
options
to
purchase
an
aggregate
of
131,945
shares
of
common
stock
at
an
exercise
price
of
$23.24
per
share.
The
options
were
issued
pursuant
to
Rule
701
promulgated
under
Section
3(b)
of
the
Securities
Act
as
transactions
by
an
issuer
not
involving
any
public
offering
or
pursuant
to
benefit
plans
and
contracts
relating
to
compensation
as
provided
under
Rule
701.

On
May
24,
2016,
we
granted
three
of
our
officers,
employees
or
other
service
providers
options
to
purchase
an
aggregate
of
2,762
shares
of
common
stock
at
an
exercise
price
of
$23.24
per
share.
The
options
were
issued
pursuant
to
Rule
701
promulgated
under
Section
3(b)
of
the
Securities
Act
as
transactions
by
an
issuer
not
involving
any
public
offering
pursuant
to
benefit
plans
and
contracts
relating
to
compensation
as
provided
under
Rule
701.

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of
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On
October
25,
2016,
we
granted
one
of
our
officers,
employees
or
other
service
providers
options
to
purchase
an
aggregate
of
162,267
shares
of
common
stock
at
an
exercise
price
of
$23.36
per
share.
The
options
were
issued
pursuant
to
Rule
701
promulgated
under
Section
3(b)
of
the
Securities
Act
as
transactions
by
an
issuer
not
involving
any
public
offering
pursuant
to
benefit
plans
and
contracts
relating
to
compensation
as
provided
under
Rule
701.

On
December
8,
2016,
we
granted
four
of
our
officers,
employees
or
other
service
providers
options
to
purchase
an
aggregate
of
1,402
shares
of
common
stock
at
an
exercise
price
of
$22.64
per
share.
The
options
were
issued
pursuant
to
Rule
701
promulgated
under
Section
3(b)
of
the
Securities
Act
as
transactions
by
an
issuer
not
involving
the
Securities
Act
as
transactions
by
an
issuer
not
involving
any
public
offering
pursuant
to
benefit
plans
and
contracts
relating
to
compensation
as
provided
under
Rule
701.

On
February
10,
2016,
we
granted
to
two
of
our
officers,
employees
or
other
service
providers
544
Performance
Share
Units.
The
Performance
Share
Units
were
issued
pursuant
to
Rule
701
promulgated
under
Section
3(b)
of
the
Securities
Act
as
transactions
by
an
issuer
not
involving
any
public
offering
or
pursuant
to
benefit
plans
and
contracts
relating
to
compensation
as
provided
under
Rule
701.

On
May
2,
2016,
we
granted
to
114
of
our
officers,
employees
or
other
service
providers
136,712
Performance
Share
Units.
The
Performance
Share
Units
were
issued
pursuant
to
Rule
701
promulgated
under
Section
3(b)
of
the
Securities
Act
as
transactions
by
an
issuer
not
involving
any
public
offering
or
pursuant
to
benefit
plans
and
contracts
relating
to
compensation
as
provided
under
Rule
701.

On
May
24,
2016,
we
granted
three
of
our
officers,
employees
or
other
service
providers
2,832
Performance
Share
Units.
The
Performance
Share
Units
were
issued
pursuant
to
Rule
701
promulgated
under
Section
3(b)
of
the
Securities
Act
as
transactions
by
an
issuer
not
involving
any
public
offering
or
pursuant
to
benefit
plans
and
contracts
relating
to
compensation
as
provided
under
Rule
701.

On
October
25,
2016,
we
granted
25
of
our
officers,
employees
or
other
service
providers
71,588
Performance
Share
Units.
The
Performance
Share
Units
were
issued
pursuant
to
Rule
701
promulgated
under
Section
3(b)
of
the
Securities
Act
as
transactions
by
an
issuer
not
involving
any
public
offering
or
pursuant
to
benefit
plans
and
contracts
relating
to
compensation
as
provided
under
Rule
701.

On
December
8,
2016,
we
granted
five
of
our
officers,
employees
or
other
service
providers
2,195
Performance
Share
Units.
The
Performance
Share
Units
were
issued
pursuant
to
Rule
701
promulgated
under
Section
3(b)
of
the
Securities
Act
as
transactions
by
an
issuer
not
involving
any
public
offering
or
pursuant
to
a
benefit
plans
and
contracts
relating
to
compensation
as
provided
under
Rule
701.

On
June
30,
2016,
we
granted
an
aggregate
of
13,984
shares
of
common
stock
to
seven
of
our
directors
and
board
observers,
of
which
6,994
were
Restricted
Shares.
The
common
stock
was
granted
under
the
2013
Plan
pursuant
to
Rule
701
promulgated
under
Section
3(b)
of
the
Securities
Act
as
transactions
by
an
issuer
not
involving
any
public
offering
or
pursuant
to
benefit
plans
and
contracts
relating
to
compensation
as
provided
under
Rule
701.

On
February
10,
2016,
we
granted
to
two
of
our
officers,
employees
or
other
service
providers
11,274
Restricted
Stock
Units.
The
Restricted
Stock
Units
were
issued
pursuant
to
Rule
701
promulgated
under
Section
3(b)
of
the
Securities
Act
as
transactions
by
an
issuer
not
involving
any
public
offering
or
pursuant
to
benefit
plans
and
contracts
relating
to
compensation
as
provided
under
Rule
701.

On
May
2,
2016,
we
granted
to
205
of
our
officers,
employees
or
other
service
providers
174,142
Restricted
Stock
Units.
The
Restricted
Stock
Units
were
issued
pursuant
to
Rule
701
promulgated
under
Section
3(b)
of
the
Securities
Act
as
transactions
by
an
issuer
not
involving
any
public
offering
or
pursuant
to
benefit
plans
and
contracts
relating
to
compensation
as
provided
under
Rule
701.

158

Table
of
Contents

On
May
24,
2016,
we
granted
six
of
our
officers,
employees
or
other
service
providers
9,242
Restricted
Stock
Units.
The
Restricted
Stock
Units
were
issued
pursuant
to
Rule
701
promulgated
under
Section
3(b)
of
the
Securities
Act
as
transactions
by
an
issuer
not
involving
any
public
offering
or
pursuant
to
benefit
plans
and
contracts
relating
to
compensation
as
provided
under
Rule
701.

On
October
25,
2016,
we
granted
44
of
our
officers,
employees
or
other
service
providers
221,550
Restricted
Stock
Units.
The
Restricted
Stock
Units
were
issued
pursuant
to
Rule
701
promulgated
under
Section
3(b)
of
the
Securities
Act
as
transactions
by
an
issuer
not
involving
any
public
offering
or
pursuant
to
benefit
plans
and
contracts
relating
to
compensation
under
Rule
701.

On
December
8,
2016,
we
granted
eight
of
our
officers,
employees
or
other
service
providers
5,194
Restricted
Stock
Units.
The
Restricted
Stock
Units
were
issued
pursuant
to
Rule
701
promulgated
under
Section
3(b)
of
the
Securities
Act
as
transactions
by
an
issuer
not
involving
any
public
offering
or
pursuant
to
benefit
plans
and
contracts
relating
to
compensation
as
provided
under
Rule
701.

ITEM
6.

SELECTED
FINANCIAL
DATA

Set
forth
below
are
selected
consolidated
financial
data
of
Laureate
Education,
Inc.,
at
the
dates
and
for
the
periods
indicated.
The
selected
historical
statements
of
operations
data
and
statements
of
cash
flows
data
for
the
fiscal
years
ended
December
31,
2016,
2015
and
2014
and
balance
sheet
data
as
of
December
31,
2016
and
2015
have
been
derived
from
our
historical
audited
consolidated
financial
statements
included
elsewhere
in
this
Form
10-K.
The
selected
historical
statements
of
operations
data
and
statements
of
cash
flows
data
for
the
fiscal
years
ended
December
31,
2013
and
2012
and
balance
sheet
data
as
of
December
31,
2014,
2013
and
2012
have
been
derived
from
our
historical
audited
consolidated
financial
statements
not
included
in
this
Form
10-K.
The
segment
data
reflects
the
operating
segment
change
discussed
in
the
section
entitled
"Presentation
of
Financial
Information."
Our
historical
results
are
not
necessarily
indicative
of
our
future
results.
The
data
should
be
read
in
conjunction
with
the
consolidated
financial
statements,
related
notes,
and
other
financial
information
included
therein.
See
accompanying
historical
financial
statements
of
FMU
Group
and
Sociedade
Educacional
Sul-Rio-Grandense
Ltda.,
which
are
included
because
these
two
acquisitions
met
the
significance
thresholds
of
Rule
3-05
of
Regulation
S-X.

159

Table
of
Contents

The
selected
historical
consolidated
financial
data
should
be
read
in
conjunction
with
"Item
7—Management's
Discussion
and
Analysis
of
Financial
Condition
and
Results
of
Operations"
and
our
consolidated
financial
statements
and
related
notes
included
elsewhere
in
this
Form
10-K.

(Dollar
amounts
in
thousands)

Consolidated
Statements
of
Operations:
Revenues
Costs
and
expenses:

Direct
costs
General
and
administrative
expenses
Loss
on
impairment
of
assets

Operating
income
Interest
income
Interest
expense
Loss
on
debt
extinguishment
(Loss)
gain
on
derivatives
Loss
from
regulatory
changes(1)
Other
income
(expense),
net
Foreign
currency
exchange
gain
(loss),
net
Gain
on
sale
of
subsidiaries,
net(2)

Income
(loss)
from
continuing
operations
before

income
taxes
and
equity
in
net
income
(loss)
of
affiliates

Income
tax
(expense)
benefit
Equity
in
net
income
(loss)
of
affiliates,
net
of
tax
Income
(loss)
from
continuing
operations
Income
from
discontinued
operations,
net
of
tax
of

$0,
$0,
$0,
$0,
and
$787,
respectively

Gain
on
sales
of
discontinued
operations,
net
of
tax
of
$0,
$0,
$0,
$1,864,
and
$179,
respectively

Net
income
(loss)
Net
loss
(income)
attributable
to
noncontrolling

interests

Net
income
(loss)
attributable
to
Laureate

2016

Fiscal
Year
Ended
December
31,
2014

2013

2015

2012

$ 4,244,192
$ 4,291,659
$ 4,414,682
$ 3,913,881
$ 3,567,117

3,615,338

222,496

23,465

382,893

18,670

(421,936)

(17,363)

(6,084)

—

910

67,450

406,557

3,760,016

194,686

—

336,957

13,328

(398,042)

(1,263)

(2,607)

—

195

(149,178)

3,838,179

151,215

125,788

299,500

21,822

(385,754)

(22,984)

(3,101)

—

(1,184)

(109,970)

—

3,418,449

141,197

33,582

320,653

21,805

(350,196)

(1,361)

6,631

—

7,499

(3,102)

—

3,148,530

110,078

58,329

250,180

19,467

(307,728)
(4,421)
(63,234)
(43,716)
(5,533)
14,401

—

431,097

(65,001)

366,186

(200,610)

(117,730)

2,495

(315,845)

(201,671)

39,060

158

(162,453)

1,929

(91,246)

(905)

(90,222)

(140,584)
(68,061)
(8,702)
(217,347)

—

366,186

—

(315,845)

(162,453)

796

4,384

4,350

(85,076)

3,308

(209,655)

5,661

(403)

4,162

15,398

8,597

Education,
Inc
.

371,847
$

(316,248) $

(158,291) $

(69,678) $

(201,058)

160

Table
of
Contents

(Dollar
amounts
in
thousands)

Consolidated
Statements
of
Cash
Flows:
Net
cash
provided
by
operating
activities
of

2016

Fiscal
Year
Ended
December
31,
2014

2013

2015

2012

continuing
operations

184,570
$

170,486
$

269,156
$

277,202
$

245,653

Net
cash
provided
by
(used
in)
investing
activities

of
continuing
operations

269,234

(173,642)

(489,181)

(899,083)

(453,747)

Net
cash
(used
in)
provided
by
financing
activities

of
continuing
operations

(445,722)

34,424

172,586

756,663

124,825

Net
cash
provided
by
(used
in)
operating
activities

of
discontinued
operations

Net
cash
used
in
investing
activities
of
discontinued

operations

Net
cash
provided
by
(used
in)
discontinued

operations

Effects
of
exchange
rate
changes
on
cash
Business
acquisitions,
net
of
cash
acquired
Payments
of
contingent
consideration
for

acquisitions
Segment
Data(3):
Revenues:
LatAm
Europe
AMEA
GPS
Corporate

Total
revenues

Adjusted
EBITDA(4):

LatAm
Europe
AMEA
GPS
Corporate

Total
Adjusted
EBITDA(4)

Other
Data:
Total
enrollments
(rounded
to
the
nearest

thousand):
LatAm
Europe
AMEA
GPS

Total

New
enrollments
(rounded
to
the
nearest
hundred):

LatAm
Europe
AMEA
GPS

Total

—

(1,790)

—

(34,179)

(6,705)

(50,877)

(287,945)

344

—

344

(12,531)

(177,550)

(6,190)

(149)

(6,339)
2,712

203

—

(1,275)

—

(5,674)

—

2,441,992
$ 2,415,641
$ 2,532,451
$ 2,340,867
$ 2,135,176

461,322

165,245

820,270

(14,896)

$ 4,244,192
$ 4,291,659
$ 4,414,682
$ 3,913,881
$ 3,567,117

486,235

422,134

979,920

(12,271)

480,401

431,349

900,473

(10,023)

533,862

405,555

954,494

(11,680)

501,398

202,251

872,426

(3,061)

500,704
$
83,594

59,884

257,809

(136,390)

765,601
$

463,691
$
78,439

49,869

226,804

(115,395)

703,408
$

541,975
$
72,777

30,130

222,998

(94,355)

773,525
$

466,664
$
72,745

(4,843)

205,581

(93,675)

646,472
$

380,254

71,960

(5,990)
192,944

(92,135)
547,033

823,600

61,700

85,700

72,200

1,043,200

793,600

62,800

83,800

80,900

1,021,100

393,200

25,400

42,700

43,200

504,500

401,300

24,900

39,800

41,700

507,700

161

751,900

53,500

77,500

76,500

959,400

344,700

21,400

42,500

41,000

449,600

616,700

48,800

61,000

76,000

802,500

315,400

19,600

21,000

39,000

395,000

558,900

43,500

44,600

73,700

720,700

300,700

17,500

18,100

40,100

376,400

Table
of
Contents

(Dollar
amounts
in
thousands)

Consolidated
Balance
Sheets:
Cash
and
cash
equivalents
Restricted
cash
and
investments(5)
Net
working
capital
(deficit)
(including
cash
and

cash
equivalents)

Property
and
equipment,
net
Goodwill
Tradenames
Other
intangible
assets,
net
Total
assets
Total
debt,
including
due
to
shareholders
of

acquired
companies(6)

Deferred
compensation
Total
liabilities,
excluding
debt,
due
to
shareholders
of
acquired
companies
and
derivative
instruments

Convertible
redeemable
preferred
stock
Redeemable
noncontrolling
interests
and
equity
Total
Laureate
Education,
Inc.
stockholders'
equity

2016

2015

As
of
December
31,
2014

2013

2012

464,965
$
189,319

458,673
$
160,585

461,584
$
149,438

559,900
$
361,832

427,305

130,953

(220,178)

(412,499)

(515,877)

(205,692)

2,151,633

1,934,464

1,307,633

46,700

7,102,965

2,290,900

2,115,897

1,361,125

52,197

7,439,116

2,514,319

2,469,795

1,461,762

93,064

8,358,124

2,656,726

2,376,678

1,519,737

29,973

8,356,675

(363,050)

2,353,014

2,301,138

1,526,339

14,915

7,680,047

4,019,312

14,128

4,698,007

32,343

4,734,834

115,575

4,401,461

188,394

3,608,509

182,119

2,049,460

332,957

23,876

632,210

2,313,923

—

51,746

324,759

2,498,611

—

43,876

1,017,068

2,350,067

—

42,165

1,465,755

2,284,464

—

53,225

1,596,097

(1)

(2)

(3)

(4)

Represents
a
loss
of
$43.7
million
from
regulatory
changes
resulting
from
the
deconsolidation
of
UDLA
Ecuador
at
the
end
of
the
third
quarter
of
2012.

Represents
a
gain
of
approximately
$249.4
million,
subject
to
certain
adjustments,
resulting
from
the
Swiss
Institution
Sale
that
closed
on
June
14,
2016,
a
gain
of
approximately
$148.7
million,
subject
to
certain
adjustments,
resulting
from
the
French
Institution
Sale
that
closed
on
July
20,
2016
and
a
gain
of
approximately
$8.5
million
resulting
from
the
sale
of
Sichuan
Tianyi
College
that
closed
in
December
2016.

On
January
10,
2017,
we
announced
that
we
plan
to
combine
our
Europe
and
AMEA
operations,
effective
March
31,
2017.
We
expect
this
to
result
in
a
change
in
our
operating
segments
which
will
be
reflected
in
the
financial
statements
for
the
first
quarter
of
2017,
the
period
in
which
the
change
occurred.
See
"Presentation
of
Financial
Information."

We
define
Adjusted
EBITDA
as
net
loss,
before
gain
on
sales
of
discontinued
operations,
net
of
tax,
income
from
discontinued
operations,
net
of
tax,
equity
in
net
(income)
loss
of
affiliates,
net
of
tax,
income
tax
expense
(benefit),
gain
on
sale
of
subsidiaries,
net,
foreign
currency
exchange
loss
(income),
net,
other
(income)
expense,
net,
loss
from
regulatory
changes
(for
2012),
loss
(gain)
on
derivatives,
loss
on
debt
extinguishment,
interest
expense
and
interest
income,
plus
depreciation
and
amortization,
stock-based
compensation
expense,
loss
on
impairment
of
assets
and
expenses
related
to
implementation
of
our
EiP
initiative.
When
we
review
Adjusted
EBITDA
on
a
segment
basis,
we
exclude
inter-segment
revenues
and
expenses
that
eliminate
in
consolidation.
Adjusted
EBITDA
is
used
in
addition
to
and
in
conjunction
with
results
presented
in
accordance
with
GAAP
and
should
not
be
relied
upon
to
the
exclusion
of
GAAP
financial
measures.

162

Table
of
Contents

We
have
included
Adjusted
EBITDA
in
this
Form
10-K
because
it
is
a
key
measure
used
by
our
management
and
board
of
directors
to
understand
and
evaluate
our
core
operating
performance
and
trends,
to
prepare
and
approve
our
annual
budget
and
to
develop
short-
and
long-term
operational
plans.
In
particular,
the
exclusion
of
certain
expenses
in
calculating
Adjusted
EBITDA
can
provide
a
useful
measure
for
period-to-period
comparisons
of
our
core
business.
Additionally,
Adjusted
EBITDA
is
a
key
input
used
by
the
compensation
committee
of
our
board
of
directors
and
our
Chief
Executive
Officer
in
connection
with
the
payment
of
incentive
compensation
to
our
executive
officers
and
other
members
of
our
management
team.
Accordingly,
we
believe
that
Adjusted
EBITDA
provides
useful
information
to
investors
and
others
in
understanding
and
evaluating
our
operating
results
in
the
same
manner
as
our
management
and
board
of
directors.

Our
use
of
Adjusted
EBITDA
has
limitations
as
an
analytical
tool,
and
you
should
not
consider
it
in
isolation
or
as
a
substitute
for
analysis
of
our
results
as
reported
under
GAAP.
Some
of
these
limitations
are:

•

although
depreciation
and
amortization
are
non-cash
charges,
the
assets
being
depreciated
and
amortized
may
have
to
be
replaced
in
the
future,
and
Adjusted
EBITDA
does
not
reflect
cash
capital
expenditure
requirements
for
such
replacements
or
for
new
capital
expenditure
requirements;

Adjusted
EBITDA
does
not
include
impairment
charges
on
long-lived
assets;

Adjusted
EBITDA
does
not
reflect
changes
in,
or
cash
requirements
for,
our
working
capital
needs;

Adjusted
EBITDA
does
not
consider
the
potentially
dilutive
impact
of
equity-based
compensation;

Adjusted
EBITDA
does
not
reflect
expenses
related
to
implementation
of
our
EiP
program
to
optimize
and
standardize
our
processes;
and

Adjusted
EBITDA
does
not
reflect
tax
payments
that
may
represent
a
reduction
in
cash
available
to
us.

Other
companies
may
calculate
Adjusted
EBITDA
differently
than
the
way
we
do,
limiting
the
usefulness
of
these
items
as
comparative
measures.
We
believe
that
the
inclusion
of
Adjusted
EBITDA
in
this
Form
10-K
is
appropriate
to
provide
additional
information
to
investors
about
our
business.
While
management
believes
that
these
measures
provide
useful
information
to
investors,
the
SEC
may
require
that
Adjusted
EBITDA
be
presented
differently
or
not
at
all
in
filings
made
with
the
SEC.

163

Table
of
Contents

Because
of
these
limitations,
you
should
consider
Adjusted
EBITDA
alongside
other
financial
performance
measures,
including
various
cash
flow
metrics,
net
loss
and
our
other
GAAP
results.
The
following
table
sets
forth
a
reconciliation
of
Adjusted
EBITDA
to
net
loss
for
the
periods
indicated:

(Dollar
amounts
in
thousands)

Net
income
(loss)
Plus:
Gain
on
sales
of
discontinued
operations,
net
of
tax
Income
from
discontinued
operations,
net
of
tax
Income
(loss)
from
continuing
operations
Plus:
Equity
in
net
(income)
loss
of
affiliates,
net
of
tax
Income
tax
expense
(benefit)
Income
(loss)
from
continuing
operations
before
income

2016
366,186
$ (315,845) $ (162,453) $ (85,076) $ (209,655)

2013

2015

2012

Fiscal
Year
Ended
December
31,
2014

—

366,186

—

(315,845)

(162,453)

(4,350)

(796)

(90,222)

(3,308)
(4,384)
(217,347)

(90)

(2,495)

65,001

117,730

(158)

(39,060)

905

91,246

8,702

68,061

taxes
and
equity
in
net
(income)
loss
of
affiliates

431,097

(200,610)

(201,671)

1,929

(140,584)

Plus:
Loss
from
regulatory
changes(a)
Gain
on
sale
of
subsidiaries,
net(b)
Foreign
currency
exchange
(income)
loss,
net
Other
expense
(income),
net
Loss
(gain)
on
derivatives
Loss
on
debt
extinguishment
Interest
expense
Interest
income
Operating
income
Plus:
Depreciation
and
amortization
expense
EBITDA
Plus:
Stock-based
compensation
expense(c)
Loss
on
impairment
of
assets(d)
EiP
expenses(e)
Adjusted
EBITDA

—

(406,557)

(67,450)

(910)

6,084

17,363

421,936

(18,670)

382,893

—

149,178

(195)

2,607

1,263

398,042

(13,328)

336,957

—

109,970

1,184

3,101

22,984

385,754

(21,822)

299,500

—

3,102

(7,499)

(6,631)

1,361

350,196

(21,805)

320,653

264,879

647,772

282,946

619,903

288,331

587,831

242,725

563,378

38,809

23,465

55,555

765,601
$

39,021

—

44,484

703,408
$

49,190

125,788

10,716

773,525
$ 646,472
$

49,512

33,582

—

43,716

—

(14,401)
5,533

63,234

4,421

307,728

(19,467)
250,180

221,235

471,415

17,289

58,329

—

547,033

(a)

(b)

(c)

(d)

See
footnote
(1)
above.

See
footnote
(2)
above.

Represents
non-cash,
stock-based
compensation
expense
pursuant
to
the
provisions
of
ASC
Topic
718.

Represents
non-cash
charges
related
to
impairments
of
long-lived
assets.
For
further
details
on
certain
impairment
items,
see
"Item
7—Management's
Discussion
and
Analysis
of
Financial
Condition
and
Results
of
Operations."

164

Table
of
Contents

(e)

EiP
implementation
expenses
are
related
to
our
enterprise-wide
initiative
to
optimize
and
standardize
our
processes,
creating
vertical
integration
of
procurement,
information
technology,
finance,
accounting
and
human
resources,
which
began
in
2014
and
is
expected
to
be
substantially
completed
by
the
end
of
2017.
EiP
includes
the
establishment
of
regional
SSOs
around
the
world,
as
well
as
improvements
to
our
system
of
internal
controls
over
financial
reporting.

(5)

(6)

Restricted
cash
and
investments
includes
cash
equivalents
held
to
collateralize
standby
letters
of
credit
in
favor
of
the
DOE
in
order
to
allow
our
U.S.
Institutions
to
participate
in
the
Title
IV
program.
In
addition,
we
may
have
restricted
cash
in
escrow
pending
potential
acquisition
transactions,
or
otherwise
have
cash
that
is
not
immediately
available
for
use
in
current
operations.

Includes
current
portion
of
long-term
debt
and
current
portion
of
due
to
shareholders
of
acquired
companies.

Return
on
Incremental
Invested
Capital
("ROIIC")
is
not
a
recognized
measure
under
GAAP.
We
believe
ROIIC
is
a
relevant
metric
for
investors
because
it
measures
how
effectively
we
deploy
capital
to
generate
operating
profit.
We
define
ROIIC
as
the
change
in
operating
income
(as
adjusted)
for
the
four-year
period
ended
December
31,
2015
divided
by
the
change
in
net
invested
capital
for
the
four-year
period
ended
December
31,
2014.
We
believe
comparing
the
change
in
operating
income
(as
adjusted)
for
the
four-year
period
ended
December
31,
2015
versus
the
change
in
net
invested
capital
for
the
four-year
period
ended
December
31,
2014
is
a
representative
reflection
of
the
returns
our
incremental
capital
investments
generate
because
it
only
includes
capital
deployed
for
more
than
12
months,
resulting
in
a
full-year
impact
on
operating
income
(as
adjusted).
We
believe
a
four-year
measurement
period
is
more
representative
of
the
returns
we
expect
to
generate
on
our
investments.
Our
method
of
calculating
ROIIC
may
differ
from
the
methods
other
companies
use
to
calculate
ROIIC
and
may
be
calculated
over
different
time
periods.
We
encourage
you
to
understand
the
methods
other
companies
use
to
calculate
ROIIC
before
comparing
their
ROIIC
to
ours.
The
following
table
presents
the
calculation
of
ROIIC:

(Dollars
in
thousands):
NUMERATOR:
Operating
income

Loss
on
impairment
of
assets
EiP
implementation
expenses
Cash
taxes(a)
Foreign
currency
exchange
impact
on
operating
income

Operating
income
(as
adjusted)
Change
in
operating
income
(as
adjusted)

Fiscal
Year
Ended

December
31,

2011

2015

$ 216,768
$ 336,957

—

44,484

(93,505)

108,467

—

(76,603)

101,200

—

$ 248,632
$ 389,136

$ 140,504

165

Table
of
Contents

DENOMINATOR:
Total
assets
Cash
and
cash
equivalents
Total
liabilities,
excluding
debt,
due
to
shareholders
of
acquired
companies
and

derivative
instruments
Sale-leaseback
transaction(b)
Impairment
of
assets(c)
Net
invested
capital
Change
in
net
invested
capital
ROIIC
for
the
period
from
2011
to
2015

As
of
December
31,

2010

2014

7,454,657
$
(442,196)

8,358,124

(461,584)

(1,926,174)

—

195,543

5,281,830
$

(2,498,611)

(137,878)

521,709

5,781,760

$ 499,930

28.1%

(a)

(b)

(c)

In
2014,
includes
an
adjustment
of
$14.8
million
due
to
timing
of
tax
payments
in
Mexico
resulting
from
tax
reform
changes
that
became
effective
in
January
2014.

Represents
assets
classified
as
held
for
sale
as
of
December
31,
2014,
related
to
a
sale-leaseback
agreement
for
portions
of
the
campuses
of
two
of
our
institutions
in
Switzerland.
The
asset
sale
was
completed
in
2015.

In
2010,
represents
the
impairment
of
assets
incurred
for
January
1,
2010
to
December
31,
2010.
In
2014,
represents
the
cumulative
impairment
of
assets
incurred
from
January
1,
2010
through
December
31,
2014.

ITEM
7.

MANAGEMENT'S
DISCUSSION
AND
ANALYSIS
OF
FINANCIAL
CONDITION
AND
RESULTS
OF
OPERATIONS

You should read the following discussion of our results of operations and financial condition with the "Selected Financial Data" and the audited historical
consolidated financial statements and related notes included elsewhere in this Form 10-K. This discussion contains forward-looking statements and involves
numerous risks and uncertainties, including, but not limited to, those described in the "Item 1A —
Risk Factors" section of this Form 10-K. Actual results may
differ materially from those contained in any forward-looking statements. See "Forward-Looking Statements."

Introduction

This
Management's
Discussion
and
Analysis
of
Financial
Condition
and
Results
of
Operations
(the
"MD&A")
is
provided
to
assist
readers
of
the
financial
statements
in
understanding
the
results
of
operations,
financial
condition
and
cash
flows
of
Laureate
Education,
Inc.
This
MD&A
should
be
read
in
conjunction
with
the
consolidated
financial
statements
and
related
notes
included
elsewhere
in
this
Form
10-K.
Our
MD&A
is
presented
in
the
following
sections:

•

Overview

Internal
Control
over
Financial
Reporting

Results
of
Operations

Liquidity
and
Capital
Resources

Contractual
Obligations

Off-Balance
Sheet
Arrangements

Critical
Accounting
Policies
and
Estimates

Recently
Issued
Accounting
Pronouncements

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Overview

Our
Business

We
are
the
largest
global
network
of
degree-granting
higher
education
institutions,
with
more
than
one
million
students
enrolled
at
our
70
institutions
in
25
countries
on
more
than
200
campuses,
which
we
collectively
refer
to
as
the
Laureate International Universities network.
We
participate
in
the
global
higher
education
market,
which
was
estimated
to
account
for
revenues
of
approximately
$1.5
trillion
in
2015,
according
to
Global
Silicon
Valley
(GSV).
We
believe
the
global
higher
education
market
presents
an
attractive
long-term
opportunity,
primarily
because
of
the
large
and
growing
imbalance
between
the
supply
and
demand
for
quality
higher
education
around
the
world.
Advanced
education
opportunities
drive
higher
earnings
potential,
and
we
believe
the
projected
growth
in
the
middle
class
population
worldwide
and
limited
government
resources
dedicated
to
higher
education
create
substantial
opportunities
for
high-quality
private
institutions
to
meet
this
growing
and
unmet
demand.
Our
outcomes-driven
strategy
is
focused
on
enabling
millions
of
students
globally
to
prosper
and
thrive
in
the
dynamic
and
evolving
knowledge
economy.

Our
Segments

On
May
2,
2016,
we
announced
a
change
to
our
operating
segments
in
order
to
align
our
structure
more
geographically.
Our
institution
in
Italy,
Nuova
Accademia
di
Belle
Arti
Milano
(NABA),
including
Domus
Academy,
moved
from
our
GPS
segment
into
our
Europe
segment.
Media
Design
School
(MDS),
located
in
New
Zealand,
moved
from
our
GPS
segment
into
our
AMEA
segment.
Our
GPS
segment
now
focuses
on
Laureate's
fully
online
global
operations
and
on
its
campus-based
institutions
in
the
United
States.
Our
segment
information
for
all
periods
presented
has
been
revised
to
reflect
this
change.
We
determine
our
operating
segments
based
on
information
utilized
by
our
chief
operating
decision
maker
to
allocate
resources
and
assess
performance.

•

The
LatAm
segment
includes
institutions
in
Brazil,
Chile,
Costa
Rica,
Honduras,
Mexico,
Panama
and
Peru
and
has
contractual
relationships
with
a
licensed
institution
in
Ecuador.
The
institutions
generate
revenues
by
providing
an
education
that
emphasizes
professional-oriented
fields
of
study
with
undergraduate
and
graduate
degree
programs
in
a
wide
range
of
disciplines.
The
programs
at
these
institutions
are
mainly
campus-based
and
are
primarily
focused
on
local
students.
In
addition,
the
institutions
in
our
LatAm
segment
have
begun
introducing
online
and
hybrid
(a
combination
of
online
and
in-classroom)
courses
and
programs
to
their
curriculum.
Brazil
and
Chile
have
government-supported
financing
programs,
while
in
other
countries
students
generally
finance
their
own
education.
Tuition
and
expenses
per
student
are
less
than
in
the
Europe
and
GPS
segments,
but
the
volume
of
enrollments
is
higher.

The
Europe
segment
includes
institutions
in
Cyprus,
Germany,
Italy,
Morocco,
Portugal,
Spain
and
Turkey.
The
institutions
generate
revenues
by
providing
professional-oriented
fields
of
study
with
undergraduate
and
graduate
degree
programs
in
a
wide
variety
of
disciplines.
The
programs
at
these
institutions
are
mainly
campus-based,
but
several
institutions
have
begun
to
introduce
online
and
hybrid
programs.
While
a
higher
percentage
of
the
eligible
population
in
Europe
participates
in
higher
education
than
in
LatAm,
Europe's
population
is
older
and
growing
more

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•

slowly
than
in
the
countries
in
our
LatAm
and
AMEA
segments.
The
greater
availability
in
these
locations
of
established,
and
in
some
instances
nearly
free,
public
universities
results
in
a
more
competitive
market
for
increased
and
sustained
enrollments.
The
institutions
in
this
segment
enroll
local
and
international
students.
As
most
countries
in
the
Europe
segment
do
not
have
government
financing
for
private
education,
most
students
finance
their
own
education.
Tuition
and
expenses
per
student
are
higher,
with
lower
enrollment
than
in
our
LatAm
and
AMEA
segments.

The
AMEA
segment
consists
of
campus-based
institutions
with
operations
in
Australia,
China,
India,
Malaysia,
New
Zealand,
South
Africa
and
Thailand.
AMEA
also
manages
nine
licensed
institutions
in
the
Kingdom
of
Saudi
Arabia
and
manages
one
additional
institution
in
China
through
a
joint
venture
arrangement.
The
programs
at
these
institutions
generate
revenues
by
providing
an
education
that
emphasizes
professional-oriented
fields
of
study
with
undergraduate
and
graduate
degree
programs
in
a
wide
range
of
disciplines.
The
programs
at
these
institutions
are
mainly
campus-based
and
are
primarily
focused
on
local
students.
In
certain
markets
in
the
AMEA
segment
there
are
various
forms
of
government-
supported
student
financing
programs;
however,
most
students
finance
their
own
education.
The
AMEA
segment
has
a
combination
of
fast
growing
economies,
such
as
China
and
Malaysia.
Tuition
and
expenses
per
student
are
less
than
in
our
Europe
and
GPS
segments.
In
the
Kingdom
of
Saudi
Arabia,
the
government
awarded
us
contracts
with
11
licensed
institutions,
including
eight
under
the
Colleges
of
Excellence
program.
The
contracts
are
each
five
years
in
length,
and
we
may
apply
for
renewal
with
the
government
upon
expiration
of
each
contract.
The
first
contract,
Riyadh
Polytechnic
Institute
(RPI),
under
which
we
provide
services
to
approximately
300
students,
expired
in
October
2015;
however,
it
was
renewed
on
a
temporary
basis.
The
board
of
directors
of
RPI
recently
decided
to
end
operations
at
that
institution
by
July
2017.
Two
of
the
remaining
contracts
ended
during
the
second
quarter
of
2016
and
will
not
be
renewed.
Four
of
the
contracts
for
the
Colleges
of
Excellence
will
expire
in
August
2018
and
four
will
expire
in
August
2019.
Accordingly,
as
of
December
31,
2016,
we
manage
nine
licensed
institutions
under
these
contracts.

The
GPS
segment
includes
our
fully
online
institutions
operating
globally
and
our
U.S.
campus-based
institutions.
The
GPS
segment
provides
professional-oriented
fully
online
degree
programs
in
the
United
States
offered
through
Walden
University,
a
U.S.-based
accredited
institution,
and
through
the
University
of
Liverpool
and
the
University
of
Roehampton
in
the
United
Kingdom.
Additionally,
within
the
GPS
segment
we
have
smaller
campus-based
institutions
in
the
United
States.
The
online
institutions
primarily
serve
working
adults
with
undergraduate
and
graduate
degree
programs,
while
the
campus-based
institutions
primarily
serve
traditional
students
seeking
undergraduate
and
graduate
degrees.
Students
in
the
United
States
finance
their
education
in
a
variety
of
ways,
including
Title
IV
programs.

Corporate
is
a
non-operating
business
unit
whose
purpose
is
to
support
operations.
Its
departments
are
responsible
for
establishing
operational
policies
and
internal
control
standards;
implementing
strategic
initiatives;
and
monitoring
compliance
with
policies
and
controls
throughout
our
operations.
Our
Corporate
segment
is
an
internal
source
of
capital
and
provides
financial,
human
resource,
information
technology,
insurance,
legal
and
tax
compliance
services.
The
Corporate
segment
also
contains
the
eliminations
of
inter-segment
revenues
and
expenses.

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The
following
information
for
our
operating
segments
is
presented
as
of
December
31,
2016:

Countries
Institutions
Enrollment
(rounded
to
the
nearest
hundred)

LatAm

823,600

Europe

61,700

AMEA

85,700

GPS

72,200

Total

1,043,200

2016
YTD
Revenues
($
in
millions)(1)
%
Contribution
to
2016
YTD
Revenues(1)

$2,442.0

$480.4

$431.3

$900.5

$4,244.2

58%

11%

10%

21%

100%

(1)

The
elimination
of
inter-segment
revenues
and
amounts
related
to
Corporate,
which
total
$10.0
million,
is
not
separately
presented.

Challenges

Our
global
operations
are
subject
to
complex
business,
economic,
legal,
political,
tax
and
foreign
currency
risks,
which
may
be
difficult
to
adequately
address.
The
majority
of
our
operations
are
outside
the
United
States.
As
a
result,
we
face
risks
that
are
inherent
in
international
operations,
including:
fluctuations
in
exchange
rates,
possible
currency
devaluations,
inflation
and
hyper-inflation;
price
controls
and
foreign
currency
exchange
restrictions;
potential
economic
and
political
instability
in
the
countries
in
which
we
operate;
expropriation
of
assets
by
local
governments;
key
political
elections
and
changes
in
government
policies;
multiple
and
possibly
overlapping
and
conflicting
tax
laws;
and
compliance
with
a
wide
variety
of
foreign
laws.
We
plan
to
continue
to
grow
our
business
globally
by
acquiring
or
establishing
private
higher
education
institutions.
Our
success
in
growing
our
business
will
depend
on
the
ability
to
anticipate
and
effectively
manage
these
and
other
risks
related
to
operating
in
various
countries.

Regulatory
Environment

Our
business
is
subject
to
regulation
by
various
agencies
based
on
the
requirements
of
local
jurisdictions.
These
agencies
continue
to
review
and
update
regulations
as
they
deem
necessary.
We
cannot
predict
the
form
of
the
rules
that
ultimately
may
be
adopted
in
the
future
or
what
effects
they
might
have
on
our
business,
financial
condition,
results
of
operations
and
cash
flows.
We
will
continue
to
develop
and
implement
necessary
changes
that
enable
us
to
comply
with
such
regulations.
See
"Risk
Factors—Risks
Relating
to
Our
Highly
Regulated
Industry
in
the
United
States,"
"Risk
Factors—Risks
Relating
to
Our
Business—Our
institutions
are
subject
to
uncertain
and
varying
laws
and
regulations,
and
any
changes
to
these
laws
or
regulations
or
their
application
to
us
may
materially
adversely
affect
our
business,
financial
condition
and
results
of
operations,"
"Risk
Factors—Risks
Relating
to
Our
Business—Political
and
regulatory
developments
in
Chile
may
materially
adversely
affect
our
operations"
and
"Item
1—Business—Industry
Regulation"
for
a
detailed
discussion
of
our
different
regulatory
environments
and
Note
19,
Legal
and
Regulatory
Matters,
in
our
consolidated
financial
statements
included
elsewhere
in
this
Form
10-K.

Key
Business
Metrics

Enrollment

Enrollment
is
our
lead
revenue
indicator
and
represents
our
most
important
non-financial
metric.
We
define
"enrollment"
as
the
number
of
students
registered
in
a
course
on
the
last
day
of
the
enrollment
reporting
period.
New
enrollments
provide
an
indication
of
future
revenue
trends.
Total
enrollment
is
a
function
of
continuing
student
enrollments,
new
student
enrollments
and
enrollments
from
acquisitions,
offset
by
graduations,
attrition
and
enrollment
decreases
due
to
dispositions.
Attrition
is
defined
as
a
student
leaving
the
institution
before
completion
of
the
program.
To
minimize
attrition,
we
have
implemented
programs
that
involve
assisting
students
in
remedial
education,
mentoring,
counseling
and
student
financing.

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Each
of
our
institutions
has
an
enrollment
cycle
that
varies
by
geographic
region
and
academic
program.
During
each
academic
year,
each
institution
has
a
"Primary
Intake"
period
in
which
the
majority
of
the
enrollment
occurs.
Most
institutions
also
have
one
or
more
smaller
"Secondary
Intake"
periods.
The
first
calendar
quarter
generally
coincides
with
the
Primary
Intakes
for
our
institutions
in
Central
America,
the
Andean
Region,
Brazil,
Australia,
New
Zealand,
South
Africa
and
Saudi
Arabia.
The
third
calendar
quarter
generally
coincides
with
the
Primary
Intakes
for
our
institutions
in
Mexico,
Europe,
China,
India,
Malaysia,
Thailand
and
the
GPS
segment.

The
following
chart
shows
our
enrollment
cycles.
Shaded
areas
in
the
chart
represent
periods
when
classes
are
generally
in
session
and
revenues
are
recognized.
Areas
that
are
not
shaded
represent
summer
breaks
during
which
revenues
are
not
typically
recognized.
The
large
circles
indicate
the
Primary
Intake
start
dates
of
our
institutions,
and
the
small
circles
represent
the
Secondary
Intake
start
dates.

Pricing

We
continually
monitor
market
conditions
and
carefully
adjust
our
tuition
rates
to
meet
local
demand
levels.
We
proactively
seek
the
best
price
and
content
combinations
to
ensure
that
we
remain
competitive
in
all
the
markets
in
which
we
operate.

Principal
Components
of
Income
Statement

Revenues

Tuition
is
the
largest
component
of
our
revenues
and
we
recognize
tuition
revenues
on
a
weekly
basis
as
classes
are
being
taught.
The
amount
of
tuition
generated
in
a
given
period
depends
on
the

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price
per
credit
hour
and
the
total
credit
hours
or
price
per
program
taken
by
the
enrolled
student
population.
Deferred
revenue
and
student
deposits
on
our
consolidated
balance
sheets
consist
of
tuition
paid
prior
to
the
start
of
academic
sessions
and
unearned
tuition
amounts
recorded
as
accounts
receivable
after
an
academic
session
begins.
The
price
per
credit
hour
varies
by
program,
by
market
and
by
degree
level.
Additionally,
varying
levels
of
discounts
and
scholarships
are
offered
depending
on
market-specific
dynamics
and
individual
achievements
of
our
students.
Revenues
are
reported
net
of
scholarships,
other
discounts,
refunds,
waivers
and
the
fair
value
of
any
guarantees
made
by
Laureate
related
to
student
financing
programs.
In
addition
to
tuition
revenues,
we
generate
other
revenues
from
ancillary
product
sales,
dormitory/residency
fees,
student
fees
and
other
education-related
services.
These
other
revenues
are
less
material
to
our
overall
financial
results
and
have
a
tendency
to
trend
with
tuition
revenues.
The
main
drivers
of
changes
in
revenues
between
periods
are
student
enrollment
and
price.

Direct Costs

Our
direct
costs
include
instructional
and
services
expenses
as
well
as
marketing
and
promotional
expenses.
Our
instructional
and
services
costs
consist
primarily
of
labor
and
operating
costs
associated
with
the
delivery
of
services
to
our
students,
including
the
cost
of
wages,
payroll
taxes,
and
benefits
for
institution
employees,
depreciation
and
amortization,
rent,
utilities
and
bad
debt
expenses.
Marketing
and
promotional
costs
consist
primarily
of
advertising
expenses
and
labor
costs
for
marketing
personnel
at
the
institutions.
In
general,
a
significant
portion
of
our
direct
costs
tend
to
be
variable
in
nature
and
trend
with
enrollment,
and
management
continues
to
monitor
and
improve
the
efficiency
of
instructional
delivery.
Conversely,
as
campuses
expand,
direct
costs
may
grow
faster
than
enrollment
growth
as
infrastructure
investments
are
made
in
anticipation
of
future
enrollment
growth.

General and Administrative Expenses

Our
general
and
administrative
expenses
primarily
consist
of
costs
associated
with
corporate
departments,
including
executive
management,
finance,
legal,
business
development
and
other
departments
that
do
not
provide
direct
operational
services.

Factors
Affecting
Comparability

Acquisitions

Our
past
experiences
provide
us
with
the
expertise
to
further
our
mission
of
providing
high-quality,
accessible
and
affordable
higher
education
to
students
by
expanding
into
new
markets,
primarily
through
acquisitions.
Acquisitions
affect
the
comparability
of
our
financial
statements
from
period
to
period.
Acquisitions
completed
during
one
period
impact
comparability
to
a
prior
period
in
which
we
did
not
own
the
acquired
entity.
Therefore,
changes
related
to
such
entities
are
considered
"incremental
impact
of
acquisitions"
for
the
first
12
months
of
our
ownership.
See
Note
4,
Acquisitions,
in
our
consolidated
financial
statements
for
details
of
our
acquisitions
and
other
transactions.

Dispositions

Certain
strategic
initiatives
may
include
the
sale
of
institutions
such
as
the
French
Institution
Sale
and
the
Swiss
Institution
Sale.
Such
dispositions
affect
the
comparability
of
our
financial
statements
from
period
to
period.
Dispositions
completed
during
one
period
impact
comparability
to
a
prior
period
in
which
we
owned
the
divested
entity.
Therefore,
changes
related
to
such
entities
are
considered
"incremental
impact
of
dispositions"
for
the
first
12
months
subsequent
to
the
disposition.
See
Note
3,
Dispositions
and
Asset
Sales,
in
our
consolidated
financial
statements
for
details
of
our
dispositions
and
other
transactions.

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Foreign Exchange

The
majority
of
our
institutions
are
located
outside
the
United
States.
These
institutions
enter
into
transactions
in
currencies
other
than
the
United
States
Dollar
("USD")
and
keep
their
local
financial
records
in
a
functional
currency
other
than
the
USD.
We
monitor
the
impact
of
foreign
currency
movements
and
the
correlation
between
the
local
currency
and
the
USD.
Our
revenues
and
expenses
are
generally
denominated
in
local
currency.
The
USD
is
our
reporting
currency
and
our
subsidiaries
operate
in
various
other
functional
currencies,
including:
Australian
Dollar,
Brazilian
Real,
Chilean
Peso,
Chinese
Renminbi,
Costa
Rican
Colon,
Euro,
Honduran
Lempira,
Indian
Rupee,
Malaysian
Ringgit,
Mexican
Peso,
Moroccan
Dirham,
New
Zealand
Dollar,
Peruvian
Nuevo
Sol,
Polish
Złoty,
Saudi
Riyal,
South
African
Rand,
Thai
Baht
and
Turkish
Lira.
The
principal
foreign
exchange
exposure
is
the
risk
related
to
the
translation
of
revenues
and
expenses
incurred
in
each
country
from
the
local
currency
into
USD.
For
the
years
ended
December
31,
2016,
2015,
and
2014,
the
impact
of
changing
foreign
currency
exchange
rates
reduced
consolidated
revenues
by
approximately
$180
million,
$689
million
and
$225
million,
respectively,
as
compared
to
the
comparable
preceding
period.
For
the
years
ended
December
31,
2016,
2015,
and
2014,
the
impact
of
changing
foreign
currency
exchange
rates
reduced
consolidated
Adjusted
EBITDA
by
approximately
$11
million,
$142
million
and
$46
million,
respectively,
as
compared
to
the
comparable
preceding
period.
We
experienced
a
proportionally
greater
negative
impact
related
to
the
years
ended
December
31,
2014
and
December
31,
2015
and
the
first
half
of
2016,
which
resulted
from
the
significant
weakening
against
the
USD
experienced
by
most
currencies
where
we
have
significant
operations.
See
"Risk
Factors—Risks
Relating
to
Our
Business—Our
reported
revenues
and
earnings
may
be
negatively
affected
by
the
strengthening
of
the
U.S.
dollar
and
currency
exchange
rates."

Seasonality

Most
of
the
institutions
in
our
network
have
a
summer
break
during
which
classes
are
generally
not
in
session
and
minimal
revenues
are
recognized.
In
addition
to
the
timing
of
summer
breaks,
holidays
such
as
Easter
also
have
an
impact
on
our
academic
calendar.
Operating
expenses,
however,
do
not
fully
correlate
to
the
enrollment
and
revenue
cycles,
as
the
institutions
continue
to
incur
expenses
during
summer
breaks.
Given
the
geographic
diversity
of
our
institutions
and
differences
in
timing
of
summer
breaks,
our
second
and
fourth
quarters
are
stronger
revenue
quarters
as
the
majority
of
our
institutions
are
in
session
for
most
of
these
respective
quarters.
Our
first
and
third
fiscal
quarters
are
weaker
revenue
quarters
because
the
majority
of
our
institutions
have
summer
breaks
for
some
portion
of
one
of
these
two
quarters.
Due
to
this
seasonality,
revenues
and
profits
in
any
one
quarter
are
not
necessarily
indicative
of
results
in
subsequent
quarters
and
may
not
be
correlated
to
new
enrollment
in
any
one
quarter.
For
a
discussion
of
our
revenue
recognition
accounting
policy,
see
Note
2,
Significant
Accounting
Policies,
in
our
consolidated
financial
statements.

Income Tax Expense

Our
consolidated
income
tax
provision
is
derived
based
on
the
combined
impact
of
federal,
state
and
foreign
income
taxes.
Laureate
has
operations
in
multiple
countries,
many
of
which
have
statutory
tax
rates
lower
than
the
United
States.
Generally,
lower
tax
rates
in
these
foreign
jurisdictions,
along
with
Laureate's
intent
and
ability
to
indefinitely
reinvest
foreign
earnings
outside
of
the
United
States,
results
in
an
effective
tax
rate
lower
than
the
statutory
rate
in
the
United
States.
Further,
discrete
items
can
arise
in
the
course
of
our
operations
that
can
further
impact
the
Company's
effective
tax
rate
for
the
period.

Our
tax
rate
fluctuates
from
period
to
period
due
to
changes
in
the
mix
of
earnings
between
our
tax-paying
entities,
our
tax-exempt
entities
and
our
loss-
making
entities
for
which
it
is
not
more
likely
than
not
that
a
tax
benefit
will
be
realized
on
the
loss.
The
pre-tax
result
from
our
profitable
entities
for
the
years
ended
December
31,
2016
and
2015
was
$596.7
million
and
$423.0
million,
respectively.
A

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significant
driver
of
the
lower
tax
expense
as
compared
to
pre-tax
income
is
the
non-taxable
gain
on
the
sale
of
certain
operations,
primarily
in
Switzerland
and
France,
that
is
included
in
pre-tax
income.

Internal
Control
over
Financial
Reporting

We
have
identified
material
weaknesses
that
existed
as
of
December
31,
2015
and/or
December
31,
2016.
A
material
weakness
is
a
deficiency,
or
a
combination
of
deficiencies,
in
internal
control
over
financial
reporting,
such
that
there
is
a
reasonable
possibility
that
a
material
misstatement
of
our
annual
or
interim
consolidated
financial
statements
will
not
be
prevented
or
detected
on
a
timely
basis.

As
of
December
31,
2015,
we
identified
a
material
weakness
in
our
internal
control
over
financial
reporting
related
to
inadequate
controls
over
key
reports
and
spreadsheets.
Specifically,
we
did
not
design
adequate
controls
to
address
the
completeness
and
accuracy
of
key
reports
and
key
spreadsheets.
This
material
weakness,
in
combination
with
other
prior
material
weaknesses,
contributed
to
a
revision
to
our
audited
financial
statements
for
the
year
ended
December
31,
2013.
This
material
weakness
could
result
in
additional
misstatements
to
the
accounts
and
disclosures
that
would
result
in
a
material
misstatement
of
our
consolidated
financial
statements
that
would
not
be
prevented
or
detected.

As
of
December
31,
2016,
we
identified
three
additional
material
weaknesses,
as
follows:

•

We
identified
a
material
weakness
in
that
we
did
not
appropriately
assess
the
risks
relating
to
our
contracting
processes
and
did
not
have
controls
that
were
properly
designed
or
operating
effectively
to
detect
and
prevent
fraud.
Specifically,
our
controls
over
contracting
processes
were
not
designed
or
operating
effectively
to
incorporate
appropriate
levels
of
due
diligence,
requisite
management
approvals,
segregation
of
duties
or
ongoing
monitoring.
This
material
weakness
allowed
for
the
occurrence
of
the
incident
in
our
network
institution
in
Turkey
as
discussed
in
"Item
1—Business—Turkish
Regulation
and
Internal
Investigation,"
as
well
as
certain
other
contracting
irregularities
at
other
network
institutions
that
also
necessitated
an
internal
investigation.
This
control
deficiency
could
result
in
material
misstatements
of
the
accounts
and
disclosures
that
would
result
in
a
material
misstatement
of
our
consolidated
financial
statements
that
would
not
be
prevented
or
detected.

(i)

(ii)

(iii)

maintain
user
access
controls
to
ensure
appropriate
segregation
of
duties
and
that
access
to
financial
applications
and
data
is
adequately
restricted
to
appropriate
personnel;
and

maintain
computer
operations
controls
to
ensure
that
privileges
are
appropriately
granted,
and
data
backups
are
authorized
and
monitored.

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We
have
commenced
the
remediation
of
each
of
these
material
weaknesses,
including
making
significant
investments
to
develop
training
programs
for
our
global
organization,
changing
the
organizational
design
and
upgrading
the
qualifications
of
personnel
where
necessary,
and
designing
and
implementing
improved
processes
and
internal
controls,
some
of
which
are
manual.
We
have
begun
an
enterprise-wide
risk
assessment
whereby
risks
throughout
the
organization
will
be
identified,
assessed
and
prioritized.
This
enterprise-wide
risk
assessment
will
be
periodically
updated
and
leveraged
as
an
ongoing
mechanism
to
manage
the
broad
set
of
risks
the
Company
faces.
We
will
leverage
the
results
of
this
entity-wide
risk
assessment
as
input
for
the
determination
of
future
initiatives
and
to
tailor
our
future
activities
around
the
implementation
assessment,
and
monitoring
of
internal
controls
for
all
entities,
including
variable
interest
entities
("VIEs").
We
have
also
commenced
a
remediation
process
that
includes,
among
other
things,
enhancement
of
our
contract
management
policy,
communication
and
training
on
the
enhanced
policy,
and
increased
oversight.
We
are
in
the
process
of
ensuring
that
the
design
of
our
policies
and
procedures
have
been
fully
implemented
and
are
operational,
including
monitoring
of
access,
change
management
and
segregation
of
duties
relating
to
IT
development
and
production
roles.
We
are
in
the
process
of
designing
and
implementing
procedures
to
address
the
design
deficiencies
relating
to
the
completeness
and
accuracy
of
our
key
reports
and
spreadsheets.

In
addition
to
the
remediation
actions
discussed
above,
we
are
continuing
with
our
ongoing
EiP
initiative,
which
is
anticipated
to
be
completed
by
the
end
of
2017
and
includes
implementing
a
global
enterprise
resource
planning
system
and
completing
the
vertical
integration
of
our
finance
organization
through
the
establishment
of
SSOs.

Our
efforts
to
remediate
these
material
weaknesses
may
not
be
effective
or
prevent
any
future
material
weakness
in
our
internal
control
over
financial
reporting.
See
"Risk
Factors—Risks
Relating
to
Our
Business—We
currently
have
four
material
weaknesses
in
our
internal
control
over
financial
reporting
that,
if
not
corrected,
could
result
in
material
misstatements
of
our
financial
statements,"
and
"Risk
Factors—Risks
Relating
to
Our
Business—If
we
fail
to
maintain
proper
and
effective
internal
controls,
our
ability
to
produce
accurate
financial
statements
on
a
timely
basis
could
be
materially
adversely
affected."

As
a
public
company,
we
will
be
required
to
devote
significant
resources
to
complete
the
assessment
and
documentation
of
our
internal
control
over
financial
reporting
under
Section
404
of
the
Sarbanes-Oxley
Act,
including
an
assessment
of
the
design,
implementation
and
operating
effectiveness
of
our
information
systems
associated
with
our
internal
control
over
financial
reporting.
We
will
incur
material
costs
to
remediate
the
material
weaknesses
described
above,
as
well
as
ensuring
compliance
with
Section
404
of
the
Sarbanes-Oxley
Act.

Results
of
Operations

The
following
discussion
of
the
results
of
our
operations
is
organized
as
follows:

•

Summary
Comparison
of
Consolidated
Results

Non-GAAP
Financial
Measure

Segment
Results

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Table
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Contents

Summary
Comparison
of
Consolidated
Results
for
the
Years
Ended
December
31,
2016,
2015
and
2014

Discussion of Significant Items Affecting the Consolidated Results for the Years Ended December 31, 2016, 2015 and 2014

Year Ended December 31, 2016

On
July
20,
2016,
we
sold
the
operations
of
École
Supérieure
du
Commerce
Extérieur
(ESCE),
Institut
Français
de
Gestion
(IFG),
European
Business
School
(EBS),
École
Centrale
d'Electronique
(ECE),
and
Centre
d'Études
Politiques
et
de
la
Communication
(CEPC),
which
resulted
in
a
gain
on
sale
of
approximately
$148.7
million.
This
gain
is
included
in
other
non-operating
income
in
the
tables
below.

In
December
2016,
we
completed
the
sale
of
our
remaining
21%
ownership
interest
in
Sichuan
Tianyi
College
(Tianyi)
in
China,
which
resulted
in
a
gain
on
sale
of
approximately
$8.5
million.
This
gain
is
included
in
other
non-operating
income
in
the
tables
below.

Impairment

Upon
completion
of
our
impairment
testing
for
2016,
we
recorded
a
total
impairment
loss
of
$23.5
million.
We
recorded
a
goodwill
impairment
charge
of
$4.2
million
related
to
our
institutions
in
Germany
that
are
part
of
the
Europe
segment.
We
also
recorded
a
goodwill
impairment
charge
of
$19.3
million
at
MSA,
an
institution
in
our
AMEA
segment.
The
weakness
of
the
South
African
Rand
and
challenging
economic
conditions
have
resulted
in
a
change
to
our
capital
allocation
strategy
for
this
business,
resulting
in
an
impairment
charge
in
the
fourth
quarter
of
2016.
We
determined
the
fair
value
of
the
reporting
units
using
an
income
approach
based
primarily
on
discounted
cash
flow
projections.

Year Ended December 31, 2015

On
March
5,
2015,
we
completed
the
sale
of
our
interest
in
HSM
Group
Management
Focus
Europe
Global
S.L.
(HSM).
We
recognized
a
net
gain
of
$2.0
million
in
equity
in
net
income
(loss)
of
affiliates,
net
of
tax,
for
the
year
ended
December
31,
2015.

During
the
quarter
ended
June
30,
2015,
we
reassessed
our
position
regarding
certain
ongoing
Spanish
tax
audits
and,
as
a
result
of
recent
adverse
decisions
from
the
Spanish
Supreme
Court
and
Spanish
National
Court
on
cases
for
taxpayers
with
similar
facts,
it
was
determined
that
we
could
no
longer
support
a
more-
likely-than-not
position
and
therefore
recorded
a
provision
of
$42.1
million
relating
to
these
tax
audits.

The
fiscal
reform
that
was
enacted
in
Mexico
in
December
2013
subjects
our
Mexican
entities
to
corporate
income
tax
and
also
requires
them
to
comply
with
profit-sharing
legislation,
whereby
10%
of
the
taxable
income
of
our
Mexican
entities
will
be
set
aside
as
employee
compensation.
In
2013,
the
Company
established
an
asset
for
a
deferred
benefit
related
to
this
matter.
During
2014,
we
revised
our
estimate
regarding
the
realizability
of
this
asset
and,
accordingly,
recorded
a
net
decrease
in
operating
expense
for
the
year
ended
December
31,
2014
of
$22.8
million.
During
2015,
we
revised
our
estimate
regarding
the
realizability
of
this
asset
and,
accordingly,
recorded
a
net
increase
in
operating
expense
for
the
year
ended
December
31,
2015
of
$0.9
million.

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During
the
fourth
quarter
of
2015,
we
approved
a
plan
of
restructuring,
which
primarily
included
workforce
reductions
in
order
to
reduce
operating
costs
in
response
to
overcapacity
at
certain
locations.
We
incurred
employee
termination
costs
of
$15.5
million
resulting
from
a
reduction
in
force
at
certain
locations,
including
$5.4
million
in
our
LatAm
segment,
$4.1
million
in
our
Europe
segment,
$2.5
million
in
our
AMEA
segment,
$3.2
million
in
our
GPS
segment
and
$0.3
million
incurred
at
Corporate.

Year Ended December 31, 2014

In
the
first
quarter
of
2014,
we
announced
the
beginning
of
a
teach-out
process
at
National
Hispanic
University
("NHU"),
an
institution
in
our
GPS
segment
that
closed
in
August
2015
and
will
no
longer
enroll
new
students.
In
connection
with
this
teach-out,
we
recorded
direct
costs
of
$6.6
million
for
2014
to
ensure
an
orderly
and
successful
transition
for
our
students.

In
the
second
quarter
of
2014,
corporate
expenses
were
reduced
by
$3.4
million
related
to
proceeds
received
from
the
settlement
of
earthquake-related
insurance
claims.
In
the
fourth
quarter
of
2014,
corporate
expenses
were
further
reduced
by
$1.4
million
related
to
additional
proceeds
received
from
the
settlement
of
earthquake-related
insurance
claims.

We
recorded
a
loss
on
disposal
of
property
of
$4.4
million
at
Hunan
International
Economics
University
(HIEU),
an
institution
in
our
AMEA
segment,
to
write
off
the
carrying
value
of
several
parcels
of
land
for
which
it
no
longer
has
land
use
rights.

In
the
second
quarter
of
2014,
we
recorded
a
benefit
to
direct
costs
of
$11.3
million
in
our
LatAm
segment
related
to
the
settlement
of
a
pre-acquisition
loss
contingency
after
receiving
a
favorable
court
ruling
with
respect
to
the
use
of
grant
funds
by
the
prior
owners
of
Universidade
Anhembi
Morumbi
("UAM
Brazil").

In
the
second
quarter
of
2014,
we
determined
it
was
probable
that
performance
targets
would
be
achieved
for
contingent
consideration
payable
under
the
terms
of
the
2013
purchase
agreement
for
THINK,
an
institution
in
our
AMEA
segment,
therefore
we
accrued
this
contingent
consideration
at
its
estimated
fair
value
of
$3.8
million,
which
we
charged
to
operating
expenses.

In
the
third
quarter
of
2014,
an
entity
in
the
Kingdom
of
Saudi
Arabia
in
our
AMEA
segment
recorded
a
benefit
to
direct
costs
of
$2.8
million,
primarily
related
to
cash
payments
received
for
fully
reserved
receivables.

In
2014,
we
incurred
employee
termination
costs
of
$18.0
million
resulting
from
a
reduction
in
force
at
certain
locations,
including
$11.5
million
in
our
LatAm
segment,
$4.7
million
in
our
Europe
segment
and
$1.8
million
in
our
GPS
segment.

In
2014,
we
reached
an
arbitration
settlement
related
to
certain
indemnification
claims
with
the
former
owners
of
an
institution
in
Brazil
and
recorded
a
gain
of
$6.7
million
in
our
LatAm
segment.

During
the
fourth
quarter
of
2014,
we
recorded
an
operating
expense
of
$18.0
million
for
a
donation
to
a
foundation
for
an
initiative
supported
by
the
Turkish
government.
This
donation
was
made
by
our
network
institution
in
Turkey
to
support
our
ongoing
operations.

During
2013,
we
recorded
a
liability
of
$11.8
million
for
a
social
security
tax
matter
in
our
Europe
segment
for
the
years
2009
through
2012.
In
2014,
we
reversed
$2.1
million
of
the
social
security
tax
liability
due
to
statute
of
limitations
expirations.

As
discussed
above,
during
2014,
we
revised
our
estimate
regarding
the
realizability
of
the
asset
related
to
the
Mexico
profit-sharing
legislation
and,
accordingly,
recorded
a
net
decrease
in
operating
expense
for
the
year
ended
December
31,
2014
of
$22.8
million.

176

Table
of
Contents

Impairment

In
2014,
we
recorded
a
total
impairment
loss
of
$125.8
million.
Tradenames
were
impaired
in
the
aggregate
amount
of
$47.7
million
related
to
two
Chilean
institutions
in
our
LatAm
segment.
Also
in
our
LatAm
segment,
goodwill
was
impaired
in
the
amount
of
$77.1
million,
which
related
to
our
institutions
in
Costa
Rica,
Honduras
and
Panama.
Our
LatAm
and
GPS
segments
recorded
impairments
of
long-lived
assets
of
$0.7
million
and
$0.1
million,
respectively.
Our
Europe
segment
recorded
impairments
of
deferred
costs
of
$0.3
million.

UDLA
Chile
recorded
impairment
of
$16.4
million
for
Tradenames.
This
is
an
additional
impairment
to
the
charge
taken
in
2013.
The
primary
driver
for
this
additional
charge
was
the
secondary
intake
of
enrollment
that
occurred
during
the
third
quarter
of
2014,
which
provided
us
with
additional
information
regarding
the
projected
financial
performance
of
UDLA
Chile
and
that
indicated
that
the
financial
impact
of
the
loss
of
accreditation
was
larger
than
initially
estimated.
UNAB
recorded
an
impairment
charge
for
tradenames
of
$31.3
million
that
resulted
from
our
expectation
of
reduced
margins
and
lower
pricing.
The
lower
projections
reflect
weaker
operating
performance
compared
to
the
prior
long-range
plan,
combined
with
reduced
expectations
as
a
result
of
a
regulatory
environment
that
favors
public
rather
than
private
supply
in
higher
education.

The
goodwill
impairment
of
$77.1
million
in
LatAm
at
our
institutions
in
Costa
Rica,
Honduras
and
Panama
can
be
attributed
to
a
weaker
long-range
outlook
as
compared
to
the
assumptions
contained
in
the
models
previously
used
to
value
the
intangible
assets.
The
primary
driver
of
this
weaker
outlook
is
a
shortfall
in
2014
enrollments,
which
has
caused
us
to
decrease
our
long-term
enrollment
projections.
The
softened
enrollment
outlook
has
also
resulted
in
pricing
pressure
on
revenue.

Comparison
of
Consolidated
Results
for
the
Years
Ended
December
31,
2016,
2015
and
2014

(in
millions)
Revenues
Direct
costs
General
and
administrative
expenses
Loss
on
impairment
of
assets
Operating
income
Interest
expense,
net
of
interest
income
Other
non-operating
income
(expense)
Income
(loss)
from
continuing
operations
before
income
taxes

and
equity
in
net
income
of
affiliates

Income
tax
(expense)
benefit
Equity
in
net
income
of
affiliates,
net
of
tax
Net
income
(loss)
Net
loss
(income)
attributable
to
noncontrolling
interests
Net
income
(loss)
attributable
to
Laureate
Education,
Inc.

nm—percentage
changes
not
meaningful

2014

2016

2015

$ 4,244.2
$ 4,291.7
$ 4,414.7

3,838.2

151.2

125.8

299.5

(363.9)

(137.2)

3,615.3

222.5

23.5

382.9

(403.3)

451.5

3,760.0

194.7

—

337.0

(384.7)

(152.9)

431.1

(65.0)

0.1

366.2

5.7

371.8
$

(200.6)

(117.7)

2.5

(315.8)

(0.4)

(316.2) $

(201.7)

39.1

0.2

(162.5)

4.2

(158.3)

177

%
Change

Better/(Worse)

2016
vs.

2015

2015
vs.

2014

(1)%

(14)%

14%

(5)%

45%

(96)%

(3)%
2%
(29)%
nm

13%
(6)%
(11)%

(94)%
(110)%
(100)%

Table
of
Contents

For
further
details
on
certain
discrete
items
discussed
below,
see
"—Discussion
of
Significant
Items
Affecting
the
Consolidated
Results
for
the
Years
Ended
December
31,
2016,
2015
and
2014."

Comparison of Consolidated Results for the Year Ended December 31, 2016 to the Year Ended December 31, 2015

Revenues decreased
by
$47.5
million
to
$4,244.2
million
for
the
year
ended
December
31,
2016
from
$4,291.7
million
for
the
year
ended
December
31,
2015.
This
revenue
decrease
was
driven
by
the
effect
of
a
net
change
in
foreign
currency
exchange
rates,
which
decreased
revenues
by
$180.4
million
and
the
incremental
impact
of
dispositions,
which
reduced
revenue
by
$129.2
million.
Partially
offsetting
this
decrease
in
revenues
was
the
overall
increased
average
total
enrollment
at
a
majority
of
our
institutions,
which
increased
revenues
by
$117.9
million;
the
incremental
impact
of
acquisitions,
which
increased
revenues
by
$3.4
million;
and
the
effect
of
changes
in
tuition
rates
and
enrollments
in
programs
at
varying
price
points
("product
mix"),
pricing
and
timing,
which
increased
revenues
by
$138.5
million.
Other
Corporate
and
Elimination
changes
accounted
for
an
increase
in
revenues
of
$2.3
million.

Direct costs and general and administrative expenses combined decreased
by
$116.9
million
to
$3,837.8
million
for
2016
from
$3,954.7
million
for
2015.
The
direct
costs
decrease
was
due
to
the
effect
of
a
net
change
in
foreign
currency
exchange
rates,
which
decreased
costs
by
$182.1
million
for
2016
compared
to
2015;
the
incremental
impact
of
dispositions,
which
decreased
costs
by
$122.2
million
for
2016
compared
to
2015;
and
employee
termination
costs
increased
direct
costs
by
$15.5
million
in
2015.

Offsetting
these
direct
cost
decreases
was
the
incremental
impact
of
acquisitions,
which
increased
costs
by
$2.0
million
and
overall
higher
enrollments
and
expanded
operations,
which
increased
costs
by
$164.1
million.
Acquisition-related
contingent
liabilities
for
taxes
other
than
income
tax,
net
of
changes
in
recorded
indemnification
assets
increased
direct
costs
by
$18.8
million
in
2016
and
increased
direct
costs
by
$5.6
million
in
2015,
increasing
expenses
by
$13.2
million
in
2016
compared
to
2015.
Other
Corporate
and
Eliminations
expenses
accounted
for
an
increase
in
costs
of
$23.6
million
in
2016
compared
to
2015.

Operating income increased
by
$45.9
million
to
$382.9
million
for
2016
from
$337.0
million
for
2015.
The
increase
in
operating
income
was
related
to
increased
operating
income
from
our
LatAm,
Europe
and
GPS
segments.
The
increase
in
operating
income
was
partially
offset
by
a
loss
on
impairment
of
$23.5
million
for
2016
and
increased
Corporate
expenses.

Interest expense, net of interest income increased
by
$18.6
million
to
$403.3
million
for
2016
from
$384.7
million
for
2015.
The
increase
in
interest
expense
was
primarily
attributable
to
higher
interest
rates
on
our
outstanding
balances,
partially
offset
by
lower
average
balances
outstanding
during
2016.

Other non-operating income (expense) increased
by
$604.4
million
to
income
of
$451.5
million
for
2016
from
expense
of
$152.9
million
for
2015.
This
increase
was
primarily
attributable
to
a
gain
on
sales
of
subsidiaries
in
2016
of
$406.6
million,
a
gain
on
foreign
currency
exchange
in
2016
compared
to
a
loss
in
2015
for
a
change
of
$216.6
million
and
a
change
in
other
non-operating
income
(expense)
of
$0.8
million
in
2016
compared
to
2015.
This
increase
was
offset
by
an
increase
in
the
loss
on
debt
extinguishment
of
$16.1
million
combined
with
an
increased
loss
on
derivative
instruments
in
2016
compared
to
2015
of
$3.5
million.

Income tax expense decreased
by
$52.7
million
to
$65.0
million
in
2016
from
$117.7
million
in
2015.
This
year-over-year
decrease
in
expense
was
the
result
of
recognizing
a
contingent
liability
in
2015
of
$42.1
million
related
to
the
Spanish
tax
audits.
In
addition,
2016
had
a
benefit
of
$7.9
million
related
to
the
deferred
taxes
included
within
the
accounting
for
the
sale
of
the
hospitality
management
schools
and
a
release
of
contingent
liabilities
related
to
Peru
and
Brazil
of
$21.8
million
and
$12.5
million,
respectively.
There
was
also
a
change
in
the
mix
of
pre-tax
book
income
attributable
to
taxable
and

178

Table
of
Contents

tax-exempt
entities,
partially
offsetting
the
decreases
above.
Of
the
total
2016
pre-tax
book
income,
$83.1
million
related
to
the
non-taxable
gain
on
the
sale
of
the
hospitality
management
schools,
resulting
in
a
decrease
to
the
overall
effective
tax
rate
for
the
2016
fiscal
period.

Equity in net income of affiliates, net of tax decreased
by
$2.4
million
to
$0.1
million
in
2016
from
$2.5
million
in
2015.
We
recognized
a
net
gain
on
the
sale
of
HSM
for
$2.0
million
in
2015.
Other
equity-method
investments
resulted
in
a
change
of
$0.4
million
for
2016
compared
to
2015.

Net loss (income) attributable to noncontrolling interests increased
by
$6.1
million
to
net
loss
of
$5.7
million
for
2016
from
net
income
of
$0.4
million
for
2015.
The
increase
in
net
loss
attributable
to
noncontrolling
interests
primarily
related
to
a
higher
net
loss
at
Monash,
combined
with
net
losses
at
Obeikan
and
INTI
and
less
net
income
from
St.
Augustine.
We
acquired
the
remaining
noncontrolling
interest
of
St.
Augustine
in
2016.
These
losses
were
offset
by
increased
net
income
related
to
HIEU
and
the
closure
of
NHU
in
August
2015,
which
had
losses
in
2015.

Comparison of Consolidated Results for the Year Ended December 31, 2015 to the Year Ended December 31, 2014

Revenues decreased
by
$123.0
million
to
$4,291.7
million
for
the
year
ended
December
31,
2015
from
$4,414.7
million
for
the
year
ended
December
31,
2014.
This
revenue
decrease
was
driven
by
the
effect
of
a
net
change
in
foreign
currency
exchange
rates,
which
decreased
revenues
by
$688.9
million.
Partially
offsetting
this
decrease
in
revenues
was
the
overall
increased
average
total
enrollment
at
a
majority
of
our
institutions,
which
increased
revenues
by
$299.8
million;
the
incremental
impact
of
acquisitions,
which
increased
revenues
by
$114.8
million;
and
the
effect
of
changes
in
product
mix,
pricing
and
timing,
which
increased
revenues
by
$151.9
million.
Other
Corporate
and
Elimination
changes
accounted
for
a
decrease
in
revenues
of
$0.6
million.

Direct costs and general and administrative expenses combined decreased
by
$34.7
million
to
$3,954.7
million
for
2015
from
$3,989.4
million
for
2014.
The
direct
costs
decrease
was
due
to
the
effect
of
a
net
change
in
foreign
currency
exchange
rates,
which
decreased
costs
by
$587.9
million
for
2015
compared
to
2014.
During
the
fourth
quarter
of
2014,
we
recorded
an
operating
expense
of
$18.0
million
for
a
donation
to
a
foundation
for
an
initiative
supported
by
the
Turkish
government
in
our
Europe
segment.
Employee
termination
costs
increased
direct
costs
by
$15.5
million
in
2015
and
$18.0
million
in
2014,
decreasing
costs
year-
over-year
by
$2.5
million.
In
connection
with
a
teach
out
at
NHU,
an
institution
in
our
GPS
segment
that
closed
in
August
2015,
we
recorded
costs
of
$6.6
million
in
2014
to
ensure
an
orderly
and
successful
transition
for
our
students.
Additionally,
in
2014,
HIEU,
an
institution
in
our
AMEA
segment,
recorded
a
$4.4
million
loss
on
disposal
of
property
to
write
off
the
carrying
value
of
several
parcels
of
land
for
which
it
no
longer
has
land
use
rights.
In
2014,
we
determined
it
was
probable
that
THINK,
an
institution
in
our
AMEA
segment,
would
meet
performance
targets
that
were
part
of
a
share
purchase
agreement
and
accrued
for
a
contingent
earn-out
of
$3.8
million.

Offsetting
these
direct
cost
decreases
was
the
incremental
impact
of
acquisitions,
which
increased
costs
by
$110.4
million,
and
overall
higher
enrollments
and
expanded
operations,
which
increased
costs
by
$403.3
million.
Acquisition-related
contingent
liabilities
for
taxes
other
than
income
tax,
net
of
changes
in
recorded
indemnification
assets
increased
direct
costs
by
$5.6
million
in
2015
and
decreased
direct
costs
by
$4.6
million
in
2014,
increasing
expenses
by
$10.2
million
in
2015
compared
to
2014.
We
recorded
an
increase
in
direct
costs
for
a
profit-sharing
plan
in
Mexico
of
$0.9
million
in
2015
and
a
decrease
in
direct
costs
of
$22.8
million
in
2014,
increasing
costs
by
$23.7
million
in
2015
compared
to
2014.
Additionally
during
2014,
we
recorded
a
benefit
in
our
LatAm
segment
of
$11.3
million
related
to
the
settlement
of
a
pre-acquisition
loss
contingency
after
receiving
a
favorable
court
ruling.
In
2014,
we
reached
an
arbitration
settlement
related
to
indemnification
claims
with
the
former
owners
of
a
university
in
Brazil
in
our
LatAm
segment
and
recorded
a
gain
of
$6.7
million.
In
2014,
an
entity
in
the

179

Table
of
Contents

Kingdom
of
Saudi
Arabia
in
our
AMEA
segment
recorded
a
benefit
of
$2.8
million,
primarily
related
to
cash
payments
received
for
fully
reserved
receivables.
In
2014,
corporate
expenses
were
reduced
by
$4.8
million
related
to
proceeds
received
from
the
settlement
of
earthquake-related
insurance
claims.
Other
Corporate
and
Eliminations
expenses
accounted
for
an
increase
in
costs
of
$15.3
million
in
2015
compared
to
2014.

Operating income increased
by
$37.5
million
to
$337.0
million
for
2015
from
$299.5
million
for
2014.
The
increase
in
operating
income
was
related
to
a
decrease
in
the
loss
on
impairment
of
$125.8
million
between
2015
and
2014
and
increased
operating
income
from
our
GPS
segment
combined
with
less
operating
loss
in
our
AMEA
and
Europe
segments.
The
increase
in
operating
income
was
partially
offset
by
a
decrease
in
our
operating
income
for
our
LatAm
segment,
which
was
significantly
affected
by
the
weakening
of
foreign
currency
against
the
USD,
and
increased
Corporate
expenses.

Interest expense, net of interest income increased
by
$20.8
million
to
$384.7
million
for
2015
from
$363.9
million
for
2014.
The
increase
in
interest
expense
was
primarily
attributable
to
higher
debt
balances
and
increased
special
interest
expense
since
our
registration
statement
on
Form
S-4
was
not
declared
effective
by
July
25,
2014.

Other non-operating expense increased
by
$15.7
million
to
expense
of
$152.9
million
for
2015
from
expense
of
$137.2
million
for
2014.
This
increase
was
primarily
attributable
to
a
larger
loss
on
foreign
currency
exchange
in
2015
compared
to
2014
for
an
increase
in
expense
of
$39.2
million.
This
increase
was
offset
by
a
decrease
in
the
loss
on
debt
extinguishment
of
$21.7
million
combined
with
a
decreased
loss
on
derivative
instruments
in
2015
compared
to
2014
of
$0.5
million
and
a
change
in
other
non-operating
(expense)
income
of
$1.3
million
in
2015
compared
to
2014.

Income tax (expense) benefit increased
by
$156.8
million
to
expense
of
$117.7
million
for
2015
from
a
benefit
of
$39.1
million
for
2014.
We
have
operations
in
multiple
countries,
many
of
which
have
statutory
tax
rates
lower
than
the
United
States.
The
main
reasons
for
this
year-over-year
increase
in
expense
were
releases
of
valuation
allowances
in
2014,
the
recording
of
the
tax
contingency
related
to
the
ICE
audit
matters
in
2015,
as
discussed
in
Note
15,
Income
Taxes,
and
significant
tax
rate
changes
in
multiple
jurisdictions
on
deferred
tax
balances,
partially
offset
by
a
change
in
the
mix
of
taxable
and
non-taxable
entities
in
various
taxing
jurisdictions.

Equity in net income of affiliates, net of tax increased
by
$2.3
million
to
income
of
$2.5
million
for
2015
from
income
of
$0.2
million
for
2014.
We
recognized
a
net
gain
on
the
sale
of
HSM
for
$2.0
million
in
2015.
Other
equity-method
investments
resulted
in
a
change
of
$0.3
million
for
2015
compared
to
2014.

Net loss (income) attributable to noncontrolling interests decreased
by
$4.6
million
to
net
income
of
$0.4
million
for
2015,
from
a
net
loss
of
$4.2
million
for
2014.
The
decrease
in
net
loss
attributable
to
noncontrolling
interests
primarily
related
to
changes
from
net
loss
to
net
income
at
Obeikan
and
HIEU,
combined
with
increased
net
income
at
St.
Augustine
and
less
net
loss
at
NHU,
which
closed
in
August
2015.
These
decreases
were
partially
offset
by
a
higher
net
loss
at
Monash
and
less
net
income
at
INTI.

Non-GAAP
Financial
Measure

We
define
Adjusted
EBITDA
as
net
income
(loss),
before equity
in
net
(income)
loss
of
affiliates,
net
of
tax,
income
tax
expense
(benefit),
gain
on
sale
of
subsidiaries,
net,
foreign
currency
exchange
(gain)
loss,
net,
other
(income)
expense,
net,
loss
(gain)
on
derivatives,
loss
on
debt
extinguishment,
interest
expense
and
interest
income,
plus depreciation
and
amortization,
stock-based
compensation
expense,
loss
on
impairment
of
assets
and
expenses
related
to
implementation
of
our
EiP
initiative.
When
we
review
Adjusted
EBITDA
on
a
segment
basis,
we
exclude
inter-segment
revenues
and

180

Table
of
Contents

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

Adjusted
EBITDA
is
a
key
measure
used
by
our
management
and
board
of
directors
to
understand
and
evaluate
our
core
operating
performance
and
trends,
to
prepare
and
approve
our
annual
budget
and
to
develop
short-
and
long-term
operational
plans.
In
particular,
the
exclusion
of
certain
expenses
in
calculating
Adjusted
EBITDA
can
provide
a
useful
measure
for
period-to-period
comparisons
of
our
core
business.
Additionally,
Adjusted
EBITDA
is
a
key
financial
measure
used
by
the
compensation
committee
of
our
board
of
directors
and
our
Chief
Executive
Officer
in
connection
with
the
payment
of
incentive
compensation
to
our
executive
officers
and
other
members
of
our
management
team.
Accordingly,
we
believe
that
Adjusted
EBITDA
provides
useful
information
to
investors
and
others
in
understanding
and
evaluating
our
operating
results
in
the
same
manner
as
our
management
and
board
of
directors.

The
following
table
presents
Adjusted
EBITDA
and
reconciles
Net
income
(loss)
to
Adjusted
EBITDA
for
the
years
ended
December
31,
2016,
2015
and
2014:

(in
millions)
Net
income
(loss)
Plus:
Equity
in
net
income
of
affiliates,
net
of
tax
Income
tax
expense
(benefit)
Income
(loss)
from
continuing
operations
before
income

2016
366.2
$ (315.8) $ (162.5)

2015

2014

%
Change

Better/(Worse)

2016
v
2015

2015
v
2014

(94)%

(0.1)

65.0

(2.5)

117.7

(0.2)

(39.1)

(96)%

45%

taxes
and
equity
in
net
income
of
affiliates

431.1

(200.6)

(201.7)

Plus:
Gain
on
sales
of
subsidiaries,
net
Foreign
currency
exchange
(gain)
loss,
net
Other
(income)
expense,
net
Loss
on
derivatives
Loss
on
debt
extinguishment
Interest
expense
Interest
income
Operating
income
Plus:
Depreciation
and
amortization
EBITDA
Plus:
Stock-based
compensation
expense(a)
Loss
on
impairment
of
assets(b)
EiP
implementation
expenses(c)
Adjusted
EBITDA

nm—percentage
changes
not
meaningful

(406.6)

(67.5)

(0.9)

6.1

17.4

421.9

(18.7)

382.9

—

149.2

(0.2)

2.6

1.3

398.0

(13.3)

337.0

264.9

647.8

282.9

619.9

38.8

23.5

55.6

765.6
$

39.0

—

44.5

703.4
$

—

110.0

1.2

3.1

23.0

385.8

(21.8)

299.5

288.3

587.8

49.2

125.8

10.7

773.5

145%

(135)%

(6)%

41%

14%

(25)%

(a)

Represents
non-cash,
stock-based
compensation
expense
pursuant
to
the
provisions
of
ASC
Topic
718.

181

(1)%

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

2%
5%

21%
nm

(9)%

Table
of
Contents

(b)

(c)

Represents
non-cash
charges
related
to
impairments
of
long-lived
assets.
For
further
details
on
certain
impairment
items
see
"Discussion
of
Significant
Items
Affecting
the
Consolidated
Results
for
the
Years
Ended
December
31,
2016,
2015
and
2014—Impairments."

Comparison of Depreciation and Amortization, Stock-based Compensation and EiP Implementation Expenses for the Years Ended December 31, 2016 and 2015

Depreciation and amortization decreased
by
$18.0
million
to
$264.9
million
for
2016
from
$282.9
million
for
2015.
The
effects
of
foreign
currency
exchange
decreased
depreciation
and
amortization
expense
by
$12.5
million
for
2016
compared
to
2015.
The
incremental
impact
from
dispositions
decreased
depreciation
and
amortization
expense
by
$7.0
million.
New
capital
expenditures
accounted
for
an
increase
in
depreciation
expense
of
$10.5
million.
Other
items
accounted
for
the
remaining
change
in
amortization
expense
of
$9.0
million.

Stock-based compensation expense decreased
by
$0.2
million
to
$38.8
million
for
2016
from
$39.0
million
for
2015.
This
decrease
was
primarily
due
to
the
following:
(1)
a
decrease
in
expense
recorded
for
the
deferred
compensation
arrangement
as
the
remaining
2016
obligation
of
$18.2
million
was
settled
in
2016
with
$7.7
million
in
cash
and
$10.5
million
in
notes
and
as
$87.1
million
was
paid
in
December
2015
with
$37.1
million
in
cash
and
$50.0
million
in
notes
and
(2)
a
decrease
in
restricted
stock
awards
expense
in
2016
as
compared
to
2015.
These
decreases
were
partially
offset
by
an
increase
in
stock
option
expense
related
to
an
equity
award
modification
in
2016.

EiP implementation expenses increased
by
$11.1
million
to
$55.6
million
for
2016
from
$44.5
million
for
2015.
These
increased
expenses
represent
increased
spending
related
to
an
enterprise-wide
initiative
to
optimize
and
standardize
our
processes,
creating
vertical
integration
of
procurement,
information
technology,
financing,
accounting
and
human
resources.
It
includes
the
establishment
of
regional
SSOs
around
the
world,
as
well
as
improvements
to
our
system
of
internal
controls
over
financial
reporting.

Comparison of Depreciation and Amortization, Stock-based Compensation and EiP Implementation Expenses for the Years Ended December 31, 2015 and 2014

Depreciation and amortization decreased
by
$5.4
million
to
$282.9
million
for
2015
from
$288.3
million
for
2014.
The
effects
of
foreign
currency
exchange
decreased
depreciation
and
amortization
expense
by
$40.7
million
for
2015
compared
to
2014.
The
incremental
impact
from
acquisitions
resulted
in
a
$5.5
million
increase
in
depreciation
and
amortization
expense
for
2015
compared
to
2014.
New
capital
expenditures
primarily
accounted
for
an
increase
in
depreciation
expense
of
$25.5
million.
Other
items
accounted
for
the
remaining
change
in
amortization
expense
of
$4.3
million.

Stock-based compensation expense decreased
by
$10.2
million
to
$39.0
million
for
2015
from
$49.2
million
for
2014.
This
decrease
was
primarily
due
to
the
following:
(1)
a
decrease
in
restricted
stock
awards
expense
in
2015
as
compared
to
2014
due
to
accelerated
expense
recognition
under
graded
vesting,
primarily
related
to
a
large
tranche
of
performance-based
restricted
stock
awards
that
vested
on
December
31,
2014;
(2)
a
decrease
in
expense
recorded
for
the
deferred
compensation
arrangement
as
$81.0
million
was
paid
in
September
2014;
and
(3)
a
decrease
in
stock
option
expense
resulting
from
a
modification
charge
recorded
for
a
30%
special
vesting
tranche
in
2014.

182

Table
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Contents

EiP implementation expenses increased
by
$33.8
million
to
$44.5
million
for
2015
from
$10.7
million
for
2014.
These
increased
expenses
represent
increased
spending
related
to
an
enterprise-wide
initiative
to
optimize
and
standardize
our
processes,
creating
vertical
integration
of
procurement,
information
technology,
financing,
accounting
and
human
resources.
It
includes
the
establishment
of
regional
SSOs
around
the
world,
as
well
as
improvements
to
our
system
of
internal
controls
over
financial
reporting.

Segment
Results

We
have
four
operating
segments,
LatAm,
Europe,
AMEA
and
GPS.
On
May
2,
2016,
we
announced
a
change
to
our
operating
segments
in
order
to
align
our
structure
more
geographically.
Our
institution
in
Italy,
NABA,
including
Domus
Academy,
moved
from
our
GPS
segment
into
our
Europe
segment.
MDS,
located
in
New
Zealand,
moved
from
our
GPS
segment
into
our
AMEA
segment.
Our
GPS
segment
now
focuses
on
Laureate's
fully
online
global
operations
and
on
its
campus-based
institutions
in
the
United
States.
Our
segment
information
for
all
periods
presented
has
been
revised
to
reflect
this
change.
We
determine
our
operating
segments
based
on
information
utilized
by
our
chief
operating
decision
maker
to
allocate
resources
and
assess
performance.

On
January
10,
2017,
we
announced
that
we
plan
to
combine
our
Europe
and
AMEA
operations,
effective
March
31,
2017,
in
order
to
reflect
our
belief
that
we
will
be
able
to
operate
the
institutions
in
those
segments
more
successfully
and
efficiently
under
common
management.
We
expect
this
to
result
in
a
change
in
our
operating
segments
that
we
anticipate
reflecting
in
the
financial
statements
for
the
first
quarter
of
2017,
the
period
in
which
the
change
is
expected
to
occur.
All
information
in
this
MD&A
is
presented
consistently
with
our
operating
segments
that
were
in
effect
on
December
31,
2016
and
does
not
reflect
any
possible
segment
realignment
resulting
from
the
January
10,
2017
announcement.

For
purposes
of
the
following
comparison
of
results
discussion,
"
segment direct costs "
represent
direct
costs
by
segment
as
they
are
included
in
Adjusted
EBITDA,
such
that
depreciation
and
amortization
expense,
impairment
charges
on
long-lived
assets,
stock-based
compensation
expense
and
our
EiP
implementation
expenses
have
been
excluded.
In
the
segment
tables
presented
below,
total
segment
direct
costs
are
segregated
into
instructional
and
services,
and
marketing
and
promotional
expenses.
For
a
further
description
of
our
segments,
see
"—Overview."

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Table
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Contents

The
following
table,
derived
from
our
consolidated
financial
statements,
presents
selected
financial
information
of
our
segments
for
the
years
ended
December
31,
2016,
2015
and
2014:

(in
millions)
Revenues:
LatAm
Europe
AMEA
GPS
Corporate
Consolidated
Total
Revenues
Adjusted
EBITDA:
LatAm
Europe
AMEA
GPS
Corporate
Consolidated
Total
Adjusted
EBITDA

2016

2015

2014

2016
vs.
2015

2015
vs.
2014

%
Change

Better/(Worse)

$ 2,442.0
$ 2,415.6
$ 2,532.5

533.9

405.6

954.5

(11.7)

486.2

422.1

979.9

(12.3)

480.4

431.3

900.5

(10.0)

$ 4,244.2
$ 4,291.7
$ 4,414.7

500.7
$
83.6

59.9

257.8

(136.4)

765.6
$

463.7
$
78.4

49.9

226.8

(115.4)

703.4
$

542.0

72.8

30.1

223.0

(94.4)

773.5

(1)%

(8)%

19%

(1)%

20%

14%

(18)%

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

(14)%
8%
66%
2%
(22)%
(9)%

LatAm

Operating
results
for
our
LatAm
segment
for
the
years
ended
December
31,
2016,
2015
and
2014
were
as
follows:

(in
millions)
Segment
revenues
Segment
direct
costs:
Instructional
and
services
Marketing
and
promotional
Adjusted
EBITDA

2016

2015

$ 2,442.0
$ 2,415.6
$ 2,532.5

2014

1,832.8

108.5

500.7
$

1,837.9

114.0

463.7
$

1,868.5

122.0

542.0

%
Change

Better/(Worse)

2016
vs.
2015

2015
vs.
2014

—%

(5)%

2%
7%
(14)%

Comparison of LatAm Results for the Year Ended December 31, 2016 to the Year Ended December 31, 2015

LatAm segment revenues for
2016
increased
by
$26.4
million
to
$2,442.0
million,
compared
to
2015.
On
average,
organic
enrollment
excluding
acquisitions
increased
during
2016
by
3%
for
this
segment,
increasing
revenues
by
$72.4
million
compared
to
2015.
Each
institution
in
the
segment
offers
tuition
at
various
prices
based
upon
degree
program.
For
2016,
the
effects
of
product
mix,
pricing
and
timing
resulted
in
a
$104.5
million
increase
in
revenues
compared
to
2015.
Our
LatAm
segment
operates
in
several
countries
and
is
subject
to
the
effects
of
foreign
currency
exchange
rates
in
each
of
those
countries.
For
2016,
the
effects
of
currency
translations
decreased
revenues
by
$150.5
million,
primarily
due
to
the
weakening
of
the
Mexican
Peso,
Peruvian
Nuevo
Sol,
Chilean
Peso
and
Brazilian
Real
relative
to
the
USD.
LatAm
revenues
represented
58%
of
our
total
revenues
for
2016
compared
to
56%
for
2015.

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Table
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Contents

LatAm segment direct costs decreased
by
$10.6
million
to
$1,941.3
million,
or
79%
of
LatAm
revenues
for
2016,
compared
to
$1,951.9
million,
or
81%
of
LatAm
revenues
for
2015.
The
effects
of
currency
translations
decreased
expenses
by
$145.9
million,
primarily
due
to
the
weakening
of
the
Mexican
Peso,
Brazilian
Real,
Chilean
Peso
and
Peruvian
Nuevo
Sol
relative
to
the
USD.
In
addition,
2015
direct
costs
included
employee
termination
costs
of
$5.4
million.

Offsetting
these
direct
costs
decreases,
higher
enrollments
and
expanded
operations
at
our
LatAm
institutions
increased
direct
costs
by
$127.4
million
in
2016,
as
compared
to
2015,
due
to
increased
labor
costs
to
service
the
enrollment
growth,
increased
compliance
costs
to
address
regulatory
changes,
and
increased
direct
costs
associated
with
the
growth
in
the
LatAm
segment
during
2016.
Acquisition-related
contingent
liabilities
for
taxes
other
than
income
tax,
net
of
changes
in
recorded
indemnification
assets,
increased
expenses
by
$13.3
million
for
2016
compared
to
2015.

LatAm segment Adjusted EBITDA increased
by
$37.0
million
to
$500.7
million
in
2016
from
$463.7
million
in
2015,
as
described
above.

Comparison of LatAm Results for the Year Ended December 31, 2015 to the Year Ended December 31, 2014

LatAm segment revenues for
2015
decreased
by
$116.9
million
to
$2,415.6
million,
compared
to
2014.
Our
LatAm
segment
operates
in
several
countries
and
is
subject
to
the
effects
of
foreign
currency
exchange
rates
in
each
of
those
countries.
For
2015,
the
effects
of
currency
translations
decreased
revenues
by
$512.1
million,
primarily
due
to
the
weakening
of
the
Brazilian
Real,
Mexican
Peso,
Chilean
Peso,
Peruvian
Nuevo
Sol
and
Honduran
Lempira
relative
to
the
USD.
The
incremental
impact
of
acquisitions
resulted
in
a
$106.1
million
increase
in
revenues
in
2015.
On
average,
organic
enrollment
excluding
acquisitions
increased
during
2015
by
7%
for
this
segment,
increasing
revenues
by
$169.0
million
compared
to
2014.
Each
institution
in
the
segment
offers
tuition
at
various
prices
based
upon
degree
program.
For
2015,
the
effects
of
product
mix,
pricing
and
timing
resulted
in
a
$120.1
million
increase
in
revenues
compared
to
2014.
LatAm
revenues
represented
56%
of
our
total
revenues
for
2015
compared
to
57%
for
2014.

LatAm segment direct costs decreased
by
$38.6
million
to
$1,951.9
million,
or
81%
of
LatAm
revenues
for
2015,
compared
to
$1,990.5
million,
or
79%
of
LatAm
revenues
for
2014.
The
effects
of
currency
translations
decreased
expenses
by
$394.9
million,
primarily
due
to
the
weakening
of
the
Brazilian
Real,
Mexican
Peso,
Chilean
Peso,
Peruvian
Nuevo
Sol
and
Honduran
Lempira
relative
to
the
USD.
Employee
termination
costs
were
$5.4
million
in
2015
and
$11.5
million
in
2014,
which
resulted
in
a
decrease
year-over-year
of
$6.1
million.

Offsetting
these
direct
costs
decreases,
the
incremental
impact
of
acquisitions
increased
segment
direct
costs
by
$97.1
million
in
2015
compared
to
2014.
Higher
enrollments
and
expanded
operations
at
our
LatAm
institutions
increased
direct
costs
by
$213.5
million
in
2015
compared
to
2014
due
to
increased
labor
costs
to
service
the
enrollment
growth,
increased
compliance
costs
to
address
regulatory
changes
and
increased
direct
costs
associated
with
the
growth
in
the
LatAm
segment
during
2015.
Acquisition-related
contingent
liabilities
for
taxes
other
than
income
tax,
net
of
changes
in
recorded
indemnification
assets,
increased
expenses
by
$10.1
million
for
2015
compared
to
2014.
We
recorded
an
increase
in
direct
costs
for
a
profit-sharing
plan
in
Mexico
of
$0.9
million
in
2015
and
a
decrease
in
direct
costs
of
$22.8
million
in
2014,
thereby
increasing
costs
by
$23.7
million
in
2015
compared
to
2014.
Additionally
during
2014,
we
recorded
a
benefit
of
$11.3
million
related
to
the
settlement
of
a
pre-acquisition
loss
contingency
after
receiving
a
favorable
court
ruling.
In
2014,
we
reached
an
arbitration
settlement
related
to
indemnification
claims
with
the
former
owners
in
Brazil
and
recorded
a
gain
of
$6.7
million.

LatAm segment Adjusted EBITDA decreased
by
$78.3
million
to
$463.7
million
in
2015,
from
$542.0
million
in
2014,
as
described
above.

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Europe

Operating
results
for
our
Europe
segment
for
the
years
ended
December
31,
2016,
2015
and
2014
were
as
follows:

(in
millions)
Segment
revenues
Segment
direct
costs:
Instructional
and
services
Marketing
and
promotional
Adjusted
EBITDA

2016
$480.4

2015
$486.2

2014
$533.9

2016
vs.
2015

2015
vs.
2014

(1)%

(9)%

%
Change

Better/(Worse)

363.4
33.4
$ 83.6

374.3
33.5
$ 78.4

426.2
34.9
$ 72.8

3%
—%
7%

12%
4%
8%

Comparison of Europe Results for the Year Ended December 31, 2016 to the Year Ended December 31, 2015

Europe segment revenues for
2016
decreased
by
$5.8
million
to
$480.4
million,
compared
to
2015.
The
incremental
impact
of
dispositions
resulted
in
a
$38.7
million
decrease
in
revenue
in
2016.
The
segment
operates
in
several
countries
and
is
subject
to
the
effects
of
foreign
currency
exchange
rates
in
each
of
those
countries.
For
2016,
the
effects
of
currency
translations
decreased
revenues
by
$12.6
million
due
to
the
weakening
of
the
Turkish
Lira
and
Euro
relative
to
the
USD.
The
incremental
impact
of
acquisitions
resulted
in
a
$3.4
million
increase
in
revenues
in
2016.
On
average,
organic
enrollment
excluding
acquisitions
and
dispositions
increased
during
2016
by
12%
for
this
segment,
increasing
revenues
by
$41.0
million
compared
to
2015.
For
2016,
the
effects
of
product
mix,
pricing
and
timing
resulted
in
a
$1.1
million
increase
in
revenues
compared
to
2015.
Europe
revenues
represented
11%
of
our
total
revenues
for
2016
and
2015.

Europe segment direct costs decreased
by
$11.0
million
to
$396.8
million,
or
83%
of
Europe
revenues
for
2016,
compared
to
$407.8
million,
or
84%
of
Europe
revenues
for
2015.
The
incremental
impact
of
dispositions
resulted
in
a
$30.2
million
decrease
in
direct
costs
in
2016.
The
effects
of
currency
translations
decreased
expenses
by
$8.3
million
due
to
the
weakening
of
the
Turkish
Lira
and
Euro
relative
to
the
USD.
2015
direct
costs
included
employee
termination
costs
of
$4.1
million.
Acquisition-related
contingent
liabilities
for
taxes
other
than
income
tax,
net
of
changes
in
recorded
indemnification
assets,
decreased
expenses
by
$0.2
million
for
2016
compared
to
2015.

Offsetting
these
direct
cost
decreases,
the
incremental
impact
of
acquisitions
increased
segment
direct
costs
by
$2.0
million
in
2016
compared
to
2015.
Higher
enrollments
and
expanded
operations
at
our
institutions
in
the
Europe
segment
increased
direct
costs
by
$29.8
million
in
2016
compared
to
2015,
driven
primarily
by
increased
labor
costs
and
student
support
activities
to
service
the
enrollment
growth
experienced
during
2016.

Europe segment Adjusted EBITDA increased
by
$5.2
million
to
$83.6
million
in
2016,
from
$78.4
million
in
2015,
as
described
above.

Comparison of Europe Results for the Year Ended December 31, 2015 to the Year Ended December 31, 2014

Europe segment revenues for
2015
decreased
by
$47.7
million
to
$486.2
million,
compared
to
2014.
The
segment
operates
in
several
countries
and
is
subject
to
the
effects
of
foreign
currency
exchange
rates
in
each
of
those
countries.
For
2015,
the
effects
of
currency
translations
decreased
revenues
by
$97.0
million
due
to
the
weakening
of
the
Euro
and
Turkish
Lira
relative
to
the
USD.
The
incremental
impact
of
acquisitions
resulted
in
an
$8.2
million
increase
in
revenues
in
2015.
On
average,
organic

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enrollment
excluding
acquisitions
increased
during
2015
by
10%
for
this
segment,
increasing
revenues
by
$35.5
million
compared
to
2014.
For
2015,
the
effects
of
product
mix,
pricing
and
timing
resulted
in
a
$5.6
million
increase
in
revenues
compared
to
2014.
Europe
revenues
represented
11%
of
our
total
revenues
for
2015
compared
to
12%
for
2014.

Europe segment direct costs decreased
by
$53.3
million
to
$407.8
million,
or
84%
of
Europe
revenues
for
2015,
compared
to
$461.1
million,
or
86%
of
Europe
revenues
for
2014.
The
effects
of
currency
translations
decreased
expenses
by
$82.1
million
due
to
the
weakening
of
the
Euro
and
Turkish
Lira
relative
to
the
USD.
During
the
fourth
quarter
of
2014,
we
recorded
an
operating
expense
of
$18.0
million
for
a
donation
to
a
foundation
for
an
initiative
supported
by
the
Turkish
government.
Employee
termination
costs
were
$4.1
million
in
2015
and
$4.7
million
in
2014,
which
resulted
in
a
decrease
year-over-year
of
$0.6
million
in
2015
compared
to
2014.

Offsetting
these
direct
cost
decreases,
the
incremental
impact
of
acquisitions
increased
segment
direct
costs
by
$6.5
million
in
2015
compared
to
2014.
Higher
enrollments
and
expanded
operations
at
our
institutions
in
the
Europe
segment
increased
direct
costs
by
$40.9
million
in
2015
compared
to
2014,
driven
primarily
by
increased
labor
costs
and
student
support
activities
to
service
the
enrollment
growth
experienced
during
2015.

Europe segment Adjusted EBITDA increased
by
$5.6
million
to
$78.4
million
in
2015,
from
$72.8
million
in
2014,
as
described
above.

AMEA

Operating
results
for
our
AMEA
segment
for
the
years
ended
December
31,
2016,
2015
and
2014
were
as
follows:

(in
millions)
Segment
revenues
Segment
direct
costs:
Instructional
and
services
Marketing
and
promotional
Adjusted
EBITDA

2016
$431.3

2015
$422.1

2014
$405.6

333.7
37.7
$ 59.9

337.5
34.7
$ 49.9

343.0
32.5
$ 30.1

%
Change

Better/(Worse)

2016
vs.
2015

2015
vs.
2014

1%
(9)%
20%

2%
(7)%
66%

Comparison of AMEA Results for the Year Ended December 31, 2016 to the Year Ended December 31, 2015

AMEA segment revenues for
2016
increased
by
$9.2
million
to
$431.3
million,
compared
to
2015.
On
average,
organic
enrollment
excluding
acquisitions
increased
during
2016
by
4%
for
this
segment,
increasing
revenues
by
$3.7
million
compared
to
2015.
For
2016,
the
effects
of
product
mix,
pricing
and
timing
resulted
in
a
$20.0
million
increase
in
revenues
compared
to
2015.
The
segment
operates
in
several
countries
and
is
subject
to
the
effects
of
foreign
currency
exchange
rates
in
each
of
those
countries.
For
2016,
the
effects
of
currency
translations
decreased
revenues
by
$14.5
million,
primarily
due
to
the
weakening
of
the
Malaysian
Ringgit,
Chinese
Renminbi,
Indian
Rupee
and
South
African
Rand
relative
to
the
USD.
AMEA
revenues
represented
10%
of
our
total
revenues
for
2016
and
2015.

AMEA segment direct costs decreased
by
$0.8
million
to
$371.4
million,
or
86%
of
AMEA
revenues
for
2016,
compared
to
$372.2
million,
or
88%
of
AMEA
revenues
for
2015.
For
2016,
the
effects
of
currency
translations
decreased
expenses
by
$13.0
million,
primarily
due
to
the
weakening
of
the
Malaysian
Ringgit,
South
African
Rand,
Indian
Rupee,
Chinese
Renminbi
and
Australian
Dollar
relative
to
the
USD.
Employee
termination
costs
increased
direct
costs
by
$2.5
million
in
2015.
These

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decreases
were
partially
offset
by
increased
costs
to
support
the
growth
in
our
operations,
which
increased
costs
by
$14.6
million
in
2016
compared
to
2015.
Changes
in
contingent
liabilities
for
taxes
other
than
income
tax,
net
of
changes
in
recorded
indemnification
assets,
increased
expenses
by
$0.1
million
for
2016
compared
to
2015.

AMEA segment Adjusted EBITDA increased
by
$10.0
million
to
$59.9
million
in
2016,
from
$49.9
million
in
2015,
as
described
above.

Comparison of AMEA Results for the Year Ended December 31, 2015 to the Year Ended December 31, 2014

AMEA segment revenues for
2015
increased
by
$16.5
million
to
$422.1
million,
compared
to
2014.
The
incremental
impact
of
acquisitions
resulted
in
a
$0.5
million
increase
in
revenues
in
2015.
On
average,
organic
enrollment
excluding
acquisitions
increased
during
2016
by
9%
for
this
segment,
increasing
revenues
by
$65.7
million
compared
to
2014.
For
2015,
the
effects
of
product
mix,
pricing
and
timing
resulted
in
a
$4.0
million
increase
in
revenues
compared
to
2014.
The
segment
operates
in
several
countries
and
is
subject
to
the
effects
of
foreign
currency
exchange
rates
in
each
of
those
countries.
For
2015,
the
effects
of
currency
translations
decreased
revenues
by
$53.7
million,
primarily
due
to
the
weakening
of
the
Australian
Dollar,
Malaysian
Ringgit,
South
African
Rand
and
Indian
Rupee
relative
to
the
USD.
AMEA
revenues
represented
10%
of
our
total
revenues
for
2015
compared
to
9%
for
2014.

AMEA segment direct costs decreased
by
$3.3
million
to
$372.2
million,
or
88%
of
AMEA
revenues
for
2015,
compared
to
$375.5
million,
or
93%
of
AMEA
revenues
for
2014.
For
2015,
the
effects
of
currency
translations
decreased
expenses
by
$46.0
million,
primarily
due
to
the
weakening
of
the
Australian
Dollar,
Malaysian
Ringgit,
South
African
Rand,
and
Indian
Rupee
relative
to
the
USD.
In
2014,
we
determined
it
was
probable
that
THINK
would
meet
performance
targets
that
were
part
of
a
share
purchase
agreement
and
accrued
for
a
contingent
earn-out
of
$3.8
million.
Additionally,
during
2014,
HIEU
recorded
a
$4.4
million
loss
on
disposal
of
property
to
write
off
the
carrying
value
of
several
parcels
of
land
for
which
it
no
longer
has
land
use
rights.
The
incremental
impact
of
acquisitions
increased
segment
direct
costs
by
$1.3
million
in
2015
compared
to
2014.
Increased
costs
to
support
the
growth
in
our
operations
increased
costs
by
$44.2
million
in
2015
compared
to
2014.
In
2014,
an
entity
in
Saudi
Arabia
received
a
benefit
of
$2.8
million,
primarily
related
to
cash
payments
received
for
fully
reserved
receivables.
Employee
termination
costs
increased
direct
costs
by
$2.5
million
in
2015.
Changes
in
contingent
liabilities
for
taxes
other
than
income
tax,
net
of
changes
in
recorded
indemnification
assets,
increased
expenses
by
$0.1
million
for
2015
compared
to
2014.

AMEA segment Adjusted EBITDA increased
by
$19.8
million
to
$49.9
million
in
2015,
from
$30.1
million
in
2014,
as
described
above.

GPS

Operating
results
for
our
GPS
segment
for
the
years
ended
December
31,
2016,
2015
and
2014
were
as
follows:

(in
millions)
Segment
revenues
Segment
direct
costs:
Instructional
and
services
Marketing
and
promotional
Adjusted
EBITDA

2016
$900.5

2015
$979.9

2014
$954.5

516.7
126.0
$257.8

627.8
125.3
$226.8

602.3
129.2
$223.0

%
Change

Better/(Worse)

2016
vs.
2015

2015
vs.
2014

(8)%

18%
(1)%
14%

(4)%
3%
2%

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Comparison of GPS Results for the Year Ended December 31, 2016 to the Year Ended December 31, 2015

GPS segment revenues for
2016
decreased
by
$79.4
million
to
$900.5
million,
compared
to
2015.
The
incremental
impact
of
dispositions
decreased
revenues
by
$90.5
million
in
2016.
For
2016,
the
effects
of
currency
translations
decreased
revenues
by
$2.8
million,
primarily
due
to
the
weakening
of
the
Swiss
Franc
relative
to
the
USD.
On
average,
organic
enrollment
excluding
acquisitions
and
dispositions
remained
relatively
flat
during
2016,
with
revenues
increasing
by
$0.8
million
compared
to
2015.
For
2016,
the
effects
of
product
mix,
pricing
and
timing
resulted
in
a
$13.1
million
increase
in
revenues
compared
to
2015.
GPS
segment
revenues
represented
21%
of
our
total
revenues
for
2016
compared
to
23%
for
2015.

GPS segment direct costs decreased
by
$110.4
million
to
$642.7
million,
or
71%
of
total
GPS
segment
revenues
for
2016,
compared
to
$753.1
million,
or
77%
of
total
GPS
segment
revenues
for
2015.
The
incremental
impact
of
dispositions
decreased
direct
costs
by
$85.0
million
in
2016.
Decreased
expenses
from
the
closure
of
NHU
in
August
2015
and
other
operational
impacts
decreased
direct
costs
by
$19.8
million
during
2016
compared
to
2015.
The
effects
of
currency
translations
decreased
direct
costs
by
$2.4
million
in
2016,
compared
to
2015,
due
to
the
weakening
of
the
Swiss
Franc
relative
to
the
USD.
2015
direct
costs
included
employee
termination
costs
of
$3.2
million.

GPS segment Adjusted EBITDA increased
by
$31.0
million
to
$257.8
million
for
2016,
from
$226.8
million
for
2015,
as
described
above.

Comparison of GPS Results for the Year Ended December 31, 2015 to the Year Ended December 31, 2014

GPS segment revenues for
2015
increased
by
$25.4
million
to
$979.9
million,
compared
to
2014.
On
average,
organic
enrollment
excluding
acquisitions
increased
during
2015
by
3%,
increasing
revenues
by
$29.6
million
compared
to
2014.
For
2015,
the
effects
of
product
mix,
pricing
and
timing
resulted
in
a
$21.1
million
increase
in
revenues
compared
to
2014.
For
2015,
the
effects
of
currency
translations
decreased
revenues
by
$26.1
million,
primarily
due
to
the
weakening
of
the
Euro
and
Swiss
Franc
relative
to
the
USD.
GPS
Shared
Service
and
Eliminations
revenue
increased
by
$0.8
million
for
2015
compared
to
2014
due
to
increases
in
inter-segment
revenues
related
to
a
management
service
arrangement.
GPS
segment
revenues
represented
23%
of
our
total
revenues
for
2015
compared
to
22%
for
2014.

GPS segment direct costs increased
by
$21.6
million
to
$753.1
million,
or
77%
of
total
GPS
segment
revenues
for
2015,
compared
to
$731.5
million,
or
77%
of
total
GPS
segment
revenues
for
2014.
Higher
enrollments
and
expanded
operations
contributed
to
$53.2
million
of
the
increased
expenses
during
2015
compared
to
2014.
Direct
costs
included
employee
termination
costs
of
$3.2
million
in
2015
and
$1.8
million
in
2014,
resulting
in
a
year-over-year
direct
cost
increase
of
$1.4
million.
The
effects
of
currency
translations
decreased
segment
direct
costs
by
$24.2
million
in
2015,
compared
to
2014,
due
to
the
weakening
of
the
Euro
and
Swiss
Franc
relative
to
the
USD.
In
connection
with
a
teach
out
at
NHU,
we
recorded
costs
of
$6.6
million
for
2014
to
ensure
an
orderly
and
successful
transition
for
our
students.
GPS
direct
costs
decreased
by
$2.2
million
for
2015
compared
to
2014
related
to
the
operation
of
the
shared
service
center.

GPS segment Adjusted EBITDA increased
by
$3.8
million
to
$226.8
million
for
2015,
from
$223.0
million
for
2014,
as
described
above.

Corporate

Corporate revenues represent
amounts
from
contractual
arrangements
with
UDLA
Ecuador,
our
consolidated
joint
venture
with
the
University
of
Liverpool
and
Corporate
billings
for
centralized
IT
costs
billed
to
various
segments,
offset
by
the
elimination
of
inter-segment
revenues.

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Operating
results
for
Corporate
for
the
years
ended
December
31,
2016,
2015
and
2014
were
as
follows:

(in
millions)
Revenues
Expenses
Adjusted
EBITDA

2014

2016

2015
$ (10.0) $ (12.3) $ (11.7)
82.7
$ (136.4) $ (115.4) $ (94.4)

103.1

126.4

%
Change

Better/(Worse)

2016
vs.
2015

19%
(23)%
(18)%

2015
vs.
2014
(5)%
(25)%
(22)%

Comparison of Corporate Results for the Year Ended December 31, 2016 to the Year Ended December 31, 2015

Corporate Adjusted EBITDA decreased
by
$21.0
million
to
$(136.4)
million
for
2016,
compared
to
$(115.4)
million
for
2015.
This
decrease
in
adjusted
EBITDA
results
primarily
from
an
increase
in
labor
costs
of
$19.2
million.
In
2015,
we
recognized
employee
termination
costs
of
$0.3
million.
Other
items
accounted
for
a
change
of
$2.1
million.

Comparison of Corporate Results for the Year Ended December 31, 2015 to the Year Ended December 31, 2014

Corporate Adjusted EBITDA decreased
by
$21.0
million
to
$(115.4)
million
for
2015,
compared
to
$(94.4)
million
for
2014.
This
decrease
in
adjusted
EBITDA
results
primarily
from
an
increase
in
labor
costs
of
$14.5
million
combined
with
$4.8
million
of
proceeds
in
2014
for
the
settlement
of
earthquake-related
insurance
claims.
Additionally,
in
2015,
we
recognized
employee
termination
costs
of
$0.3
million.
Other
items
accounted
for
a
change
of
$1.4
million.

Liquidity
and
Capital
Resources

Liquidity
Sources

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

Our
primary
source
of
cash
is
revenue
from
tuition
charged
to
students
in
connection
with
our
various
education
program
offerings.
The
majority
of
our
students
finance
the
costs
of
their
own
education
and/or
seek
third-party
financing
programs.
We
anticipate
generating
sufficient
cash
flow
from
operations
in
the
majority
of
countries
where
we
operate
to
satisfy
the
working
capital
and
financing
needs
of
our
organic
growth
plans
for
each
country.
If
our
educational
institutions
within
one
country
were
unable
to
maintain
sufficient
liquidity
we
would
consider
using
internal
cash
resources
or
reasonable
short-term
working
capital
facilities
to
accommodate
any
short-
to
medium-term
shortfalls.

As
of
December
31,
2016,
our
secondary
source
of
cash
was
cash
and
cash
equivalents
of
$465.0
million.
Our
cash
accounts
are
maintained
with
high-quality
financial
institutions
with
no
significant
concentration
in
any
one
institution.

The
Company
also
maintains
a
revolving
credit
facility
with
a
syndicate
of
financial
institutions
as
a
third
source
of
liquidity.
The
revolving
credit
facility
provides
for
borrowings
of
$325.0
million
if
certain
financial
covenants
are
maintained,
and
a
maturity
date
of
June
2019,
subject
to
certain
acceleration
provisions
as
further
discussed
below.
The
Company
was
in
compliance
with
these
covenants
at
December
31,
2016.
The
Company
continues
to
maintain
a
substantial
unencumbered
asset
pool
that
it
believes
can
be
used
for
additional
secured
and
unsecured
borrowings,
and
for
sale
and
sale-leaseback
transactions.
Additionally,
a
significant
portion
of
the
Company's
capital
expenditures
in
any
given
year
are
for
growth
initiatives
and
are
therefore
discretionary.

190

Table
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Since
the
beginning
of
2016,
the
Company
has
taken
numerous
actions
to
reduce
leverage,
improve
liquidity
and
increase
cash
flow.
The
sale
of
our
Swiss
and
French
operations,
as
further
discussed
below,
resulted
in
net
proceeds
to
the
Company
of
approximately
$546
million.
These
proceeds
were
used
to
repay
approximately
$380
million
of
long-term
indebtedness,
with
the
remaining
proceeds
used
to
repay
a
portion
of
our
revolving
credit
facility,
thus
increasing
our
liquidity.
In
addition,
during
July
2016,
the
Company
completed
amendments
to
our
Senior
Secured
Credit
Facilities
which
addressed
a
significant
portion
of
the
near-term
debt
maturities
of
the
Company
by
extending
84%
of
the
term
loan
maturities
originally
scheduled
to
mature
in
2018
to
2021,
and
all
of
the
revolving
credit
facility
to
2019,
both
subject
to
certain
acceleration
rights
as
further
discussed
below.
The
Company
continually
evaluates
its
debt
maturities
and,
based
on
management's
current
assessment,
believes
it
has
viable
financing
and
refinancing
alternatives.

On
December
4,
2016,
the
Company
signed
the
Subscription
Agreement
pursuant
to
which
we
agreed
to
issue
and
sell
to
certain
investors
an
aggregate
of
400,000
shares
of
Series
A
Preferred
Stock
in
a
private
offering
for
total
expected
net
proceeds
of
approximately
$383.0
million.
Closing
of
the
first
tranche
of
funding
for
this
transaction
occurred
on
December
20,
2016
and
we
received
net
proceeds,
after
issuance
costs,
of
approximately
$328
million.
In
January
2017,
one
investor
funded
a
portion
of
its
purchase
price
equal
to
$57
million
(approximately
$55
million
net
of
issuance
costs).
The
proceeds
from
the
Series
A
Preferred
Stock
offering
have
and
will
be
used
primarily
to,
among
other
things,
repay
a
portion
of
our
outstanding
debt,
including
our
revolving
credit
facility,
which
will
improve
our
liquidity.

On
February
6,
2017
the
Company
completed
its
IPO
of
its
Class
A
common
stock,
a
newly
established
class
of
the
Company's
common
stock
of
which
700.0
million
shares
were
authorized.
The
Company
sold
35.0
million
shares
of
its
Class
A
common
stock
at
an
initial
public
offering
price
of
$14.00
per
share,
resulting
in
net
proceeds,
after
deducting
underwriting
discounts
and
commissions
and
estimated
offering
expenses
payable
by
us,
of
approximately
$456.5
million.
We
intend
to
use
the
net
proceeds
from
this
offering
to
repay,
redeem
or
repurchase
our
outstanding
Senior
Notes
due
2019,
our
term
loans
under
our
Senior
Secured
Credit
Facilities
and/or
the
seller
notes
used
to
partially
finance
the
acquisition
of
the
FMU
group.

On
June
14,
2016,
we
sold
the
operations
of
Glion
in
Switzerland
and
the
United
Kingdom,
and
the
operations
of
Les
Roches
in
Switzerland
and
the
United
States,
as
well
as
Haute
école
spécialisée
Les
Roches-Gruyère
SA
(LRG)
in
Switzerland,
Les
Roches
Jin
Jiang
in
China,
Royal
Academy
of
Culinary
Arts
(RACA)
in
Jordan
and
Les
Roches
Marbella
in
Spain.
As
a
result
of
this
sale,
the
Company
received
net
proceeds
of
approximately
$332.8
million,
net
of
cash
sold
of
$14.5
million,
and
after
adjustments
for
liabilities
assumed
by
the
buyer
and
transaction-related
costs.
In
September
2016,
Laureate
received
additional
proceeds
from
the
buyer
of
approximately
$5.8
million
after
finalization
of
the
working
capital
adjustment
required
by
the
purchase
agreement.
In
addition,
on
the
June
14,
2016
closing
date,
we
settled
the
deal-contingent
forward
exchange
swap
agreement
for
a
payment
of
$10.3
million.

On
July
20,
2016,
we
sold
the
operations
of
LIUF
which
comprised
five
institutions
including
two
VIE
institutions,
with
a
total
student
population
of
approximately
7,500:

•

École
Supérieure
du
Commerce
Extérieur
(ESCE);

Institut
Français
de
Gestion
(IFG);

European
Business
School
(EBS);

École
Centrale
d'Electronique
(ECE);
and

Centre
d'Études
Politiques
et
de
la
Communication
(CEPC).

191

Table
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The
value
of
the
transaction
was
EUR
201.0
million
(approximately
US
$228.0
million
at
the
signing
date),
subject
to
certain
adjustments.
At
closing
on
July
20,
2016,
we
received
total
net
proceeds
of
approximately
$207.0
million,
net
of
cash
sold
of
$3.4
million,
and
adjustments
for
liabilities
assumed
by
the
buyer
and
transaction-related
costs.
In
addition,
in
July
we
settled
the
forward
exchange
swap
agreements
related
to
this
sale,
resulting
in
total
proceeds
of
$4.6
million.

During
2014
and
2015
the
United
States
Dollar
strengthened
significantly
against
most
of
the
local
currencies
in
countries
where
we
have
significant
operations,
which
has
negatively
affected
our
cash
flows
from
operations.
Though
currency
movements
can
unfavorably
impact
our
cash
flows,
we
have
the
ability
to
increase
cash
flow
and
liquidity,
if
needed,
through
reductions
in
certain
discretionary
spending
including,
but
not
limited
to,
growth
capital
expenditures,
investments
in
our
EiP
initiative
and
other
discretionary
investments.

FIES Payment Plan

The
Brazilian
government
implemented
changes
to
the
FIES
program
in
2015,
which
included
extending
the
payment
period
from
the
government
to
the
participating
institutions.
Our
total
FIES
receivable
balances
at
December
31,
2016
and
2015
were
approximately
$111.7
million
and
$78.3
million,
compared
to
a
balance
of
approximately
$24.0
million
at
December
31,
2014.
The
increase
in
total
FIES
receivables
was
caused
by
a
delay
in
the
receipt
of
funds
from
the
Brazilian
government,
as
well
as
foreign
currency
exchange
impacts.
The
government
has
implemented
a
payment
plan
for
all
outstanding
2015
FIES
amounts.
We
received
payment
for
25
percent
of
the
outstanding
2015
FIES
balances
in
June
2016.
We
expect
to
receive
payments
on
the
remaining
outstanding
2015
FIES
balances
of
25
percent
by
June
30,
2017
and
50
percent
by
June
30,
2018.
Each
payment
will
include
an
adjustment
based
on
the
Brazilian
inflation
index.
If
the
payments
are
not
received
by
the
due
dates,
it
will
have
a
negative
impact
on
our
operating
cash
flows.
See
also
Note
19,
Legal
and
Regulatory
Matters,
in
our
consolidated
financial
statements.

Liquidity Restrictions

Our
liquidity
is
affected
by
restricted
cash
and
investments
balances,
which
totaled
$189.3
million
and
$160.6
million
as
of
December
31,
2016
and
2015,
respectively.

Restricted
cash
and
investments
consists
of
cash
equivalents
and
short-term
investments
held
to
collateralize
standby
letters
of
credit
in
favor
of
the
DOE.
These
letters
of
credit
are
required
by
the
DOE
in
order
to
allow
our
U.S.
Institutions
to
participate
in
the
Title
IV
program
and
totaled
$105.6
million
and
$86.6
million
as
of
December
31,
2016
and
2015,
respectively.

As
of
December
31,
2016
and
2015,
we
had
$34.7
million
and
$36.5
million,
respectively,
posted
as
cash-collateralized
letters
of
credit
in
order
to
continue
the
appeals
process
with
the
Spanish
Taxing
Authorities
(STA)
who
challenged
the
holding
company
structure
in
Spain
and
issued
final
assessments
against
Iniciativas
Culturales
de
España,
S.L.
(ICE),
our
Spanish
holding
company,
of
EUR
11.1
million
(US
$11.5
million
at
December
31,
2016),
including
interest,
for
the
periods
2006
through
2007.
In
July
2013,
we
were
notified
by
the
STA
that
an
audit
of
the
Spanish
subsidiaries
was
being
initiated
for
2008
through
2010.
In
October
2015,
the
STA
issued
a
final
assessment
to
ICE
for
approximately
EUR
17.2
million
(US
$17.9
million
at
December
31,
2016),
including
interest,
for
those
three
years.
We
have
appealed
the
assessments
and,
in
order
to
suspend
the
payment
of
the
tax
assessments
until
the
court
decision,
we
issued
cash-
collateralized
letters
of
credit
for
the
assessment
amounts
plus
interest
and
surcharges.
We
believe
the
assessments
in
this
case
are
without
merit
and
intend
to
defend
vigorously
against
them.
During
the
second
quarter
of
2016,
we
were
notified
by
the
STA
that
tax
audits
of
the
Spanish
subsidiaries
were
also
being
initiated
for
2011
and
2012;
no
assessments
have
yet
been
issued
for
these
years.
Also
during
the
second
quarter
of
2016,
the
Regional
Administrative
Court
issued
a
decision
against
the
Company
on
its
appeal.
The
Company
has
further

192

Table
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Contents

appealed
at
the
Highest
Administrative
Court
level.
The
Company
plans
to
continue
the
appeals
process
for
the
periods
already
audited
and
assessed.

Indefinite Reinvestment of Foreign Earnings

We
earn
a
significant
portion
of
our
income
from
subsidiaries
located
in
countries
outside
of
the
United
States.
As
part
of
our
business
strategies,
we
have
determined
that
all
earnings
from
our
foreign
operations
will
be
deemed
indefinitely
reinvested
outside
of
the
United
States.
As
of
December
31,
2016
and
2015,
our
undistributed
earnings
from
non-U.S.
subsidiaries
totaled
approximately
$1,827.2
million
and
$1,154.0
million,
respectively.
As
of
December
31,
2016,
$373.4
million
of
our
total
$465.0
million
of
cash
and
cash
equivalents
were
held
by
foreign
subsidiaries,
including
$169.1
million
held
by
VIEs.
As
of
December
31,
2015,
$342.8
million
of
our
total
$458.7
million
of
cash
and
cash
equivalents
were
held
by
foreign
subsidiaries,
including
$120.9
million
held
by
VIEs.
The
VIEs'
cash
and
cash
equivalents
balances
are
generally
required
to
be
used
only
for
the
operations
of
these
VIEs.

Our
plans
to
indefinitely
reinvest
certain
earnings
are
supported
by
projected
working
capital
and
long-term
capital
requirements
in
each
foreign
subsidiary
location
in
which
the
earnings
are
generated.
We
have
analyzed
our
domestic
operation's
cash
repatriation
strategies,
projected
cash
flows,
projected
working
capital
and
liquidity,
and
the
expected
availability
within
the
debt
or
equity
markets
to
provide
funds
for
our
domestic
needs.
As
a
result,
we
rely
on
payments
from
contractual
arrangements,
such
as
intellectual
property
royalty,
network
fee
and
management
services
agreements,
as
well
as
repayments
of
intercompany
loans
to
meet
any
of
our
existing
or
future
debt
service
and
other
obligations,
a
substantial
portion
of
which
are
denominated
in
USD.
Based
on
our
analysis,
we
believe
we
have
the
ability
to
indefinitely
reinvest
these
foreign
earnings.

If
our
expectations
change
based
on
future
developments
such
that
some
or
all
of
the
undistributed
earnings
of
our
foreign
subsidiaries
may
be
remitted
to
the
United
States
in
the
foreseeable
future,
we
will
be
required
to
recognize
deferred
tax
expense
and
liabilities
on
those
amounts
and
pay
additional
taxes.
In
addition,
if
applicable
U.S.
tax
rules
are
modified
to
cause
U.S.
corporations
to
pay
taxes
on
foreign
earnings,
even
if
the
earnings
are
not
remitted
to
the
United
States,
we
may
incur
additional
taxes
in
the
United
States.

Liquidity
Requirements

Our
short-term
liquidity
requirements
include:
funding
for
debt
service
(including
capital
leases);
operating
lease
obligations;
payments
of
deferred
compensation;
payments
due
to
shareholders
of
acquired
companies;
settlements
of
derivatives;
working
capital;
operating
expenses;
payments
of
third-party
obligations;
capital
expenditures;
and
business
development
activities.

Long-term
liquidity
requirements
include:
principal
payments
of
long-term
debt;
operating
lease
obligations;
payments
of
long-term
amounts
due
to
shareholders
of
acquired
companies;
payments
of
deferred
compensation;
settlements
of
derivatives;
and
business
development
activities.

Debt

As
of
December
31,
2016,
senior
long-term
borrowings,
totaled
$2,885.9
million
and
consisted
of
the
following:

•

$1,497.9
million
under
the
Senior
Secured
Credit
Facility
that
matures
in
June
2018,
June
2019
and
March
2021;
and

$1,388.0
million
in
Senior
Notes
that
mature
in
September
2019.

As
of
December
31,
2016,
other
debt
balances
totaled
$716.3
million,
and
our
capital
lease
obligations
and
sale-leaseback
financings
were
$250.8
million.
Other
debt
includes
lines
of
credit
and

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short-term
borrowing
arrangements
of
subsidiaries,
mortgages
payable,
and
notes
payable.
As
discussed
further
below,
the
Company
has
undertaken
several
initiatives
to
reduce
its
leverage
and
extend
the
maturities
of
its
obligations.
Also,
in
addition
to
using
the
IPO
proceeds
for
repayment,
redemption
or
repurchase
of
certain
of
our
indebtedness
as
described
above,
we
plan
to
take
one
or
more
actions
in
2017
to
refinance
certain
of
our
existing
indebtedness,
including
our
Senior
Secured
Credit
Facilities
and
revolving
credit
facility.
Any
refinancing
is
subject
to
market
and
other
conditions
and
the
terms
of
any
such
refinancing
will
be
announced
upon
completion
of
the
transaction.

Senior Secured Credit Facilities

We
entered
into
the
Senior
Secured
Credit
Facilities
with
a
syndicate
of
lenders
on
August
17,
2007
to
fund
the
leveraged
buyout
merger
between
Laureate
and
Wengen.
On
June
16,
2011,
we
amended
and
restated
our
credit
agreement
(the
"Amended
and
Restated
Credit
Agreement")
in
order
to,
among
other
things,
extend
maturity
dates.
During
2011
and
2013,
the
Company
entered
into
additional
term
loan
agreements
totaling
approximately
$785.0
million.

As
discussed
in
further
detail
in
Note
9,
Debt,
in
our
consolidated
financial
statements,
on
June
3,
2016,
we
entered
into
the
Fifth
Amendment
to
the
Amended
and
Restated
Credit
Agreement
to,
among
other
things,
extend
the
maturity
dates
on
approximately
$1,526.0
million
of
the
approximately
$1,810.1
million
of
then-
outstanding
term
loans
from
June
2018
to
March
17,
2021.
Effectiveness
of
such
term
loan
extensions
were
subject
to
the
satisfaction
of
certain
conditions
including,
(i)
the
closing
of
the
sale
of
the
Glion
and
Les
Roches
hospitality
management
schools
and
our
operations
in
France,
(ii)
the
prepayment
of
$300.0
million
to
the
holders
of
the
term
loans
who
have
agreed
to
extend
their
maturity,
and
(iii)
the
further
amendment
of
the
Amended
and
Restated
Credit
Agreement
pursuant
to
which
certain
of
the
lenders
thereunder
holding
revolving
credit
commitments
would
have
agreed
to
extend
the
maturity
date
of
the
revolving
line
of
credit
facility
to
a
date
on
or
after
March
8,
2019.
These
conditions
were
satisfied
and
the
Fifth
Amendment
became
effective
on
July
29,
2016.
The
extended
term
loans
with
a
maturity
date
of
March
17,
2021
are
referred
to
as
the
2021
Extended
Term
Loan,
and
the
non-extended
term
loans
with
a
maturity
date
of
June
2018
continue
to
be
referred
to
as
the
2018
Extended
Term
Loan.
The
Fifth
Amendment
also
provides
that,
if
on
the
date
that
is
91days
prior
to
September
1,
2019
more
than
$250.0
million
of
the
principal
amount
of
the
Senior
Notes
due
2019
is
outstanding,
then
the
2021
Extended
Term
Loan
maturity
date
shall
be
the
date
that
is
91
days
prior
to
September
1,
2019.

As
discussed
in
further
detail
in
Note
9,
Debt,
in
our
consolidated
financial
statements,
on
July
7,
2016,
we
entered
into
the
Sixth
Amendment
to
the
Amended
and
Restated
Credit
Agreement
(the
"Sixth
Amendment")
to
extend
the
maturity
date
of
the
revolving
credit
facility
to
June
7,
2019,
subject
to
the
closing
of
the
Fifth
Amendment
and
other
conditions
needing
to
be
satisfied.
The
Sixth
Amendment
also
reduced
the
borrowing
capacity
of
the
revolving
line
of
credit
facility
from
$350.0
million
to
$325.0
million.
The
conditions
for
the
effectiveness
of
the
Sixth
Amendment
were
satisfied
and
the
Sixth
Amendment
became
effective
on
July
29,
2016.
If,
on
that
date
that
is
91
days
prior
to
September
1,
2019,
more
than
$250.0
million
of
the
principal
amount
of
the
Senior
Notes
due
2019
is
outstanding,
then
the
maturity
date
of
the
revolving
line
of
credit
facility
shall
be
the
date
that
is
91
days
prior
to
September
1,
2019.
Further,
if,
on
that
date
that
is
91
days
prior
to
the
maturity
date
of
the
2018
Extended
Term
Loan
more
than
$250.0
million
of
the
principal
amount
of
the
2018
Extended
Term
Loan
is
outstanding,
then
the
maturity
date
of
the
revolving
line
of
credit
facility
shall
be
the
date
that
is
91
days
prior
to
the
2018
Extended
Term
Loan
maturity
date.

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Contents

As
of
December
31,
2016,
the
outstanding
balance
under
our
Senior
Secured
Credit
Facility
was
$1,497.9
million,
which
consisted
of
no
amount
outstanding
under
our
senior
secured
multi-currency
revolving
credit
facility
and
an
aggregate
outstanding
balance
of
$1,497.9
million,
net
of
a
debt
discount,
under
the
term
loans.
As
of
December
31,
2016,
we
had
$0.9
million
of
outstanding
letters
of
credit
that
decrease
availability
on
our
revolving
credit
facility.
Accordingly,
as
of
December
31,
2016,
the
available
borrowing
capacity
on
our
$325.0
million
senior
secured
multi-currency
revolving
credit
facility
was
approximately
$324.1
million.
As
of
December
31,
2015,
the
outstanding
balance
under
our
Senior
Secured
Credit
Facility
was
$2,084.1
million,
which
consisted
of
$269.3
million
outstanding
under
our
senior
secured
multi-currency
revolving
credit
facility
and
an
aggregate
outstanding
balance
of
$1,814.8
million,
net
of
a
debt
discount,
under
the
term
loans.

Senior Notes due 2019

On
July
25,
2012,
we
completed
an
offering
of
$350.0
million
of
9.250%
Senior
Notes
due
2019.
The
net
proceeds
received
from
the
debt
offering
were
used
to
repay
a
portion
of
our
senior
secured
multi-currency
revolving
credit
facility.
On
November
13,
2012,
we
completed
an
offering
of
$1,050.0
million
of
additional
Senior
Notes
due
2019.
The
notes
are
treated
as
a
single
series
with
the
$350.0
million
of
Senior
Notes
that
were
issued
in
July
2012.
The
Company
used
the
net
proceeds
from
the
sale
of
the
additional
Senior
Notes
due
2019
to
repay
other
outstanding
indebtedness.
On
December
29,
2015,
we
issued
$50.0
million
of
Senior
Notes
to
the
participants
of
the
nonqualified
share-based
compensation
agreement
to
satisfy
the
2015
obligation
to
the
participants.
On
December
30,
2016,
we
issued
$10.5
million
aggregate
principal
amount
of
Senior
Notes
to
the
participants
of
the
nonqualified
share-based
deferred
compensation
arrangement
to
satisfy
the
2016
obligation
to
the
participants.

As
of
December
31,
2016
and
2015,
our
outstanding
balance
under
our
Senior
Notes
was
$1,388.0
million
and
$1,436.2
million,
respectively,
net
of
a
debt
discount.
The
Senior
Notes
mature
on
September
1,
2019.

On
April
15,
2016,
we
entered
into
Note
Exchange
Agreements
with
certain
Existing
Holders
of
the
Senior
Notes
pursuant
to
which
we
will
exchange
$250.0
million
in
aggregate
principal
amount
of
Senior
Notes
for
shares
of
our
Class
A
common
stock.
We
expect
the
exchange
to
be
completed
within
one
year
after
the
consummation
a
Qualified
Public
Offering,
as
defined
in
the
Note
Exchange
Agreements,
which
occurred
on
February
6,
2017.
The
number
of
shares
of
Class
A
common
stock
issuable
will
equal
104.625%
of
the
aggregate
principal
amount
of
Senior
Notes
to
be
exchanged,
or
$261.6
million,
divided
by
$14.00
per
share,
the
initial
public
offering
price
per
share
of
Class
A
common
stock
in
the
Qualified
Public
Offering.

Pursuant
to
the
Note
Exchange
Agreements,
on
June
15,
2016,
we
also
repurchased
from
the
Existing
Holders
$62.5
million
aggregate
principal
amount
of
Senior
Notes
at
par
value,
plus
accrued
and
unpaid
interest
and
special
interest.
The
Note
Exchange
Agreements
also
provided
that,
within
60
days
after
the
consummation
of
a
Qualified
Public
Offering,
at
the
option
of
the
Existing
Holders
or
their
transferees,
we
will
repurchase
up
to
an
additional
$62.5
million
aggregate
principal
amount
of
Senior
Notes
at
the
redemption
price
set
forth
in
the
indenture
governing
the
Senior
Notes
that
is
applicable
as
of
the
date
of
pricing
of
the
Qualified
Public
Offering,
plus
accrued
and
unpaid
interest
and
special
interest.
On
March
1,
2017,
in
accordance
with
the
Note
Exchange
Agreements,
we
repurchased
Senior
Notes
with
an
aggregate
principal
amount
of
$22.6
million
at
a
repurchase
price
of
104.625%
of
the
aggregate
principal
amount
for
a
total
payment
of
$23.6
million.

We
or
our
affiliates
from
time
to
time
may
purchase
our
outstanding
Senior
Notes,
term
loans
under
our
Senior
Secured
Credit
Facilities
and/or
other
of
our
indebtedness.
Any
such
future
purchases
may
be
made
through
open
market
or
privately
negotiated
transactions
with
third
parties
or
pursuant

195

Table
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Contents

to
one
or
more
tender
or
exchange
offers
or
otherwise,
upon
such
terms
and
at
such
prices
as
well
as
with
such
considerations
as
we
or
any
such
affiliates
may
determine.

Covenants

Our
senior
long-term
debt
contains
certain
negative
covenants
including,
among
others:
(1)
limitations
on
additional
indebtedness;
(2)
limitations
on
dividends;
(3)
limitations
on
asset
sales,
including
the
sale
of
ownership
interests
in
subsidiaries
and
sale-leaseback
transactions;
and
(4)
limitations
on
liens,
guarantees,
loans
or
investments.
In
connection
with
the
extension
of
our
revolving
line
of
credit
facility
in
July
2015,
we
are
now
subject
to
a
Consolidated
Senior
Secured
Debt
to
Consolidated
EBITDA,
as
defined
in
the
Amended
and
Restated
Credit
Agreement,
financial
maintenance
covenant
beginning
in
the
third
quarter
of
2015.
The
maximum
ratio,
as
defined,
is
5.30x,
4.50x
and
3.50x
at
December
31,
2015,
2016
and
2017,
respectively.
The
ratios
as
of
December
31,
2016
and
2015
were
2.79x
and
3.91x,
respectively.
In
addition,
notes
payable
at
some
of
our
locations
contain
financial
maintenance
covenants.
We
are
in
compliance
with
our
debt
covenants
and
expect
to
be
for
the
next
12
months.

Registration of Senior Notes due 2019

We
and
our
guarantors
agreed
to:
(1)
file
a
registration
statement
with
the
SEC
with
respect
to
a
registered
offer
to
exchange
the
Senior
Notes
for
new
notes
having
terms
substantially
identical
in
all
material
respects
to
the
outstanding
notes
(except
that
the
new
notes
will
not
contain
transfer
restrictions
or
provide
for
special
interest);
or
(2)
file
a
shelf
registration
for
the
resale
of
the
Senior
Notes.
We
were
required
to
use
all
commercially
reasonable
efforts
to
cause
the
registration
statement
to
be
declared
effective
on
or
before
July
25,
2014.
Since
the
registration
statement
was
not
declared
effective
by
July
25,
2014,
we
have
incurred
special
interest
at
a
rate
equal
to
0.25%
per
annum
for
the
first
90-day
period
of
the
outstanding
indenture
indebtedness
on
the
outstanding
notes,
0.50%
per
annum
for
the
next
90-day
period,
and
0.75%
thereafter,
as
liquidated
damages
until
the
registration
statement
is
declared
effective
and
the
exchange
offer
is
completed.
Accordingly,
we
have
recorded
a
liability
for
the
amount
of
special
interest
on
the
Senior
Notes
that
we
have
determined
to
be
probable
and
estimable
based
on
our
expected
timing
of
registration
as
of
each
balance
sheet
date.
As
of
December
31,
2016
and
2015,
we
had
a
total
contingent
liability
for
special
interest
on
the
Senior
Notes
of
$8.4
million
and
$8.1
million,
respectively,
recorded
in
accrued
expenses
in
our
consolidated
balance
sheets.

Other Debt

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

As
of
December
31,
2016
and
2015,
the
aggregate
outstanding
balances
on
our
lines
of
credit
were
$66.1
million
and
$74.3
million,
respectively.

On
May
12,
2016,
two
of
UVM
Mexico's
outstanding
loans
that
originated
in
2007
and
2012
and
were
both
scheduled
to
mature
in
May
2021
were
refinanced
and
combined
into
one
loan.
The
maturity
date
of
the
combined
loan
was
extended
to
May
15,
2023.
Principal
repayments
were
suspended
until
May
15,
2018.
The
new
refinanced
loan
carries
a
variable
interest
rate
based
on
the
28-day
Mexican
Interbanking
Offer
Rate
("TIIE"),
plus
the
applicable
margin.
The
applicable
margin
for
the
interest
calculation
is
established
based
on
the
ratio
of
debt
to
EBITDA,
as
defined
in
the
agreement.
Interest
is
paid
monthly
commencing
on
May
15,
2016.
The
outstanding
balance
of
the
loan
on
May
12,
2016
was
MXN
2,224.6
million
(US
$120.5
million
at
that
date).
As
of
December
31,
2016,
the
interest
rate
on
the
loan
was
8.94%
and
the
outstanding
balance
on
the
loan
was
$107.8
million.

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In
addition
to
the
loans
above,
in
August
2015,
UVM
Mexico
entered
into
an
agreement
with
a
bank
for
a
loan
of
MXN
1,300.0
million
(US
$79.0
million
at
the
time
of
the
loan).
The
loan
carries
a
variable
interest
rate
(8.09%
at
December
31,
2016)
and
matures
in
August
2020.
As
of
December
31,
2016
and
2015,
the
outstanding
balance
of
this
loan
was
$63.0
million
and
$75.3
million,
respectively.

We
also
obtained
financing
to
fund
the
construction
of
two
new
campuses
at
one
of
our
institutions
in
Peru,
Universidad
Peruana
de
Ciencias
Aplicadas.
As
of
December
31,
2016
and
2015,
the
outstanding
balance
on
the
loans
was
$47.8
million
and
$60.6
million,
respectively.
These
loans
have
varying
maturity
dates
with
the
final
payment
due
in
October
2022.

In
May
2014,
we
obtained
financing
to
fund
the
construction
of
a
new
campus
at
one
of
our
institutions
in
Panama.
As
of
both
December
31,
2016
and
2015,
the
outstanding
balance
of
this
loan
was
$25.0
million.
It
has
a
fixed
interest
rate
of
8.11%
and
matures
in
2024.

We
had
outstanding
notes
payable
at
HIEU
in
China.
As
of
December
31,
2016
and
2015,
the
outstanding
balance
on
the
loans
was
$61.9
million
and
$90.4
million,
respectively.
These
notes
are
repayable
in
installments
with
the
final
installment
due
in
November
2019.

We
had
outstanding
notes
payable
at
a
real
estate
subsidiary
in
Chile.
As
of
December
31,
2016
and
2015,
the
outstanding
balance
on
the
loans
was
$62.7
million
and
$55.0
million,
respectively.
These
notes
are
repayable
in
installments
with
the
final
installment
due
in
August
2028.

We
financed
a
portion
of
the
purchase
price
for
THINK
by
borrowing
AUD
45.0
million
(US
$32.3
million
at
December
31,
2016)
under
a
syndicated
facility
agreement
in
the
form
of
two
term
loans
of
AUD
22.5
million
each.
The
syndicated
facility
agreement
also
provides
for
additional
borrowings
of
up
to
AUD
20.0
million
(US
$14.4
million
at
December
31,
2016)
under
a
capital
expenditure
facility
and
a
working
capital
facility.
The
first
term
loan
has
a
term
of
five
years
and
principal
is
payable
in
quarterly
installments
beginning
on
March
31,
2014.
The
second
term
loan
has
a
term
of
five
years
and
the
total
principal
balance
is
payable
at
its
maturity
date
of
December
20,
2018.
In
June
2016,
these
loan
facilities
were
amended
and
restated.
As
a
result
of
this
amendment
and
a
repayment
of
AUD
11.0
million
($8.1
million
at
the
date
of
payment):

•

Facility
A
has
been
amended
to
be
a
term
loan
of
AUD
10.0
million
($7.2
million
at
December
31,
2016),
and
principal
is
repayable
in
quarterly
installments
of
AUD
0.8
million
($0.6
million
at
December
31,
2016).
The
final
balance
is
repayable
at
its
maturity
date
of
December
20,
2018;
and

Facility
B
has
been
amended
to
be
a
revolving
facility
of
up
to
AUD
15.0
million
($10.8
million
at
December
31,
2016)
and
any
balance
outstanding
is
repayable
at
its
maturity
date
of
December
20,
2018.

As
of
December
31,
2016
and
2015,
$16.8
million
and
$25.7
million,
respectively,
was
outstanding
under
these
loan
facilities.

We
acquired
FMU
on
September
12,
2014
and
financed
a
portion
of
the
purchase
price
by
borrowing
amounts
under
two
loans
that
totaled
BRL
259.1
million
(US
$110.3
million
at
the
borrowing
date).
The
loans
require
semi-annual
principal
payments
beginning
at
BRL
6.5
million
in
October
2014
and
increasing
to
a
maximum
of
BRL
22.0
million
beginning
in
October
2017
and
continuing
through
their
maturity
dates
in
April
2021.
As
of
December
31,
2016
and
2015,
the
outstanding
balance
of
these
loans
was
$59.8
million
and
$58.9
million,
respectively.

On
November
18,
2015,
Universidad
Europea
de
Madrid
(UEM),
one
of
our
Spanish
institutions,
entered
into
an
agreement
with
two
banks
to
borrow
a
total
of
EUR
100
million
(US
$106.5
million
at
the
borrowing
date)
for
a
term
of
10
years.
As
of
December
31,
2016
and
2015,
the
outstanding
balance
on
this
loan
was
$96.6
million
and
$107.1
million,
respectively.

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Laureate
has
outstanding
notes
payable
at
Universidad
Privada
del
Norte
(UPN),
one
of
our
institutions
in
Peru,
to
finance
the
construction
of
a
new
campus.
These
loans
all
have
interest
rates
ranging
from
3.34%
to
8.70%
and
varying
maturity
dates
through
December
2024.
As
of
December
31,
2016
and
2015,
these
loans
had
a
balance
of
$44.5
million
and
$31.8
million,
respectively.

Leases

We
conduct
a
significant
portion
of
our
operations
from
leased
facilities.
These
facilities
include
our
corporate
headquarters,
other
office
locations,
and
many
of
our
higher
education
facilities.
See
"—Contractual
Obligations"
for
a
summary
of
our
capital
and
operating
lease
obligations.

Due to Shareholders of Acquired Companies

One
method
of
payment
for
acquisitions
is
the
use
of
promissory
notes
payable
to
the
sellers
of
acquired
companies.
As
of
December
31,
2016
and
2015,
we
recorded
$210.9
million
and
$186.7
million,
respectively,
for
these
liabilities.
See
Note
5,
Due
to
Shareholders
of
Acquired
Companies,
in
our
consolidated
financial
statements
for
further
details.

Capital Expenditures

Capital
expenditures
consist
of
purchases
of
property
and
equipment,
purchases
of
land
use
rights
and
expenditures
for
deferred
costs.
Our
capital
expenditure
program
is
a
component
of
our
liquidity
and
capital
management
strategy.
This
program
includes
discretionary
spending,
which
we
can
adjust
in
response
to
economic
and
other
changes
in
our
business
environment,
to
grow
our
network
through
the
following:
(1)
capacity
expansion
at
institutions
to
support
enrollment
growth;
(2)
new
campuses
for
institutions
entering
new
geographic
markets;
(3)
information
technology
to
increase
efficiency
and
controls;
and
(4)
online
content
development.
Our
non-discretionary
spending
includes
the
maintenance
of
existing
facilities.
We
typically
fund
our
capital
expenditures
through
cash
flow
from
operations
and
external
financing.

Our
capital
expenditures
were
$256.7
million,
$366.9
million
and
$436.4
million
during
2016,
2015
and
2014,
respectively.
The
30%
decrease
in
capital
expenditures
for
2016
compared
to
2015
primarily
related
to
decreases
in
capital
expenditures
in
Chile,
Peru,
GPS
and
AMEA
related
in
part
to
an
ongoing
initiative
to
increase
online
delivery
and
reduce
capital
expenditures,
in
addition
to
project
deferrals.
These
decreases
were
partially
offset
by
increased
information
technology
spending
in
Corporate.
Our
online
initiative
is
designed
to
not
only
provide
our
students
with
access
to
the
technology
platforms
and
innovative
programs
they
expect,
but
also
to
increase
our
enrollment
in
a
more
capital
efficient
manner,
leveraging
current
infrastructure
and
improving
classroom
utilization.
The
16%
decrease
in
capital
expenditures
for
2015
compared
to
2014
primarily
related
to
significant
decreases
in
capital
expenditures
in
Chile,
Europe,
and
AMEA,
partially
offset
by
the
continued
construction
of
new
campuses
and
capacity
expansion
projects
throughout
the
rest
of
LatAm
and
increased
information
technology
spending
in
Corporate
and
Brazil.

Derivatives

In
the
normal
course
of
business,
our
operations
are
exposed
to
fluctuations
in
foreign
currency
values
and
interest
rate
changes.
We
mitigate
a
portion
of
these
risks
through
a
risk-management
program
that
includes
the
use
of
derivatives.
We
were
required
to
make
periodic
net
cash
payments
on
our
derivatives
totaling
$17.7
million,
$11.3
million
and
$38.5
million
for
the
years
ended
December
31,
2016,
2015
and
2014,
respectively.
These
amounts
include
cash
payments
that
were
recognized
as
interest
expense
for
the
derivatives
designated
as
cash
flow
hedges,
as
well
as
net
cash
payments
made
for
non-hedged
derivatives
including
the
derivatives
related
to
the
sale
transactions.
See
Note
14,

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Derivative
Instruments,
in
our
consolidated
financial
statements
for
further
information
on
our
derivatives.

Series A Preferred Stock

As
discussed
above,
in
December
2016
and
January
2017,
we
issued
a
total
of
400
thousand
shares
of
Series
A
Preferred
Stock
for
total
gross
proceeds
of
$400
million.
The
shares
of
Series
A
Preferred
Stock
are
redeemable
at
our
option
at
any
time
(subject
to
certain
limitations
involving
the
price
of
our
Class
A
common
stock)
and
by
the
holders
after
the
fifth
anniversary
of
the
issue
date
at
a
redemption
price
per
share
equal
to
1.15
multiplied
by
the
sum
of
the
issue
amount
per
share
plus
any
accrued
and
unpaid
dividends.
The
shares
of
Series
A
Preferred
Stock
may
also
be
converted
into
shares
of
our
common
stock
upon
certain
conditions.
For
further
description
see
Note
11,
Commitments
and
Contingencies,
in
our
consolidated
financial
statements
included
elsewhere
in
this
Form
10-K.

Redeemable Noncontrolling Interests and Equity

In
connection
with
certain
acquisitions,
we
have
entered
into
put/call
arrangements
with
certain
minority
shareholders,
and
we
may
be
required
or
elect
to
purchase
additional
ownership
interests
in
the
associated
entities
within
a
specified
timeframe.
Certain
of
our
call
rights
contain
minimum
payment
provisions.
If
we
exercise
such
call
rights,
the
consideration
required
could
be
significantly
higher
than
the
estimated
put
values.
Upon
exercise
of
these
puts
or
calls,
our
ownership
interests
in
these
subsidiaries
would
increase.

Business Development Activities

Our
growth
plans
have
historically
included
and
may
include
future
acquisition
activity.
Our
acquisitions
have
historically
been
funded
primarily
through
existing
liquidity
and
seller
financing.
We
evaluate
various
alternatives
to
raise
additional
capital
to
fund
potential
acquisitions
and
other
investing
activities.
These
alternatives
may
include
issuing
additional
equity
or
debt
and
entering
into
operating
or
other
leases
relating
to
facilities
that
we
use,
including
sale-leaseback
transactions
involving
new
or
existing
facilities.
The
incurrence
covenants
in
our
debt
agreements
impose
limitations
on
our
ability
to
engage
in
additional
debt
and
sale-leaseback
transactions,
as
well
as
on
investments
that
may
be
made.
In
the
event
that
we
are
unable
to
obtain
the
necessary
funding
or
capital
for
potential
acquisitions
or
other
business
initiatives,
it
could
have
a
significant
impact
on
our
long-term
growth
strategy.
We
believe
that
our
internal
sources
of
cash
and
our
ability
to
incur
seller
financing
and
additional
third-party
financing,
subject
to
market
conditions,
will
be
sufficient
to
fund
our
investing
activities.

On
March
27,
2015,
we
acquired
four
higher
education
institutions
in
Portugal,
as
well
as
a
not-for-profit
association
and
a
for-profit
services
company
that
conducts
market
research.
The
total
purchase
price
for
this
group
of
entities
was
$10.4
million.
The
purchase
price
included
an
initial
cash
payment
of
$6.5
million,
a
seller
note
of
$3.2
million
and
a
deferred
payment
of
$0.7
million
related
to
a
working
capital
settlement.
The
seller
note
carries
an
annual
interest
rate
of
3%
and
will
be
paid
in
three
equal
installments
of
EUR
1.0
million
at
18
months
after
the
closing
date,
36
months
after
the
closing
date,
and
60
months
after
the
closing
date.

In
August
2013,
we
made
an
investment
of
$2.2
million
for
a
25%
ownership
interest
in
a
for-profit
entity
that
controls
Monash
South
Africa
(MSA),
a
not-
for-profit
institution
in
South
Africa.
In
February
2014,
we
assumed
control
of
MSA
for
a
total
ownership
interest
in
the
for-profit
entity
of
75%
and
acquired
100%
of
an
entity
that
owns
the
real
estate
used
by
MSA,
for
a
total
purchase
price
of
$44.4
million.
The
purchase
price
consisted
of
the
initial
investment
of
$2.2
million
made
in
2013,
a
cash
payment
of
$6.7
million,
and
deferred
payments
totaling
$35.4
million.
MSA
was
converted
to
a
for-profit
institution
during
the
first
quarter
of
2015.

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On
August
12,
2014,
we
acquired
Faculdade
Porto-Alegrense
(FAPA),
an
institution
in
Porto
Alegre,
Brazil.
The
total
purchase
price
was
$4.1
million,
and
was
paid
in
the
form
of
two
seller
notes
with
a
total
discounted
present
value
of
approximately
$3.0
million,
plus
an
additional
deferred
payment
of
approximately
$1.1
million.
The
deferred
payment
of
$1.1
million
was
paid
in
September
2014.

On
September
12,
2014,
we
acquired
FMU,
an
affiliated
group
of
higher
educational
institutions
in
Brazil.
The
total
purchase
price
was
$387.6
million,
which
was
paid
with
seller
notes
totaling
$96.8
million
and
cash
paid
at
closing
of
$290.6
million,
net
of
cash
acquired
of
$0.1
million.
The
cash
paid
at
acquisition
included
approximately
$231.0
million
of
cash,
including
accrued
interest,
that
had
been
held
by
us
in
an
escrow
bank
account
prior
to
the
acquisition
date
and
was
recorded
as
restricted
cash
and
investments
on
our
consolidated
balance
sheet
at
December
31,
2013.The
remainder
of
the
cash
paid
at
closing
was
financed
through
borrowings
from
third-party
lenders.

Share-based Deferred Compensation Arrangements

Immediately
prior
to
the
leveraged
buyout
merger
in
2007,
our
Chief
Executive
Officer
and
another
then-member
of
the
board
of
directors
held
vested
equity-
based
awards
which
they
exchanged
on
the
date
of
the
merger
for
unfunded,
nonqualified
stock-based
deferred
compensation
arrangements
("stock-based
DCPs")
having
an
aggregate
fair
value
at
that
time
of
$126.7
million.
Prior
to
the
occurrence
of
an
initial
public
offering,
each
of
the
stock-based
DCPs
allows
the
participant
the
potential
to
earn
an
amount
(at
any
time,
a
"Plan
Balance")
equal
to
the
product
of
(A)
the
number
of
"phantom
shares"
credited
to
the
participant's
account,
and
(B)
the
lesser
of
(i)
the
fair
market
value
per
"phantom
share"
on
the
date
of
the
merger
plus
a
5%
compounded
annual
return
thereon,
and
(ii)
the
fair
market
value
per
"phantom
share"
on
the
earlier
of
September
17,
2014
(the
"Distribution
Date")
or
a
change
of
control.
On
and
after
the
occurrence
of
an
initial
public
offering,
each
of
the
stock-based
DCPs
allows
the
participant
the
potential
to
earn
a
Plan
Balance
equal
to
the
product
of
(A)
the
number
of
"phantom
shares"
credited
to
the
participant's
account
as
of
the
initial
public
offering
and
(B)
the
fair
market
value
per
"phantom
share"
on
the
Distribution
Date
or
a
change
of
control,
as
applicable.
If
we
have
not
consummated
an
initial
public
offering
prior
to
the
first
or
second
anniversary
of
the
Distribution
Date,
as
applicable,
the
scheduled
distribution
will
be
made
in
cash.
Distributions
made
after
Laureate
has
consummated
an
initial
public
offering
would
generally
be
made
in
shares
of
our
common
stock,
the
number
of
which
will
depend
on
the
value
of
the
shares
on
the
date
of
distribution.
Notwithstanding
the
foregoing,
immediately
upon
a
change
of
control,
the
stock-based
DCPs
will
be
terminated
and
liquidated
and
the
Plan
Balances
will
be
distributed
in
a
lump
sum.
A
change
of
control
would
generally
occur
if
all
or
substantially
all
of
our
assets
or
more
than
50%
of
our
equity
interests
are
sold.

Under
these
stock-based
DCPs,
a
cash
payment
of
$81.0
million
was
made
in
September
2014.
Under
the
terms
of
the
arrangement,
$85.9
million
was
payable
on
September
17,
2015,
and
the
remainder
was
payable
on
September
17,
2016.
The
participants
agreed
to
extend
the
payment
due
on
September
17,
2015
(the
2015
Obligation),
the
first
anniversary
of
the
Distribution
Date,
until
December
31,
2015,
in
order
to
agree
with
the
Company
on
a
form
of
payment
that
we
believe
more
closely
aligns
with
the
long-term
interests
of
the
Company
and
our
securityholders.
On
December
29,
2015
(the
2015
Executive
DCP
Closing
Date),
we
satisfied
the
2015
Obligation
by
paying
the
participants
a
total
amount
of
$87.1
million,
including
$6.1
million
in
interest
from
the
Distribution
Date
to
the
2015
Executive
DCP
Closing
Date.
The
payment
consisted
of
$37.1
million
in
cash
and
$50.0
million
aggregate
principal
amount
of
Senior
Notes.
The
participants
agreed
not
to
offer
or
sell
their
Senior
Notes
due
2019,
other
than
to
the
Company,
until
12
months
after
the
2015
Executive
DCP
Closing
Date.
The
participants
also
agreed
to
extend
the
payment
that
was
due
on
September
17,
2016
(2016
Executive
DCP
Obligation)
until
December
30,
2016.
On
December
30,
2016,
we
satisfied
the
2016
Executive
DCP
Obligation
by
paying
the
participants
a
total
amount
of
$18.2
million,

200

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Contents

including
$0.2
million
in
interest
from
September
17,
2016
to
the
2016
Executive
DCP
Closing
Date.
The
payment
consisted
of
$7.7
million
in
cash
and
$10.5
million
aggregate
principal
amount
of
Senior
Notes.
Following
the
satisfaction
of
the
2016
Executive
DCP
Obligation,
the
Company's
obligations
under
the
DCPs
were
satisfied
in
full.

In
connection
with
the
Executive
Profits
Interests
("EPI")
agreement,
on
January
31,
2017,
the
Company
granted
to
Mr.
Becker
options
(the
"EPI
Options")
to
purchase
2,773,098
shares
of
its
Class
B
common
stock.
The
EPI
Options
vested
upon
consummation
of
the
Company's
initial
public
offering
on
February
6,
2017.
The
exercise
price
of
the
EPI
Options
is
equal
to
(i)
$17.00
with
respect
to
50%
of
the
shares
of
our
Class
B
common
stock
subject
to
the
EPI
Option
and
(ii)
$21.32
with
respect
to
50%
of
the
shares
of
our
Class
B
common
stock
subject
to
the
EPI
Option,
and
the
EPI
Options
shall
remain
exercisable
until
December
31,
2019.
The
Company
will
record
share-based
compensation
expense
for
the
EPI
options
in
the
first
quarter
of
2017,
which
is
estimated
to
be
approximately
$14.6
million.

Contribution to Network Institution in Turkey

On
November
4,
2016,
we
made
a
contribution
to
our
network
institution
in
Turkey,
a
VIE,
of
approximately
$13.0
million
(the
value
of
40.0
million
Turkish
Liras
at
the
date
of
the
contribution).
This
amount
eliminates
in
consolidation
in
our
financial
statements.

Cash
Flows

In
the
consolidated
statements
of
cash
flows,
the
changes
in
operating
assets
and
liabilities
are
presented
excluding
the
effects
of
exchange
rate
changes,
acquisitions,
and
reclassifications,
as
these
effects
do
not
represent
operating
cash
flows.
Accordingly,
the
amounts
in
the
consolidated
statements
of
cash
flows
do
not
agree
with
the
changes
of
the
operating
assets
and
liabilities
as
presented
in
the
consolidated
balance
sheets.
The
effects
of
exchange
rate
changes
on
cash
are
presented
separately
in
the
consolidated
statements
of
cash
flows.
Cash
paid
for
acquisitions,
net
of
cash
acquired,
is
reported
in
investing
activities
in
the
consolidated
statements
of
cash
flows.

The
following
table
summarizes
our
cash
flows
from
operating,
investing,
and
financing
activities
for
each
of
the
past
three
fiscal
years:

(in
millions)

For
the
years
ended
December
31,
Cash
provided
by
(used
in):
Operating
activities
Investing
activities
Financing
activities
Effects
of
exchange
rates
changes
on
cash
Net
change
in
cash
and
cash
equivalents

2016

2015

2014

184.6
$
269.2

(445.7)

(1.8)

6.3
$

170.5
$
(173.6)

34.4

(34.2)

(2.9) $

269.2

(489.2)
172.6

(50.9)
(98.3)

Comparison of Cash Flows for the Year Ended December 31, 2016 to the Year Ended December 31, 2015

Operating activities

Cash
provided
by
operating
activities
increased
by
$14.1
million
to
$184.6
million
for
2016,
compared
to
$170.5
million
for
2015.

The
increase
in
operating
cash
flows
was
primarily
related
to
increased
operating
income
in
2016
of
$45.9
million
over
2015.
Partially
offsetting
these
increases
were:
(1)
cash
paid
for
interest
increased
by
$15.9
million
to
$367.3
million
for
2016
compared
to
$351.4
million
for
2015,
primarily
due
to
higher
average
interest
rates
on
our
outstanding
debt
balances;
and
(2)
cash
paid
for
taxes
increased
by

201

Table
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Contents

$20.4
million
to
$128.7
million
for
2016,
compared
to
$108.3
million
for
2015,
primarily
due
to
a
change
in
the
estimated
tax
payment
requirements
in
Spain.
Other
working
capital
changes
accounted
for
the
remaining
change
of
$4.5
million.

Investing activities

Cash
provided
by
investing
activities
increased
by
$442.8
million
for
2016
to
$269.2
million,
from
an
investing
cash
usage
of
$173.6
million
for
2015.
Cash
provided
by
investing
activities
was
higher
during
2016
than
in
2015
due
to
the
following:
(1)
proceeds
from
the
sale
of
property
and
equipment
were
$350.4
million
higher
in
2016
than
in
2015,
due
to
proceeds
received
in
2016
from
the
sale
of
the
Glion
and
Les
Roches
Hospitality
Management
schools
and
the
French
institutions,
partially
offset
by
the
proceeds
from
the
Switzerland
sale-leaseback
arrangements
received
in
2015;
(2)
our
capital
expenditures
were
$110.2
million
lower
in
2016
than
in
2015;
and
(3)
in
2015,
we
used
cash
for
business
acquisitions
of
$6.7
million
related
to
the
2015
Portugal
acquisition.
These
changes
were
partially
offset
by:
(1)
in
2016,
we
settled
derivatives
related
to
the
sale
of
our
subsidiaries
for
net
cash
payments
of
$5.7
million;
and
(2)
in
2015,
we
received
proceeds
of
$5.0
million
related
to
the
sale
of
HSM.
Other
items
accounted
for
the
remaining
change
of
$13.8
million.

Financing activities

Cash
used
in
financing
activities
increased
by
$480.1
million
for
2016
to
$445.7
million,
compared
to
a
financing
cash
inflow
of
$34.4
million
for
2015.
This
change
in
financing
activities
was
due
to
higher
net
payments
of
long-term
debt
during
2016
versus
2015
of
$813.0
million,
which
included
the
prepayment
of
$300.0
million
related
to
the
Fifth
Amendment,
a
$62.5
million
payment
on
our
Senior
Notes,
and
a
full
pay
down
of
our
revolving
credit
facility,
which
had
an
outstanding
balance
of
$269.3
million
at
the
end
of
2015.
In
addition,
payments
to
purchase
noncontrolling
interests
were
higher
in
2016
versus
2015
by
$20.3
million,
primarily
related
to
the
2016
purchase
of
the
remaining
noncontrolling
interest
of
St.
Augustine.
These
changes
were
partially
offset
by
the
receipt
of
$329.1
million
of
proceeds
from
the
issuance
of
the
Series
A
redeemable
preferred
stock
in
December
2016,
a
$19.0
million
decrease
in
cash
dividends
to
our
shareholders,
which
is
primarily
related
to
a
November
2015
cash
dividend
of
$19.0
million,
and
a
$3.3
million
reduction
in
seller
note
payments
during
2016
as
compared
to
2015.
Other
items
accounted
for
the
remaining
difference
of
$1.8
million.

Comparison of Cash Flows for the Year Ended December 31, 2015 to the Year Ended December 31, 2014

Operating activities

Cash
provided
by
operating
activities
decreased
by
$98.7
million
to
$170.5
million
for
2015,
compared
to
$269.2
million
for
2014.
The
decrease
in
operating
cash
flows
primarily
included
the
following:
(1)
cash
paid
for
interest
increased
by
$30.4
million
to
$351.4
million
for
2015
compared
to
$321.0
million
for
2014,
primarily
due
to
higher
average
debt
balances;
and
(2)
cash
paid
for
taxes
increased
by
$39.6
million
to
$108.3
million
for
2015,
compared
to
$68.7
million
for
2014,
due
primarily
to
timing
of
tax
payments
in
Mexico
resulting
from
the
tax
reform
changes
that
became
effective
in
January
2014.
Other
working
capital
changes,
including
changes
in
accounts
receivable
and
deferred
revenue,
accounted
for
the
remaining
change
of
$28.7
million.

Investing activities

Cash
used
in
investing
activities
decreased
by
$315.6
million
for
2015
to
$173.6
million,
compared
to
$489.2
million
for
2014.
Cash
usage
for
investing
activities
was
lower
during
2015
than
during
2014
due
to
the
following:
(1)
proceeds
from
the
sale
of
property
and
equipment
were
$199.5
million
higher,
which
was
the
result
of
the
sale-leaseback
arrangements
at
certain
campuses
in
Switzerland;
(2)
our
capital
expenditures
were
$69.6
million
lower
in
2015
than
in
2014;
(3)
in
2015,
our
proceeds
from

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Table
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investments
in
affiliates
were
$5.0
million,
related
to
the
sale
of
HSM;
and
(4)
in
2015,
our
cash
used
for
business
acquisitions
was
$281.2
million
less
than
in
2014,
due
principally
to
the
FMU
acquisition
in
September
2014.
This
was
partially
offset
by
a
change
in
restricted
cash
of
$239.9
million,
primarily
related
to
the
release
of
the
escrow
deposit
for
the
FMU
acquisition.
Other
items
accounted
for
the
remaining
change
of
$0.2
million.

Financing activities

Cash
provided
by
financing
activities
was
$34.4
million
for
2015,
compared
to
$172.6
million
for
2014,
a
net
decrease
of
$138.2
million.
This
decrease
in
cash
provided
by
financing
activities
was
due
to
the
following:
(1)
net
proceeds
from
issuance
of
long-term
debt
were
$130.9
million
less
for
2015
compared
to
2014,
primarily
related
to
the
loans
that
were
issued
during
2014
to
partially
finance
the
FMU
acquisition;
(2)
debt
issuance
costs
increased
by
$9.7
million
in
2015
as
compared
to
2014,
related
to
the
extension
of
the
revolving
line
of
credit
facility
in
the
2015
fiscal
period;
and
(3)
cash
dividends
to
our
shareholders
increased
by
$13.9
million,
which
is
primarily
related
to
a
2015
cash
dividend
of
$19.0
million.
These
changes
were
partially
offset
by
a
$15.5
million
reduction
in
seller
note
payments
during
2015
compared
to
2014.
Other
items
accounted
for
the
remaining
difference
of
$0.8
million.

Contractual
Obligations

The
following
table
reflects
a
summary
of
our
contractual
obligations
as
of
December
31,
2016:

(in
millions)
Long-term
debt(a)(b)
Operating
lease
obligations
Interest
payments(c)
Capital
lease
obligations(d)
Due
to
shareholders
of
acquired
companies(e)
Other
obligations(f)
Total

Total

$ 3,612.1
$

1,474.4

1,361.1

250.8

216.6

60.9

$ 6,975.9
$

less
than

1
year

Payments
due
by
period

1
-
3
years

3
-
5
years

More
than

5
years

163.2
$ 1,878.4
$ 1,364.2
$
192.9

374.4

15.8

120.7

8.7

206.3

666.4

136.2

170.9

—

20.2

875.7
$ 2,945.3
$ 1,954.9
$ 1,200.0

283.9

244.8

25.4

23.5

13.1

331.2

605.7

38.7

72.4

18.9

(a)

(b)

(c)

(d)

(e)

(f)

We
intend
to
use
the
net
proceeds
from
our
initial
public
offering
to
repay,
redeem,
or
repurchase
our
outstanding
Senior
Notes,
our
term
loans
under
the
Senior
Secured
Credit
Facilities
and/or
the
seller
notes
used
to
partially
finance
the
acquisition
of
FMU
group.

Includes
$250.0
million
in
aggregate
principal
amount
of
the
outstanding
9.250%
Senior
Notes
due
2019
that
will
be
exchanged
for
shares
of
our
common
stock
within
one
year
after
the
February
2017
consummation
of
the
qualified
public
offering
of
our
common
stock.

Interest
payments
relate
to
long-term
debt,
capital
lease
obligations
and
amounts
due
to
shareholders
of
acquired
companies.
Interest
payments
for
variable-rate
long-term
debt
were
calculated
using
the
variable
interest
rates
in
effect
at
December
31,
2016.

Includes
failed
sale-leasebacks.

Due
to
shareholders
of
acquired
companies
represent
promissory
notes
payable
to
the
sellers
of
companies
acquired
by
us.
These
notes
payable
are
generally
interest-bearing
and
have
been
recorded
on
the
consolidated
balance
sheets
at
their
carrying
value
of
$210.9
million.

Other
obligations
consists
primarily
of
contractually-owed
service-related
compensation,
foreign
tax
settlement
payments,
purchase
commitments,
and
other
contractual
obligations.

203

Table
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Contents

The
preceding
table
does
not
reflect
unrecognized
income
tax
benefits,
including
interest
and
penalties,
as
of
December
31,
2016
of
approximately
$128.8
million.
We
are
unable
to
make
a
reasonably
reliable
estimate
of
the
period
of
any
cash
settlements.
It
is
reasonably
possible
that
our
liability
for
unrecognized
tax
benefits
could
change
during
the
time
period.

As
of
December
31,
2016,
FMU
recorded
a
prepaid
asset
of
$7.4
million
and
a
liability
of
$16.1
million
related
to
Brazilian
federal
tax-related
debt
that
will
be
paid
based
on
an
installment
program,
Programa
de
Recuperacão
Fiscal
(REFIS).
This
program
provides
for
reductions
in
fines,
penalties
and
interest
associated
with
outstanding
tax
debt.
These
outstanding
liabilities
relate
to
pre-acquisition
taxes
for
which
the
Company
has
received
indemnification
from
the
prior
owners.
We
are
unable
to
make
a
reasonably
reliable
estimate
of
the
period
for
the
cash
settlements
as
the
REFIS
installment
payments
have
not
yet
been
approved
for
this
liability.
As
a
result,
we
have
not
presented
this
$16.1
million
REFIS
liability
in
the
table
above.

As
of
December
31,
2016,
we
recorded
a
total
liability
of
$16.0
million
for
a
deferred
compensation
plan
for
certain
executive
employees
and
members
of
our
board
of
directors.
This
amount
is
not
included
in
the
table
above
as
the
payout
dates
cannot
be
estimated.

The
preceding
table
does
not
include
the
Series
A
Preferred
Stock
that
is
discussed
in
"—Liquidity
and
Capital
Resources."
We
have
not
included
the
Series
A
Preferred
Stock
in
the
table
above
since
it
could
be
converted
into
common
stock
upon
certain
conditions
and
is
not
mandatorily
redeemable
for
cash
on
a
fixed
date.

Off-Balance
Sheet
Arrangements

As
of
December
31,
2016,
we
have
the
following
off-balance
sheet
arrangements:

Noncontrolling
Interest
Call
Options

We
hold
various
call
options
that
give
us
the
right
to
purchase
the
remaining
shares
owned
by
noncontrolling
interest
holders
of
certain
acquired
subsidiaries.
These
call
options
had
no
impact
on
our
consolidated
financial
statements
as
of
December
31,
2016.
For
further
discussion
regarding
call
options,
see
Note
11,
Commitments
and
Contingencies,
and
Note
2,
Significant
Accounting
Policies,
in
our
consolidated
financial
statements.

Student
Loan
Guarantees

The
accredited
Chilean
institutions
in
our
network
also
participate
in
the
CAE
Program.
As
part
of
the
CAE
Program,
these
institutions
provide
guarantees
which
result
in
contingent
liabilities
to
third-party
financing
institutions,
beginning
at
90%
of
the
tuition
loans
made
directly
to
qualified
students
enrolled
through
the
CAE
Program
and
declining
to
60%
over
time.
The
guarantees
by
these
institutions
are
in
effect
during
the
period
in
which
the
student
is
enrolled.
The
maximum
potential
amount
of
payments
our
institutions
could
be
required
to
make
under
the
CAE
Program
was
approximately
$479.0
million
and
$428.0
million
at
December
31,
2016
and
2015,
respectively.
This
maximum
potential
amount
assumes
that
all
students
in
the
CAE
Program
do
not
graduate,
so
that
our
guarantee
would
not
be
assigned
to
the
government,
and
that
all
students
default
on
the
full
amount
of
the
CAE-qualified
loan
balances.
As
of
December
31,
2016
and
2015,
we
recorded
$20.6
million
and
$18.8
million,
respectively,
as
estimated
long-term
guarantee
liabilities
for
these
obligations.

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Subsidiary
Shares
as
Collateral

In
conjunction
with
the
purchase
of
Universidade
Potiguar
in
Brazil
(UNP),
we
pledged
all
of
the
acquired
shares
as
a
guarantee
of
our
payments
of
rents
as
they
become
due.
In
the
event
that
we
default
on
any
payment,
the
pledge
agreement
provides
for
a
forfeiture
of
the
relevant
pledged
shares.
In
the
event
of
forfeiture,
we
may
be
required
to
transfer
the
books
and
management
of
UNP
to
the
former
owners.

We
acquired
the
remaining
49%
ownership
interest
in
UAM
Brazil
in
April
2013.
As
part
of
the
agreement
to
purchase
the
49%
ownership
interest,
we
pledged
49%
of
our
total
shares
in
UAM
Brazil
as
a
guarantee
of
our
payment
obligations
under
the
purchase
agreement.
In
the
event
that
we
default
on
any
payment,
the
agreement
provides
for
a
forfeiture
of
the
pledged
shares.

In
connection
with
the
purchase
of
FMU
on
September
12,
2014,
we
pledged
75%
of
the
acquired
shares
to
third-party
lenders
as
a
guarantee
of
our
payment
obligations
under
the
loans
that
financed
a
portion
of
the
purchase
price.
We
pledged
the
remaining
25%
of
the
acquired
shares
to
the
sellers
as
a
guarantee
of
our
payment
obligations
under
the
purchase
agreement
for
the
seller
notes.
In
the
event
that
we
default
on
any
payment
of
the
loans
or
seller
notes,
the
purchase
agreement
provides
for
a
forfeiture
of
the
relevant
pledged
shares.
Upon
maturity
and
payment
of
the
seller
notes
in
September
2017,
the
shares
pledged
to
the
sellers
will
be
pledged
to
the
third-party
lenders
until
full
payment
of
the
loans,
which
mature
in
April
2021.

Standby
Letters
of
Credit

As
of
December
31,
2016,
Laureate
had
outstanding
letters
of
credit
(LOCs)
of
$154.4
million,
which
primarily
consisted
of
the
following:

Fully
cash-collateralized
LOCs
of
$105.6
million
in
favor
of
the
DOE,
which
are
included
in
restricted
cash.
These
LOCs
were
required
to
allow
Walden,
Kendall,
NewSchool
and
St.
Augustine
to
continue
participating
in
the
DOE
Title
IV
program.

Fully
cash-collateralized
LOCs
totaling
$34.7
million,
which
are
included
in
restricted
cash,
that
were
issued
to
continue
the
appeals
process
with
the
Spain
Tax
Authorities
who
challenged
the
holding
company
structure
in
Spain.

•

Surety
Bonds

As
part
of
our
normal
operations,
our
insurers
issue
surety
bonds
on
our
behalf,
as
required
by
various
state
education
authorities
in
the
United
States.
We
are
obligated
to
reimburse
our
insurers
for
any
payments
made
by
the
insurers
under
the
surety
bonds.
As
of
December
31,
2016,
the
total
face
amount
of
these
fully
cash-collateralized
surety
bonds
was
$12.2
million.

Critical
Accounting
Policies
and
Estimates

The
preparation
of
the
consolidated
financial
statements
in
conformity
with
GAAP
requires
our
management
to
make
estimates
and
assumptions
that
affect
the
reported
amounts
of
assets,
liabilities,
revenues
and
expenses,
and
the
related
disclosure
of
contingent
assets
and
liabilities.
Actual
results
could
differ
from
these
estimates.
Our
significant
accounting
policies
are
discussed
in
Note
2,
Significant
Accounting
Policies,
in
our
consolidated
financial
statements.
We
believe
the
following
critical
accounting
policies
require
the
most
significant
judgments
and
estimates
about
the
effect
of
matters
that
are
inherently
uncertain.
As
a
result,
these
accounting
policies
and
estimates
could
materially
affect
our
financial
statements
and
are
critical
to
the
understanding
of
our
results
of
operations
and
financial
condition.
Management
has
discussed
the
selection
of
these
critical
accounting
policies
and
estimates
with
the
audit
committee
of
the
board
of
directors.

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Table
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Variable
Interest
Entities
(VIEs)

Laureate
consolidates
in
its
financial
statements
certain
internationally
based
educational
organizations
that
do
not
have
shares
or
other
equity
ownership
interests.
Although
these
educational
organizations
may
be
considered
not-for-profit
entities
in
their
home
countries,
and
they
are
operated
in
compliance
with
their
respective
not-for-profit
legal
regimes,
we
believe
they
do
not
meet
the
definition
of
a
not-for-profit
entity
under
GAAP,
and
we
treat
them
as
"for-profit"
entities
for
accounting
purposes.
These
entities
generally
cannot
declare
dividends
or
distribute
their
net
assets
to
the
entities
that
control
them.
Under
ASC
Topic
810-10,
"Consolidation,"
we
have
determined
that
these
institutions
are
VIEs
and
that
Laureate
is
the
primary
beneficiary
of
these
VIEs
because
we
have,
as
further
described
below:
(1)
the
power
to
direct
the
activities
of
the
VIEs
that
most
significantly
affect
their
educational
and
economic
performance,
and
(2)
the
right
to
receive
economic
benefits
from
contractual
and
other
arrangements
with
the
VIEs
that
could
potentially
be
significant
to
the
VIEs.
We
account
for
the
acquisition
of
the
right
to
control
a
VIE
in
accordance
with
ASC
805
"Business
Combinations."

As
with
all
of
our
educational
institutions,
the
VIE
institutions'
primary
source
of
income
is
tuition
fees
paid
by
students,
for
which
the
students
receive
educational
services
and
goods
that
are
proportionate
to
the
prices
charged.
We
maintain
control
of
these
VIEs
through
our
rights
to
designate
a
majority
of
the
governing
entities'
board
members,
through
which
we
have
the
legal
ability
to
direct
the
activities
of
the
entities.
Laureate
maintains
a
variable
interest
in
these
VIEs
through
mutual
contractual
arrangements
at
market
rates
and
terms
that
provide
them
with
necessary
products
and
services,
and/or
intellectual
property,
and
has
the
ability
to
enter
into
additional
such
contractual
arrangements
at
market
rates
and
terms.
We
also
have
the
ability
to
transfer
our
rights
to
govern
these
VIEs,
or
the
entities
that
possess
those
rights,
to
other
parties,
which
could
yield
a
return
if
and
when
these
rights
are
transferred.

We
generally
do
not
have
legal
entitlement
to
distribute
the
net
assets
of
the
VIEs.
Generally,
in
the
event
of
liquidation
or
the
sale
of
the
net
assets
of
the
VIEs,
the
net
proceeds
can
only
be
transferred
either
to
another
VIE
institution
with
similar
purposes
or
to
the
government.
In
the
unlikely
case
of
liquidation
or
a
sale
of
the
net
assets
of
the
VIE,
we
may
be
able
to
retain
the
residual
value
by
naming
another
Laureate-controlled
VIE
resident
in
the
same
jurisdiction
as
the
recipient,
if
one
exists;
however
we
generally
cannot
name
a
for-profit
entity
as
the
recipient.
Moreover,
because
the
institution
generally
would
be
required
to
provide
for
the
continued
education
of
its
students,
liquidation
would
not
be
a
likely
course
of
action
and
would
be
unlikely
to
result
in
significant
residual
assets
available
for
distribution.
However,
we
operate
our
VIEs
as
going
concern
enterprises,
maintain
control
in
perpetuity,
and
have
the
ability
to
provide
additional
contractual
arrangements
for
educational
and
other
services
priced
at
up
to
market
rates
with
Laureate-controlled
service
companies.
Typically,
we
are
not
legally
obligated
to
make
additional
investments
in
the
VIE
institutions.

Laureate
for-profit
entities
provide
necessary
products
and
services,
and/or
intellectual
property,
to
all
institutions
in
the
Laureate International Universities
network,
including
the
VIE
institutions,
through
contractual
arrangements
at
market
rates
and
terms,
which
are
accretive
to
Laureate.
We
periodically
modify
the
rates
we
charge
under
these
arrangements
to
ensure
that
they
are
priced
at
or
below
fair
market
value
and
to
add
additional
services.
If
it
is
determined
that
contractual
arrangements
with
any
institution
are
not
on
market
terms,
it
could
have
an
adverse
regulatory
impact
on
such
institution.
We
believe
these
arrangements
improve
the
quality
of
the
academic
curriculum
and
the
students'
educational
experience.
There
are
currently
four
types
of
contractual
arrangements:
(i)
intellectual

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Table
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property
(IP)
royalty
arrangements;
(ii)
network
fee
arrangements;
(iii)
management
service
arrangements;
and
(iv)
lease
arrangements.

(i)

(ii)

(iii)

(iv)

Under
the
IP
royalty
arrangements,
institutions
in
the
Laureate International Universities network
pay
to
Laureate
royalty
payments
for
the
use
of
Laureate's
tradename
and
best
practice
policies
and
procedures.

Institutions
in
the
Laureate International Universities network
gain
access
to
other
network
resources,
including
academic
content,
support
with
curriculum
design,
online
programs,
professional
development,
student
exchange
and
access
to
dual
degree
programs,
through
network
fee
arrangements
whereby
the
institutions
pay
stipulated
fees
to
Laureate
for
such
access.

Institutions
in
the
Laureate International Universities network
contract
with
Laureate
and
pay
fees
under
management
services
agreements
for
the
provision
of
support
and
managerial
services
including
access
to
management,
legal,
tax,
finance,
accounting,
treasury
and
other
services,
which
in
some
cases
Laureate
provides
through
shared
service
arrangements
in
certain
jurisdictions.

Laureate
for-profit
entities,
including
for-profit
entities
in
which
the
VIEs
are
investors,
own
various
campus
real
estate
properties
and
have
entered
into
long-term
lease
contracts
with
the
respective
institutions
in
the
Laureate International Universities network,
whereby
they
pay
market-based
rents
for
the
use
of
the
properties
in
the
conduct
of
their
educational
operations.

Revenues
recognized
by
our
for-profit
entities
from
these
contractual
arrangements
with
our
consolidated
VIEs
were
approximately
$113.3
million,
$106.0
million
and
$113.5
million
for
the
years
ended
December
31,
2016,
2015
and
2014,
respectively.
These
revenues
are
eliminated
in
consolidation.

Under
our
accounting
policy,
we
allocate
all
of
the
income
or
losses
of
these
VIEs
to
Laureate
unless
there
is
a
noncontrolling
interest
where
the
economics
of
the
VIE
are
shared
with
a
third
party.
The
income
or
losses
of
these
VIEs
allocated
to
Laureate
represent
the
earnings
after
deducting
charges
related
to
contractual
arrangements
with
our
for-profit
entities
as
described
above.
We
believe
that
the
income
remaining
at
the
VIEs
after
these
charges
accretes
value
to
our
rights
to
control
these
entities.

Laureate's
VIEs
are
generally
exempt
from
income
taxes.
As
a
result,
the
VIEs
generally
do
not
record
deferred
tax
assets
or
liabilities
or
recognize
any
income
tax
expense
in
the
consolidated
financial
statements.
No
deferred
taxes
are
recognized
by
the
for-profit
service
companies
for
the
remaining
income
in
these
VIEs
as
the
legal
status
of
these
entities
generally
prevents
them
from
declaring
dividends
or
making
distributions
to
their
sponsors.
However,
these
for-profit
service
companies
record
income
taxes
related
to
revenues
from
their
contractual
arrangements
with
these
VIEs.

Risks in relation to the VIEs

We
believe
that
all
of
the
VIE
institutions
in
the
Laureate
network
are
operated
in
full
compliance
with
local
law
and
that
the
contractual
arrangements
with
the
VIEs
are
legally
enforceable;
however,
these
VIEs
are
subject
to
regulation
by
various
agencies
based
on
the
requirements
of
local
jurisdictions.
These
agencies,
as
well
as
local
legislative
bodies,
review
and
update
laws
and
regulations
as
they
deem
necessary
or
appropriate.
We
cannot
predict
the
form
of
any
laws
that
may
be
enacted,
or
regulations
that
ultimately
may
be
adopted
in
the
future,
or
what
effects
they
might
have
on
our
business,
financial
condition,
results
of
operations
and
cash
flows.
If
local
laws
or
regulations
were
to
change,
if
the
VIEs
were
found
to
be
in
violation
of
existing
local
laws
or
regulations,
or
if
the

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Table
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regulators
were
to
question
the
financial
sustainability
of
the
VIEs
and/or
whether
the
contractual
arrangements
were
at
fair
value,
local
government
agencies
could,
among
other
actions:

•

revoke
the
business
licenses
and/or
accreditations
of
the
VIE
institutions;

void
or
restrict
related-party
transactions,
such
as
the
contractual
arrangements
between
us
and
the
VIE
institutions;

impose
fines
that
significantly
impact
business
performance
or
other
requirements
with
which
the
VIEs
may
not
be
able
to
comply;

require
us
to
change
the
VIEs'
governance
structures,
such
that
we
would
no
longer
maintain
control
of
the
activities
of
the
VIEs;
or

disallow
a
transfer
of
our
rights
to
govern
these
VIEs,
or
the
entities
that
possess
those
rights,
to
a
third
party
for
consideration.

Our
ability
to
conduct
our
business
would
be
negatively
affected
if
local
governments
were
to
carry
out
any
of
the
aforementioned
or
other
similar
actions.
In
any
such
case,
we
may
no
longer
be
able
to
consolidate
the
VIEs.

Selected
consolidated
statements
of
operations
information
for
these
VIEs
was
as
follows,
net
of
the
charges
related
to
the
above-described
contractual
arrangements:

(in
millions)

For
the
years
ended
December
31,
Selected
Statements
of
Operations
information:
Revenues,
by
segment:

LatAm
Europe
AMEA
Revenues

2016

2015

2014

$ 438.0
$ 417.7
$ 458.1

130.4

139.1

727.6

128.6

136.1

682.4

126.7

146.4

711.0

Depreciation
and
amortization

51.7

53.0

54.8

Operating
income
(loss),
by
segment:

LatAm
Europe
AMEA

Operating
income
(loss)

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

(17.8)

13.3

15.7

11.2

(14.8)

13.6

9.2

8.1

35.1

33.0

11.8

11.5

(50.0)
(11.2)
4.4

(56.9)

(51.5)
(50.9)

The
following
table
reconciles
the
net
income
(loss)
attributable
to
Laureate
Education,
Inc.
as
presented
in
the
table
above,
to
the
amounts
in
our
consolidated
statements
of
operations:

(in
millions)

For
the
years
ended
December
31,
Variable
interest
entities
Other
operations
Corporate
and
eliminations
Net
income
(loss)
attributable
to
Laureate
Education,
Inc.

2016

2015

2014

(50.9)
11.5
$
33.0
$
291.2

118.0

519.1

(180.3)

(398.6)
(445.8)

371.8
$ (316.2) $ (158.3)

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Contents

The
following
table
presents
selected
assets
and
liabilities
of
the
consolidated
VIEs.
Except
for
goodwill,
the
assets
in
the
table
below
include
the
assets
that
can
be
used
only
to
settle
the
obligations
for
the
VIEs.
The
liabilities
in
the
table
are
liabilities
for
which
the
creditors
of
the
VIEs
do
not
have
recourse
to
our
general
credit.

Selected
consolidated
balance
sheet
amounts
for
these
VIEs
were
as
follows:

(in
millions)
Balance
Sheets
data:
Cash
and
cash
equivalents
Other
current
assets
Total
current
assets
Goodwill
Tradenames
Other
intangible
assets,
net
Other
long-term
assets
Total
assets

Total
current
liabilities
Long-term
debt
and
other
long-term
liabilities
Total
liabilities

Total
stockholders'
equity
Total
stockholders'
equity
attributable
to
Laureate
Education,
Inc.

December
31,
2016

December
31,
2015

VIE

Consolidated

VIE

Consolidated

169.1
$
153.1

322.2

181.7

104.1

—

701.1

1,309.1

465.0
$
760.9

1,225.8

1,934.5

1,307.6

46.7

2,588.4

7,103.0

120.9
$
186.1

307.0

196.9

105.0

—

738.0

1,346.9

320.9

103.4

424.3

884.8

867.0

1,446.0

4,635.7

6,081.7

664.4

632.2

305.1

150.3

455.4

891.5

874.6

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

324.8

The
VIEs'
cash
and
cash
equivalents
balances
are
generally
required
to
be
used
only
for
the
benefit
of
the
operations
of
these
VIEs.
These
balances
are
included
in
cash
and
cash
equivalents
in
our
consolidated
balance
sheets.

Business
Combinations

We
apply
the
purchase
accounting
standards
under
ASC
805,
"Business
Combinations,"
to
acquisitions.
The
purchase
price
of
an
acquisition
is
allocated,
for
accounting
purposes,
to
individual
tangible
and
identifiable
intangible
assets
acquired,
liabilities
assumed
and
noncontrolling
interests
based
on
their
estimated
fair
values
on
the
acquisition
date.
Any
excess
purchase
price
over
the
assigned
values
of
net
assets
acquired
is
recorded
as
goodwill.
The
acquisition
date
is
the
date
on
which
control
is
obtained
by
the
acquiring
company.
Any
non-monetary
consideration
transferred
and
any
previously
held
noncontrolling
interests
that
are
part
of
the
purchase
consideration
are
remeasured
at
fair
value
on
the
acquisition
date,
with
any
resulting
gain
or
loss
recognized
in
earnings.
The
preliminary
allocations
of
the
purchase
price
are
subject
to
revision
in
subsequent
periods
based
on
the
final
determination
of
fair
values,
which
must
be
finalized
no
later
than
the
first
anniversary
of
the
date
of
the
acquisition.
Transaction
costs
are
expensed
as
incurred.
See
Note
4,
Acquisitions,
in
our
consolidated
financial
statements
for
details
of
our
2015
and
2014
business
combinations.

Redeemable
Noncontrolling
Interests
and
Equity

In
certain
cases,
we
initially
purchase
a
majority
ownership
interest
in
a
company
and
uses
various
put
and
call
arrangements
with
the
noncontrolling
interest
holders
that
require
or
enable
us
to
purchase
all
or
a
portion
of
the
remaining
minority
ownership
at
a
later
date.
In
accounting
for
these
arrangements
we
are
required
to
make
estimates
with
regard
to
the
final
amount
we
will
eventually
pay

209

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for
the
additional
ownership
interest
that
we
will
acquire.
In
the
minority
put
arrangements,
the
final
settlement
values
are
usually
based
on
future
earnings
measurements
that
we
refer
to
as
"non-GAAP
earnings,"
as
they
are
calculated
using
an
agreed-upon
set
of
rules
that
are
not
necessarily
consistent
with
GAAP.
We
use
the
current
value
of
a
multiple
of
the
current
period
non-GAAP
earnings
as
an
estimate
for
the
final
value
that
will
eventually
be
paid
to
settle
the
arrangement.
These
values
are
then
adjusted
annually
to
reflect
changes
in
the
acquired
company's
non-GAAP
earnings
as
well
as
the
additional
passage
of
time
to
maturity
for
the
arrangement.
To
the
extent
that
the
current
period's
non-GAAP
earnings
are
different
from
future
periods'
non-GAAP
earnings,
the
value
of
these
obligations
can
change
significantly
and
can
impact
our
financial
position
and
results
of
operations.
See
Note
11,
Commitments
and
Contingencies,
in
our
consolidated
financial
statements
for
details
of
our
noncontrolling
interest
put
arrangements.

Goodwill
and
Indefinite-lived
Intangible
Assets

We
perform
annual
impairment
tests
of
indefinite-lived
intangible
assets,
primarily
goodwill
and
tradenames,
as
of
October
1st
of
each
year.
We
also
evaluate
these
assets
on
an
interim
basis
if
events
or
changes
in
circumstances
between
annual
tests
indicate
that
the
assets
may
be
impaired.
We
have
not
made
material
changes
to
the
methodology
used
to
assess
impairment
loss
on
indefinite-lived
intangible
assets
during
the
past
three
fiscal
years.

We
have
the
option
of
first
performing
a
qualitative
assessment
(i.e.,
step
zero)
before
calculating
the
fair
value
of
the
reporting
unit
(i.e.,
step
one
of
the
two-
step
fair
value-based
impairment
test).
A
reporting
unit
is
defined
as
a
component
of
an
operating
segment
for
which
discrete
financial
information
is
available
and
regularly
reviewed
by
management
of
the
segment.
If
we
determine
on
the
basis
of
qualitative
factors
that
the
fair
value
of
the
reporting
unit
is
more
likely
than
not
less
than
the
carrying
amount,
the
two-step
impairment
test
is
required.

If
we
do
not
perform
the
qualitative
assessment
for
a
reporting
unit
or
determine
that
it
is
more
likely
than
not
that
the
fair
value
of
a
reporting
unit
is
less
than
its
carrying
amount,
a
quantitative
two-step
fair
value-based
test
is
performed.
In
the
first
step,
we
estimate
the
fair
value
of
each
reporting
unit,
utilizing
a
weighted
combination
of
a
discounted
cash
flow
analysis
and
a
market
multiples
analysis.
A
reporting
unit
is
defined
as
a
component
of
an
operating
segment
for
which
discrete
financial
information
is
available
and
regularly
reviewed
by
management
of
that
segment.
If
the
recorded
net
assets
of
the
reporting
unit
are
less
than
the
reporting
unit's
estimated
fair
value,
then
there
is
no
goodwill
deemed
to
be
impaired.
If
the
recorded
net
assets
of
the
reporting
unit
exceed
its
estimated
fair
value,
then
goodwill
is
potentially
impaired
and
we
calculate
the
implied
fair
value
of
goodwill,
by
deducting
the
estimated
fair
value
of
all
tangible
and
identifiable
intangible
net
assets
of
the
reporting
unit
from
the
estimated
fair
value
of
the
reporting
unit.
If
the
recorded
amount
of
goodwill
exceeds
this
implied
fair
value,
the
difference
is
recognized
as
a
loss
on
impairment
of
assets
in
the
consolidated
statements
of
operations.

Our
valuation
approach
utilizes
a
weighted
combination
of
a
discounted
cash
flow
analysis
and
a
market
multiples
analysis,
where
available.
The
discounted
cash
flow
analysis
relies
on
historical
data
and
internal
estimates,
which
are
developed
as
a
part
of
our
long-range
plan
process,
and
includes
an
estimate
of
terminal
value
based
on
these
expected
cash
flows
using
the
generally
accepted
Gordon
Dividend
Growth
formula,
which
derives
a
valuation
using
an
assumed
perpetual
annuity
based
on
the
reporting
unit's
residual
cash
flows.
The
discount
rate
is
based
on
the
generally
accepted
Weighted
Average
Cost
of
Capital
methodology,
and
is
derived
using
a
cost
of
equity
based
on
the
generally
accepted
Capital
Asset
Pricing
Model
and
a
cost
of
debt
based
on
the
typical
rate
paid
by
market
participants.
The
market
multiples
analysis
utilizes
multiples
of
business
enterprise
value
to
revenues,
operating
income
and
earnings
before
interest,
taxes,
depreciation
and
amortization
of
comparable
publicly
traded
companies
and
multiples
based
on
fair
value
transactions
where
public
information
is
available.
Significant
assumptions
used
in
estimating
the
fair
value
include:
(1)
discount
and
growth

210

Table
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Contents

rates,
and
(2)
our
long-range
plan
which
includes
enrollment,
pricing,
planned
capital
expenditures
and
operating
margins.
Management
reviews
the
sum
of
the
estimated
fair
value
of
all
our
reporting
units
to
our
enterprise
value
to
corroborate
the
results
of
its
weighted
combination
approach
to
determining
fair
value.

We
also
evaluate
the
sensitivity
of
a
change
in
assumptions
related
to
goodwill
impairment,
assessing
whether
a
10%
reduction
in
our
estimates
of
revenue
or
a
100
basis
point
increase
in
our
estimated
discount
rates
would
result
in
impairment
of
goodwill.
After
taking
into
consideration
the
2016
goodwill
impairment
charges
recorded
for
Germany
and
MSA,
and
excluding
the
impact
of
any
recent
acquisitions
to
their
respective
reporting
units,
using
the
current
estimated
cash
flows
and
discount
rates,
each
reporting
unit's
estimated
fair
value
exceeds
its
carrying
value
by
at
least
15%.
Following
the
impairment
charges
recorded
in
2016,
we
have
determined
that
none
of
our
reporting
units
with
material
goodwill
were
at
risk
of
failing
the
first
step
of
the
goodwill
impairment
test
as
of
December
31,
2016.

The
impairment
test
for
indefinite-lived
intangible
assets
generally
requires
a
new
determination
of
the
fair
value
of
the
intangible
asset
using
the
"relief-from-
royalty"
method.
This
method
estimates
the
amount
of
royalty
expense
that
we
would
expect
to
incur
if
the
assets
were
licensed
from
a
third
party.
We
use
publicly
available
information
and
proprietary
third-party
arm's
length
agreements
that
Laureate
has
entered
into
with
various
licensors
in
determining
certain
assumptions
to
assist
us
in
estimating
fair
value
using
market
participant
assumptions.
If
the
fair
value
of
the
intangible
asset
is
less
than
its
carrying
value,
the
intangible
asset
is
adjusted
to
its
new
estimated
fair
value,
and
an
impairment
loss
is
recognized.

If
the
estimates
and
related
assumptions
used
in
assessing
the
recoverability
of
our
goodwill
and
indefinite-lived
intangible
assets
decline,
we
may
be
required
to
record
impairment
charges
for
those
assets.
We
base
our
fair
value
estimates
on
assumptions
that
we
believe
to
be
reasonable
but
that
are
unpredictable
and
inherently
uncertain.
Actual
results
may
differ
from
those
estimates.
In
addition,
we
make
certain
judgments
and
assumptions
in
allocating
shared
assets
and
liabilities
to
determine
the
carrying
values
for
each
of
our
reporting
units.

For
the
year
ended
December
31,
2016,
we
recorded
impairment
losses
on
goodwill.
We
recorded
no
impairment
losses
for
the
year
ended
December
31,
2015.
For
the
year
ended
December
31,
2014,
we
recorded
impairment
losses
on
goodwill
and
tradenames.
See
"—Results
of
Operations—Discussion
of
Significant
Items
Affecting
the
Consolidated
Results
for
the
Years
Ended
December
31,
2016,
2015
and
2014"
and
Note
7,
Goodwill
and
Other
Intangible
Assets,
in
our
consolidated
financial
statements
for
further
details
of
the
impairments.

We
completed
our
IPO
on
February
6,
2017
at
an
initial
public
offering
price
that
was
below
the
range
and
since
then
our
stock
price
has
traded
below
the
initial
public
offering
price.
While
our
market
capitalization
is
currently
in
excess
of
the
carrying
value
of
our
stockholders'
equity,
a
significant
decline
in
our
stock
price
for
an
extended
period
of
time
could
be
considered
an
impairment
indicator
that
would
cause
us
to
perform
an
interim
impairment
test
that
could
result
in
additional
impairments
of
goodwill
or
other
intangible
assets.

Long-Lived
Assets
and
Finite-Lived
Intangible
Assets

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

Indicators
of
impairment
include,
but
are
not
limited
to:

•

a
significant
deterioration
of
operating
results;

a
change
in
regulatory
environment;

a
significant
change
in
the
use
of
an
asset,
its
physical
condition,
or
a
change
in
management's
intended
use
of
the
asset;

211

Table
of
Contents

•

an
adverse
change
in
anticipated
cash
flows;
or

a
significant
decrease
in
the
market
price
of
an
asset.

If
an
impairment
indicator
is
present,
we
evaluate
recoverability
by
a
comparison
of
the
carrying
amount
of
the
assets
to
future
undiscounted
net
cash
flows
expected
to
result
from
the
use
and
eventual
disposition
of
the
assets.
If
the
assets
are
determined
to
be
impaired,
the
impairment
recognized
is
the
excess
of
the
carrying
amount
over
the
fair
value
of
the
assets.
Fair
value
is
generally
determined
by
the
discounted
cash
flow
method.
The
discount
rate
used
in
any
estimate
of
discounted
cash
flows
is
the
rate
commensurate
with
a
similar
investment
of
similar
risk.
We
use
judgment
in
determining
whether
a
triggering
event
has
occurred
and
in
estimating
future
cash
flows
and
fair
value.
Changes
in
our
judgments
could
result
in
impairments
in
future
periods.

As
a
result
of
our
impairment
testing,
we
recorded
no
impairment
losses
on
long-lived
assets
and
finite-lived
intangible
assets
for
the
years
ended
December
31,
2016
and
December
31,
2015.
For
the
year
ended
December
31,
2014,
we
recorded
impairment
losses
on
long-lived
assets,
as
described
in
"—
Results
of
Operations—Discussion
of
Significant
Items
Affecting
the
Consolidated
Results
for
the
Years
Ended
December
31,
2016,
2015
and
2014"
and
in
Note
7,
Goodwill
and
Other
Intangible
Assets,
in
our
consolidated
financial
statements.

Deferred
Costs

Deferred
costs
on
the
consolidated
balance
sheets
consist
primarily
of
direct
costs
associated
with
online
course
development
and
accreditation.
Deferred
costs
associated
with
the
development
of
online
educational
programs
are
capitalized
after
technological
feasibility
has
been
established.
Deferred
online
course
development
costs
are
amortized
to
direct
costs
on
a
straight-line
basis
over
the
estimated
period
that
the
associated
products
are
expected
to
generate
revenues.
Deferred
online
course
development
costs
are
evaluated
on
a
quarterly
basis
through
review
of
the
corresponding
course
catalog.
If
a
course
is
no
longer
listed
or
offered
in
the
current
course
catalog,
then
the
costs
associated
with
its
development
are
written
off.
As
of
December
31,
2016
and
2015,
the
unamortized
balances
of
online
course
development
costs
were
$54.7
million
and
$54.5
million,
respectively.
We
defer
direct
and
incremental
third-party
costs
incurred
for
obtaining
initial
accreditation
and
for
the
renewal
of
accreditations.
These
accreditation
costs
are
amortized
to
direct
costs
over
the
life
of
the
accreditation
on
a
straight-line
basis.
As
of
December
31,
2016
and
2015,
the
unamortized
balances
of
accreditation
costs
were
$3.0
million
and
$3.7
million,
respectively.

At
December
31,
2016
and
2015,
our
total
deferred
costs
were
$160.6
million
and
$156.0
million,
respectively,
with
accumulated
amortization
of
$(102.8)
million
and
$(97.9)
million,
respectively.

As
a
result
of
our
impairment
testing,
we
recorded
no
impairment
losses
on
deferred
costs
for
the
years
ended
December
31,
2016
and
December
31,
2015.
For
the
year
ended
December
31,
2014,
we
recorded
impairment
losses
on
deferred
costs,
as
described
in
"—Results
of
Operations—Discussion
of
Significant
Items
Affecting
the
Consolidated
Results
for
the
Years
Ended
December
31,
2016,
2015
and
2014"
and
in
Note
7,
Goodwill
and
Other
Intangible
Assets,
in
our
consolidated
financial
statements.

Debt
Issuance
Costs

Debt
issuance
costs
are
paid
as
a
result
of
certain
debt
transactions
and
are
presented
as
a
deduction
from
debt.
These
debt
issuance
costs
are
amortized
over
the
term
of
the
associated
debt
instruments.
The
amortization
expense
is
recognized
as
a
component
of
Interest
expense
in
the
Consolidated
Statements
of
Operations.
If
we
extinguish
our
debt
before
its
full
term,
we
may
need
to
write
off
all
or
a
portion
of
these
deferred
financing
costs
and
recognize
a
loss
on
extinguishment.
As
of
December
31,
2016
and
2015,
the
unamortized
balances
of
deferred
financing
costs
were
$44.6
million
and
$69.3
million,
respectively.

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Income
Taxes

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

Deferred Taxes

Estimates
of
deferred
tax
assets
and
liabilities
are
based
on
current
tax
laws,
rates
and
interpretations,
and,
in
certain
cases,
business
plans
and
other
expectations
about
future
outcomes.
We
develop
estimates
of
future
profitability
based
upon
historical
data
and
experience,
industry
projections,
forecasts
of
general
economic
conditions,
and
our
own
expectations.
Our
accounting
for
deferred
tax
consequences
represents
management's
best
estimate
of
future
events
that
can
be
appropriately
reflected
in
our
accounting
estimates.
Changes
in
existing
tax
laws
and
rates,
their
related
interpretations,
as
well
as
the
uncertainty
generated
by
the
current
economic
environment
may
impact
the
amounts
of
deferred
tax
liabilities
or
the
valuations
of
deferred
tax
assets.

Tax Contingencies

We
are
subject
to
regular
review
and
audit
by
both
domestic
and
foreign
tax
authorities.
We
apply
a
more-likely-than-not
threshold
for
tax
positions,
under
which
we
must
conclude
that
a
tax
position
is
more
likely
than
not
to
be
sustained
in
order
for
us
to
continue
to
recognize
the
benefit.
This
assumes
that
the
position
will
be
examined
by
the
appropriate
taxing
authority
and
that
full
knowledge
of
all
relevant
information
is
available.
In
determining
the
provision
for
income
taxes,
judgment
is
used,
reflecting
estimates
and
assumptions,
in
applying
the
more-likely-than-not
threshold.
A
change
in
the
assessment
of
the
outcome
of
a
tax
review
or
audit
could
materially
adversely
affect
our
consolidated
financial
statements.

See
Note
15,
Income
Taxes,
in
our
consolidated
financial
statements
for
details
of
our
deferred
taxes
and
tax
contingencies.

Indefinite Reinvestment of Foreign Earnings

We
earn
a
significant
portion
of
our
income
from
subsidiaries
located
in
countries
outside
the
United
States.
Deferred
tax
liabilities
have
not
been
recognized
for
undistributed
foreign
earnings
because
management
believes
that
the
earnings
will
be
indefinitely
reinvested
outside
the
United
States
under
the
Company's
planned
tax
neutral
methods.
ASC
740,
"Income
Taxes,"
requires
that
we
evaluate
our
circumstances
to
determine
whether
or
not
there
is
sufficient
evidence
to
support
the
assertion
that
we
will
reinvest
undistributed
foreign
earnings
indefinitely.
Our
assertion
that
earnings
from
our
foreign
operations
will
be
indefinitely
reinvested
is
supported
by
projected
working
capital
and
long-term
capital
plans
in
each
foreign
subsidiary
location
in
which
the
earnings
are
generated.
Additionally,
we
believe
that
we
have
the
ability
to
indefinitely
reinvest
foreign
earnings
based
on
our
domestic
operation's
cash
repatriation
strategies,
projected
cash
flows,
projected
working
capital
and
liquidity,
and
the
expected
availability
of
capital
within
the
debt
or
equity
markets.
If
our
expectations
change
based
on
future
developments
such
that
some
or
all
of
the
undistributed
earnings
of
our
foreign
subsidiaries
may
be
remitted
to
the
United
States
in
the
foreseeable
future,
we
will
be
required
to
recognize
deferred
tax
expense
and
liabilities
on
those
amounts.
In
addition,
if
applicable
tax
rules
in
the
United
States
are
modified
to
cause
U.S.
corporations
to
pay
taxes
on
foreign
earnings
even
if
the
earnings
are
not
remitted
to
the
United
States,
we
may
incur
additional
tax
expense.

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Revenue
Recognition

Our
revenues
primarily
consist
of
tuition
and
educational
service
revenues.
We
also
generate
revenues
from
student
fees,
dormitory/residency
fees,
and
education-related
activities.
Revenues
are
reported
net
of
scholarships
and
other
discounts,
refunds,
waivers
and
the
fair
value
of
any
guarantees
made
by
us
related
to
student
financing
programs.
Our
institutions
have
various
billing
and
academic
cycles.
Collectability
is
determined
on
a
student-by-student
basis
at
the
time
of
enrollment.
Generally,
students
cannot
re-enroll
for
the
next
academic
session
without
satisfactory
resolution
of
any
past-due
amounts.
Tuition
revenues
are
recognized
ratably
on
a
weekly
straight-line
basis
over
each
academic
session.
Deferred
revenue
and
student
deposits
on
our
consolidated
balance
sheets
consist
of
tuition
paid
prior
to
the
start
of
academic
sessions
and
unearned
tuition
amounts
recorded
as
accounts
receivable
after
an
academic
session
begins.
If
a
student
withdraws
from
an
institution,
our
obligation
to
issue
a
refund
depends
on
the
refund
policy
at
that
institution
and
the
timing
of
the
student's
withdrawal.
Generally,
our
refund
obligations
are
reduced
over
the
course
of
the
academic
term.
We
record
refunds
as
a
reduction
of
deferred
revenue
and
student
deposits,
as
applicable.
Once
a
student
withdraws,
the
Company
recognizes
revenue
on
a
cash
basis
as
collectability
is
not
reasonably
assured.
Dormitory
revenues
are
recognized
over
the
occupancy
period.
Revenues
from
the
sale
of
educational
products
are
generally
recognized
upon
delivery
and
when
collectability
is
reasonably
assured.
Student
fees
and
other
revenues,
which
include
revenues
from
contractual
arrangements
with
unconsolidated
institutions,
are
recognized
as
earned
over
the
appropriate
service
period.

Allowance
for
Doubtful
Accounts

Receivables
are
deemed
to
be
uncollectible
when
they
have
been
outstanding
for
two
years,
or
earlier
when
collection
efforts
have
ceased,
at
which
time
they
are
written
off.
Prior
to
that,
we
record
an
allowance
for
doubtful
accounts
to
reduce
our
receivables
to
their
net
realizable
value.
Our
allowance
estimation
methodology
is
based
on
the
age
of
the
receivables,
the
status
of
past-due
amounts,
historical
collection
trends,
current
economic
conditions
and
student
enrollment
status.
In
the
event
that
current
collection
trends
differ
from
historical
trends,
an
adjustment
is
made
to
the
allowance
account
and
bad
debt
expense.

Derivatives

In
the
normal
course
of
business,
our
operations
have
significant
exposure
to
fluctuations
in
foreign
currency
values
and
interest
rate
changes.
Accordingly,
we
mitigate
a
portion
of
these
risks
through
a
risk-management
program
that
includes
the
use
of
derivative
financial
instruments
(derivatives).
The
interest
and
principal
payments
for
our
senior
long-term
debt
arrangements
are
primarily
paid
in
USD.
Because
the
majority
of
our
operating
cash
flow
and
revenues
comes
from
business
units
located
outside
the
United
States
with
functional
currencies
other
than
the
USD,
our
ability
to
make
debt
payments
and
our
earnings
are
subject
to
fluctuations
in
the
value
of
the
USD
relative
to
foreign
currencies.
In
order
to
mitigate
these
foreign
currency
risks,
we
selectively
enter
into
foreign
exchange
forward
contracts.
Additionally,
borrowings
under
our
Senior
Secured
Credit
Facilities
and
certain
local
credit
facilities
bear
interest
at
variable
rates.
If
market
interest
rates
increase,
variable-rate
debt
will
create
higher
debt
service
requirements,
which
could
adversely
affect
our
cash
flow.
Therefore,
we
have
entered
into
floating-to-fixed
interest
rate
swap
contracts
for
certain
debt
arrangements
that
are
subject
to
fluctuations
in
interest
rates.
We
do
not
engage
in
speculative
or
leveraged
transactions,
nor
do
we
hold
or
issue
derivatives
for
trading
purposes.

We
report
all
derivatives
on
the
consolidated
balance
sheets
at
fair
value.
The
values
are
derived
using
valuation
models
commonly
used
for
derivatives.
These
valuation
models
require
a
variety
of
inputs,
including
contractual
terms,
market
prices,
forward-price
yield
curves,
notional
quantities,
measures
of
volatility
and
correlations
of
such
inputs.
Our
fair
value
models
incorporate
the
measurement
of
our
own
nonperformance
risk
into
our
calculations.
Our
derivatives
expose
us
to
credit

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risk
to
the
extent
that
the
counterparty
may
possibly
fail
to
perform
its
contractual
obligation
when
we
are
in
a
net
gain
position.
As
a
result,
our
valuation
models
reflect
measurements
for
counterparty
credit
risk.
We
also
actively
monitor
counterparty
credit
ratings
for
any
significant
changes
that
could
impact
the
nonperformance
risk
calculation
for
our
fair
value.
We
value
derivatives
using
management's
best
estimate
of
inputs
we
believe
market
participants
would
use
in
pricing
the
asset
or
liability
at
the
measurement
date.
Derivative
and
hedge
accounting
requires
judgment
in
the
use
of
estimates
that
are
inherently
uncertain
and
that
may
change
in
subsequent
periods.
External
factors,
such
as
economic
conditions,
will
impact
the
inputs
to
the
valuation
model
over
time.
The
effect
of
changes
in
assumptions
and
estimates
could
materially
impact
our
financial
statements.
See
Note
14,
Derivative
Instruments,
in
our
consolidated
financial
statements
for
details
of
our
derivatives.

Share-Based
Compensation

We
use
the
Black-Scholes-Merton
option
pricing
model
to
calculate
the
fair
value
of
stock
options.
This
option
valuation
model
requires
the
use
of
subjective
assumptions,
including
the
estimated
fair
value
of
the
underlying
common
stock,
the
expected
stock
price
volatility,
and
the
expected
term
of
the
option.
The
estimated
fair
value
of
the
underlying
common
stock
is
based
on
third-party
valuations.
Our
volatility
estimates
are
based
on
a
peer
group
of
companies.
We
estimate
the
expected
term
of
awards
to
be
the
weighted
average
mid-point
between
the
vesting
date
and
the
end
of
the
contractual
term.
We
use
this
method
to
estimate
the
expected
term
since
we
do
not
have
sufficient
historical
exercise
data.

We
have
granted
restricted
stock,
restricted
stock
units,
stock
options,
and
performance
awards
for
which
the
vesting
is
based
on
our
annual
performance
metrics.
For
interim
periods,
we
use
our
year-to-date
actual
results,
financial
forecasts,
and
other
available
information
to
estimate
the
probability
of
the
award
vesting
based
on
the
performance
metrics.
The
related
compensation
expense
recognized
is
affected
by
our
estimates
of
the
vesting
potential
of
these
performance
awards.
See
Note
13,
Share-based
Compensation,
in
our
consolidated
financial
statements
for
further
discussion
of
these
arrangements.

Recently
Issued
Accounting
Pronouncements

Accounting Standards Update (ASU) No. 2017-04 (ASU 2017-04), Intangibles—Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment

In
January
2017,
the
Financial
Accounting
Standards
Board
(FASB)
issued
ASU
2017-04
in
order
to
simplify
the
test
for
goodwill
impairment
by
eliminating
Step
2,
which
measures
a
goodwill
impairment
loss
by
comparing
the
implied
fair
value
of
a
reporting
unit's
goodwill
with
the
carrying
amount
of
that
goodwill.
Under
the
amendments
in
this
Update,
an
entity
should
perform
its
annual
goodwill
impairment
test
by
comparing
the
fair
value
of
a
reporting
unit
with
its
carrying
amount
and
should
recognize
an
impairment
charge
for
the
amount
by
which
the
carrying
amount
exceeds
the
reporting
unit's
fair
value.
However,
the
loss
recognized
should
not
exceed
the
total
amount
of
goodwill
allocated
to
that
reporting
unit.
This
Update
is
effective
for
Laureate
beginning
on
January
1,
2020
and
early
adoption
is
permitted
for
interim
or
annual
goodwill
impairment
tests
performed
on
testing
dates
after
January
1,
2017.
We
are
currently
evaluating
the
impact
of
ASU
2017-04
on
our
Consolidated
Financial
Statements.

ASU No. 2017-01 (ASU 2017-01), Business Combinations (Topic 805), Clarifying the Definition of a Business

215

Table
of
Contents

a
business
with
the
objective
of
adding
guidance
to
assist
entities
in
evaluating
whether
transactions
should
be
accounted
for
as
acquisitions
(or
disposals)
of
assets
or
businesses.
The
amendments
in
this
Update
provide
a
screen
to
determine
whether
an
integrated
set
of
assets
and
activities
("set")
is
a
business.
Under
current
GAAP,
there
are
three
elements
to
a
business—inputs,
processes
and
outputs,
though
outputs
do
not
have
to
be
present
and
all
the
inputs
and
processes
that
a
seller
uses
in
operating
a
set
are
not
required
if
market
participants
can
acquire
the
set
and
continue
to
produce
outputs
by
integrating
the
acquired
set
with
their
own
inputs
and
processes.
This
Update
is
effective
for
Laureate
beginning
on
January
1,
2018
and
should
be
applied
prospectively
on
or
after
the
effective
date.
We
are
currently
evaluating
the
impact
of
ASU
2017-01
on
our
Consolidated
Financial
Statements.

ASU No. 2016-18 (ASU 2016-18), Statement of Cash Flows (Topic 230): Restricted Cash

In
November
2016,
the
FASB
issued
ASU
2016-18
in
order
to
address
diversity
around
the
classification
and
presentation
of
changes
in
restricted
cash
on
the
statement
of
cash
flows.
The
amendments
in
this
Update
require
that
a
statement
of
cash
flows
explains
the
change
during
the
period
of
total
cash,
cash
equivalents
and
amounts
described
as
restricted
cash
or
restricted
cash
equivalents.
Therefore,
restricted
cash
should
be
included
when
reconciling
beginning
and
ending
cash
on
the
statement
of
cash
flows
and
changes
to
restricted
cash
would
not
be
considered
in
calculating
cash
flows
from
operating
and
investing
activities.
This
ASU
is
effective
for
Laureate
beginning
on
January
1,
2018
and
should
be
applied
retrospectively.
Early
adoption
is
permitted
and
if
this
ASU
is
adopted
during
an
interim
period,
any
adjustments
should
be
reflected
as
of
the
beginning
of
the
fiscal
year
that
includes
the
interim
period.
We
are
currently
evaluating
the
impact
of
ASU
2016-18
on
our
Consolidated
Financial
Statements.

ASU No. 2016-16 (ASU 2016-16), Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory

In
October
2016,
the
FASB
issued
ASU
2016-16
in
order
to
improve
the
accounting
for
income
tax
consequences
for
intra-entity
transfers
of
assets
other
than
inventory.
Under
current
GAAP,
the
recognition
of
current
and
deferred
income
taxes
for
an
intra-entity
transfer
is
prohibited
until
the
asset
has
been
sold
to
a
third
party.
The
amendments
in
this
ASU
state
that
an
entity
should
recognize
income
tax
consequences
of
an
intra-entity
transfer
when
the
transfer
occurs.
This
aligns
the
recognition
of
income
tax
consequences
for
intra-entity
transfers
of
assets
with
International
Financing
Reporting
Standards
(IFRS).
This
ASU
is
effective
for
Laureate
beginning
on
January
1,
2018
and
early
adoption
is
permitted.
The
amendments
in
this
ASU
should
be
applied
on
a
modified
retrospective
basis
through
a
cumulative-effect
adjustment
directly
to
retained
earnings
as
of
the
beginning
of
the
period
of
adoption.
We
are
currently
evaluating
the
impact
of
ASU
2016-16
on
our
Consolidated
Financial
Statements.

ASU No. 2016-15 (ASU 2016-15), Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments

In
August
2016,
the
FASB
issued
ASU
2016-15
in
order
to
reduce
diversity
around
how
certain
cash
receipts
and
cash
payments
are
presented
and
classified
on
the
Statement
of
Cash
Flows.
This
ASU
provides
guidance
on
the
following
areas,
for
which
current
GAAP
is
either
unclear
or
does
not
include
specific
guidance:

Debt
prepayment
or
debt
extinguishment
costs;

Settlement
of
zero-coupon
debt
instruments
or
other
debt
instruments
with
coupon
rates
that
are
insignificant
in
relation
to
the
effective
interest
rate
of
the
borrowing;

Contingent
consideration
payments
made
after
a
business
combination;

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Proceeds
from
the
settlement
of
insurance
claims;

Proceeds
from
the
settlement
of
corporate-owned
life
insurance
policies;

Distributions
received
from
equity
method
investees;

Beneficial
interests
in
securitization
transactions;
and

Separately
identifiable
cash
flows
and
application
of
the
predominance
principle.

This
ASU
is
effective
for
Laureate
beginning
on
January
1,
2018
and
early
adoption
is
permitted;
however,
if
early
adoption
is
elected,
all
of
the
amendments
to
the
areas
above
must
be
adopted
at
the
same
time.
The
amendments
in
this
ASU
should
be
applied
retrospectively.
We
are
currently
evaluating
the
impact
of
ASU
2016-15
on
our
Consolidated
Financial
Statements.

ASU No. 2016-09 (ASU 2016-09), Compensation—Stock compensation (Topic 718): Improvements to Employee Share-based Payment Accounting

On
March
30,
2016,
the
FASB
issued
ASU
2016-09
as
part
of
its
initiative
to
reduce
complexity
in
accounting
standards.
The
areas
for
simplification
in
this
ASU
involve
several
aspects
of
the
accounting
for
employee
share-based
payment
transactions,
including
the
income
tax
consequences,
classification
of
awards
as
either
equity
or
liabilities,
and
classification
on
the
statement
of
cash
flows.
The
guidance
is
effective
for
Laureate
beginning
January
1,
2017.
Early
adoption
is
permitted
in
any
annual
or
interim
period
for
which
financial
statements
have
not
been
issued
or
made
available
for
issuance,
but
all
of
the
guidance
must
be
adopted
in
the
same
period.
If
an
entity
early
adopts
the
guidance
in
an
interim
period,
any
adjustments
must
be
reflected
as
of
the
beginning
of
the
fiscal
year
that
includes
that
interim
period.
We
do
not
expect
ASU
2016-09
to
have
a
material
impact
on
our
Consolidated
Financial
Statements.

ASU No. 2016-08 (ASU 2016-08), Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus

Net)

In
March
2016,
the
FASB
issued
ASU
2016-08
in
response
to
an
issue
regarding
the
determination
of
whether
the
entity
acts
as
the
principal
or
an
agent
in
certain
transactions
where
another
party,
along
with
the
entity,
is
involved
in
providing
a
good
or
service
to
a
customer.
The
amendments
in
this
update
do
not
change
the
core
principle
of
the
existing
implementation
guidance
in
Topic
606
on
principal
versus
agent
considerations,
but
do
clarify
how
an
entity
should
determine
whether
it
is
a
principal
or
an
agent
by
providing
indicators
that
assist
in
the
assessment
of
control.
Such
indicators
may
be
more
or
less
relevant
to
the
control
assessment
and
one
or
more
indicators
may
be
more
or
less
persuasive
to
the
control
assessment,
depending
on
the
facts
and
circumstances.

The
amendments
in
this
update
affect
the
guidance
in
ASU
2014-09,
Contracts
with
Customers
(Topic
606),
which
is
not
yet
effective,
and
therefore
follows
the
same
effective
date
and
transition
requirements.
ASU
2014-09
is
effective
for
Laureate
on
January
1,
2018
and
allows
either
a
full
retrospective
adoption
to
all
periods
presented
or
a
modified
retrospective
adoption
approach
with
the
cumulative
effect
of
initial
application
of
the
revised
guidance
recognized
at
the
date
of
the
initial
application.
With
its
evaluation
of
the
impact
of
ASU
2014-09,
the
Company
will
also
consider
the
impact
related
to
ASU
2016-08.

ASU No. 2016-02 (ASU 2016-02), Leases (Topic 842)

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For
income
statement
purposes,
the
FASB
retained
a
dual
model,
requiring
leases
to
be
classified
as
either
operating
or
finance.
Operating
leases
will
result
in
straight-line
expense
(similar
to
current
operating
leases)
while
finance
leases
will
result
in
a
front-loaded
expense
pattern
(similar
to
current
capital
leases).
Classification
will
be
based
on
criteria
that
are
largely
similar
to
those
applied
in
current
lease
accounting,
but
without
explicit
bright
lines.
The
standard
is
effective
for
Laureate
beginning
January
1,
2019.
The
new
standard
must
be
adopted
using
a
modified
retrospective
transition,
and
provides
for
certain
practical
expedients.
Transition
will
require
application
of
the
new
guidance
at
the
beginning
of
the
earliest
comparative
period
presented.
We
are
in
the
process
of
completing
our
diagnostic
assessment
and
anticipate
that
ASU
2016-02
will
have
a
material
impact
on
our
Consolidated
Balance
Sheets,
as
we
will
record
significant
asset
and
liability
balances
in
connection
with
our
leased
properties.
We
are
still
evaluating
the
impact
to
our
Consolidated
Statements
of
Operations.

ASU No. 2016-01 (ASU 2016-01), Financial Instruments—Overall (Subtopic 815-10)

In
January
2016,
the
FASB
issued
ASU
2016-01
in
order
to
enhance
the
reporting
model
for
financial
instruments
to
provide
users
of
financial
statements
with
more
decision-useful
information.
The
amendments
in
this
ASU
require
all
equity
investments
(except
those
accounted
for
under
the
equity
method
of
accounting
or
those
that
result
in
consolidation
of
the
investee)
to
be
measured
at
fair
value,
with
changes
in
fair
value
recognized
through
net
income.
In
addition,
the
amendments
in
this
ASU
require
that
entities
that
have
elected
to
measure
financial
instruments
at
fair
value
must
disclose,
as
a
separate
item
in
comprehensive
income,
the
portion
of
the
total
change
in
fair
value
of
a
liability
resulting
from
a
change
in
instrument-specific
credit
risk.

This
ASU
is
effective
for
Laureate
beginning
January
1,
2018
and
amendments
should
be
applied
as
a
cumulative-effect
adjustment
to
the
balance
sheet
as
of
the
beginning
of
the
fiscal
year
of
adoption.
The
amendments
related
to
equity
securities
without
readily
determinable
fair
values
should
be
applied
prospectively
to
equity
investments
that
exist
as
of
the
date
of
adoption
of
the
ASU.
We
are
currently
evaluating
the
impact
of
ASU
2016-01
on
our
Consolidated
Financial
Statements.

ASU No. 2015-17 (ASU 2015-17), Income Taxes (Topic 740)

In
November
2015,
the
FASB
issued
ASU
2015-17
as
a
part
of
the
Simplification
Initiative
and
in
response
to
concerns
that
the
current
requirement
that
entities
separate
deferred
income
tax
liabilities
and
assets
into
current
and
noncurrent
amounts
results
in
little
or
no
benefit
to
users
of
the
financial
statements.
This
classification
does
not
generally
align
with
the
time
period
in
which
the
recognized
deferred
tax
amounts
are
expected
to
be
recovered
or
settled
and
there
are
costs
incurred
by
an
entity
to
separate
deferred
income
tax
liabilities
and
assets
into
current
and
noncurrent
amounts.
The
amendments
in
this
ASU
aim
to
simplify
this
presentation
by
requiring
that
deferred
tax
liabilities
and
assets
be
classified
as
noncurrent
in
a
classified
statement
of
financial
position,
which
aligns
the
GAAP
presentation
of
deferred
income
tax
assets
and
liabilities
with
International
Financial
Reporting
Standards
(IFRS).
This
ASU
is
effective
for
Laureate
beginning
January
1,
2017.
We
expect
the
impact
of
adoption
to
be
material
to
the
presentation
of
our
Consolidated
Balance
Sheets,
as
we
had
$110.0
million
and
$87.9
million
of
current
deferred
tax
assets
recorded
as
of
December
31,
2016
and
2015
respectively,
that
will
be
reclassified
from
current
to
noncurrent.

ASU No. 2014-09, (ASU 2014-09): Revenue from Contracts with Customers (Topic 606)

On
May
28,
2014,
the
FASB
issued
ASU
2014-09,
which
supersedes
the
revenue
recognition
requirements
in
Topic
605,
"Revenue Recogniation" and
most
industry-specific
guidance.
The
core
principle
of
ASU
2014-09
is
that
a
company
will
recognize
revenue
when
it
transfers
promised
goods
or
services
to
customers
in
an
amount
that
reflects
the
consideration
to
which
the
company
expects
to
be
entitled
in
exchange
for
those
goods
or
services.
On
July
9,
2015,
the
FASB
deferred
the
effective
date
of
ASU
2014-09.
The
new
revenue
standard
is
effective
for
fiscal
years,
and
interim
periods
within

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those
years,
beginning
after
December
15,
2017
(January
1,
2018
for
Laureate)
and
allows
either
a
full
retrospective
adoption
to
all
periods
presented
or
a
modified
retrospective
adoption
approach
with
the
cumulative
effect
of
initial
application
of
the
revised
guidance
recognized
at
the
date
of
initial
application.
We
are
in
the
process
of
completing
our
diagnostic
assessment
and
plan
to
adopt
this
ASU
effective
January
1,
2018.
We
do
not
expect
the
adoption
of
this
ASU
to
result
in
a
significant
change
to
our
method
of
recognizing
tuition
revenues;
however,
we
are
still
evaluating
other
components
of
revenue.
We
are
also
still
assessing
the
adoption
alternatives
between
full
retrospective
adoption
and
modified
retrospective
adoption.

ITEM
7A.

QUANTITATIVE
AND
QUALITATIVE
DISCLOSURES
ABOUT
MARKET
RISK

We
are
exposed
to
market
risk
primarily
from
fluctuations
in
interest
rates
and
foreign
currency
exchange
rates.
We
may
seek
to
control
a
portion
of
these
risks
through
a
risk-management
program
that
includes
the
use
of
derivatives
to
reduce
earnings
and
cash
flow
volatility
associated
with
changes
in
interest
rates
and
foreign
currency
exchange
rates.
As
a
policy,
we
do
not
engage
in
speculative
or
leveraged
transactions,
nor
do
we
hold
or
issue
derivatives
for
trading
purposes.

Interest
Rate
Risk

We
are
subject
to
risk
from
fluctuations
in
interest
rates,
primarily
relating
to
our
Senior
Secured
Credit
Facilities
and
certain
local
credit
facilities,
which
bear
interest
at
variable
rates.
However,
two
factors
serve
to
mitigate
this
risk.
First,
we
enter
into
floating-to-fixed
interest
rate
swap
contracts
in
order
to
fix
a
portion
of
our
floating-rate
debt,
and
our
cross
currency
swap
includes
an
embedded
floating-to-fixed
rate
component.
Second,
a
portion
of
our
senior
secured
credit
agreement
contains
a
floor
on
LIBOR
contracts
and
ABR
draws.

Based
on
our
outstanding
variable-rate
debt
as
of
December
31,
2016
and
factoring
in
the
impact
of
the
derivatives,
an
increase
of
100
basis
points
in
our
weighted-average
interest
rate
would
result
in
an
increase
in
interest
expense
of
$16.4
million
on
an
annual
basis.

Based
on
our
outstanding
variable-rate
debt
as
of
December
31,
2016
and
factoring
in
the
impact
of
the
derivatives
and
the
LIBOR
floor,
an
increase
of
100
basis
points
in
interest
rates
would
result
in
an
increase
in
interest
expense
of
$15.7
million
on
an
annual
basis.

See
Note
14,
Derivative
Instruments,
in
our
consolidated
financial
statements
included
elsewhere
in
this
Form
10-K
for
further
discussion
of
our
derivatives.

Foreign
Currency
Exchange
Risk

We
use
the
USD
as
our
reporting
currency.
We
derived
approximately
83%
of
our
revenues
from
students
outside
of
the
United
States
for
the
year
ended
December
31,
2016.
Our
business
is
transacted
through
a
network
of
international
and
domestic
subsidiaries,
generally
in
the
local
currency,
considered
the
functional
currency
for
that
subsidiary.

Our
foreign
currency
exchange
rate
risk
is
related
to
the
following
items:

•

Adjustments
relating
to
the
translation
of
our
assets
and
liabilities
from
the
subsidiaries'
functional
currencies
to
USD.
These
adjustments
are
recorded
in
accumulated
other
comprehensive
income
(loss)
on
our
consolidated
balance
sheets.

Gains
and
losses
resulting
from
foreign
currency
exchange
rate
changes
related
to
intercompany
loans
that
are
deemed
to
have
the
characteristics
of
a
long-term
investment.
These
gains
and
losses
are
recorded
in
accumulated
other
comprehensive
income
(loss)
on
our
consolidated
balance
sheets.

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•

Gains
and
losses
resulting
from
foreign
currency
exchange
rate
changes
related
to
intercompany
loans
that
are
not
deemed
to
have
the
characteristics
of
a
long-term
investment.
These
gains
and
losses
are
recorded
in
foreign
currency
exchange
gain
(loss)
on
our
consolidated
statements
of
operations.

Gains
and
losses
on
foreign
currency
transactions.
These
gains
and
losses
are
recorded
in
foreign
currency
exchange
gain
(loss)
on
our
consolidated
statements
of
operations.

For
the
year
ended
December
31,
2016,
a
hypothetical
10%
adverse
change
in
average
annual
foreign
currency
exchange
rates,
excluding
the
impacts
of
our
derivatives,
would
have
decreased
Operating
income
and
Adjusted
EBITDA
by
approximately
$26.2
million
and
$78.1
million,
respectively.

We
monitor
the
impact
of
foreign
currency
movements
related
to
differences
between
our
subsidiaries'
local
currencies
and
the
USD.
Our
U.S.
debt
facilities
are
primarily
denominated
in
USD.
We
enter
into
foreign
exchange
forward
contracts
to
protect
the
USD
value
of
our
assets
and
future
cash
flows,
as
well
as
to
reduce
the
earnings
impact
of
exchange
rate
fluctuations
on
receivables
and
payables
denominated
in
currencies
other
than
the
functional
currencies.
See
Note
14,
Derivative
Instruments,
in
our
consolidated
financial
statements
included
elsewhere
in
this
Form
10-K
for
additional
discussion
regarding
our
derivatives.

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ITEM
8.

FINANCIAL
STATEMENTS
AND
SUPPLEMENTARY
DATA

LAUREATE
EDUCATION,
INC.

INDEX
TO
FINANCIAL
STATEMENTS

COVERED
BY
REPORT
OF
INDEPENDENT
REGISTERED
PUBLIC
ACCOUNTING
FIRM

Laureate
Education,
Inc.
and
Subsidiaries:
Consolidated
Financial
Statements:

Report
of
PricewaterhouseCoopers
LLP,
Independent
Registered
Public
Accounting
Firm
Consolidated
Statements
of
Operations
for
the
years
ended
December
31,
2016,
2015,
and
2014
Consolidated
Statements
of
Comprehensive
Income
for
the
years
ended
December
31,
2016,
2015,
and
2014
Consolidated
Balance
Sheets
as
of
December
31,
2016
and
2015
Consolidated
Statements
of
Stockholders'
Equity
for
the
years
ended
December
31,
2016,
2015,
and
2014
Consolidated
Statements
of
Cash
Flows
for
the
years
ended
December
31,
2016,
2015,
and
2014
Notes
to
the
Consolidated
Financial
Statements

Schedules:

Schedule
II—Valuation
and
Qualifying
Accounts

221

222

223

224

225

227

228

229

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Table
of
Contents

To
the
Board
of
Directors
and
Stockholders
of
Laureate
Education,
Inc.

Report
of
Independent
Registered
Public
Accounting
Firm

In
our
opinion,
the
accompanying
consolidated
balance
sheets
and
the
related
consolidated
statements
of
operations,
comprehensive
income,
stockholders'
equity
and
cash
flows
present
fairly,
in
all
material
respects,
the
financial
position
of
Laureate
Education,
Inc.
and
its
subsidiaries
as
of
December
31,
2016
and
December
31,
2015,
and
the
results
of
their
operations
and
their
cash
flows
for
each
of
the
three
years
in
the
period
ended
December
31,
2016
in
conformity
with
accounting
principles
generally
accepted
in
the
United
States
of
America.
In
addition,
in
our
opinion,
the
financial
statement
schedule
listed
in
the
accompanying
index
presents
fairly,
in
all
material
respects,
the
information
set
forth
therein
when
read
in
conjunction
with
the
related
consolidated
financial
statements.
These
financial
statements
and
financial
statement
schedule
are
the
responsibility
of
the
Company's
management.
Our
responsibility
is
to
express
an
opinion
on
these
financial
statements
and
financial
statement
schedule
based
on
our
audits.
We
conducted
our
audits
of
these
financial
statements
in
accordance
with
the
standards
of
the
Public
Company
Accounting
Oversight
Board
(United
States).
Those
standards
require
that
we
plan
and
perform
the
audit
to
obtain
reasonable
assurance
about
whether
the
financial
statements
are
free
of
material
misstatement.
An
audit
includes
examining,
on
a
test
basis,
evidence
supporting
the
amounts
and
disclosures
in
the
financial
statements,
assessing
the
accounting
principles
used
and
significant
estimates
made
by
management,
and
evaluating
the
overall
financial
statement
presentation.
We
believe
that
our
audits
provide
a
reasonable
basis
for
our
opinion.

As
discussed
in
Note
2
to
the
consolidated
financial
statements,
the
Company
changed
the
manner
in
which
it
classifies
deferred
financing
costs
in
2016.

/s/
PricewaterhouseCoopers
LLP

Baltimore,
MD

March
28,
2017

222

Table
of
Contents

LAUREATE
EDUCATION,
INC.
AND
SUBSIDIARIES

Consolidated
Statements
of
Operations

IN
THOUSANDS

For
the
years
ended
December
31,
Revenues
Costs
and
expenses:

Direct
costs
General
and
administrative
expenses
Loss
on
impairment
of
assets

Operating
income
Interest
income
Interest
expense
Loss
on
debt
extinguishment
Loss
on
derivatives
Other
income
(expense),
net
Foreign
currency
exchange
gain
(loss),
net
Gain
on
sales
of
subsidiaries,
net
Income
(loss)
from
continuing
operations
before
income
taxes
and
equity
in
net

income
of
affiliates

Basic
and
diluted
earnings
(loss)
per
share:
Basic
earnings
(loss)
per
share
Diluted
earnings
(loss)
per
share

2016

2015

$ 4,244,192
$ 4,291,659
$ 4,414,682

2014

3,615,338

222,496

23,465

382,893

18,670

(421,936)

(17,363)

(6,084)

910

67,450

406,557

3,760,016

194,686

—

336,957

13,328

(398,042)

(1,263)

(2,607)

195

(149,178)

3,838,179

151,215

125,788

299,500

21,822

(385,754)
(22,984)
(3,101)
(1,184)
(109,970)
—

—

431,097

(65,001)

366,186

5,661

371,847
$

(200,610)

(117,730)

2,495

(315,845)

(403)

(316,248) $

(201,671)
39,060

158

(162,453)
4,162

(158,291)

2.78
$
2.76
$

(2.44) $
(2.44) $

(1.24)
(1.24)

The
accompanying
notes
are
an
integral
part
of
these
consolidated
financial
statements.

223

Table
of
Contents

LAUREATE
EDUCATION,
INC.
AND
SUBSIDIARIES

Consolidated
Statements
of
Comprehensive
Income

For
the
years
ended
December
31,
Net
income
(loss)
Other
comprehensive
loss:

IN
THOUSANDS

2016
366,186
$ (315,845) $ (162,453)

2015

2014

Foreign
currency
translation
adjustment,
net
of
tax
of
$0
for
all
years
Unrealized
gain
(loss)
on
derivative
instruments,
net
of
tax
of
$0
for
all
years
Minimum
pension
liability
adjustment,
net
of
tax
of
$1,800,
$982
and
$715,

respectively

Total
other
comprehensive
loss
Comprehensive
income
(loss)
Net
comprehensive
loss
(income)
attributable
to
noncontrolling
interests
Comprehensive
income
(loss)
attributable
to
Laureate
Education,
Inc
.

(115,685)

8,032

(386,310)

5,629

(307,101)
(733)

8,391

(99,262)

266,924

5,545

(6,994)
2,966

(314,828)
(377,715)

(477,281)
(693,560)

(8,759)
3,234

272,469
$ (690,326) $ (486,040)

The
accompanying
notes
are
an
integral
part
of
these
consolidated
financial
statements.

224

Table
of
Contents

LAUREATE
EDUCATION,
INC.
AND
SUBSIDIARIES

Consolidated
Balance
Sheets

IN
THOUSANDS,
except
per
share
amounts

December
31,
Assets
Current
assets:
Cash
and
cash
equivalents
(includes
VIE
amounts
of
$169,074
and
$120,944,
see
Note
2)
Restricted
cash
and
investments
Receivables:
Accounts
and
notes
receivable
Other
receivables
Related
party
receivables
Allowance
for
doubtful
accounts
Receivables,
net
Deferred
income
taxes
Income
tax
receivable
Prepaid
expenses
and
other
current
assets
Total
current
assets
(includes
VIE
amounts
of
$322,210
and
$307,043,
see
Note
2)
Notes
receivable,
net
Property
and
equipment:
Land
Buildings
Furniture,
equipment
and
software
Leasehold
improvements
Construction
in-progress
Accumulated
depreciation
and
amortization
Property
and
equipment,
net
Land
use
rights,
net
Goodwill
Other
intangible
assets:
Tradenames
Other
intangible
assets,
net
Deferred
costs,
net
Deferred
income
taxes
Other
assets
Total
assets
(includes
VIE
amounts
of
$1,309,113
and
$1,346,908,
see
Note
2)

2016

2015

464,965
$
189,319

458,673

160,585

494,646

23,758

6,931

(190,499)

334,836

110,015

29,447

97,234

1,225,816

61,157

441,051

35,788

7,336

(158,006)
326,169

87,895

17,048

85,314

1,135,684

59,272

396,821

1,219,783

1,160,350

399,555

103,205

(1,128,081)

2,151,633

45,275

1,934,464

419,977

1,294,263

1,142,176

384,655

93,260

(1,043,431)
2,290,900

50,336

2,115,897

1,307,633

46,700

57,748

72,610

199,929

7,102,965
$

1,361,125

52,197

58,169

80,754

234,782

7,439,116

The
accompanying
notes
are
an
integral
part
of
these
consolidated
financial
statements.

225

Table
of
Contents

LAUREATE
EDUCATION,
INC.
AND
SUBSIDIARIES

Consolidated
Balance
Sheets
(Continued)

IN
THOUSANDS,
except
per
share
amounts

December
31,
Liabilities
and
stockholders'
equity
Current
liabilities:
Accounts
payable
Accrued
expenses
Accrued
compensation
and
benefits
Deferred
revenue
and
student
deposits
Current
portion
of
long-term
debt
Current
portion
of
due
to
shareholders
of
acquired
companies
Deferred
compensation
Income
taxes
payable
Deferred
income
taxes
Derivative
instruments
Other
current
liabilities
Total
current
liabilities
(includes
VIE
amounts
of
$320,922
and
$305,067,
see
Note
2)
Long-term
debt,
less
current
portion
Due
to
shareholders
of
acquired
companies,
less
current
portion
Deferred
compensation
Income
taxes
payable
Deferred
income
taxes
Derivative
instruments
Other
long-term
liabilities
Total
liabilities
(includes
VIE
amounts
of
$424,297
and
$455,373,
see
Note
2)
Convertible
redeemable
preferred
stock,
Series
A,
$0.001
par
value;
512
shares
authorized,
343

shares
issued
and
outstanding
on
December
31,
2016

Redeemable
noncontrolling
interests
and
equity
Stockholders'
equity:

2016

2015

86,699
$

368,973

239,495

362,891

178,989

118,679

—

30,371

5,762

5,218

48,917

1,445,994

3,629,375

92,269

14,128

135,140

486,817

7,750

270,267

6,081,740

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

7,031,944

332,957

23,876

—

51,746

Preferred
stock,
par
value
$0.001
per
share—authorized
49,488
shares,
no
shares
issued
and

outstanding
as
of
December
31,
2016
and
December
31,
2015

—

Common
stock,
par
value
$0.004
per
share—authorized
175,000
shares,
issued
and

outstanding
shares
of
133,376
and
133,255
as
of
December
31,
2016
and
December
31,
2015,
respectively
Additional
paid-in
capital
Accumulated
deficit
Accumulated
other
comprehensive
loss

Total
Laureate
Education,
Inc.
stockholders'
equity
Noncontrolling
interests
Total
stockholders'
equity
Total
liabilities
and
stockholders'
equity

534

2,721,432

(1,037,701)

(1,052,055)

632,210

32,182

664,392

7,102,965
$

533

2,686,451

(1,409,548)
(952,677)
324,759

30,667

355,426

7,439,116

The
accompanying
notes
are
an
integral
part
of
these
consolidated
financial
statements.

226

Table
of
Contents

LAUREATE
EDUCATION,
INC.
AND
SUBSIDIARIES

Consolidated
Statements
of
Stockholders'
Equity

IN
THOUSANDS

Shares
of

common

stock

outstanding

Laureate
Education,
Inc.
Stockholders
(Accumulated
deficit)

retained

earnings

Additional
paid-in

capital

Common
stock

Accumulated

other

comprehensive
(loss)
income

Noncontrolling
interests

(935,009) $

(268,810) $

Balance
at
December
31,
2013
Non-cash
stock
compensation
Cash
distributions
to
stockholders
Equity
to
liability
award
modification
Exercise
of
stock
options
Vesting
of
restricted
stock
and
exercise
of
stock

options,
net
of
shares
withheld
to
satisfy
minimum
employee
tax
withholding

Changes
in
noncontrolling
interests
Dividends
to
noncontrolling
interests
Capital
contributions
from
noncontrolling
interest

holders

Accretion
of
redeemable
noncontrolling
interests

and
equity

Reclassification
of
redeemable
noncontrolling

interests
and
equity

Other,
net
Net
loss
Foreign
currency
translation
adjustment,
net
of
tax

of
$0

Unrealized
loss
on
derivatives,
net
of
tax
of
$0
Minimum
pension
liability
adjustment,
net
of
tax
of

$715

Balance
at
December
31,
2014
Non-cash
stock
compensation
Cash
distributions
to
stockholders
Exercise
of
stock
options
Vesting
of
restricted
stock
and
exercise
of
stock

options,
net
of
shares
withheld
to
satisfy
minimum
employee
tax
withholding

Changes
in
noncontrolling
interests
Dividends
to
noncontrolling
interests
Capital
contributions
from
noncontrolling
interest

holders

Accretion
of
redeemable
noncontrolling
interests

and
equity

Reclassification
of
redeemable
noncontrolling

interests
and
equity

Net
(loss)
income
Foreign
currency
translation
adjustment,
net
of
tax

of
$0

Unrealized
gain
on
derivatives,
net
of
tax
of
$0
Minimum
pension
liability
adjustment,
net
of
tax
of

$982

Balance
at
December
31,
2015
Non-cash
stock
compensation
Exercise
of
stock
options
Vesting
of
restricted
stock
and
exercise
of
stock

options,
net
of
shares
withheld
to
satisfy
minimum
employee
tax
withholding

Changes
in
noncontrolling
interests
Dividends
to
noncontrolling
interests
Capital
contributions
from
noncontrolling
interest

holders

Accretion
of
redeemable
noncontrolling
interests

and
equity

Accretion
of
Series
A
Convertible
Redeemable

Preferred
Stock

Reclassification
of
redeemable
noncontrolling

interests
and
equity

Net
income
(loss)
Foreign
currency
translation
adjustment,
net
of
tax

of
$0

Unrealized
gain
on
derivatives,
net
of
tax
of
$0
Minimum
pension
liability
adjustment,
net
of
tax
of

$1,800

Balance
at
December
31,
2016

132,470
$
11

—

(25)
52

530
$2,669,044
$
—

—

40,693

(5,271)
(2,986)
964

465

—

(2,242)
(4,498)
(2,461)

4,821

(9,187)

—

132,973

—

111

—

532

—

2,688,877

34,120

(18,975)
2,040

163

—

(3,869)
(1,554)
(1,147)

—

(13,041)

—

133,255

—

533

—

2,686,451

38,071

253

109

—

(1,726)
1,003

(1,164)

—

263

(1,719)

—

133,376
$

—

534
$2,721,432
$

—

(158,291)

—

(1,093,300)
—

—

(316,248)

—

(1,409,548)
—

—

371,847

—

(1,037,701) $

—

(302,504)
(733)

(6,994)
(579,041)
—

—

442

—

(382,673)
5,629

2,966

(952,677)
—

—

(115,801)
8,032

Total

stockholders'
equity
1,509,137

40,693

(5,271)
(2,986)
964

43,382
$
—

—

3,769

1,050

166

—

(119)
(9)
(4,162)

(4,597)
—

(2,240)
(729)
(1,411)

4,987

(9,187)

(119)
(9)
(162,453)

(307,101)
(733)

—

39,480
$
—

—

(6,994)
1,056,548

34,120

(18,975)
2,040

—

(2,253)
(95)

1,382

(3,868)
(3,365)
(1,242)

1,382

—

(13,041)

(4,613)
403

(3,637)
—

—

30,667
$
—

—

2,101

—

5,572

—

(613)
(5,661)

116

—

(4,613)
(315,845)

(386,310)
5,629

2,966

355,426

38,071

253

(1,725)
3,104

(1,164)

5,572

263

(1,719)

(613)
366,186

(115,685)
8,032

8,391

(1,052,055) $

—

32,182
$

8,391

664,392

The
accompanying
notes
are
an
integral
part
of
these
consolidated
financial
statements.

227

Table
of
Contents

LAUREATE
EDUCATION,
INC.
AND
SUBSIDIARIES

Consolidated
Statements
of
Cash
Flows

IN
THOUSANDS

For
the
years
ended
December
31,
Cash
flows
from
operating
activities
Net
income
(loss)
Adjustments
to
reconcile
net
income
(loss)
to
net
cash
provided
by
operating
activities:
Depreciation
and
amortization
Loss
on
impairment
of
assets
(Gain)
loss
on
sale
of
subsidiaries
and
disposal
of
property
and
equipment
Loss
(gain)
on
derivative
instruments
Loss
on
debt
extinguishment
Non-cash
interest
expense
Non-cash
share-based
compensation
expense
Bad
debt
expense
Deferred
income
taxes
Unrealized
foreign
currency
exchange
(gain)
loss
Non-cash
loss
(gain)
from
non-income
tax
contingencies
Non-cash
expense
(income)
from
profit-sharing
legislation
Other,
net
Changes
in
operating
assets
and
liabilities:
Restricted
cash
Receivables
Inventory,
prepaid
expenses
and
other
assets
Accounts
payable
and
accrued
expenses
Income
tax
receivable/payable,
net
Deferred
revenue
and
other
liabilities
Net
cash
provided
by
operating
activities
Cash
flows
from
investing
activities
Purchase
of
property
and
equipment
and
land
use
rights
Expenditures
for
deferred
costs
Receipts
from
sale
of
subsidiaries
and
property
and
equipment,
net
of
cash
sold
Settlement
of
derivatives
related
to
sale
of
subsidiaries
Property
insurance
recoveries
Business
acquisitions,
net
of
cash
acquired
Payment
of
contingent
consideration
for
acquisitions
Proceeds
from
affiliates
Payments
from
related
parties
Change
in
restricted
cash
and
investments
Proceeds
from
sale
or
maturity
of
available-for-sale
securities,
net
Net
cash
provided
by
(used
in)
investing
activities
Cash
flows
from
financing
activities
Proceeds
from
issuance
of
long-term
debt
Payments
on
long-term
debt
Payments
of
deferred
purchase
price
for
acquisitions
Payments
to
purchase
noncontrolling
interests
Payments
of
dividends
Proceeds
from
issuance
of
convertible
redeemable
preferred
stock,
net
of
issuance
costs
Proceeds
from
exercise
of
stock
options
Withholding
of
shares
to
satisfy
minimum
employee
tax
withholding
for
vested
stock
awards
and
exercised
stock

options

Payments
of
debt
issuance
costs
and
modification
fees
Noncontrolling
interest
holder's
loan
to
subsidiaries
Distributions
to
noncontrolling
interest
holders
Net
cash
(used
in)
provided
by
financing
activities
Effects
of
exchange
rate
changes
on
cash
Net
change
in
cash
and
cash
equivalents
Cash
and
cash
equivalents
at
beginning
of
period
Cash
and
cash
equivalents
at
end
of
period

2016

2015

2014

366,186
$

(315,845) $

(162,453)

264,879

23,465

(408,672)
4,717

17,363

46,195

38,809

108,019

(30,150)
(67,946)
17,360

462

5,487

(7,686)
(110,693)
(17,594)
688

(36,762)
(29,557)
184,570

(240,258)
(16,436)
554,441

(5,663)
3,623

—

1,590

(28,063)
—

269,234

708,827

(1,421,379)
(22,236)
(25,665)
(1,505)
329,142

253

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

(1,725)
(11,582)
802

(654)
(445,722)
(1,790)
6,292

458,673

464,965
$

(3,868)
(13,020)
2,772

(2,582)
34,424

(34,179)
(2,911)
461,584

458,673
$

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

(2,240)
(3,282)
4,754

(1,855)
172,586

(50,877)
(98,316)
559,900

461,584

The
accompanying
notes
are
an
integral
part
of
these
consolidated
financial
statements.

228

Table
of
Contents

Note
1.
Description
of
Business

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements

(Dollars
and
shares
in
thousands)

Laureate
Education,
Inc.
and
subsidiaries
(hereinafter
Laureate,
we,
us,
our,
or
the
Company)
provide
higher
education
programs
and
services
to
students
through
an
international
network
of
licensed
universities
and
higher
education
institutions
(institutions).
We
are
a
subsidiary
of
Wengen
Alberta,
Limited
Partnership
(Wengen),
an
Alberta
limited
partnership,
which
acquired
Laureate
on
August
17,
2007
through
a
merger
using
leveraged
buyout
financing
(the
LBO).
On
October
1,
2015,
we
redomiciled
in
Delaware
as
a
public
benefit
corporation
as
a
demonstration
of
our
long-term
commitment
to
our
mission
to
benefit
our
students
and
society.

Laureate's
programs
are
provided
through
institutions
that
are
campus-based
and
internet-based,
or
through
electronically
distributed
educational
programs
(online).
Our
educational
offerings
are
delivered
through
four
operating
segments:
Latin
America
(LatAm),
Europe
(Europe),
Asia,
Middle
East
&
Africa
(AMEA),
and
Global
Products
and
Services
(GPS).
LatAm
has
locations
in
Brazil,
Chile,
Costa
Rica,
Honduras,
Mexico,
Panama
and
Peru
and
has
contractual
relationships
with
a
licensed
institution
in
Ecuador.
Europe
has
locations
in
Cyprus,
Germany,
Italy,
Morocco,
Portugal,
Spain
and
Turkey.
The
AMEA
segment
consists
of
campus-based
institutions
with
operations
in
Australia,
China,
India,
Malaysia,
New
Zealand,
South
Africa
and
Thailand.
AMEA
also
manages
nine
licensed
institutions
in
the
Kingdom
of
Saudi
Arabia
and
manages
one
additional
institution
in
China
through
a
joint
venture
arrangement.
The
GPS
segment
includes
fully
online
degree
programs
in
the
United
States
offered
through
Walden
University,
LLC,
which
is
a
U.S.-based
accredited
institution,
and
through
the
University
of
Liverpool
and
the
University
of
Roehampton
in
the
United
Kingdom.
GPS
also
includes
campus-based
institutions
located
in
the
United
States.
As
discussed
further
in
Note
3,
Dispositions
and
Asset
Sales,
during
the
second
quarter
of
2016
we
sold
certain
operations
in
our
GPS
segment
and
during
the
third
quarter
of
2016
we
sold
our
French
operations
in
the
Europe
segment.

These
financial
statements
reflect
a
4
to
1
reverse
stock
split
for
our
common
stock
that
became
effective
January
31,
2017,
the
date
that
our
Amended
and
Restated
Certificate
of
Incorporation
was
accepted
for
filing
by
Delaware's
Secretary
of
State.
On
January
31,
2017,
each
share
of
the
Company's
common
stock
was
automatically
reclassified
into
Class
B
Common
Stock,
a
newly
established
class
of
the
Company's
common
stock,
with
any
resulting
fractional
shares
rounded
down
to
the
next
whole
share.

On
February
6,
2017
the
Company
completed
an
initial
public
offering
(IPO)
of
its
Class
A
common
stock,
a
newly
established
class
of
the
Company's
common
stock
of
which
700,000
shares
were
authorized.
The
Company
sold
35,000
shares
of
its
Class
A
common
stock
at
an
initial
public
offering
price
of
$14.00
per
share,
resulting
in
net
proceeds,
after
deducting
underwriting
discounts
and
commissions
and
estimated
offering
expenses
payable
by
us,
of
approximately
$456,500.
We
intend
to
use
the
net
proceeds
from
this
offering
to
repay,
redeem
or
repurchase
our
outstanding
Senior
Notes
due
2019,
our
term
loans
under
our
Senior
Secured
Credit
Facilities
and/or
the
seller
notes
used
to
partially
finance
the
acquisition
of
the
FMU
group.

229

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
2.
Significant
Accounting
Policies

The
preparation
of
the
Consolidated
Financial
Statements
in
conformity
with
accounting
principles
generally
accepted
in
the
United
States
(GAAP)
requires
our
management
to
make
estimates
and
assumptions
that
affect
the
reported
amounts
of
assets,
liabilities,
revenues
and
expenses,
and
the
related
disclosure
of
contingent
assets
and
liabilities.
Actual
results
could
differ
from
these
estimates.

Principles
of
Consolidation
and
Investments
in
Affiliates

General

Our
Consolidated
Financial
Statements
include
all
accounts
of
Laureate,
our
majority-owned
subsidiaries,
and
educational
institutions
that
are
part
of
our
network
and,
although
not
owned
by
Laureate,
are
variable
interest
entities
(VIEs)
pursuant
to
ASC
Topic
810-10,
"Consolidation."
As
of
December
31,
2016,
the
Laureate
network
includes
13
VIE
institutions
in
eight
countries.
Laureate
has
determined
it
is
the
"primary
beneficiary"
of
these
VIEs,
as
such
term
is
defined
in
ASC
810-10-20,
and
has
consolidated
the
financial
results
of
operations,
assets
and
liabilities,
and
cash
flows
of
these
VIEs
in
the
Company's
Consolidated
Financial
Statements.
Intercompany
accounts
and
transactions
have
been
eliminated
in
consolidation.

Noncontrolling Interests

A
noncontrolling
interest
is
the
portion
of
a
subsidiary
that
is
not
attributable
to
us
either
directly
or
indirectly.
A
noncontrolling
interest
can
also
be
referred
to
as
a
minority
interest.
We
recognize
noncontrolling
interest
holders'
share
of
equity
and
net
income
or
loss
separately
in
Noncontrolling
interests
in
the
Consolidated
Balance
Sheets
and
Net
loss
(income)
attributable
to
noncontrolling
interests
in
the
Consolidated
Statements
of
Operations.
For
the
VIEs
in
our
network,
we
generally
do
not
recognize
a
noncontrolling
interest.
A
noncontrolling
interest
is
only
recognized
when
a
VIE's
economics
are
shared
with
a
third
party
(e.g.,
when
the
transferor
of
the
control
of
the
VIE
retained
a
portion
of
the
economics
associated
with
it).

The VIE Arrangements

Under
ASC
Topic
810-10,
"Consolidation,"
we
have
determined
that
these
institutions
are
VIEs
and
that
Laureate
is
the
primary
beneficiary
of
these
VIEs
because
we
have,
as
further
described
below:
(1)
the
power
to
direct
the
activities
of
the
VIEs
that
most
significantly
affect
their
educational
and
economic
performance,
and
(2)
the
right
to
receive
economic
benefits
from
contractual
and
other
arrangements
with
the
VIEs
that
could
potentially
be
significant
to
the
VIEs.
We
account
for
the
acquisition
of
the
right
to
control
a
VIE
in
accordance
with
ASC
805.

230

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
2.
Significant
Accounting
Policies
(Continued)

As
with
all
of
our
educational
institutions,
the
VIE
institutions'
primary
source
of
income
is
tuition
fees
paid
by
students,
for
which
the
students
receive
educational
services
and
goods
that
are
proportionate
to
the
prices
charged.
Laureate
maintains
control
of
these
VIEs
through
our
rights
to
designate
a
majority
of
the
governing
entities'
board
members,
through
which
we
have
the
legal
ability
to
direct
the
activities
of
the
entities.
Laureate
maintains
a
variable
interest
in
these
VIEs
through
mutual
contractual
arrangements
at
market
rates
and
terms
that
provide
them
with
necessary
products
and
services,
and/or
intellectual
property,
and
has
the
ability
to
enter
into
additional
such
contractual
arrangements
at
market
rates
and
terms.
We
also
have
the
ability
to
transfer
our
rights
to
govern
these
VIEs,
or
the
entities
that
possess
those
rights,
to
other
parties,
which
could
yield
a
return
if
and
when
these
rights
are
transferred.

(i)

(ii)

231

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
2.
Significant
Accounting
Policies
(Continued)

(iii)

(iv)

Revenues
recognized
by
Laureate's
for-profit
entities
from
these
contractual
arrangements
with
our
consolidated
VIEs
were
approximately
$113,276,
$106,005
and
$113,500
for
the
years
ended
December
31,
2016,
2015
and
2014,
respectively.
These
revenues
are
eliminated
in
consolidation.

Laureate's
VIEs
are
generally
exempt
from
income
taxes.
As
a
result,
the
VIEs
generally
do
not
record
deferred
tax
assets
or
liabilities
or
recognize
any
income
tax
expense
in
the
Consolidated
Financial
Statements.
No
deferred
taxes
are
recognized
by
the
for-profit
service
companies
for
the
remaining
income
in
these
VIEs
as
the
legal
status
of
these
entities
generally
prevents
them
from
declaring
dividends
or
making
distributions
to
their
sponsors.
However,
these
for-profit
service
companies
record
income
taxes
related
to
revenues
from
their
contractual
arrangements
with
these
VIEs.

Risks in relation to the VIEs

•

revoke
the
business
licenses
and/or
accreditations
of
the
VIE
institutions;

232

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
2.
Significant
Accounting
Policies
(Continued)

•

void
or
restrict
related-party
transactions,
such
as
the
contractual
arrangements
between
Laureate
and
the
VIE
institutions;

impose
fines
that
significantly
impact
business
performance
or
other
requirements
with
which
the
VIEs
may
not
be
able
to
comply;

require
Laureate
to
change
the
VIEs'
governance
structures,
such
that
Laureate
would
no
longer
maintain
control
of
the
activities
of
the
VIEs;
or

disallow
a
transfer
of
our
rights
to
govern
these
VIEs,
or
the
entities
that
possess
those
rights,
to
a
third
party
for
consideration.

Laureate's
ability
to
conduct
our
business
would
be
negatively
affected
if
local
governments
were
to
carry
out
any
of
the
aforementioned
or
other
similar
actions.
In
any
such
case,
Laureate
may
no
longer
be
able
to
consolidate
the
VIEs.

Selected
Consolidated
Statements
of
Operations
information
for
these
VIEs
was
as
follows,
net
of
the
charges
related
to
the
above-described
contractual
arrangements:

For
the
years
ended
December
31,
Selected
Statements
of
Operations
information:
Revenues,
by
segment:

LatAm
Europe
AMEA
Revenues
Depreciation
and
amortization
Operating
income
(loss),
by
segment:

LatAm
Europe
AMEA

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

2016

2015

2014

$ 437,950
$ 417,711
$ 458,080

130,353

128,605

139,146

136,051

727,579

682,367

54,821

53,019

126,674

146,424

711,048

51,708

(17,776)

13,295

15,660

11,179

35,075

33,033

(14,778)

13,591

9,249

8,062

11,760

11,538

(50,028)
(11,243)
4,386

(56,885)
(51,471)
(50,941)

Included
in
Net
income
(loss)
for
the
VIEs
in
the
table
above
is
non-operating
investment
income
that
was
recorded
by
three
of
the
Chilean
institutions
relating
to
investments
that
these
institutions
have
in
a
for-profit,
education-related
real
estate
subsidiary
of
Laureate
in
Chile.
This
non-operating
investment
income,
which
eliminated
in
consolidation,
totaled
$11,061,
$10,297
and
$11,981
for
the
years
ended
December
31,
2016,
2015
and
2014,
respectively.
Also,
of
Laureate's
impairment
charges
of
$125,788
for
the
year
ended
December
31,
2014,
$47,965
related
to
VIEs
within
the
LatAm
segment.
See
Note
7,
Goodwill
and
Other
Intangible
Assets,
for
further
discussion
of
the
impairment
charges
recorded.

233

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
2.
Significant
Accounting
Policies
(Continued)

The
following
table
reconciles
the
Net
income
(loss)
attributable
to
Laureate
Education,
Inc.
as
presented
in
the
table
above,
to
the
amounts
in
our
Consolidated
Statements
of
Operations:

For
the
years
ended
December
31,
Net
income
(loss)
attributable
to
Laureate
Education,
Inc.:
Variable
interest
entities
Other
operations
Corporate
and
eliminations
Net
income
(loss)
attributable
to
Laureate
Education,
Inc.

2016

2015

2014

(50,941)
11,538
$
33,033
$
291,212

118,001

519,104

(180,290)

(398,562)
(445,787)

371,847
$ (316,248) $ (158,291)

The
following
table
presents
selected
assets
and
liabilities
of
the
consolidated
VIEs.
Except
for
Goodwill,
the
assets
in
the
table
below
include
the
assets
that
can
be
used
only
to
settle
the
obligations
for
the
VIEs.
The
liabilities
in
the
table
are
liabilities
for
which
the
creditors
of
the
VIEs
do
not
have
recourse
to
the
general
credit
of
Laureate.

Selected
Consolidated
Balance
Sheet
amounts
for
these
VIEs
were
as
follows:

December
31,
2016

December
31,
2015

VIE

Consolidated

VIE

Consolidated

Balance
Sheets
data:
Cash
and
cash
equivalents
Other
current
assets
Total
current
assets
Goodwill
Tradenames
Other
intangible
assets,
net
Other
long-term
assets
Total
assets
Total
current
liabilities
Long-term
debt
and
other
long-term
liabilities
Total
liabilities
Total
stockholders'
equity
Total
stockholders'
equity
attributable
to
Laureate
Education,
Inc.

169,074
$
153,136

322,210

181,669

104,117

—

701,117

1,309,113

320,922

103,375

424,297

884,816

866,997

464,965
$
760,851

1,225,816

1,934,464

1,307,633

46,700

2,588,352

7,102,965

1,445,994

4,635,746

6,081,740

664,392

632,210

120,944
$
186,099

307,043

196,869

104,952

738,019

1,346,908

305,067

150,306

455,373

891,535

874,610

458,673

677,011

1,135,684

2,115,897

1,361,125

52,197

2,774,213

7,439,116

1,548,183

5,483,761

7,031,944

355,426

324,759

The
VIEs'
Cash
and
cash
equivalents
balances
are
generally
required
to
be
used
only
for
the
benefit
of
the
operations
of
these
VIEs.
These
balances
are
included
in
Cash
and
cash
equivalents
in
our
Consolidated
Balance
Sheets.
As
discussed
further
in
Note
3,
Dispositions
and
Asset
Sales,
we
completed
the
sale
of
our
French
operations
in
July
2016.
Those
operations
included
two
institutions
that
were
VIE's.

234

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
2.
Significant
Accounting
Policies
(Continued)

Affiliates

When
Laureate
exercises
significant
influence
over
an
affiliated
entity,
but
does
not
control
the
entity,
we
account
for
our
investments
using
the
equity
method
of
accounting.
Significant
influence
occurs
generally
through
ownership,
directly
or
indirectly,
of
at
least
20%
and
up
to
50%
of
the
voting
interests.
Under
the
equity
method
of
accounting,
Laureate
records
the
proportionate
share
of
these
investments
in
Other
assets
in
the
Consolidated
Balance
Sheets.
Our
proportionate
share
of
income
or
loss
related
to
these
investments
is
recorded
in
Equity
in
net
income
of
affiliates,
net
of
tax,
in
the
Consolidated
Statements
of
Operations.

Equity
investments
in
which
we
do
not
exercise
significant
influence,
generally
through
ownership
of
less
than
20%
of
the
voting
rights,
are
accounted
for
using
the
cost
method
of
accounting.
Under
the
cost
method
of
accounting,
the
investment
is
carried
at
cost
on
the
Consolidated
Balance
Sheets
in
Other
assets
and
income
is
recognized
when
dividends
are
received.

Impairments
are
recognized
for
an
equity
or
cost
method
investment
when
and
if
the
investment
suffers
an
other-than-temporary
decline
in
value.
At
that
time,
the
investment
is
adjusted
to
its
new
fair
value
and
the
difference
is
recognized
as
a
loss
in
our
Consolidated
Statements
of
Operations.
For
equity
method
investments,
this
impairment
loss
is
included
in
Equity
in
net
income
of
affiliates,
net
of
tax.

Business
Combinations

Effective
January
1,
2009,
Laureate
adopted
the
accounting
guidance
for
business
combinations
as
prescribed
by
ASC
805,
"Business
Combinations."
When
we
complete
a
business
combination,
all
tangible
and
identifiable
intangible
assets
acquired
and
all
liabilities
assumed
are
recorded
at
fair
value.
Any
excess
purchase
price
is
recorded
as
goodwill.
Transaction
costs
associated
with
business
combinations
are
expensed
as
incurred.
If
Laureate
acquires
less
than
100%
of
an
entity
(a
partial
acquisition)
and
consolidates
the
entity
upon
acquisition,
all
assets
and
liabilities,
including
noncontrolling
interests,
are
recorded
at
their
estimated
fair
value.
When
a
partial
acquisition
results
in
Laureate
obtaining
control
of
an
entity,
Laureate
remeasures
any
previously
existing
investment
in
the
entity
at
fair
value
and
records
a
gain
or
loss.
Partial
acquisitions
in
which
Laureate's
control
does
not
change
are
accounted
for
as
equity
transactions.
Revenues
and
the
results
of
operations
of
the
acquired
business
are
included
in
the
accompanying
Consolidated
Financial
Statements
commencing
on
the
date
of
acquisition.

Laureate
accounts
for
acquired
businesses
using
the
acquisition
method
of
accounting.
Certain
acquisitions
require
the
payment
of
contingent
amounts
of
purchase
consideration
if
specified
operating
results
are
achieved
in
periods
subsequent
to
the
acquisition
date.
For
acquisitions
consummated
on
or
after
January
1,
2009,
we
record
such
contingent
consideration
at
fair
value
on
the
acquisition
date,
with
subsequent
adjustments
recognized
in
Direct
costs
in
our
Consolidated
Statements
of
Operations.
We
classify
the
subsequent
cash
payments
of
contingencies
that
are
recorded
at
the
acquisition
date
within
financing
activities
in
the
Consolidated
Statements
of
Cash
Flows.
Contingent
consideration
arrangements
related
to
acquisitions
consummated
prior
to
January
1,
2009
result
in
additional
goodwill
being
recorded
upon
settlement
of
the
underlying
contingencies,
with
the
settlement
of
these

235

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
2.
Significant
Accounting
Policies
(Continued)

contingencies
by
transfer
of
cash
classified
within
investing
activities
in
the
Consolidated
Statements
of
Cash
Flows.

Laureate
generally
obtains
indemnification
from
the
sellers
of
the
higher
education
institutions
upon
acquisition
for
various
contingent
liabilities
that
may
arise
and
are
related
to
pre-acquisition
events
in
order
to
protect
itself
from
economic
losses
arising
from
such
exposures.
Prior
to
January
1,
2009,
we
did
not
record
indemnification
assets
related
to
any
liabilities
recorded
as
part
of
the
purchase
price
allocation.
Instead,
an
indemnification
asset
was
recorded
when
the
seller
was
obligated
to
make
a
payment
under
the
indemnification
and
the
amount
was
determined
to
be
reasonably
assured
of
collection.
In
cases
in
which
the
contingent
liability
was
extinguished
for
an
amount
less
than
originally
established
or
the
related
statute
of
limitations
lapses
such
that
the
contingent
amount
was
no
longer
required
to
be
paid,
the
remaining
liability
was
reversed,
and
any
difference
between
the
liability's
carrying
value
and
settlement
amount
was
recognized
in
our
Consolidated
Statements
of
Operations.

For
acquisitions
consummated
on
or
after
January
1,
2009,
we
recognize
an
indemnification
asset
at
the
same
time
and
on
the
same
basis
as
the
related
indemnified
item,
subject
to
any
contractual
limitations
and
to
the
extent
that
collection
is
reasonably
assured,
in
accordance
with
ASC
805.
In
subsequent
periods,
changes
in
the
indemnified
item
are
offset
by
changes
in
the
indemnification
asset.
We
assess
the
realizability
of
the
indemnification
assets
each
reporting
period.
However,
changes
in
uncertain
income
tax
positions
are
recorded
as
a
component
of
Income
tax
(expense)
benefit,
while
related
changes
to
the
indemnification
asset
are
included
in
Operating
income
in
the
Consolidated
Statements
of
Operations.

Redeemable
Noncontrolling
Interests
and
Equity

In
certain
cases,
Laureate
initially
purchases
a
majority
ownership
interest
in
a
company
and
uses
various
put
and
call
arrangements
with
the
noncontrolling
interest
holders
that
require
or
enable
us
to
purchase
all
or
a
portion
of
the
remaining
minority
ownership
at
a
later
date.
The
nature
of
these
Minority
Put
Arrangements
and
our
accounting
for
the
redeemable
noncontrolling
interests
are
discussed
below.

Minority Put Arrangements

Minority
Put
Arrangements
give
noncontrolling
interest
holders
the
right
to
require
Laureate
to
purchase
their
shares
(i.e.,
Put
option).
The
Put
option
price
is
generally
established
by
multiplying
an
agreed-upon
earnings
measurement
of
the
acquired
company
by
a
negotiated
factor
within
a
specified
time
frame.
The
future
earnings
measurement
is
based
on
an
agreed-upon
set
of
rules
that
are
not
necessarily
consistent
with
GAAP,
which
we
refer
to
as
"non-GAAP
earnings."

Laureate
accounts
for
all
of
these
Minority
Put
Arrangements
as
temporary
equity
in
an
account
presented
between
liabilities
and
equity
called
Redeemable
noncontrolling
interests
and
equity
on
the
Consolidated
Balance
Sheets.
This
classification
is
appropriate
because
the
instruments
are
contingently
redeemable
based
on
events
outside
Laureate's
control.
This
accounting
treatment
is
in
accordance
with
ASC
480-10-S99,
"Distinguishing
Liabilities
from
Equity."

Redeemable
noncontrolling
interests
are
accreted
to
their
redemption
value
(Put
value)
over
the
period
from
the
date
of
issuance
to
the
first
date
on
which
the
Put
option
is
exercisable.
The
change
in

236

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
2.
Significant
Accounting
Policies
(Continued)

Put
value
is
recorded
against
Additional
paid-in
capital
since
Laureate
has
an
Accumulated
deficit.
If
Laureate
had
retained
earnings,
then
the
change
in
Put
value
would
be
recorded
against
retained
earnings.
In
a
computation
of
earnings
per
share,
the
accretion
of
redeemable
noncontrolling
interests
to
their
redemption
value
would
be
a
reduction
of
earnings
available
to
common
stockholders.

Foreign
Currency
Translation
and
Transaction
Gains
and
Losses

The
United
States
Dollar
(USD)
is
the
functional
currency
of
Laureate
and
our
subsidiaries
operating
in
the
United
States.
Our
subsidiaries'
financial
statements
are
maintained
in
their
functional
currencies.
The
functional
currency
of
each
of
our
foreign
subsidiaries
is
the
currency
of
the
economic
environment
in
which
the
subsidiary
primarily
does
business.
Our
foreign
subsidiaries'
financial
statements
are
translated
into
USD
using
the
exchange
rates
applicable
to
the
dates
of
the
financial
statements.
Assets
and
liabilities
are
translated
into
USD
using
the
period-end
spot
foreign
exchange
rates.
Income
and
expenses
are
translated
at
the
weighted-average
exchange
rates
in
effect
during
the
period.
Equity
accounts
are
translated
at
historical
exchange
rates.
The
effects
of
these
translation
adjustments
are
reported
as
a
component
of
Accumulated
other
comprehensive
income
(loss)
included
in
the
Consolidated
Statements
of
Stockholders'
Equity.

Laureate
has
certain
intercompany
loans
that
are
deemed
to
have
the
characteristics
of
a
long-term
investment.
That
is,
the
settlement
of
the
intercompany
loan
is
not
planned
or
anticipated
in
the
foreseeable
future.
Transaction
gains
and
losses
related
to
these
types
of
loans
are
recorded
as
a
component
of
Accumulated
other
comprehensive
income
(loss)
included
in
the
Consolidated
Statements
of
Stockholders'
Equity.
Transaction
gains
and
losses
related
to
all
other
intercompany
loans
are
included
in
Foreign
currency
exchange
gain
(loss),
net
in
the
Consolidated
Statements
of
Operations.

For
any
transaction
that
is
in
a
currency
different
from
the
entity's
functional
currency,
Laureate
records
a
gain
or
loss
based
on
the
difference
between
the
exchange
rate
at
the
transaction
date
and
the
exchange
rate
at
the
transaction
settlement
date
(or
rate
at
period
end,
if
unsettled)
as
Foreign
currency
exchange
gain
(loss),
net
in
the
Consolidated
Statements
of
Operations.

Cash
and
Cash
Equivalents

Laureate
considers
all
highly
liquid
investments
that
are
purchased
with
an
original
maturity
of
three
months
or
less
to
be
cash
equivalents.

The
Department
of
Education
of
the
Hunan
Province
in
China
considers
it
prudent
for
universities
in
Hunan
to
demonstrate
that
they
have
adequate
cash
to
meet
operational
needs
for
the
remainder
of
the
academic
year.
Although
there
is
no
formal
rule
or
law,
it
is
customary
to
retain
on
the
university's
year-end
balance
sheet
approximately
25%
of
the
cash
received
from
the
September
enrollment
cycle.
It
is
the
Company's
position
that
this
is
not
a
restricted
cash
requirement
and
therefore
this
cash
has
been
classified
as
Cash
and
cash
equivalents
on
the
Company's
Consolidated
Balance
Sheets.

237

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
2.
Significant
Accounting
Policies
(Continued)

Restricted
Cash
and
Investments

Laureate's
United
States
institutions
participate
in
the
United
States
Department
of
Education
(DOE)
Title
IV
student
financing
assistance
lending
programs
(Title
IV
programs).
Restricted
cash
and
investments
includes
cash
equivalents
and
short-term
investments
held
to
collateralize
standby
letters
of
credit
in
favor
of
the
DOE.
Letters
of
credit
are
required
by
the
DOE
in
order
to
allow
our
United
States
institutions
to
participate
in
the
Title
IV
program.
In
addition,
Laureate
may
at
times
have
restricted
cash
in
escrow
pending
potential
acquisition
transactions,
hold
a
United
States
deposit
for
a
letter
of
credit
in
lieu
of
a
surety
bond,
or
otherwise
have
cash
that
is
not
immediately
available
for
use
in
current
operations.

Financial
Instruments

Laureate's
financial
instruments
consist
of
cash
and
cash
equivalents,
restricted
cash
and
investments,
accounts
and
notes
receivable,
other
receivables,
accounts
payable,
amounts
due
to
shareholders
of
acquired
companies,
derivative
instruments,
debt,
capital
lease
obligations,
and
redeemable
noncontrolling
interests
and
equity.
The
fair
value
of
these
financial
instruments
approximates
their
carrying
amounts
reported
in
the
Consolidated
Balance
Sheets
with
the
exception
of
debt,
as
discussed
in
Note
9,
Debt.
Additional
information
about
fair
value
is
provided
in
Note
20,
Fair
Value
Measurement.

Our
cash
accounts
are
maintained
with
high-quality
financial
institutions
with
no
significant
concentration
in
any
one
institution.
Our
accounts
receivable
are
not
concentrated
with
any
one
significant
customer.
Our
United
States
institutions
participate
in
the
DOE
Title
IV
program
and
certain
Chilean
institutions
in
the
Laureate
network
participate
in
a
government-sponsored
student
financing
program
known
as
the
Crédito
con
Aval
del
Estado,
the
CAE
Program.
During
the
course
of
the
year,
Laureate
could
have
material
receivables
related
to
Title
IV
and
the
CAE
Program.

Accounts
and
Notes
Receivable

We
recognize
student
receivables
when
an
academic
session
begins,
although
students
generally
enroll
in
courses
prior
to
the
start
of
the
academic
session.
Receivables
are
recognized
only
to
the
extent
that
amounts
are
due
and
collection
is
reasonably
assured.

Laureate
offers
long-term
financing
through
note
receivable
agreements
with
students
at
certain
of
our
institutions.
These
notes
receivable
generally
are
not
collateralized.
Non-interest
bearing,
long-term
student
receivables
are
recorded
at
present
value
using
a
discount
rate
approximating
the
unsecured
borrowing
rate
for
an
individual.
Differences
between
the
present
value
and
the
principal
amount
of
long-term
student
receivables
are
accreted
through
Interest
income
over
their
terms.
In
the
past,
certain
of
our
institutions
have
sold
certain
long-term
student
receivables
to
local
financial
institutions.
These
transactions
were
deemed
sales
of
receivables
and
the
receivables
were
derecognized
from
our
Consolidated
Balance
Sheets.

Certain
Chilean
institutions
in
the
Laureate
network
also
participate
in
the
CAE
Program.
In
this
program,
these
institutions
provide
guarantees
to
third-party
financing
institutions
for
tuition
loans
made
to
qualifying
students.
Refer
to
Note
11,
Commitments
and
Contingencies,
for
further
discussion
of
this
program.

238

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
2.
Significant
Accounting
Policies
(Continued)

Allowance
for
Doubtful
Accounts

Receivables
are
deemed
to
be
uncollectible
when
they
have
been
outstanding
for
two
years,
or
earlier
when
collection
efforts
have
ceased,
at
which
time
they
are
written
off.
Prior
to
that,
Laureate
records
an
allowance
for
doubtful
accounts
to
reduce
our
receivables
to
their
net
realizable
value.
Our
allowance
estimation
methodology
is
based
on
the
age
of
the
receivables,
the
status
of
past-due
amounts,
historical
collection
trends,
current
economic
conditions
and
student
enrollment
status.
In
the
event
that
current
collection
trends
differ
from
historical
trends,
an
adjustment
is
made
to
the
allowance
account
and
bad
debt
expense.

Property
and
Equipment,
and
Leased
Assets

Property
and
equipment
includes
land,
buildings,
furniture,
equipment,
software,
library
books,
leasehold
improvements,
and
construction
in-progress.
We
record
property
and
equipment
at
cost
less
accumulated
depreciation
and
amortization.
Software
that
is
developed
for
internal
use
is
classified
within
the
line
item
titled
Furniture,
equipment
and
software
in
our
Consolidated
Balance
Sheets.
Repairs
and
maintenance
costs
are
expensed
as
incurred.
Assets
under
construction
are
recorded
in
Construction
in-progress
until
they
are
available
for
use.
Interest
is
capitalized
as
a
component
of
the
cost
of
projects
during
the
construction
period.

We
conduct
a
significant
portion
of
our
operations
at
leased
facilities.
Laureate
analyzes
each
lease
agreement
to
determine
whether
it
should
be
classified
as
a
capital
or
an
operating
lease.
We
recognize
operating
lease
rent
expense
on
a
straight-line
basis
over
the
expected
term
of
each
lease.
In
some
instances,
we
enter
into
arrangements
in
which
the
landlord
will
construct
real
estate
assets
to
be
used
for
our
business
operations.
In
some
cases,
we
are
responsible
for
construction
cost
overruns
or
nonstandard
tenant
improvements.
Laureate
reviews
these
leases
to
determine
whether
we
bear
substantially
all
of
the
construction
period
risks
and,
therefore,
should
be
considered
for
accounting
purposes
to
be
the
"owner"
of
the
real
estate
project.
If
we
are
deemed
to
be
the
owner
we
are
required
to
capitalize
the
construction
costs
on
our
Consolidated
Balance
Sheet.
Upon
completion
of
the
project,
we
perform
a
sale-leaseback
analysis
pursuant
to
guidance
on
accounting
for
leases
to
determine
if
we
can
remove
the
assets
from
our
Consolidated
Balance
Sheet.
For
some
of
these
leases,
we
are
considered
to
have
"continuing
involvement,"
which
precludes
us
from
derecognizing
the
assets
from
our
Consolidated
Balance
Sheet
when
construction
is
complete
(a
failed
sale-
leaseback).
In
conjunction
with
these
leases,
we
capitalize
the
construction
costs
on
our
Consolidated
Balance
Sheet
and
also
record
financing
obligations
representing
payments
owed
to
the
landlord.
We
do
not
report
rent
expense
for
the
properties
which
are
owned
for
accounting
purposes.
For
capital
leases,
we
initially
record
the
assets
at
the
lower
of
fair
value
or
the
present
value
of
the
future
minimum
lease
payments,
excluding
executory
costs.
If
the
lease
agreement
includes
a
legal
obligation
that
requires
the
leased
premises
to
be
returned
in
a
predetermined
condition,
we
recognize
an
asset
retirement
obligation
and
a
corresponding
depreciating
asset,
when
such
an
asset
exists.

Depreciation
is
recorded
on
a
straight-line
basis
over
the
estimated
useful
lives
of
the
assets.
Leasehold
improvements,
including
structural
improvements,
are
amortized
using
the
straight-line
method
over
the
lesser
of
the
estimated
useful
life
of
the
asset
or
the
lease
term,
including
reasonably-assured
renewals
or
purchase
options
that
are
considered
likely
to
be
exercised.
Laureate
includes
the

239

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
2.
Significant
Accounting
Policies
(Continued)

amortization
of
assets
recorded
under
capital
leases
within
depreciation
expense.
Assets
under
capital
leases
are
typically
amortized
over
the
related
lease
term
using
the
straight-line
method.

Depreciation
and
amortization
periods
are
as
follows:

Buildings
Furniture,
equipment
and
software
Leasehold
improvements

Land
Use
Rights

3
-
50
years

2
-
15
years

2
-
25
years

Certain
of
our
institutions
in
China,
Malaysia,
Mexico
and
Turkey
have
obtained
land
use
rights
for
certain
time
periods
from
government
authorities.
Land
use
rights
allow
us
to
use
the
land
to
build
our
campus
facilities.
Upon
expiry
of
a
land
use
right,
it
will
either
be
renewed
or
the
land
will
be
returned
to
the
government
authority.
Land
use
rights
are
stated
at
cost
less
accumulated
amortization
and
any
recognized
impairment
loss.
Amortization
is
provided
on
a
straight-
line
basis
over
the
respective
term
of
the
land
use
right
agreement,
and
is
recorded
as
rent
expense
within
Direct
costs
in
our
Consolidated
Statements
of
Operations.

Direct
and
Deferred
Costs

Direct
costs
reported
on
the
Consolidated
Statements
of
Operations
represent
the
cost
of
operations,
including
selling
and
administrative
expenses,
which
are
directly
attributable
to
specific
business
units.

Deferred
costs
on
the
Consolidated
Balance
Sheets
consist
primarily
of
direct
costs
associated
with
online
course
development
and
accreditation.
Deferred
costs
associated
with
the
development
of
online
educational
programs
are
capitalized
after
technological
feasibility
has
been
established.
Deferred
online
course
development
costs
are
amortized
to
Direct
costs
on
a
straight-line
basis
over
the
estimated
period
that
the
associated
products
are
expected
to
generate
revenues.
Deferred
online
course
development
costs
are
evaluated
on
a
quarterly
basis
through
review
of
the
corresponding
course
catalog.
If
a
course
is
no
longer
listed
or
offered
in
the
current
course
catalog,
then
the
costs
associated
with
its
development
are
written
off.
As
of
December
31,
2016
and
2015,
the
unamortized
balances
of
online
course
development
costs
were
$54,713
and
$54,461,
respectively.
Laureate
defers
direct
and
incremental
third-party
costs
incurred
for
obtaining
initial
accreditation
and
for
the
renewal
of
accreditations.
These
accreditation
costs
are
amortized
to
Direct
costs
over
the
life
of
the
accreditation
on
a
straight-line
basis.
As
of
December
31,
2016
and
2015,
the
unamortized
balances
of
accreditation
costs
were
$3,035
and
$3,708,
respectively.

At
December
31,
2016
and
2015,
Laureate's
total
Deferred
costs
were
$160,554
and
$156,033,
respectively,
with
accumulated
amortization
of
$(102,806)
and
$(97,864),
respectively.

Debt
Issuance
Costs

On
January
1,
2016,
Laureate
adopted
ASU
2015-03,
which
simplified
the
presentation
of
debt
issuance
costs
by
requiring
debt
issuance
costs
to
be
presented
as
a
deduction
from
the
corresponding
debt
liability.
This
makes
the
presentation
of
debt
issuance
costs
consistent
with
the
presentation
of

240

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
2.
Significant
Accounting
Policies
(Continued)

debt
discounts
or
premiums.
The
recognition
and
measurement
guidance
for
debt
issuance
costs
is
not
affected,
therefore
these
costs
will
continue
to
be
amortized
as
interest
expense.
At
adoption,
the
new
guidance
was
applied
retrospectively
to
all
prior
periods
presented.
The
impact
to
our
December
31,
2015
Consolidated
Balance
Sheet
was
a
reduction
to
Deferred
costs,
net
and
Long-term
debt
of
$69,294.

Debt
issuance
costs
were
paid
as
a
result
of
certain
debt
transactions
and
are
presented
as
a
deduction
from
debt.
These
debt
issuance
costs
are
amortized
over
the
term
of
the
associated
debt
instruments.
The
amortization
expense
is
recognized
as
a
component
of
Interest
expense
in
the
Consolidated
Statements
of
Operations.
As
of
December
31,
2016
and
2015,
the
unamortized
balances
of
deferred
financing
costs
were
$44,648
and
$69,294,
respectively.

Goodwill,
Other
Intangible
Assets
and
Long-lived
Assets

Goodwill

Goodwill
primarily
represents
the
amounts
paid
by
Wengen
in
excess
of
the
fair
value
of
the
net
assets
acquired
in
the
merger
transaction
(see
Note
7,
Goodwill
and
Other
Intangible
Assets),
plus
the
excess
purchase
price
over
fair
value
of
net
assets
for
businesses
acquired
after
the
merger
transaction.

Goodwill
is
evaluated
annually
as
of
October
1st
each
year
for
impairment
at
the
reporting
unit
level,
in
accordance
with
ASC
350,
"Intangibles—Goodwill
and
Other."
We
also
evaluate
goodwill
for
impairment
on
an
interim
basis
if
events
or
changes
in
circumstances
between
annual
tests
indicate
that
the
asset
may
be
impaired.
Goodwill
is
impaired
when
the
carrying
amount
of
a
reporting
unit's
goodwill
exceeds
its
implied
fair
value.
A
reporting
unit
is
defined
as
a
component
of
an
operating
segment
for
which
discrete
financial
information
is
available
and
regularly
reviewed
by
management
of
the
segment.
We
have
not
made
material
changes
to
the
methodology
used
to
assess
impairment
loss
during
the
past
three
fiscal
years.

We
have
the
option
of
first
performing
a
qualitative
assessment
(i.e.,
step
zero)
before
calculating
the
fair
value
of
the
reporting
unit
(i.e.,
step
one
of
the
two-
step
fair
value-based
impairment
test).
If
we
determine
on
the
basis
of
qualitative
factors
that
the
fair
value
of
the
reporting
unit
is
more
likely
than
not
less
than
the
carrying
amount,
the
two-step
impairment
test
is
required.

If
we
do
not
perform
the
qualitative
assessment
for
a
reporting
unit
or
determine
that
it
is
more
likely
than
not
that
the
fair
value
of
a
reporting
unit
is
less
than
its
carrying
amount,
a
quantitative
two-step
fair
value-based
test
is
performed.
In
the
first
step,
we
estimate
the
fair
value
of
each
reporting
unit,
utilizing
a
weighted
combination
of
a
discounted
cash
flow
analysis
and
a
market
multiples
analysis.
If
the
recorded
net
assets
of
the
reporting
unit
are
less
than
the
reporting
unit's
estimated
fair
value,
then
there
is
no
goodwill
deemed
to
be
impaired.
If
the
recorded
net
assets
of
the
reporting
unit
exceed
its
estimated
fair
value,
then
goodwill
is
potentially
impaired
and
Laureate
calculates
the
implied
fair
value
of
goodwill,
by
deducting
the
estimated
fair
value
of
all
tangible
and
identifiable
intangible
net
assets
of
the
reporting
unit
from
the
estimated
fair
value
of
the
reporting
unit.
If
the
recorded
amount
of
goodwill
exceeds
this
implied
fair
value,
the
difference
is
recognized
as
a
Loss
on
impairment
of
assets
in
the
Consolidated
Statements
of
Operations.

Our
valuation
approach
utilizes
a
weighted
combination
of
a
discounted
cash
flow
analysis
and
a
market
multiples
analysis,
where
available.
The
discounted
cash
flow
analysis
relies
on
historical
data

241

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
2.
Significant
Accounting
Policies
(Continued)

and
internal
estimates,
which
are
developed
as
a
part
of
our
long-range
plan
process,
and
includes
an
estimate
of
terminal
value
based
on
these
expected
cash
flows
using
the
generally
accepted
Gordon
Dividend
Growth
formula,
which
derives
a
valuation
using
an
assumed
perpetual
annuity
based
on
the
reporting
unit's
residual
cash
flows.
The
discount
rate
is
based
on
the
generally
accepted
Weighted
Average
Cost
of
Capital
methodology,
and
is
derived
using
a
cost
of
equity
based
on
the
generally
accepted
Capital
Asset
Pricing
Model
and
a
cost
of
debt
based
on
the
typical
rate
paid
by
market
participants.
The
market
multiples
analysis
utilizes
multiples
of
business
enterprise
value
to
revenues,
operating
income
and
earnings
before
interest,
taxes,
depreciation
and
amortization
of
comparable
publicly
traded
companies
and
multiples
based
on
fair
value
transactions
where
public
information
is
available.
Significant
assumptions
used
in
estimating
the
fair
value
include:
(1)
discount
and
growth
rates,
and
(2)
our
long-range
plan
which
includes
enrollment,
pricing,
planned
capital
expenditures
and
operating
margins.
Management
reviews
the
sum
of
the
estimated
fair
value
of
all
Laureate's
reporting
units
to
Laureate's
enterprise
value
to
corroborate
the
results
of
its
weighted
combination
approach
to
determining
fair
value.

Other Intangible Assets

Other
intangible
assets
on
the
Consolidated
Balance
Sheets
include
acquired
indefinite-lived
Tradenames,
which
are
valued
using
the
relief-from-royalty
method.
This
method
estimates
the
amount
of
royalty
expense
that
we
would
expect
to
incur
if
the
assets
were
licensed
from
a
third
party.
We
use
publicly
available
information
and
proprietary
third-party
arm's
length
agreements
that
Laureate
has
entered
into
with
various
licensors
in
determining
certain
assumptions
to
assist
us
in
estimating
fair
value
using
market
participant
assumptions.
Any
costs
incurred
to
internally
develop
new
tradenames
are
expensed
as
incurred.
Accreditations
are
not
considered
a
separate
unit
of
account
and
their
values
are
embedded
in
the
cash
flows
generated
by
the
institution,
which
are
used
to
value
its
tradename.
The
Company
does
not
believe
accreditations
have
significant
value
on
their
own
due
to
the
fact
that
they
are
neither
exclusive
nor
scarce,
and
the
direct
costs
associated
with
obtaining
accreditations
are
not
material.

Indefinite-lived
intangibles
are
evaluated
annually
as
of
October
1st
of
each
year
for
impairment
as
well
as
on
an
interim
basis
if
events
or
changes
in
circumstances
between
annual
tests
indicate
that
the
asset
may
be
impaired.
The
impairment
test
for
indefinite-lived
intangible
assets
generally
requires
a
new
determination
of
the
fair
value
of
the
intangible
asset
using
the
relief-from-royalty
method.
If
the
fair
value
of
the
intangible
asset
is
less
than
its
carrying
value,
the
intangible
asset
is
adjusted
to
its
new
estimated
fair
value,
and
an
impairment
loss
is
recognized.

Other
intangible
assets
on
the
Consolidated
Balance
Sheets
also
include
intangible
assets
with
finite
useful
lives
such
as
acquired
student
rosters
and
non-
compete
agreements.
We
use
the
income
approach
to
establish
the
asset
values
of
these
intangible
assets.
The
cost
of
finite-lived
intangible
assets
is
amortized
on
a
straight-line
basis
over
the
intangible
assets'
estimated
useful
lives.

Long-lived Assets

Long-lived
assets,
including
finite-lived
intangible
assets,
are
reviewed
for
impairment
whenever
events
or
changes
in
circumstances
indicate
that
the
carrying
amount
of
an
asset
or
group
of
assets
may
not
be
fully
recoverable.
These
events
or
changes
in
circumstances
may
include,
but
are
not
limited
to,

242

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
2.
Significant
Accounting
Policies
(Continued)

a
significant
deterioration
of
operating
results,
a
change
in
regulatory
environment,
changes
in
business
plans,
or
adverse
changes
in
anticipated
future
cash
flows.
If
an
impairment
indicator
is
present,
we
evaluate
recoverability
by
a
comparison
of
the
carrying
amount
of
the
assets
to
future
undiscounted
net
cash
flows
expected
to
result
from
the
use
and
eventual
disposition
of
the
assets.
If
the
assets
are
determined
to
be
impaired,
the
impairment
recognized
is
the
excess
of
the
carrying
amount
over
the
fair
value
of
the
assets.
Fair
value
is
generally
determined
by
the
discounted
cash
flow
method.
The
discount
rate
used
in
any
estimate
of
discounted
cash
flows
is
the
rate
commensurate
with
a
similar
investment
of
similar
risk.

Derivative
Instruments

In
the
normal
course
of
business,
our
operations
have
significant
exposure
to
fluctuations
in
foreign
currency
values
and
interest
rate
changes.
Accordingly,
Laureate
mitigates
a
portion
of
these
risks
through
a
risk-management
program
that
includes
the
use
of
derivative
financial
instruments
(derivatives).
Laureate
selectively
enters
into
foreign
exchange
forward
contracts
to
reduce
the
earnings
impact
related
to
receivables
and
payables
that
are
denominated
in
foreign
currencies.
In
addition,
Laureate
uses
interest
rate
swaps
to
mitigate
certain
risks
associated
with
floating-rate
debt
arrangements.
We
do
not
engage
in
speculative
or
leveraged
transactions,
nor
do
we
hold
or
issue
derivatives
for
trading
purposes.
Laureate
reports
all
derivatives
on
our
Consolidated
Balance
Sheets
at
fair
value.
Realized
and
unrealized
gains
and/or
losses
resulting
from
derivatives
are
recognized
in
our
Consolidated
Statements
of
Operations,
unless
designated
and
effective
as
a
hedge.

For
derivatives
that
are
both
designated
and
effective
as
cash
flow
hedges,
gains
or
losses
associated
with
the
change
in
fair
value
of
the
derivatives
are
recognized
on
our
Consolidated
Balance
Sheets
as
a
component
of
Accumulated
other
comprehensive
income
(loss)
and
amortized
over
the
term
of
the
related
hedged
items.

Revenue
Recognition

Laureate's
revenues
primarily
consist
of
tuition
and
educational
service
revenues.
We
also
generate
revenues
from
student
fees,
dormitory/residency
fees,
and
education-related
activities.
Revenues
are
reported
net
of
scholarships
and
other
discounts,
refunds,
waivers
and
the
fair
value
of
any
guarantees
made
by
Laureate
related
to
student
financing
programs.
Laureate's
institutions
have
various
billing
and
academic
cycles.
Collectibility
is
determined
on
a
student-by-student
basis
at
the
time
of
enrollment.
Generally,
students
cannot
re-enroll
for
the
next
academic
session
without
satisfactory
resolution
of
any
past-due
amounts.
Tuition
revenues
are
recognized
ratably
on
a
weekly
straight-line
basis
over
each
academic
session.
Deferred
revenue
and
student
deposits
on
our
Consolidated
Balance
Sheets
consist
of
tuition
paid
prior
to
the
start
of
academic
sessions
and
unearned
tuition
amounts
recorded
as
accounts
receivable
after
an
academic
session
begins.
If
a
student
withdraws
from
an
institution,
Laureate's
obligation
to
issue
a
refund
depends
on
the
refund
policy
at
that
institution
and
the
timing
of
the
student's
withdrawal.
Generally,
our
refund
obligations
are
reduced
over
the
course
of
the
academic
term.
We
record
refunds
as
a
reduction
of
Deferred
revenue
and
student
deposits,
as
applicable.
Once
a
student
withdraws,
the
Company
recognizes
revenue
on
a
cash
basis
as
collectability
is
not
reasonably
assured.
Dormitory
revenues
are
recognized
over
the
occupancy
period.
Revenues
from
the
sale
of
educational
products
are
generally
recognized
upon
delivery
and
when
collectibility
is
reasonably
assured.
Student
fees
and
other
revenues,
which
include
revenues
from
contractual

243

Table
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Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
2.
Significant
Accounting
Policies
(Continued)

arrangements
with
unconsolidated
institutions,
are
recognized
as
earned
over
the
appropriate
service
period.

The
following
table
shows
the
components
of
Revenues
as
a
percentage
of
total
net
revenue
for
the
periods
presented:

For
the
years
ended
December
31,
Tuition
and
educational
services
Student
fees
Dormitory
/
residency
Other
Gross
revenue
Less:
Discounts
/
waivers
/
scholarships
Total

Advertising

2016

$ 4,640,159

126,510

65,644

201,886

5,034,199

2015

109% $ 4,562,704

129,521

75,759

225,785

119%
4,993,769

2014

106% $ 4,651,178

129,267

76,664

254,189

116%
5,111,298

(790,007)

(19)%

(702,110)

(16)%

(696,616)

$ 4,244,192

100% $ 4,291,659

100% $ 4,414,682

105%
3%
2%
6%

116%
(16)%

100%

Laureate
expenses
advertising
costs
as
incurred.
Advertising
expenses
were
$274,870,
$278,296
and
$290,830
for
the
years
ended
December
31,
2016,
2015
and
2014,
respectively,
and
are
recorded
in
Direct
costs
in
our
Consolidated
Statements
of
Operations.

Share-based
Compensation

Share-based
compensation
expense
is
based
on
the
grant-date
fair
value
estimated
in
accordance
with
the
provisions
of
ASC
718,
"Compensation—Stock
Compensation."
Laureate
recognizes
share-based
compensation
expense,
less
estimated
forfeitures,
on
a
straight-line
basis
over
the
requisite
service
period
for
time
based
awards
and
graded
vesting
basis
for
performance
based
awards.
Laureate
estimates
forfeitures
based
on
historical
activity,
expected
employee
turnover,
and
other
qualitative
factors
which
are
adjusted
for
changes
in
estimates
and
award
vesting.
All
expenses
for
an
award
will
be
recognized
by
the
time
it
becomes
fully
vested.

Laureate
has
granted
restricted
stock,
restricted
stock
units,
stock
options,
and
performance
awards
for
which
the
vesting
is
based
on
annual
performance
metrics
of
the
Company.
For
interim
periods,
we
use
our
year-to-date
actual
results,
financial
forecasts,
and
other
available
information
to
estimate
the
probability
of
the
award
vesting
based
on
the
performance
metrics.

244

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Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
2.
Significant
Accounting
Policies
(Continued)

Income
Taxes

Laureate
records
the
amount
of
taxes
payable
or
refundable
for
the
current
year.
Deferred
income
tax
assets
and
liabilities
are
recorded
with
respect
to
temporary
differences
in
the
accounting
treatment
of
items
for
GAAP
financial
reporting
purposes
and
for
income
tax
purposes.
Deferred
tax
assets
and
liabilities
are
measured
using
enacted
tax
rates
in
effect
for
the
year
in
which
those
temporary
differences
are
expected
to
be
recovered
or
settled.
The
effect
on
deferred
tax
assets
and
liabilities
of
a
change
in
tax
rates
is
recognized
in
earnings
in
the
period
in
which
the
new
rate
is
enacted.
Where,
based
on
the
weight
of
all
available
evidence,
it
is
more
likely
than
not
that
some
portion
of
recorded
deferred
tax
assets
will
not
be
realized,
a
valuation
allowance
is
established
for
the
amount
that,
in
management's
judgment,
is
sufficient
to
reduce
the
deferred
tax
asset
to
an
amount
that
is
more
likely
than
not
to
be
realized.

A
tax
position
must
meet
a
minimum
probability
threshold
before
a
financial
statement
benefit
is
recognized.
The
minimum
threshold
is
defined
as
a
tax
position
that
is
more
likely
than
not
to
be
sustained
upon
examination
by
the
applicable
taxing
authority,
including
resolution
of
any
related
appeals
or
litigation
processes,
based
on
the
technical
merits
of
the
position
and
having
full
knowledge
of
all
relevant
information.

We
earn
a
significant
portion
of
our
income
from
subsidiaries
located
in
countries
outside
the
United
States.
Deferred
tax
liabilities
have
not
been
recognized
for
undistributed
foreign
earnings
because
management
believes
that
the
earnings
will
be
indefinitely
reinvested
outside
the
United
States
under
the
Company's
planned
tax
neutral
methods.
Our
assertion
that
earnings
from
our
foreign
operations
will
be
indefinitely
reinvested
is
supported
by
projected
working
capital
and
long-term
capital
plans
in
each
foreign
subsidiary
location
in
which
the
earnings
are
generated.
Additionally,
we
believe
that
we
have
the
ability
to
indefinitely
reinvest
foreign
earnings
based
on
our
domestic
operation's
cash
repatriation
strategies,
projected
cash
flows,
projected
working
capital
and
liquidity,
and
the
expected
availability
of
capital
within
the
debt
or
equity
markets.
If
our
expectations
change
based
on
future
developments
such
that
some
or
all
of
the
undistributed
earnings
of
our
foreign
subsidiaries
may
be
remitted
to
the
United
States
in
the
foreseeable
future,
we
will
be
required
to
recognize
deferred
tax
expense
and
liabilities
on
those
amounts.

For
additional
information
regarding
income
taxes
and
deferred
tax
assets
and
liabilities,
see
Note
15,
Income
Taxes.

Contingencies

Laureate
accrues
for
contingent
obligations
when
it
is
probable
that
a
liability
is
incurred
and
the
amount
or
range
of
amounts
is
reasonably
estimable.
As
new
facts
become
known
to
management,
the
assumptions
related
to
a
contingency
are
reviewed
and
adjustments
are
made,
as
necessary.
Any
legal
costs
incurred
related
to
contingencies
are
expensed
as
incurred.

245

Table
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Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
2.
Significant
Accounting
Policies
(Continued)

Recently
Issued
Accounting
Standards

Accounting Standards Update (ASU) No. 2017-04 (ASU 2017-04), Intangibles—Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment

ASU No. 2017-01 (ASU 2017-01), Business Combinations (Topic 805), Clarifying the Definition of a Business

In
January
2017,
the
FASB
issued
ASU
2017-01
in
response
to
shareholders'
concerns
that
Topic
805
applied
the
definition
of
a
business
too
broadly,
which
resulted
in
business
acquisitions
being
recorded
in
situations
that
were
more
akin
to
asset
acquisitions.
This
Update
clarifies
the
definition
of
a
business
with
the
objective
of
adding
guidance
to
assist
entities
in
evaluating
whether
transactions
should
be
accounted
for
as
acquisitions
(or
disposals)
of
assets
or
businesses.
The
amendments
in
this
Update
provide
a
screen
to
determine
whether
an
integrated
set
of
assets
and
activities
("set")
is
a
business.
Under
current
GAAP,
there
are
three
elements
to
a
business—inputs,
processes
and
outputs,
though
outputs
do
not
have
to
be
present
and
all
the
inputs
and
processes
that
a
seller
uses
in
operating
a
set
are
not
required
if
market
participants
can
acquire
the
set
and
continue
to
produce
outputs
by
integrating
the
acquired
set
with
their
own
inputs
and
processes.
This
Update
is
effective
for
Laureate
beginning
on
January
1,
2018
and
should
be
applied
prospectively
on
or
after
the
effective
date.
We
are
currently
evaluating
the
impact
of
ASU
2017-01
on
our
Consolidated
Financial
Statements.

ASU No. 2016-18 (ASU 2016-18), Statement of Cash Flows (Topic 230): Restricted Cash

246

Table
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Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
2.
Significant
Accounting
Policies
(Continued)

year
that
includes
the
interim
period.
We
are
currently
evaluating
the
impact
of
ASU
2016-18
on
our
Consolidated
Financial
Statements.

ASU No. 2016-16 (ASU 2016-16), Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory

ASU No. 2016-15 (ASU 2016-15), Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments

Debt
prepayment
or
debt
extinguishment
costs;

Settlement
of
zero-coupon
debt
instruments
or
other
debt
instruments
with
coupon
rates
that
are
insignificant
in
relation
to
the
effective
interest
rate
of
the
borrowing;

Contingent
consideration
payments
made
after
a
business
combination;

Proceeds
from
the
settlement
of
insurance
claims;

Proceeds
from
the
settlement
of
corporate-owned
life
insurance
policies;

Distributions
received
from
equity
method
investees;

Beneficial
interests
in
securitization
transactions;
and

Separately
identifiable
cash
flows
and
application
of
the
predominance
principle.

247

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
2.
Significant
Accounting
Policies
(Continued)

ASU No. 2016-09 (ASU 2016-09), Compensation—Stock compensation (Topic 718): Improvements to Employee Share-based Payment Accounting

ASU No. 2016-08 (ASU 2016-08), Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus

Net)

ASU No. 2016-02 (ASU 2016-02), Leases (Topic 842)

On
February
25,
2016,
the
FASB
issued
ASU
2016-02.
Lessees
will
need
to
recognize
on
their
balance
sheet
a
right-of-use
asset
and
a
lease
liability
for
virtually
all
of
their
leases
(other
than
leases
that
meet
the
definition
of
a
short-term
lease).
The
liability
will
be
equal
to
the
present
value
of
lease
payments.
The
asset
will
be
based
on
the
liability,
subject
to
adjustment,
such
as
for
initial
direct
costs.
For
income
statement
purposes,
the
FASB
retained
a
dual
model,
requiring
leases
to
be
classified
as
either
operating
or
finance.
Operating
leases
will
result
in
straight-line
expense
(similar
to
current
operating
leases)
while
finance
leases
will
result
in
a
front-loaded
expense
pattern
(similar
to
current
capital
leases).
Classification
will
be
based
on
criteria
that
are
largely
similar
to
those
applied
in
current
lease
accounting,
but
without
explicit
bright
lines.
The
standard
is
effective
for
Laureate
beginning
January
1,
2019.
The
new
standard
must
be
adopted
using
a
modified
retrospective
transition,
and

248

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
2.
Significant
Accounting
Policies
(Continued)

provides
for
certain
practical
expedients.
Transition
will
require
application
of
the
new
guidance
at
the
beginning
of
the
earliest
comparative
period
presented.
We
are
in
the
process
of
completing
our
diagnostic
assessment
and
anticipate
that
ASU
2016-02
will
have
a
material
impact
on
our
Consolidated
Balance
Sheets,
as
we
will
record
significant
asset
and
liability
balances
in
connection
with
our
leased
properties.
We
are
still
evaluating
the
impact
to
our
Consolidated
Statements
of
Operations.

ASU No. 2016-01 (ASU 2016-01), Financial Instruments—Overall (Subtopic 815-10)

ASU No. 2015-17 (ASU 2015-17), Income Taxes (Topic 740)

In
November
2015,
the
FASB
issued
ASU
2015-17
as
a
part
of
the
Simplification
Initiative
and
in
response
to
concerns
that
the
current
requirement
that
entities
separate
deferred
income
tax
liabilities
and
assets
into
current
and
noncurrent
amounts
results
in
little
or
no
benefit
to
users
of
the
financial
statements.
This
classification
does
not
generally
align
with
the
time
period
in
which
the
recognized
deferred
tax
amounts
are
expected
to
be
recovered
or
settled
and
there
are
costs
incurred
by
an
entity
to
separate
deferred
income
tax
liabilities
and
assets
into
current
and
noncurrent
amounts.
The
amendments
in
this
ASU
aim
to
simplify
this
presentation
by
requiring
that
deferred
tax
liabilities
and
assets
be
classified
as
noncurrent
in
a
classified
statement
of
financial
position,
which
aligns
the
GAAP
presentation
of
deferred
income
tax
assets
and
liabilities
with
International
Financial
Reporting
Standards
(IFRS).
This
ASU
is
effective
for
Laureate
beginning
January
1,
2017.
We
expect
the
impact
of
adoption
to
be
material
to
the
presentation
of
our
Consolidated
Balance
Sheets,
as
we
had
$110,015
and
$87,895
of
current
deferred
tax
assets
recorded
as
of
December
31,
2016
and
2015,
respectively,
that
will
be
reclassified
from
current
to
noncurrent.

ASU No. 2014-09, (ASU 2014-09): Revenue from Contracts with Customers (Topic 606)

On
May
28,
2014,
the
FASB
issued
ASU
2014-09,
which
supersedes
the
revenue
recognition
requirements
in
Topic
605,
"Revenue Recognition" and
most
industry-specific
guidance.
The
core
principle
of
ASU
2014-09
is
that
a
company
will
recognize
revenue
when
it
transfers
promised
goods
or
services
to
customers
in
an
amount
that
reflects
the
consideration
to
which
the
company
expects
to
be
entitled
in
exchange
for
those
goods
or
services.
On
July
9,
2015,
the
FASB
deferred
the
effective
date

249

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
2.
Significant
Accounting
Policies
(Continued)

of
ASU
2014-09.
The
new
revenue
standard
is
effective
for
fiscal
years,
and
interim
periods
within
those
years,
beginning
after
December
15,
2017
(January
1,
2018
for
Laureate)
and
allows
either
a
full
retrospective
adoption
to
all
periods
presented
or
a
modified
retrospective
adoption
approach
with
the
cumulative
effect
of
initial
application
of
the
revised
guidance
recognized
at
the
date
of
initial
application.
We
are
in
the
process
of
completing
our
diagnostic
assessment
and
plan
to
adopt
this
ASU
effective
January
1,
2018.
We
do
not
expect
the
adoption
of
this
ASU
to
result
in
a
significant
change
to
our
method
of
recognizing
tuition
revenues;
however,
we
are
still
evaluating
other
components
of
revenue.
We
are
also
still
assessing
the
adoption
alternatives
between
full
retrospective
adoption
and
modified
retrospective
adoption.

Note
3.
Dispositions
and
Asset
Sales

Dispositions

Sale of Glion and Les Roches Hospitality Management Schools

On
March
15,
2016,
we
signed
an
agreement
with
Eurazeo,
a
publicly
traded
French
investment
company,
to
sell
Glion
Institute
of
Higher
Education
(Glion)
and
Les
Roches
International
School
of
Hotel
Management
(Les
Roches)
for
a
total
transaction
value
of
approximately
CHF
380,000
(approximately
$385,000
at
the
signing
date),
subject
to
certain
adjustments.
The
sale
included
the
operations
of
Glion
in
Switzerland
and
the
United
Kingdom,
the
operations
of
Les
Roches
in
Switzerland
and
the
United
States,
Haute
école
spécialisée
Les
Roches-Gruyère
SA
(LRG)
in
Switzerland,
Les
Roches
Jin
Jiang
in
China,
Royal
Academy
of
Culinary
Arts
(RACA)
in
Jordan
and
Les
Roches
Marbella
in
Spain.
Closing
of
the
transaction
was
subject
to
regulatory
approvals,
including
by
the
New
England
Association
of
Schools
and
Colleges,
and
other
customary
conditions
and
provisions.
The
transaction
closed
on
June
14,
2016
and
we
received
total
net
proceeds
of
approximately
$332,800,
net
of
cash
sold
of
$14,500,
and
after
adjustments
for
liabilities
assumed
by
the
buyer
and
transaction-related
costs.
In
September
2016,
Laureate
received
additional
proceeds
from
the
buyer
of
approximately
$5,800
after
finalization
of
the
working
capital
adjustment
required
by
the
purchase
agreement,
resulting
in
a
total
non-taxable
gain
on
sale
of
approximately
$249,400.
In
addition,
on
the
June
14,
2016
closing
date,
we
settled
the
deal-contingent
forward
exchange
swap
agreement
for
a
payment
of
$10,297;
see
Note
14,
Derivative
Instruments,
for
further
description
of
this
swap.
We
are
continuing
to
provide
certain
back-office
services
to
Glion
and
Les
Roches
for
a
period
of
time,
and
programs
of
those
institutions
will
continue
on
various
campuses
in
the
Laureate International Universities network
throughout
the
world.

Sale of Institutions in France

On
April
19,
2016,
Laureate
announced
that
it
had
signed
an
agreement
for
the
transfer
of
control
of
LIUF
SAS
(LIUF),
the
French
holding
entity,
to
Apax
Partners,
a
leading
private
equity
firm
in
French-speaking
European
countries.
Bpifrance,
the
investment
vehicle
of
the
French
state,
will
co-invest
alongside
Apax
Partners
and
hold
around
10%
of
the
entity.
Management
obtained
approval
for
this
transaction
on
April
6,
2016.
The
French
anti-trust
authority
also
approved
the
transaction,
and
closing
took
place
on
July
20,
2016.
LIUF
comprised
five
institutions,
including
two
VIE
institutions,
with
a
total
student
population
of
approximately
7,500:

•

École
Supérieure
du
Commerce
Extérieur
(ESCE);

Institut
Français
de
Gestion
(IFG);

250

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
3.
Dispositions
and
Asset
Sales
(Continued)

•

European
Business
School
(EBS);

École
Centrale
d'Electronique
(ECE);
and

Centre
d'Études
Politiques
et
de
la
Communication
(CEPC).

The
value
of
the
transaction
was
EUR
201,000
(approximately
$228,000
at
the
signing
date),
subject
to
certain
adjustments.
At
closing
on
July
20,
2016,
we
received
total
net
proceeds
of
approximately
$207,000,
net
of
cash
sold
of
$3,400,
and
after
adjustments
for
liabilities
assumed
by
the
buyer
and
transaction-related
costs,
resulting
in
a
non-taxable
gain
on
sale
of
approximately
$148,700.
In
addition,
in
July
we
settled
the
forward
exchange
swap
agreements
related
to
this
sale,
resulting
in
total
proceeds
of
$4,634.
See
Note
14,
Derivative
Instruments,
for
further
description
of
these
swap
agreements.

Sale of Tianyi

In
December
2016,
we
completed
the
sale
of
our
remaining
21%
ownership
interest
in
Sichuan
Tianyi
College
(Tianyi)
in
China
after
receiving
the
required
regulatory
approvals.
We
received
total
cash
consideration
of
approximately
$10,500,
of
which
approximately
$7,300
was
received
in
2015
and
recorded
as
deferred
gain
at
that
time,
pending
the
regulatory
approvals
that
were
conditions
precedent
to
transferring
the
ownership
interest.
The
regulatory
approvals
were
received
in
December
2016,
and
the
remaining
cash
consideration
of
approximately
$3,200
was
collected
in
January
2017.
Accordingly,
the
conditions
precedent
to
complete
the
transaction
were
met
in
December
2016,
resulting
in
a
gain
on
sale
of
approximately
$8,500.

This
non-operating
gain,
along
with
the
gain
on
the
sales
of
the
institutions
described
above,
are
recorded
in
Gain
on
sales
of
subsidiaries,
net
for
the
year
ended
December
31,
2016
in
the
Consolidated
Statements
of
Operations.

Sale-Leaseback
Transaction

Les Roches and Glion

During
the
fourth
quarter
of
2014,
our
GPS
segment
entered
into
a
sale-leaseback
agreement
for
a
portion
of
the
campuses
of
two
of
our
institutions
in
Switzerland,
Glion
and
Les
Roches.
The
asset
group
did
not
meet
the
conditions
required
in
ASC
205-20
to
be
reported
as
discontinued
operations
in
our
Consolidated
Financial
Statements
as
it
did
not
have
discrete
cash
flow
information.

In
the
first
quarter
of
2015,
the
sale
of
the
assets
was
completed
and
Laureate
received
net
proceeds
of
approximately
$182,000,
resulting
in
a
gain
on
sale
of
approximately
$36,000,
which
was
deferred
and
will
be
recognized
into
income
over
the
lease
term
of
20
years
from
the
sale
date.
A
portion
of
the
net
proceeds
was
used
to
repay
mortgage
debt
related
to
the
asset
group.
During
the
year
ended
December
31,
2015,
Laureate
recorded
a
Loss
on
debt
extinguishment
of
$932
as
a
result
of
mortgage
breakage
fees
that
were
paid
in
connection
with
the
repayment
of
the
mortgage
debt.
As
discussed
above,
we
sold
Glion
and
Les
Roches
in
2016
and
as
part
of
the
sale
agreement
we
are
still
a
guarantor
under
this
lease.
However,
the
Company
has
certain
indemnifications
in
the
event
that
we
are
required
to
make
payments
under
the
guarantee.
We
are
continuing
to
defer
the
gain
on
sale
from
the
2015
sale-leaseback
transaction
and
recognize
it
into
income
over
the
lease
term.

251

Table
of
Contents

Note
3.
Dispositions
and
Asset
Sales
(Continued)

INTI Education Holdings Sdn Bhd (INTI)

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

In
2014,
INTI,
in
our
AMEA
segment,
had
recorded
assets
held
for
sale
related
to
our
Sarawak
campus
in
Malaysia.
During
the
first
quarter
of
2015
the
conditions
precedent
for
the
transaction
were
met
and
the
sale
was
completed,
with
title
to
the
assets
transferred
to
the
buyer.
The
total
purchase
price
was
Malaysian
Ringgit
(MYR)
21,850
(approximately
US
$5,400).
INTI
recognized
a
gain
on
sale
of
the
Sarawak
assets
of
approximately
$2,200,
which
was
recorded
as
a
reduction
of
Direct
costs
in
our
Consolidated
Statement
of
Operations.

Note
4.
Acquisitions

2015
Acquisitions

During
the
year
ended
December
31,
2015,
Laureate
consummated
the
business
acquisitions
outlined
below,
which
are
included
in
our
Consolidated
Financial
Statements
commencing
from
the
dates
of
acquisition.

Australia

In
July
2015,
our
AMEA
segment
acquired
the
assets
and
the
business
of
Chifley
Business
School
(CBS)
in
Australia
for
a
cash
purchase
price
of
Australian
Dollar
(AUD)
600
(US
$464
at
the
acquisition
date),
plus
debt
assumed
of
AUD
1,000
(US
$772
at
the
acquisition
date).
We
accounted
for
this
as
a
business
combination.
Payment
of
the
debt
was
made
in
two
installments
of
AUD
500
(US
$386
at
the
acquisition
date),
in
January
2016
and
January
2017.
For
this
acquisition,
Revenues,
Operating
income
and
Net
income
attributable
to
Laureate
Education,
Inc.
were
immaterial
for
the
year
ended
December
31,
2015.

Portugal

On
March
27,
2015,
we
acquired
IADE—Instituto
de
Artes
Visuais
Design
e
Marketing,
S.A.
(IADE),
Ensigest-Gestão
de
Estabelecimentos
de
Ensino,
S.A.
(Ensigest),
Ensicorporate-Educação
Corporativa,
Lda.
(Ensicorporate),
and
Gemeo-Gabinete
de
Estudos
de
Mercado
e
Opinião
do
IPAM,
Lda.
(Gemeo).
IADE,
Ensigest,
and
Ensicorporate
operate
a
total
of
four
higher
education
institutions
in
Portugal.
Gemeo
was
a
for-profit
services
company
that
conducted
market
research.
In
addition,
IADE
and
Ensigest
control
Europeia
ID,
a
not-for-profit
association
that
we
have
determined
is
a
VIE
and
that
is
consolidated
by
Laureate
since
we
are
the
VIE's
primary
beneficiary.
Hereafter,
we
collectively
refer
to
all
of
the
entities
that
were
consolidated
as
a
result
of
this
acquisition
as
IADE
Group.

The
total
purchase
price
of
IADE
Group
was
$10,403,
which
includes
an
initial
cash
payment
of
$6,476,
a
seller
note
of
$3,238
and
a
deferred
payment
of
$689
related
to
a
working
capital
settlement.
The
seller
note
is
discussed
further
in
Note
5,
Due
to
Shareholders
of
Acquired
Companies.
The
purchase
of
IADE
Group
allows
Laureate
to
expand
its
existing
presence
in
Portugal.
The
goodwill
recorded
for
IADE
Group
is
related
to
the
incremental
value
this
acquisition
brings
to
the
Laureate International Universities network
and
Laureate's
existing
operations
in
Portugal
by
expanding
our
presence
and
adding
synergies
to
Laureate's
operations.
For
this
acquisition,
Revenues
of
$8,194,

252

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
4.
Acquisitions
(Continued)

Operating
income
of
$971
and
Net
income
of
$806
are
included
in
the
Consolidated
Statement
of
Operations
for
the
year
ended
December
31,
2015.

The
Consolidated
Financial
Statements
include
the
operating
results
of
IADE
Group
and
CBS
from
the
dates
of
acquisition.
The
following
table
summarizes
the
estimated
fair
values
of
all
assets
acquired
and
liabilities
assumed
at
the
dates
of
acquisition:

Current
assets
Property
and
equipment
Goodwill
Tradenames
Other
intangible
assets
Long-term
indemnification
assets
Other
long-term
assets
Total
assets
acquired
Current
portion
of
long-term
debt
Other
current
liabilities
Long-term
debt,
less
current
portion
Other
long-term
liabilities
Total
liabilities
Net
assets
acquired
attributable
to
Laureate
Education,
Inc.

Debt
assumed
Net
assets
acquired
attributable
to
Laureate
Education,
Inc.
plus
debt
assumed
Net
assets
acquired
Cash
acquired
Seller
notes
and
deferred
payments
Net
cash
paid
at
acquisition

IADE
Group

Portugal

CBS

Australia

Total

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
$

4
$
33

989

342

—

1,368

386

132

386

—

904

464

772

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

1,236
$ 11,639

464
$ 10,867

(235)
—

(3,927)
—

6,705

464
$

2015 Summary

For
all
of
the
2015
acquisitions,
the
allocations
of
purchase
price
consideration
are
no
longer
subject
to
revision,
as
the
measurement
period
has
closed.
No
material
adjustments
were
made
during
2016
to
complete
the
allocations
of
purchase
price
consideration.
None
of
the
goodwill
related
to
the
2015
acquisitions
is
expected
to
be
deductible
for
income
tax
purposes.
As
part
of
the
purchase
price
allocations
for
the
2015
acquisitions,
Laureate
recorded
liabilities
for
taxes
other-
than-income
tax
related
contingencies
of
$571
and
labor
contingencies
of
$1,466.
In
addition,
we
recorded
total
long-term
indemnification
assets
of
$2,084.
Pro
forma
results
of
operations
for
the
acquisitions
completed
during
2015
have
not
been
presented
because
the
effects
of
those
acquisitions
were
not
material
to
the
Company's
financial
results.

253

Table
of
Contents

Note
4.
Acquisitions
(Continued)

Other
2015
Transactions

India

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

In
April
2015,
the
Company
acquired
the
remaining
5%
noncontrolling
interest
in
M-Power
for
a
purchase
price
of
$2,852.
This
payment
was
included
in
Payments
to
purchase
noncontrolling
interests
in
the
Consolidated
Statement
of
Cash
Flows.

Malaysia

During
the
year
ended
December
31,
2015,
we
acquired
an
additional
2.7%
noncontrolling
interest
in
INTI
Malaysia
for
$2,499.
This
payment
was
included
in
Payments
to
purchase
noncontrolling
interests
in
the
Consolidated
Statement
of
Cash
Flows.
This
transaction
increased
Laureate's
ownership
interest
in
INTI
to
approximately
90%.

2014
Acquisitions

During
the
year
ended
December
31,
2014,
Laureate
consummated
the
business
acquisitions
outlined
below,
which
are
included
in
our
Consolidated
Financial
Statements
commencing
from
the
dates
of
acquisition.

South Africa

In
August
2013,
we
made
an
investment
of
$2,237
for
a
25%
ownership
interest
in
a
for-profit
entity
that
controls
Monash
South
Africa
(MSA),
a
not-for-
profit
institution
in
South
Africa.
In
February
2014,
Laureate
assumed
control
of
MSA
and
acquired
real
estate
for
a
total
purchase
price
of
$44,386,
for
a
total
ownership
interest
in
the
for-profit
entity
of
75%.
The
purchase
price
consisted
of
the
initial
investment
of
$2,237
made
in
2013,
a
cash
payment
of
$6,712,
and
deferred
payments
totaling
$35,437
(AUD
42,500).
Refer
to
Note
5,
Due
to
Shareholders
of
Acquired
Companies
for
a
description
of
the
deferred
payments.
The
goodwill
recorded
for
MSA
relates
primarily
to
the
incremental
value
provided
by
introducing
a
new
market
to
our
students
and
adding
potential
synergies
to
our
network.
MSA
was
converted
to
a
for-profit
institution
during
the
first
quarter
of
2015.
For
this
acquisition,
Revenues
of
$22,701,
Operating
income
of
$1,925
and
Net
loss
of
$(397)
are
included
in
the
Consolidated
Statement
of
Operations
for
the
year
ended
December
31,
2014.

Brazil

On
August
12,
2014,
the
Company
acquired
Faculdade
Porto-Alegrense
(FAPA),
an
institution
in
Porto
Alegre,
Brazil.
The
total
purchase
price
was
$4,148,
and
was
paid
in
the
form
of
two
seller
notes
with
a
total
discounted
present
value
of
approximately
$3,003,
plus
an
additional
deferred
payment
of
approximately
$1,145.
The
deferred
payment
of
$1,145
was
paid
in
September
2014.
Refer
to
Note
5,
Due
to
Shareholders
of
Acquired
Companies,
for
further
description
of
the
two
seller
notes.
The
acquisition
of
FAPA
increases
Laureate's
presence
in
Brazil,
one
of
our
fastest
growing
markets,
by
accelerating
campus
expansion
that
was
planned
at
Centro
Universitário
Ritter
dos
Reis
(UniRitter),
another
Laureate
institution
operating
in
Porto
Alegre.
The
goodwill
recorded
for
this
acquisition
relates
to
the
incremental
value
that
FAPA
brings
to
the
Laureate International Universities network
and
the
existing
Laureate
operations
in
Brazil.
For
this
acquisition,
Revenues
of
$4,078,
Operating
loss
of

254

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
4.
Acquisitions
(Continued)

$(56)
and
Net
loss
of
$(290)
are
included
in
the
Consolidated
Statement
of
Operations
for
the
year
ended
December
31,
2014.

On
September
12,
2014,
Laureate
acquired
an
affiliated
group
of
higher
educational
institutions
in
Brazil,
collectively
referred
to
as
FMU.
The
total
purchase
price
was
$387,603,
which
was
paid
with
seller
notes
totaling
$96,829
and
cash
paid
at
closing
of
$290,641,
net
of
cash
acquired
of
$133.
Refer
to
Note
5,
Due
to
Shareholders
of
Acquired
Companies,
for
further
description
of
the
seller
notes.
The
cash
paid
at
acquisition
included
approximately
$231,000
of
cash,
including
accrued
interest,
that
had
been
held
by
Laureate
in
an
escrow
bank
account
prior
to
the
acquisition
date
and
was
recorded
as
Restricted
cash
and
investments
.The
remainder
of
the
cash
paid
at
closing
was
financed
through
borrowings
from
third-party
lenders,
as
described
in
Note
9,
Debt.
The
original
purchase
price
of
FMU
was
approximately
Brazilian
Reais
(BRL)
1,000,000
(approximately
US
$427,000
at
the
acquisition
date).
The
agreement
also
required
all
interest
earned
on
the
escrow
bank
account
deposit,
which
totaled
approximately
BRL
35,000,
to
be
included
in
the
purchase
price
paid
to
the
sellers
at
closing.
This
total
purchase
price
of
BRL
1,035,000
was
reduced
to
approximately
BRL
930,000
as
a
result
of
Laureate
assuming
additional
obligations
from
the
sellers
of
approximately
BRL
105,000.

After
the
discount
of
approximately
BRL
23,000
to
record
the
seller
notes
at
their
net
present
value,
the
purchase
price
recorded
for
FMU
was
approximately
BRL
907,000
(US
$387,603
at
the
date
of
acquisition).
FMU
is
Laureate's
largest
acquisition
to
date,
and
the
goodwill
recorded
for
the
FMU
acquisition
relates
to
the
incremental
value
that
FMU
provides
to
the
Laureate International Universities network
by
significantly
expanding
our
presence
into
the
high-quality
value
institution
market
in
Brazil.
For
this
acquisition,
Revenues
of
$73,083,
Operating
income
of
$8,644
and
Net
loss
of
$(4,030)
are
included
in
the
Consolidated
Statement
of
Operations
for
the
year
ended
December
31,
2014.

255

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
4.
Acquisitions
(Continued)

The
Consolidated
Financial
Statements
include
the
operating
results
of
MSA,
FAPA
and
FMU
from
the
dates
of
acquisition.
The
following
table
summarizes
the
estimated
fair
values
of
all
assets
acquired
and
liabilities
assumed
at
the
dates
of
acquisition:

Current
assets
Property
and
equipment
Goodwill
Tradenames
Other
intangible
assets
Long-term
indemnification
assets
Other
long-term
assets
Total
assets
acquired
Current
portion
of
long-term
debt
Other
current
liabilities
Long-term
debt,
less
current
portion
Other
long-term
liabilities
Total
liabilities
Noncontrolling
interests
Net
assets
acquired
attributable
to
Laureate
Education,
Inc.

Debt
assumed
Net
assets
acquired
attributable
to
Laureate
Education,
Inc.
plus
debt

assumed

Net
assets
acquired
Cash
acquired
Seller
notes
and
deferred
payments
Fair
value
of
existing
investment
Net
cash
(received)
paid
at
acquisition

MSA
South

Africa

FAPA

Brazil

FMU

Brazil
37,156
$
34,435

395,804

95,291

72,911

132,279

41,857

809,733

19,871

63,473

11,343

327,443

422,130

—

387,603

31,214

5,675
$
985

5,435

—

2,664

3,811

1,296

19,866

—

9,706

—

6,012

15,718

—

4,148

—

9,845
$
30,360

25,197

—

65,402

1,350

13,756

838

—

15,944

5,072

44,386

2,188

46,574
$
44,386
$
(7,043)

(35,437)

(2,237)

4,148
$ 418,817
$
4,148
$ 387,603
$
(133)

(3,153)

(4,148)

(96,829)

—

(331) $ (3,153) $ 290,641
$

—

Total

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

2014 Summary

During
2014,
we
paid
$788
of
additional
purchase
price
for
a
working
capital
settlement
related
to
THINK:
Education
Group
Pty.
Ltd.
(THINK),
which
we
acquired
on
December
20,
2013.
This
payment,
in
addition
to
the
$287,157
of
total
net
cash
paid
for
the
acquisitions
of
MSA,
FAPA
and
FMU,
resulted
in
$287,945
of
total
cash
used
for
Business
acquisitions,
net
of
cash
acquired,
during
the
year
ended
December
31,
2014,
as
shown
in
the
Consolidated
Statement
of
Cash
Flows.
For
all
of
the
2014
acquisitions,
the
allocations
of
purchase
price
consideration
are
no
longer
subject
to
revision,
as
the
measurement
period
has
closed.
No
material
adjustments
were
made
during
2015
to
complete
the
allocations
of
purchase
price
consideration.
Except
for
FMU,
the
goodwill
related
to
the
2014
acquisitions
is
not
deductible
for
income
tax
purposes.
As
part
of
the
purchase
price
allocations
for
the

256

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
4.
Acquisitions
(Continued)

2014
acquisitions,
Laureate
recorded
liabilities
of
$41,222
for
uncertain
income
tax
positions
and
liabilities
of
$89,172
for
contingencies
related
to
taxes
other-
than-income
tax.

Unaudited Proforma Results

The
unaudited
proforma
combined
historical
results
of
Laureate,
as
if
MSA,
FAPA
and
FMU
had
been
acquired
as
of
January
1,
2013,
are:

Revenues
Net
loss

2014

2013

$ 4,555,876
$ 4,153,505

(41,113)

(172,800)

These
amounts
have
been
calculated
after
applying
Laureate's
accounting
policies
and
adjusting
the
results
to
reflect
additional
depreciation
and
amortization
that
would
have
been
charged
assuming
the
fair
value
adjustments
to
property,
plant,
and
equipment,
and
amortizable
intangible
assets
had
been
recorded
as
of
January
1,
2013.
In
addition,
pro
forma
adjustments
have
been
made
to
reflect
the
impact
of
certain
indemnifications
that
the
sellers
agreed
to
provide
us
for
certain
contingent
liabilities.
These
unaudited
pro
forma
combined
results
of
operations
have
been
prepared
for
comparative
purposes
only,
and
they
do
not
purport
to
be
indicative
of
the
results
of
operations
that
actually
would
have
resulted
had
the
acquisitions
occurred
on
the
date
indicated,
or
that
may
result
in
the
future.

Other
2014
Transactions

Malaysia

During
the
third
quarter
of
2014,
Laureate
acquired
an
additional
2.9%
ownership
interest
in
INTI
for
cash
consideration
of
$3,055.
This
payment
was
included
in
Payments
to
purchase
noncontrolling
interests
in
the
Consolidated
Statement
of
Cash
Flows
for
the
year
ended
December
31,
2014.

During
the
fourth
quarter
of
2014,
Laureate
acquired
an
additional
6.4%
ownership
interest
in
INTI
for
total
purchase
consideration
of
approximately
$6,783,
of
which
approximately
$6,200
was
paid
in
2014
and
$583
was
a
deferred
payment
that
was
paid
in
2015.
See
Note
5,
Due
to
Shareholders
of
Acquired
Companies,
for
further
discussion
of
the
deferred
payment.
The
consideration
paid
in
2014
was
paid
with
cash
of
approximately
$1,000
and
settlement
of
the
approximately
$5,200
of
related
party
note
receivable
and
interest
that
was
owed
to
Laureate
by
the
noncontrolling
interest
holder.

Thailand

During
the
year
ended
December
31,
2014,
we
acquired
additional
ownership
interest
in
Fareast
Stamford
International
Co.,
Ltd.
(FES),
increasing
Laureate's
ownership
interest
in
FES
from
approximately
92%
to
approximately
99%.
FES
has
the
license
to
operate
Stamford
International
University
(Stamford,
together
with
FES,
"STIU").
The
purchase
price
for
the
additional
ownership
interest
was
$312,
and
is
included
in
Payments
to
purchase
noncontrolling
interests
in
the
Consolidated
Statement
of
Cash
Flows
for
the
year
ended
December
31,
2014.

257

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
5.
Due
to
Shareholders
of
Acquired
Companies

The
amounts
due
to
shareholders
of
acquired
companies
generally
arise
in
connection
with
Laureate's
acquisition
of
a
majority
or
all
of
the
ownership
interest
of
certain
subsidiaries.
Promissory
notes
payable
to
the
sellers
of
acquired
companies,
referred
to
as
"seller
notes,"
are
commonly
used
as
a
means
of
payment
for
business
acquisitions.
Seller
note
payments
are
generally
classified
as
Payments
of
deferred
purchase
price
for
acquisitions
within
financing
activities
in
our
Consolidated
Statement
of
Cash
Flows.
The
amounts
due
to
shareholders
of
acquired
companies,
currencies,
and
interest
rates
applied
were
as
follows:

December
31,
Faculdades
Metropolitanas
Unidas
Educacionais
(FMU)
Universidade
Anhembi
Morumbi
(UAM
Brazil)
Monash
South
Africa
(MSA)
University
of
St.
Augustine
for
Health
Sciences,
LLC
(St.
Augustine)
CH
Holding
Netherlands
B.V.
(CH
Holding)
Universidad
Tecnologica
Centroamericana
(UNITEC
Honduras)
Faculdade-Porto-Alegrense
(FAPA)
IADE
Group
Universidad
Autonoma
de
Veracruz,
S.C.
(Veracruz)
Universidade
Europeia
(UE)
Centro
de
Desenvolvimento
Pessoal
e
Empresarial
Ltda.
(CEDEPE)
Total
due
to
shareholders
of
acquired
companies
Less:
Current
portion
of
due
to
shareholders
of
acquired
companies
Due
to
shareholders
of
acquired
companies,
less
current
portion

2016

$ 100,382
$

Interest

Rate
%
CDI

Nominal

Currency

BRL

BRL
CDI
+
2%
n/a,
6.75%
7%
n/a
IIBC
IGP-M
3%
CETES
3%
CDI

2015
70,512

48,172

26,662
AUD

11,550
USD

12,745
USD

6,764
HNL

BRL

2,090

3,994

EUR

2,225
MXN

EUR

1,541

464

BRL

186,719

21,050

92,269
$ 165,669

52,043

27,462

11,550

8,587

5,196

2,973

2,755

—

210,948

118,679

AUD:
Australian
Dollar

CDI:
Certificados
de
Depósitos
Interbancários
(Brazil)

BRL:
Brazilian
Real

CETES:
28
day
Certificados
de
la
Tesoreria
de
la
Federación
(Mexico)

EUR:
European
Euro

IIBC:
Índice
de
Inflación
del
Banco
Central
(Honduras)

HNL:
Honduran
Lempira

IGP-M:
General
Index
of
Market
Prices
(Brazil)

MXN:
Mexican
Peso

USD:
United
States
Dollar

258

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
5.
Due
to
Shareholders
of
Acquired
Companies
(Continued)

The
aggregate
annual
maturities
of
Due
to
shareholders
of
acquired
companies
as
of
December
31,
2016
were
as
follows:

2017
2018
2019
2020
2021
Aggregate
maturities
Less:
imputed
interest
discount
Total

$ 120,709

57,539

14,840

12,698

10,800

216,586

(5,638)

$ 210,948

FMU

As
described
in
Note
4,
Acquisitions,
the
acquisition
of
FMU
was
partially
financed
with
seller
notes
having
an
aggregate
principal
amount
of
BRL
250,000
(US
$76,464
at
December
31,
2016).
The
maturity
date
of
the
notes
is
September
12,
2017,
the
third
anniversary
of
the
acquisition
closing
date,
and
the
aggregate
principal
balance
will
be
adjusted
from
the
closing
date
until
the
date
of
payment
based
on
100%
of
the
CDI
rate.
These
notes
were
recorded
on
the
acquisition
date
at
their
discounted
present
values,
which
will
all
be
accreted
over
the
term
of
the
notes.
As
of
December
31,
2016,
the
aggregate
carrying
value
of
the
notes
was
$100,382.

UAM Brazil

A
portion
of
the
acquisition
was
financed
with
a
seller
note
in
the
amount
of
BRL
200,808
(US
$61,419
at
December
31,
2016),
which
is
scheduled
to
be
paid
in
nine
equal
installments
of
BRL
22,312
(US
$6,824
at
December
31,
2016),
adjusted
for
inflation
based
on
CDI
plus
200
basis
points.
The
initial
four
installments
were
paid
during
the
years
ended
December
31,
2013
through
2016.
The
remaining
five
installments
are
due
annually
on
August
31st
of
each
year.
The
eighth
and
ninth
installments
are
subject
to
acceleration
and
will
be
paid
on
August
31,
2019,
along
with
the
seventh
installment,
if
a
certain
financial
performance
target
is
achieved
in
2018,
as
described
in
the
purchase
agreement.
On
the
closing
date
we
recorded
the
note
payable
at
its
discounted
present
value,
which
will
be
accreted
over
the
term
of
the
note.
As
of
December
31,
2016,
the
carrying
value
of
the
note
was
$52,043.

MSA

As
described
in
Note
4,
Acquisitions,
Laureate
financed
a
portion
of
the
acquisition
of
MSA
with
two
seller
notes
and
a
final
earn-out
payment.
The
first
seller
note
of
AUD
5,000
(US
$4,072
at
payment
date)
was
paid
in
December
2014.

The
second
seller
note
of
AUD
25,000
is
payable
in
five
installments.
The
first
four
installments
of
AUD
1,000
(US
$718
at
December
31,
2016)
are
due
annually
beginning
on
January
1,
2015,
and
the
fifth
installment
of
AUD
21,000
(US
$15,078
at
December
31,
2016)
is
due
on
January
1,
2019.
Laureate
paid
the
first
three
installments
of
AUD
1,000
each
during
the
years
ended
December
31,

259

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
5.
Due
to
Shareholders
of
Acquired
Companies
(Continued)

2014,
2015
and
2016.
The
note
carries
an
annual
interest
rate
of
6.75%,
which
was
deemed
to
be
at
market.
As
of
December
31,
2016,
the
carrying
value
of
the
second
seller
note
was
US
$19,144.

The
final
earn-out
payment
is
due
in
2018,
the
amount
of
which
will
be
determined
based
on
7.0
times
MSA's
2017
EBITDA,
less
debt
and
prior
payments,
as
defined
in
the
agreement.
The
maximum
amount
of
the
final
installment
is
AUD
12,500
(US
$8,975
at
December
31,
2016).
Since
the
final
earn-out
payment
bears
interest
at
a
lower-than-market
rate,
we
imputed
the
interest
and
recorded
the
amount
on
the
acquisition
date
at
the
total
discounted
present
value,
which
will
be
accreted
over
the
remaining
term
and
had
an
aggregate
carrying
value
of
$8,318
at
December
31,
2016.

St. Augustine

On
November
21,
2013,
Laureate
initially
acquired
80%
of
the
ownership
and
voting
rights
of
the
University
of
St.
Augustine.
A
portion
of
the
purchase
price
was
financed
with
a
five-year
seller
note
in
the
amount
of
$14,000.
The
promissory
note
incurs
interest
at
an
annual
rate
of
7%,
which
is
payable
quarterly
beginning
on
January
1,
2014,
and
the
entire
principal
balance
is
payable
on
November
21,
2018.
During
2015
this
note
payable
and
a
receivable
from
the
former
owner
were
reduced
by
$2,450
following
the
resolution
of
certain
pre-acquisition
matters,
leaving
a
remaining
principal
balance
of
$11,550.
In
2016,
Laureate
acquired
the
remaining
20%
noncontrolling
interest
in
St.
Augustine,
as
discussed
in
Note
11,
Commitments
and
Contingencies.

CH Holding

In
January
2013,
Laureate
financed
a
portion
of
the
acquisition
of
the
remaining
minority
interest
in
CH
Holding
with
a
seller
note.
The
principal
amount
of
the
seller
note
is
$24,000
and
repayment
is
due
in
five
annual
installments.
The
first
four
installments
of
$5,000
are
due
on
each
of
the
first
four
anniversary
dates
of
closing
and
were
paid
accordingly.
The
fifth
installment
of
$4,000
is
due
on
the
fifth
anniversary
date
of
closing.
The
seller
note
is
non-interest
bearing.
Accordingly,
at
the
acquisition
date,
we
imputed
the
interest
and
recorded
the
note
payable
at
its
discounted
present
value
of
approximately
$17,500,
which
will
be
accreted
over
the
term
of
the
note.
During
the
year
ended
December
31,
2016,
Laureate
recorded
accretion
on
the
note,
resulting
in
a
carrying
value
of
$8,587
as
of
December
31,
2016,
which
includes
the
fourth
installment
that
was
paid
in
January
2017.

UNITEC Honduras

In
July
2005,
Laureate
assumed
control
of
UNITEC
Honduras
and
agreed
to
cause
UNITEC
Honduras
to
honor
its
severance
and
retirement
payment
obligations
with
the
founders.
Pursuant
to
this
agreement,
UNITEC
Honduras
is
required
until
2020
to
make
monthly
payments,
which
are
adjusted
annually
for
inflation
based
on
the
IIBC.
The
monthly
payment
as
of
December
31,
2016
was
HNL
2,968
(US
$126).
We
originally
recorded
the
obligation
at
its
present
value
based
on
an
incremental
borrowing
rate
of
5%.

FAPA

As
described
in
Note
4,
Acquisitions,
the
acquisition
of
FAPA
was
financed
in
part
with
two
seller
notes
having
an
aggregate
principal
amount
of
BRL
9,164
(US
$2,803
at
December
31,
2016).
The
first

260

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
5.
Due
to
Shareholders
of
Acquired
Companies
(Continued)

seller
note
of
BRL
3,055
(US
$934
at
December
31,
2016)
is
due
on
August
12,
2018,
the
fourth
anniversary
of
the
acquisition
closing
date,
and
the
second
seller
note
of
BRL
6,109
(US
$1,868
at
December
31,
2016)
is
due
on
August
12,
2019,
the
fifth
anniversary
of
the
acquisition
closing
date.
The
principal
amount
of
each
seller
note
shall
be
adjusted
according
to
the
variation
of
the
IGP-M
until
the
notes'
maturities.
Laureate
recorded
these
seller
notes
at
their
discounted
present
values
at
the
acquisition
date,
which
will
be
accreted
over
the
terms
of
the
notes.
As
of
December
31,
2016,
the
total
carrying
value
of
the
notes
was
$2,973.

IADE Group

As
discussed
in
Note
4,
Acquisitions,
the
acquisition
of
IADE
Group
was
partially
financed
with
a
seller
note
in
the
amount
of
EUR
3,000
(US
$3,132
at
December
31,
2016).
The
seller
note
carries
an
annual
interest
rate
of
3%
and
is
payable
in
three
equal
installments
of
EUR
1,000
(US
$1,044
at
December
31,
2016).
The
first
installment
was
paid
during
the
year
ended
December
31,
2016
at
18
months
after
the
acquisition
date.
The
two
remaining
installments
are
due
at
36
months
after
the
acquisition
date,
and
60
months
after
the
acquisition
date.
Additionally,
a
working
capital
adjustment
of
EUR
639
(US
$667
at
December
31,
2016)
was
recorded
during
the
year
ended
December
31,
2015
in
accordance
with
the
purchase
agreement.
As
of
December
31,
2016,
the
total
carrying
value
of
the
liability
was
$2,755.

Veracruz

On
January
14,
2011,
Laureate
financed
a
portion
of
the
acquisition
of
Veracruz
with
a
promissory
note
payable
to
the
sellers
and
deferred
payments
for
then-
unresolved
tax
matters.
This
liability
was
fully
settled
in
the
amount
of
MXN
38,437
(US
$2,054
at
date
of
payment)
at
maturity
during
the
year
ended
December
31,
2016.

UE, formerly ISLA

On
April
1,
2011,
Laureate
financed
a
portion
of
the
acquisition
of
UE
with
two
seller
notes.
The
principal
amount
of
the
first
seller
note
was
EUR
1,485
(US
$1,550
at
December
31,
2016),
and
repayment
was
made
in
three
equal
annual
installments
of
EUR
495
(US
$517
at
December
31,
2016)
with
the
final
installment
paid
in
2014.
The
principal
amount
of
the
second
seller
note
was
EUR
4,650
(US
$4,855
at
December
31,
2016)
and
was
payable
in
five
installments.
The
first
three
annual
installments
of
EUR
550
(US
$574)
were
paid
on
December
31,
2012,
2013
and
2014.
The
fourth
and
fifth
annual
installments
of
EUR
1,500
(US
$1,566)
were
paid
on
December
31,
2015
and
2016,
settling
the
liability
in
full.

CEDEPE

Laureate
financed
a
portion
of
the
acquisition
of
CEDEPE
with
a
seller
note.
The
principal
amount
of
the
seller
note
was
BRL
4,400
(US
$1,346
at
December
31,
2016),
and
repayment
was
due
in
five
installments.
The
seller
note
incurred
interest
based
on
the
CDI,
and,
since
the
note
incurred
interest
at
lower-
than-market
rates,
Laureate
recorded
the
seller
note
as
of
the
acquisition
date
at
the
present
value
of
BRL
3,872
(US
$1,184
at
December
31,
2016),
which
was
accreted
over
the
term
of
the
note.
This
note
was
fully
settled
during
the
year
ended
December
31,
2016.

261

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
6.
Business
and
Geographic
Segment
Information

Laureate's
educational
services
are
offered
through
four
operating
segments:
LatAm,
Europe,
AMEA
and
GPS.
Laureate
determines
its
operating
segments
based
on
information
utilized
by
the
chief
operating
decision
maker
to
allocate
resources
and
assess
performance.

On
May
2,
2016,
we
announced
a
change
to
our
operating
segments
in
order
to
align
our
structure
more
geographically.
Our
institution
in
Italy,
Nuova
Accademia
di
Belle
Arti
Milano
(NABA),
including
Domus
Academy,
moved
from
our
GPS
segment
into
our
Europe
segment.
Media
Design
School
(MDS),
located
in
New
Zealand,
moved
from
our
GPS
segment
into
our
AMEA
segment.
Our
GPS
segment
will
now
focus
on
its
campus-based
institutions
in
the
United
States
and
on
Laureate's
fully
online
institutions
operating
globally.
This
change
has
been
reflected
in
the
segment
information
beginning
in
the
second
quarter
of
2016,
the
period
in
which
the
change
occurred.
As
required,
the
2015
and
2014
segment
information
that
is
presented
for
comparative
purposes
has
also
been
revised
to
reflect
this
segment
change.

The
LatAm
segment
consists
of
campus-based
institutions
and
has
operations
in
Brazil,
Chile,
Costa
Rica,
Honduras,
Mexico,
Panama
and
Peru
and
has
contractual
relationships
with
a
licensed
institution
in
Ecuador.
The
institutions
provide
an
education
that
emphasizes
professional-oriented
fields
of
study
with
undergraduate
and
graduate
degree
programs
in
a
wide
range
of
disciplines.
The
programs
at
these
institutions
are
mainly
campus-based
and
are
primarily
focused
on
local
students.
In
addition,
the
institutions
in
our
LatAm
segment
have
begun
introducing
online
and
hybrid
(a
combination
of
online
and
in-classroom)
courses
and
programs
to
their
curriculum.
Brazil
and
Chile
have
government-supported
financing
programs,
while
in
other
countries
students
generally
finance
their
own
education.

The
Europe
segment
consists
of
campus-based
institutions
with
operations
in
Cyprus,
Germany,
Italy,
Morocco,
Portugal,
Spain
and
Turkey.
The
institutions
generate
revenues
by
providing
professional-oriented
undergraduate
and
graduate
degree
programs.
Several
institutions
have
begun
to
introduce
online
and
hybrid
programs.
Students
in
the
Europe
segment
generally
finance
their
own
education.
As
discussed
in
Note
3,
Dispositions
and
Asset
Sales,
in
July
2016
we
completed
the
sale
of
our
institutions
in
France.

The
GPS
segment
consists
of
accredited
online
institutions,
which
serve
students
globally,
and
campus-based
institutions
serving
students
in
the
United
States.
The
online
institutions
primarily
serve
working
adults
with
undergraduate
and
graduate
degree
programs.
The
campus-based
institutions
primarily
serve
traditional
students
seeking
undergraduate
and
graduate
degrees.
In
the
United
States,
students
have
access
to
government-supported
financing
programs.
As
discussed
in
Note
3,
Dispositions
and
Asset
Sales,
in
June
2016,
we
completed
the
sale
of
several
operations
in
the
GPS
segment.

Intersegment
transactions
are
accounted
for
in
a
similar
manner
as
third
party
transactions
and
are
eliminated
in
consolidation.
The
"Corporate"
amounts
presented
in
the
following
tables
includes

262

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
6.
Business
and
Geographic
Segment
Information
(Continued)

corporate
charges
that
were
not
allocated
to
our
reportable
segments
and
adjustments
to
eliminate
intersegment
items.

We
evaluate
segment
performance
based
on
Adjusted
EBITDA,
which
is
a
non-GAAP
profit
measure
defined
as
Income
(loss)
from
continuing
operations
before
income
taxes
and
equity
in
net
income
of
affiliates,
adding
back
the
following
items:
Gain
on
sales
of
subsidiaries,
net,
Foreign
currency
exchange
gain
(loss),
net,
Other
income
(expense),
net,
Loss
on
derivatives,
Loss
on
debt
extinguishment,
Interest
expense,
Interest
income,
Depreciation
and
amortization
expense,
Impairment
charges
on
long-lived
assets,
Share-based
compensation
expense
and,
beginning
in
2014,
expenses
related
to
our
Excellence-in-Process
(EiP)
initiative.
EiP
is
an
enterprise-wide
initiative
to
optimize
and
standardize
Laureate's
processes,
creating
vertical
integration
of
procurement,
information
technology,
finance,
accounting
and
human
resources.
It
includes
the
establishment
of
regional
shared
services
organizations
around
the
world,
as
well
as
improvements
to
the
Company's
system
of
internal
controls
over
financial
reporting.

When
we
review
Adjusted
EBITDA
on
a
segment
basis,
we
exclude
intercompany
revenues
and
expenses,
related
to
network
fees
and
royalties
between
our
segments,
that
eliminate
in
consolidation.
We
use
total
assets
as
the
measure
of
assets
for
reportable
segments.
Expenditures
for
long-lived
assets
include
purchases
of
property
and
equipment,
purchases
of
land
use
rights
and
expenditures
for
deferred
costs,
which
are
classified
as
investing
activities
in
the
Consolidated
Statements
of
Cash
Flows.

The
following
tables
provide
financial
information
for
our
reportable
segments,
including
a
reconciliation
of
Adjusted
EBITDA
to
Income
(loss)
from
continuing
operations
before
income
taxes
and
equity
in
net
income
of
affiliates,
as
reported
in
the
Consolidated
Statements
of
Operations,
for
the
years
ended
December
31,
2016,
2015
and
2014:

LatAm

Europe

AMEA

GPS

Corporate

Total

2016
Revenues
Adjusted
EBITDA
Depreciation
and
amortization
expense
Loss
on
impairment
of
assets
Total
assets
Expenditures
for
long-lived
assets
2015
Revenues
Adjusted
EBITDA
Depreciation
and
amortization
expense
Total
assets
Expenditures
for
long-lived
assets
2014
Revenues
Adjusted
EBITDA
Depreciation
and
amortization
expense
Loss
on
impairment
of
assets
Expenditures
for
long-lived
assets

$ 2,441,992
$ 480,401
$ 431,349
$

500,704

142,519

—

3,932,679

145,978

83,594

26,627

4,163

588,729

21,604

59,884

39,280

19,302

744,568

20,214

$ 2,415,641
$ 486,235
$ 422,134
$

463,691

147,975

3,823,859

230,146

78,439

32,407

690,514

27,239

49,869

39,260

782,613

40,716

900,473
$
257,809

46,880

—

1,505,242

35,276

979,920
$
226,804

55,497

1,768,009

46,877

(10,023) $ 4,244,192

765,601

264,879

23,465

7,102,965

256,694

(136,390)

9,573

—

331,747

33,622

(12,271) $ 4,291,659

703,408

282,946

7,439,116

366,858

(115,395)

7,807

374,121

21,880

$ 2,532,451
$ 533,862
$ 405,555
$

541,975

152,142

125,449

269,186

72,777

34,131

273

47,694

30,130

38,035

—

61,834

954,494
$
222,998

59,071

50,126

(11,680) $ 4,414,682

773,525

(94,355)

288,331

4,952

125,788

—

436,418

7,578

263

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
6.
Business
and
Geographic
Segment
Information
(Continued)

For
the
years
ended
December
31,
Adjusted
EBITDA
of
reportable
segments:
LatAm
Europe
AMEA
GPS
Total
Adjusted
EBITDA
of
reportable
segments
Reconciling
items:
Corporate
Depreciation
and
amortization
expense
Loss
on
impairment
of
assets
Share-based
compensation
expense
EiP
expenses
Operating
income
Interest
income
Interest
expense
Loss
on
debt
extinguishment
Loss
on
derivatives
Other
income
(expense),
net
Foreign
currency
exchange
gain
(loss),
net
Gain
on
sales
of
subsidiaries,
net
Income
(loss)
from
continuing
operations
before
income
taxes
and
equity
in
net

2016

2015

2014

500,704
$
83,594

59,884

257,809

901,991

463,691
$
78,439

49,869

226,804

818,803

541,975

72,777

30,130

222,998

867,880

(136,390)

(264,879)

(23,465)

(38,809)

(55,555)

382,893

18,670

(421,936)

(17,363)

(6,084)

910

67,450

406,557

(115,395)

(282,946)

—

(39,021)

(44,484)

336,957

13,328

(398,042)

(1,263)

(2,607)

195

(149,178)

—

(94,355)
(288,331)
(125,788)
(49,190)
(10,716)
299,500

21,822

(385,754)
(22,984)
(3,101)
(1,184)
(109,970)
—

income
of
affiliates

431,097
$ (200,610) $ (201,671)

Geographic
Information

No
individual
customer
accounted
for
more
than
10%
of
Laureate's
consolidated
revenues.
Revenues
from
customers
by
geographic
area,
primarily
generated
by
students
enrolled
at
institutions
in
those
areas,
were
as
follows:

For
the
years
ended
December
31,
External
revenue
United
States
Brazil
Mexico
Chile
Peru
Spain
Other
foreign
countries
Consolidated
total

264

2016

2015

2014

738,343
$
690,377

624,938

564,632

389,815

197,970

1,038,117

718,641

731,979
$
712,921

672,372

741,649

678,030

585,645

536,530

322,938

356,684

234,781

200,284

1,098,107

1,115,780

$ 4,244,192
$ 4,291,659
$ 4,414,682

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
6.
Business
and
Geographic
Segment
Information
(Continued)

Long-lived
assets
are
composed
of
Property
and
equipment,
net.
Laureate's
long-lived
assets
of
continuing
operations
by
geographic
area
were
as
follows:

December
31,
Long-lived
assets
Chile
Peru
Brazil
Mexico
United
States
Spain
China
Switzerland
Other
foreign
countries
Consolidated
total

2016

2015

432,499
$
299,014

252,289

218,531

199,171

163,740

125,697

—

460,692

374,101

278,501

211,675

253,459

197,067

179,957

139,922

79,893

576,325

$ 2,151,633
$ 2,290,900

Note
7.
Goodwill
and
Other
Intangible
Assets

Goodwill

The
change
in
the
net
carrying
amount
of
Goodwill
from
December
31,
2014
through
December
31,
2016
was
composed
of
the
following
items:

Balance
at
December
31,
2014
Acquisitions
Dispositions
Impairments
Currency
translation
adjustments
Adjustments
to
prior
acquisitions
Balance
at
December
31,
2015
Acquisitions
Dispositions
Re-allocation
of
goodwill
for
segment
change
Impairments
Currency
translation
adjustments
Adjustments
to
prior
acquisitions
Balance
at
December
31,
2016

LatAm

Europe

$ 1,574,725
$ 103,986
$ 143,684
$

AMEA

—

5,980

—

989

—

(334,714)

2,652

1,242,663

—

(6,711)

—

(10,570)

(17,439)

—

99,396

—

(26,312)

5,517

(4,163)

(4,701)

—

127,234

—

2,715

(19,302)

336

—

$ 1,235,952
$

69,737
$ 110,983
$

265

Total

—

(796)

—

646,604

—

GPS
647,400
$ 2,469,795

6,969

—

(363,519)
2,652

2,115,897

—

(148,264)
—

(23,465)
(9,704)
—

517,792
$ 1,934,464

(121,952)

(8,232)

—

1,372

—

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
7.
Goodwill
and
Other
Intangible
Assets
(Continued)

As
discussed
in
Note
6,
Business
and
Geographic
Segment
Information,
the
Company
announced
a
change
in
its
operating
segments
in
the
second
quarter
of
2016.
Accordingly,
goodwill
was
re-allocated
among
the
operating
segments
based
on
the
relative
fair
value
of
the
affected
reporting
units
at
the
time
of
the
segment
change.

As
of
December
31,
2016,
accumulated
goodwill
impairment
losses
were
$159,895,
with
$77,094,
$4,163,
$58,978
and
$19,660,
relating
to
our
LatAm,
Europe,
AMEA
and
GPS
segments,
respectively.
As
of
December
31,
2015,
accumulated
goodwill
impairment
losses
were
$136,430,
with
$77,094,
$39,676
and
$19,660
relating
to
our
LatAm,
AMEA
and
GPS
segments,
respectively.

Other
Intangible
Assets

Amortization
expense
for
intangible
assets
subject
to
amortization
was
$12,526,
$20,430
and
$17,697
for
the
years
ended
December
31,
2016,
2015
and
2014,
respectively.
The
estimated
future
amortization
expense
for
intangible
assets
for
the
years
ending
December
31,
2017,
2018,
2019,
2020,
2021
and
beyond
is
$10,967,
$5,410,
$3,269,
$2,714,
$2,479
and
$21,861,
respectively.

The
following
table
summarizes
our
identifiable
intangible
assets
as
of
December
31,
2016:

Subject to amortization:
Student
rosters
Other
Not subject to amortization:
Tradenames
Total

Gross

Carrying

Amount

Accumulated

Amortization

Net
Carrying

Amount

Weighted

Average

Amortization

Period
(Yrs)

96,712
$
82,000

(92,567) $
(39,445)

4,145

42,555

1,307,633

$ 1,486,345
$

—

1,307,633

(132,012) $ 1,354,333

2.7

11.8

—

The
following
table
summarizes
our
identifiable
intangible
assets
as
of
December
31,
2015:

Subject to amortization:
Student
rosters

Other

Not subject to amortization:
Tradenames
Total

Gross

Carrying

Amount

Accumulated

Amortization

Net
Carrying

Amount

Weighted

Average

Amortization

Period
(Yrs)

94,833
$
75,907

(85,794) $
(32,749)

9,039

43,158

1,361,125

$ 1,531,865
$

—

1,361,125

(118,543) $ 1,413,322

3.1

12.0

—

266

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
7.
Goodwill
and
Other
Intangible
Assets
(Continued)

Impairment
Tests

The
following
table
summarizes
the
Loss
on
impairment
of
assets:

For
the
years
ended
December
31,
Impairments
of
Tradenames,
by
segment:

LatAm
Europe
AMEA
GPS

Total
Impairments
of
Tradenames
Impairments
of
Goodwill,
by
segment:

LatAm
Europe
AMEA
GPS

Total
Impairments
of
Goodwill
Impairments
of
Deferred
costs
and
Other
intangible
assets,
net
Impairments
of
long-lived
assets
Total

2016

2015

2014

—
$ —
$

—

47,650

—

47,650

—

4,163

19,302

—

23,465

—

77,094

—

77,094

—

273

—

771

—

$ 23,465
$ —
$ 125,788

We
perform
annual
impairment
tests
of
our
non-amortizable
intangible
assets,
which
consist
of
Goodwill
and
Tradenames,
in
the
fourth
quarter
of
each
year.
The
impairment
charges
discussed
below
were
recorded
to
reduce
the
assets'
carrying
values
to
fair
value.

For
the
purposes
of
our
annual
impairment
testing
of
the
Company's
goodwill,
fair
value
measurements
were
determined
primarily
using
the
income
approach,
based
largely
on
inputs
that
are
not
observable
to
active
markets,
which
would
be
deemed
"Level
3"
fair
value
measurements
as
defined
in
Note
20,
Fair
Value
Measurement.
These
inputs
include
our
expectations
about
future
revenue
growth
and
profitability,
marginal
income
tax
rates
by
jurisdiction,
and
the
rate
at
which
the
cash
flows
should
be
discounted
in
order
to
determine
this
fair
value
estimate.
Where
a
market
approach
is
used,
the
inputs
also
include
publicly
available
data
about
our
competitors'
financial
ratios
and
transactions.

For
purposes
of
our
annual
impairment
testing
of
the
Company's
indefinite-lived
tradename
assets,
fair
value
measurements
were
determined
using
the
income
approach,
based
largely
on
inputs
that
are
not
observable
to
active
markets,
which
would
be
deemed
"Level
3"
fair
value
measurements
as
defined
in
Note
20,
Fair
Value
Measurement.
These
inputs
include
our
expectations
about
future
revenue
growth
and
profitability,
marginal
income
tax
rates
by
jurisdiction,
and
the
rate
at
which
the
cash
flows
should
be
discounted
in
order
to
determine
the
fair
value
estimate
for
indefinite-lived
tradenames
using
a
relief-from-royalty
method.
We
use
publicly
available
information
and
proprietary
third-party
arm's
length
agreements
that
Laureate
has
entered
into
with
various
licensors
in

267

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
7.
Goodwill
and
Other
Intangible
Assets
(Continued)

determining
certain
assumptions
to
assist
us
in
estimating
fair
value
using
market
participant
assumptions.

2016 Loss on Impairment of Assets

Upon
completion
of
our
impairment
testing
for
2016,
we
recorded
a
total
impairment
loss
of
$23,465.
We
recorded
a
goodwill
impairment
charge
of
$4,163
related
to
our
institutions
in
Germany
that
are
part
of
the
Europe
segment.
We
also
recorded
a
goodwill
impairment
charge
of
$19,302
at
MSA,
an
institution
in
our
AMEA
segment.
The
weakness
of
the
South
African
Rand
and
challenging
economic
conditions
have
resulted
in
a
change
to
our
capital
allocation
strategy
for
this
business,
resulting
in
an
impairment
charge
in
the
fourth
quarter
of
2016.
We
determined
the
fair
value
of
the
reporting
units
using
an
income
approach
based
primarily
on
discounted
cash
flow
projections.

2014 Loss on Impairment of Assets

In
2014,
we
recorded
a
total
impairment
loss
of
$125,788.Tradenames
were
impaired
in
the
aggregate
amount
of
$47,650
related
to
two
Chilean
institutions
in
our
LatAm
segment.
Also
in
our
LatAm
segment,
Goodwill
was
impaired
in
the
amount
of
$77,094,
which
related
to
our
institutions
in
Costa
Rica,
Honduras
and
Panama.
Our
Europe
segment
recorded
impairments
of
deferred
costs
of
$273.
Our
LatAm
and
GPS
segments
recorded
impairments
of
long-lived
assets
of
$705
and
$66,
respectively.

Of
the
total
impairment
of
Tradenames
in
LatAm,
approximately
$16,400
related
to
UDLA
Chile.
This
is
an
additional
impairment
to
the
charge
taken
in
2013.
The
primary
driver
for
this
additional
charge
was
the
secondary
intake
of
enrollment
that
occurred
during
the
third
quarter
of
2014,
which
provided
us
with
additional
information
regarding
the
projected
financial
performance
of
UDLA
Chile
and
that
indicated
that
the
financial
impact
of
the
loss
of
accreditation
was
larger
than
initially
estimated.
The
Company
also
revised
its
estimates
around
the
timing
of
enrollments
following
reaccreditation.
As
a
result,
management
performed
an
impairment
test
and
determined
that
the
estimated
fair
value
of
the
intangible
asset
was
less
than
its
carrying
value.
Accordingly,
the
Company
recorded
an
impairment
charge
in
order
to
adjust
the
carrying
value
of
the
intangible
asset
to
its
new
estimated
fair
value
of
approximately
$24,000.

The
remaining
impairment
of
Tradenames
in
LatAm
of
approximately
$31,250
related
to
UNAB
in
Chile,
in
order
to
adjust
the
intangible
asset
to
its
new
estimated
fair
value
of
approximately
$76,000.
The
impairment
at
UNAB
resulted
from
our
expectation
of
reduced
margins
and
lower
pricing,
as
compared
to
the
assumptions
contained
in
the
models
previously
used
to
value
the
intangible
assets.
The
lower
projections
reflect
weaker
operating
performance
compared
to
the
prior
long-range
plan,
combined
with
reduced
expectations
as
a
result
of
a
regulatory
environment
that
favors
public
rather
than
private
supply
in
higher
education.
In
addition,
due
to
the
uncertainty
that
currently
exists
in
Chile,
the
Company
has
decided
to
reduce
its
expected
capital
expenditures
for
growth
in
that
market
for
the
foreseeable
future.
As
a
result,
the
long-range
plan
used
to
calculate
the
fair
value
of
the
UNAB
Tradename
asset
contains
lower
growth
and
profitability
assumptions
than
the
plan
used
in
prior
years
for
such
purposes.

268

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
7.
Goodwill
and
Other
Intangible
Assets
(Continued)

The
Goodwill
impairment
of
$77,094
in
LatAm
at
our
institutions
in
Costa
Rica,
Honduras
and
Panama
can
be
attributed
to
a
weaker
long-range
outlook
as
compared
to
the
assumptions
contained
in
the
models
previously
used
to
value
the
intangible
assets.
The
primary
driver
of
this
weaker
outlook
is
a
shortfall
in
2014
enrollments
which
has
caused
us
to
decrease
our
long-term
enrollment
projections.
The
softened
enrollment
outlook
has
also
resulted
in
pricing
pressure
on
revenue.
Cost
cutting
measures
have
been
taken
by
management
to
mitigate
margin
erosion.
The
softer
long-term
outlook
resulted
in
a
lower
valuation
for
the
reporting
unit.
As
a
result
of
the
2014
impairment
test,
the
Goodwill
balances
at
these
institutions
were
entirely
written
off.

Note
8.
Land
Use
Rights

The
Company
has
acquired
rights
to
use
certain
properties
for
periods
ranging
from
20
to
899
years.
The
land
use
rights
recorded
for
AMEA
have
a
combined
net
carrying
value
of
$42,321
and
$46,544
at
December
31,
2016
and
2015,
respectively.
The
land
use
rights
recorded
for
Europe
have
a
net
carrying
value
of
$1,445
and
$1,983
at
December
31,
2016
and
2015,
respectively.
The
land
use
rights
recorded
for
the
LatAm
region
have
a
net
carrying
value
of
$1,509
and
$1,809
at
December
31,
2016
and
2015,
respectively.

The
land
use
rights
recorded
at
net
carrying
value
on
the
Company's
Consolidated
Balance
Sheets
are
summarized
as
follows:

December
31,
Cost
Less:
Accumulated
amortization
Land
use
rights,
net

2016

2015

$ 48,733
$ 52,617

(2,281)

$ 45,275
$ 50,336

(3,458)

Amortization
expense
of
land
use
rights
was
$1,460,
$1,496
and
$1,547
for
the
years
ended
December
31,
2016,
2015
and
2014,
respectively.
As
discussed
in
Note
17,
Related
Party
Transactions,
during
the
year
ended
December
31,
2014,
Hunan
International
Economics
University
(HIEU)
wrote
off
land
use
rights
with
a
net
carrying
value
of
approximately
$4,350
related
to
several
parcels
of
land
for
which
it
no
longer
has
land
use
rights.

As
of
December
31,
2016,
amortization
expense
related
to
land
use
rights
for
the
next
five
years
and
thereafter
is
as
follows:

2017
2018
2019
2020
2021
Thereafter
Total

1,371

38,420

$ 45,275

269

Table
of
Contents

Note
9.
Debt

Outstanding
long-term
debt
was
as
follows:

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

December
31,
Senior
long-term
debt:
Senior
Secured
Credit
Facility
(stated
maturity
dates
June
2018,
June
2019
and
March
2021),
net

2016

2015

of
discount

Senior
Notes
due
2019
(stated
maturity
date
September
2019),
net
of
discount
Total
senior
long-term
debt
Other
debt:
Lines
of
credit
Notes
payable
and
other
debt
Total
senior
and
other
debt
Capital
lease
obligations
and
failed
sale-leaseback
financings
Total
long-term
debt
Less:
total
unamortized
deferred
financing
costs
Less:
current
portion
of
long-term
debt
Long-term
debt,
less
current
portion

$ 1,497,869
$ 2,084,093

1,436,214

3,520,307

1,388,036

2,885,905

66,081

650,184

3,602,170

250,842

3,853,012

44,648

178,989

74,335

738,684

4,333,326

247,256

4,580,582

69,294

192,354

$ 3,629,375
$ 4,318,934

As
of
December
31,
2016,
aggregate
annual
maturities
of
the
senior
and
other
debt,
excluding
capital
lease
obligations
and
sale-leaseback
financings,
were
as
follows:

December
31,
2016
2017
2018
2019
2020
2021
Thereafter
Total
Less:
discount,
net
Total
senior
and
other
debt

Senior
and

Other
Debt

163,226

385,055

1,493,344

129,239

1,234,992

206,287

3,612,143

(9,973)

$ 3,602,170

The
estimated
fair
value
of
our
debt
was
determined
using
observable
market
prices,
as
the
majority
of
our
securities,
including
the
Senior
Secured
Credit
Facility
and
the
Senior
Notes
due
2019,
are
traded
in
a
brokered
market.
The
fair
value
of
our
remaining
debt
instruments
approximates
carrying
value
based
on
their
terms.
As
of
December
31,
2016
and
2015,
our
long-term
debt
was

270

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
9.
Debt
(Continued)

classified
as
Level
2
within
the
fair
value
hierarchy,
based
on
the
frequency
and
volume
of
trading
in
the
brokered
market.

Total
senior
and
other
debt

Senior
Secured
Credit
Facility

Overview

December
31,
2016

December
31,
2015

Carrying

amount

Estimated

fair
value

Carrying

amount

Estimated

fair
value

$ 3,602,170
$ 3,632,853
$ 4,333,326
$ 3,482,417

On
June
16,
2011,
we
amended
and
restated
our
Credit
Agreement
dated
as
of
August
17,
2007
(as
amended
and
restated,
and
as
further
amended
from
time
to
time,
our
Amended
and
Restated
Credit
Agreement
or,
the
Senior
Secured
Credit
Facility),
in
order
to,
among
other
things,
extend
maturity
dates.
Pursuant
to
this
amendment
and
restatement,
certain
lenders
in
the
syndicate:
(1)
extended
the
maturity
dates
applicable
to
$155,000
of
our
then-existing
$400,000
revolving
line
of
credit
facility
from
August
2013
to
June
2016,
(2)
converted
$245,000
of
then-existing
revolving
loans
and
revolving
credit
commitments
into
term
loans
that
mature
in
June
2018,
and
(3)
extended
the
maturity
dates
applicable
to
three
series
term
loans,
totaling
$858,896
of
aggregate
principal,
from
August
2014
to
June
2018.
In
addition,
some
existing
lenders
increased
the
amount
of
their
revolver
commitments
and
new
lenders
became
lenders
with
respect
to
the
revolving
credit
facility
that
originally
was
scheduled
to
mature
in
June
2016.
As
a
result
of
this
amendment
and
restatement,
the
credit
facilities
under
our
Amended
and
Restated
Credit
Agreement
on
June
16,
2011
were
composed
of:

The
senior
secured
term
loan
facility,
primarily
consisting
of
the
approximately
$1,104,000
extended
term
loan
(the
2018
Extended
Term
Loan);
and

$300,000
revolving
line
of
credit
facility.

In
December
2011,
the
borrowing
capacity
under
our
revolving
line
of
credit
facility
was
increased
to
$350,000.
Also,
during
2011
and
2013,
the
Company
entered
into
joinders
to
the
Amended
and
Restated
Credit
Agreement
for
additional
loans
totaling
approximately
$785,000,
all
of
which
were
on
the
same
terms
as
the
2018
Extended
Term
Loan.
These
additional
loan
agreements
included
the
Series
A-2018
New
Term
Loan,
the
Series
B
New
Term
Loans,
the
Series
B
Additional
Term
Loans
and
the
Additional
New
Series
2018
Extended
Term
Loans.
With
the
respect
to
the
2018
Extended
Term
Loan,
the
Series
A-2018
New
Term
Loan,
the
Series
B
New
Term
Loans,
the
Series
B
Additional
Term
Loans
and
the
Additional
New
Series
2018
Extended
Term
Loans,
we
were
required
to
make
fixed
quarterly
principal
payments
in
an
aggregate
amount
equal
to
$4,722
per
quarter,
prior
to
the
Fifth
Amendment
as
described
below.
All
unpaid
principal
and
interest
on
these
loans
shall
be
paid
in
full
in
June
2018.
As
of
December
31,
2015
these
loans
had
an
aggregate
outstanding
balance
of
$1,814,832
(net
of
debt
discount
of
$105),
and
an
interest
rate
of
5.00%.

271

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
9.
Debt
(Continued)

Senior Secured Credit Facility—Amendments to Credit Agreement

On
June
3,
2016,
we
entered
into
an
amendment
(the
Fifth
Amendment)
to
our
Amended
and
Restated
Credit
Agreement
in
order
to,
among
other
things,
extend
maturity
dates
on
approximately
$1,526,000
of
the
approximately
$1,810,100
of
then-outstanding
term
loans
from
June
2018
to
March
17,
2021.
Effectiveness
of
the
Fifth
Amendment
was
subject
to
the
satisfaction
of
certain
conditions
including,
(i)
the
closing
of
the
sale
of
the
Glion
and
Les
Roches
hospitality
management
schools
and
our
operations
in
France,
(ii)
the
prepayment
of
$300,000
to
the
holders
of
the
term
loans
who
have
agreed
to
extend
their
maturity,
and
(iii)
the
further
amendment
of
the
Amended
and
Restated
Credit
Agreement
pursuant
to
which
certain
of
the
lenders
thereunder
holding
revolving
credit
commitments
would
have
agreed
to
extend
the
maturity
date
of
the
revolving
line
of
credit
facility
to
a
date
on
or
after
March
8,
2019.
These
conditions
were
satisfied
and
the
Fifth
Amendment
became
effective
on
July
29,
2016.
In
connection
with
this
amendment
we
recorded
a
Loss
on
debt
extinguishment
of
$15,682
during
the
third
quarter
related
to
the
write
off
of
unamortized
deferred
financing
costs.

The
approximately
$1,226,000
of
remaining
term
loans
with
a
maturity
date
of
March
17,
2021
will
be
referred
to
as
the
2021
Extended
Term
Loan,
and
the
approximately
$284,100
of
term
loans
with
a
maturity
date
of
June
2018
will
continue
to
be
referred
to
as
the
2018
Extended
Term
Loan.
The
2021
Extended
Term
Loan
has
an
initial
interest
rate
equal
to
the
London
Interbank
Offered
Rate
(LIBOR)
+7.50%,
or
if
borrowed
as
Alternate
Base
Rate
(ABR)
loans,
ABR
+
6.50%.
The
margins
shall
be
increased
by
0.50%
each
quarter,
commencing
with
the
fiscal
quarter
ending
September
30,
2016;
provided
that
in
no
event
shall
the
LIBOR
margin
exceed
8.50%
or
the
ABR
margin
exceed
7.50%.
Upon
the
consummation
of
a
qualified
equity
offering
or
a
qualified
public
offering
or
a
combination
thereof,
as
defined
in
the
agreement,
the
LIBOR
margin
will
be
immediately
reduced
to
7.50%
and
the
ABR
margin
will
be
immediately
reduced
to
6.50%.
There
will
be
no
floor
on
LIBOR
or
ABR
(other
than
the
Federal
Funds
Rate
may
not
be
less
than
zero)
for
the
2021
Extended
Term
Loan.
As
of
December
31,
2016,
for
the
2021
Extended
Term
Loan,
the
margin
for
LIBOR
loans
was
8.50%
and
the
margin
for
ABR
loans
was
7.50%.
All
of
the
outstanding
2021
Extended
Term
Loans
were
LIBOR
loans
as
of
December
31,
2016
and
had
a
total
interest
rate
of
9.37%.
As
discussed
further
in
Note
11,
Commitments
and
Contingencies,
on
January
23,
2017,
the
Company
consummated
a
qualified
equity
offering
by
issuing
Series
A
Preferred
Stock
in
an
aggregate
amount
of
$400,000.
Accordingly,
effective
January
23,
2017,
the
2021
Extended
Term
Loan's
LIBOR
margin
was
immediately
reduced
to
7.50%
and
the
ABR
margin
was
immediately
reduced
to
6.50%.

The
Fifth
Amendment
also
provided
that
if
a
qualified
equity
offering
or
a
qualified
public
offering
or
combination
thereof,
of
the
Company
did
not
occur
on
or
before
August
15,
2017,
the
Company
would
have
been
required
to
make
an
additional
scheduled
payment
of
principal
on
the
2021
Extended
Term
Loan
in
the
amount
of
$62,500
on
August
16,
2017.
Since
the
Company
completed
the
qualified
equity
offering
on
January
23,
2017,
this
additional
payment
will
not
be
required.

On
July
7,
2016,
we
executed
an
amendment
(the
Sixth
Amendment)
to
the
Amended
and
Restated
Credit
Agreement
with
our
revolving
credit
lenders
to,
among
other
things,
extend
the
maturity
date
of
the
revolving
line
of
credit
facility
to
June
7,
2019,
subject
to
the
closing
of
the
Fifth
Amendment
and
other
conditions
needing
to
be
satisfied.
The
Sixth
Amendment
also
reduced
the
borrowing
capacity
of
the
revolving
line
of
credit
facility
from
$350,000
to
$325,000.
The
conditions
for

272

Table
of
Contents

Note
9.
Debt
(Continued)

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

the
effectiveness
of
the
Sixth
Amendment
were
satisfied
and
the
Sixth
Amendment
became
effective
on
July
29,
2016.
The
revolving
line
of
credit
facility
has
an
initial
interest
rate
equal
to
the
same
rate
that
was
in
effect
at
June
30,
2016,
LIBOR
+
3.75%,
or
if
borrowed
as
ABR
loans,
ABR
+
2.75%.
The
margins
shall
be
increased
by
0.50%
each
quarter,
commencing
with
the
fiscal
quarter
ending
September
30,
2016;
provided
that
in
no
event
shall
the
LIBOR
margin
exceed
4.75%
or
the
ABR
margin
exceed
3.75%.
Upon
the
consummation
of
a
qualified
equity
offering
or
a
qualified
public
offering
or
combination
thereof,
the
LIBOR
margin
will
be
immediately
reduced
to
3.75%
and
the
ABR
margin
will
be
immediately
reduced
to
2.75%.
As
of
December
31,
2016,
the
LIBOR
margin
was
4.75%
and
the
ABR
margin
was
3.75%.
Since
the
Company
consummated
a
qualified
equity
offering
on
January
23,
2017,
on
that
date
the
LIBOR
margin
on
the
revolving
credit
facility
was
immediately
reduced
to
3.75%
and
the
ABR
margin
was
immediately
reduced
to
2.75%.

Conditions
for
Accelerated
Maturity
of
2021
Extended
Term
Loan

If
on
the
date
that
is
91
days
prior
to
September
1,
2019
more
than
$250,000
of
the
principal
amount
of
the
Senior
Notes
due
2019
is
outstanding,
then
the
2021
Extended
Term
Loan
maturity
date
shall
be
the
date
that
is
91
days
prior
to
September
1,
2019.

Conditions
for
Accelerated
Maturity
of
Revolving
Line
of
Credit
Facility

As
described
above,
the
lenders
have
agreed
to
extend
the
maturity
date
of
the
revolving
line
of
credit
facility
to
June
7,
2019;
provided,
however,
that
if
on
the
date
that
is
91
days
prior
to
September
1,
2019
more
than
$250,000
of
the
principal
amount
of
the
Senior
Notes
due
2019
is
outstanding,
then
the
maturity
date
of
the
revolving
line
of
credit
facility
shall
be
the
date
that
is
91
days
prior
to
September
1,
2019.
Further,
if
on
the
date
that
is
91
days
prior
to
the
maturity
date
of
the
2018
Extended
Term
Loan
more
than
$250,000
of
the
principal
amount
of
the
2018
Extended
Term
Loan
is
outstanding,
then
the
maturity
date
of
the
revolving
line
of
credit
facility
shall
be
the
date
that
is
91
days
prior
to
the
2018
Extended
Term
Loan
maturity
date.

Revolving Line of Credit Facility

Borrowings
under
our
revolver
bear
interest
at
a
rate
per
annum
which,
at
our
option,
can
be
either
a
LIBOR
or
an
ABR
plus,
in
each
case,
a
margin.
For
LIBOR
revolving
borrowings,
the
interest
period
is
set
at
our
option
for
a
period
of
one,
two,
three,
six,
nine
or
12
months.
ABR
revolving
borrowings
have
no
interest
period
and
the
interest
rate
on
any
ABR
revolving
borrowing
is
subject
to
change
when
the
underlying
indices
change.
In
addition,
our
Amended
and
Restated
Credit
Agreement
provides
for
the
payment
of
a
commitment
fee
based
on
the
daily
unused
portion
of
our
revolver.
The
commitment
fee
rate
of
0.625%
per
annum
is
payable
quarterly
in
arrears.
As
of
December
31,
2015,
prior
to
completing
the
Sixth
Amendment
described
above,
LIBOR
loans
under
our
revolver
accrued
interest
at
the
applicable
LIBOR
rate
plus
a
3.75%
margin,
and
were
subject
to
a
floor
of
1.25%.
Interest
on
ABR
revolving
borrowings
accrued
at
the
ABR
(which
is
the
higher
of
the
Federal
Funds
rate
plus
0.50%
or
the
prime
rate
for
the
agent
bank)
plus
a
2.75%
margin.
The
ABR
with
respect
to
our
revolver
was
subject
to
a
floor
of
2.25%.

On
July
7,
2015,
we
amended
our
Senior
Secured
Credit
Facility,
in
order
to
extend
the
maturity
date
of
our
revolving
line
of
credit
facility
from
June
2016
to
March
2018.
As
a
result
of
this

273

Table
of
Contents

Note
9.
Debt
(Continued)

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

amendment,
during
the
third
quarter
of
2015
we
wrote
off
$331
of
unamortized
debt
issuance
costs
associated
with
the
old
revolver
as
Loss
on
debt
extinguishment,
as
several
of
the
original
creditors
did
not
participate
in
the
new
revolver.
In
addition,
in
July
2015
we
paid
approximately
$11,300
in
debt
issuance
costs
related
to
the
modification.
The
debt
issuance
costs
that
were
paid
in
connection
with
the
modification
were
capitalized
and
will
be
amortized
through
interest
expense
over
the
extended
term
of
the
revolver.

At
December
31,
2016,
there
was
no
balance
outstanding
under
our
revolver.
At
December
31,
2015,
the
total
amount
outstanding
under
our
revolver
was
$269,261,
which
consisted
entirely
of
LIBOR
loans
at
an
interest
rate
of
5.00%.

Default Interest

In
the
event
that
we
fail
to
pay
all
or
a
portion
of
the
principal
and
interest
amounts
when
due,
the
interest
rates
under
our
Senior
Secured
Credit
Facility
will
be
increased
by
2.00%
from
the
date
of
such
non-payment
to
the
date
on
which
the
payment
is
paid
in
full.

Guarantee

As
of
the
effective
date
of
the
Amended
and
Restated
Credit
Agreement,
all
obligations
under
our
Senior
Secured
Credit
Facility
are
unconditionally
guaranteed
by
the
same
subsidiaries
that
were
guarantors
under
the
original
Credit
Agreement.
Pursuant
to
Supplement
No.
2
to
the
Guarantee
dated
as
of
July
15,
2011,
Exeter
Street
Holdings
LLC,
a
Maryland
limited
liability
company
subsidiary,
became
an
additional
guarantor
of
the
obligations
under
our
Senior
Secured
Credit
Facility.
On
August
13,
2015,
Supplement
No.
2
to
the
Foreign
Obligations
Guarantee
was
signed
pursuant
to
which
LEI
China
Limited
and
Exeter
Street
Holdings
Sdn
Bhd
became
Foreign
Obligation
Guarantors.

Senior Secured Credit Facility Outstanding

The
multi-currency
revolving
line
of
credit
facility,
the
2021
Extended
Term
Loan,
and
the
2018
Extended
Term
Loan
are
collectively
referred
to
as
the
"Senior
Secured
Credit
Facility."
As
of
December
31,
2016,
the
$1,497,869
balance
of
the
Senior
Secured
Credit
Facility
consists
of
$1,216,058
in
the
2021
Extended
Term
Loan
and
$281,811
in
the
2018
Extended
Term
Loan;
the
revolver
had
a
balance
of
$0.
As
of
December
31,
2015,
the
$2,084,093
balance
of
the
Senior
Secured
Credit
Facility
consists
of
$1,814,832
in
the
2018
Extended
Term
Loan,
the
Series
A-2018
New
Term
Loan,
the
Series
B
New
Term
Loans,
the
Series
B
Additional
Term
Loans,
and
the
Additional
New
Series
2018
Extended
Term
Loans,
and
the
revolver
of
$269,261.

Senior Secured Credit Facility Borrowers and Guarantors

Laureate
Education,
Inc.
(the
U.S.
Borrower)
is
the
borrower
under
our
Senior
Secured
Credit
Facility.
Iniciativas
Culturales
de
España
S.L.
(the
Foreign
Borrower)
is
a
borrower
only
under
a
portion
of
the
revolver
of
our
Senior
Secured
Credit
Facility.

All
of
Laureate's
required
United
States
legal
entities,
excluding
Walden
University,
LLC
(Walden),
Kendall
College
(Kendall),
NewSchool
of
Architecture
and
Design
(NewSchool),
National
Hispanic
University
(NHU)
and
St.
Augustine,
are
guarantors
of
the
Senior
Secured
Credit
Facility,

274

Table
of
Contents

Note
9.
Debt
(Continued)

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

and
all
of
the
guarantors'
assets,
both
real
and
intangible,
are
pledged
as
collateral.
Certain
Walden
assets
are
also
pledged
as
collateral,
including
all
of
Walden's
United
States
receivables
other
than
Title
IV
student
loans,
all
of
its
copyrights,
patents,
and
trademarks.
As
of
December
31,
2016
and
2015,
the
carrying
value
of
the
Walden
receivables
and
intangibles
pledged
as
collateral
was
$409,971
and
$404,331,
respectively.
Additionally,
not
more
than
65%
of
the
shares
held
directly
by
United
States
guarantors
in
non-domestic
subsidiaries
are
pledged
as
collateral.
There
is
also
a
separate
guarantee
and
pledge
agreement
for
the
Foreign
Borrower
sub-facility
of
the
revolver
(the
Spanish
Tranche).
The
Spanish
Tranche
is
secured
by
certain
of
the
Foreign
Borrower's
assets,
including
intercompany
loans
and
shares
owned
in
other
non-domestic
subsidiaries,
to
secure
the
foreign
obligations.
Of
the
$325,000
revolving
line
of
credit
facility
noted
above,
we
can
borrow
up
to
$100,000
under
the
Spanish
Tranche.

Senior
Notes
due
2019

Overview

On
July
25,
2012,
we
completed
an
offering
of
$350,000
aggregate
principal
amount
of
9.250%
Senior
Notes
due
2019
(the
Senior
Notes
due
2019
or,
the
Senior
Notes).
The
net
proceeds
received
from
the
debt
offering
were
used
to
repay
a
portion
of
our
senior
secured
multi-currency
revolving
credit
facility.

On
November
13,
2012,
we
completed
an
offering
of
$1,050,000
aggregate
principal
amount
of
additional
9.250%
Senior
Notes
due
2019.
The
notes
are
treated
as
a
single
series
with
the
$350,000
of
Senior
Notes
due
2019
that
were
issued
in
July
2012.
The
notes
were
issued
at
a
price
of
97.750%
of
face
amount,
resulting
in
an
original
debt
discount
of
$23,625,
which
is
being
amortized
to
interest
expense
over
the
term
of
the
notes.
The
Company
used
the
net
proceeds
from
the
sale
of
the
additional
Senior
Notes
due
2019
to
repay
other
outstanding
indebtedness.

As
discussed
further
in
Note
13,
Share-based
Compensation,
and
Note
17,
Related
Party
Transactions,
on
December
29,
2015
we
issued
$50,046
aggregate
principal
amount
of
Senior
Notes
due
2019
to
the
participants
of
the
nonqualified
share-based
deferred
compensation
arrangement.
On
December
30,
2016,
we
issued
$10,453
aggregate
principal
amount
of
Senior
Notes
due
2019
to
the
participants
of
the
nonqualified
share-based
deferred
compensation
arrangement.
As
discussed
further
below,
on
June
15,
2016,
Laureate
also
repurchased
$62,500
aggregate
principal
amount
of
Senior
Notes
due
2019
at
par
value,
plus
accrued
and
unpaid
interest
and
special
interest
from
certain
existing
holders
of
the
notes.

The
Senior
Notes
due
2019
are
fully
and
unconditionally
guaranteed,
jointly
and
severally,
on
an
unsecured
senior
basis,
by
each
of
Laureate's
wholly
owned
domestic
subsidiaries
that
guarantee
Laureate's
obligations
under
the
Senior
Secured
Credit
Facility.
The
Senior
Notes
due
2019
rank
junior
to
the
Senior
Secured
Credit
Facility.

As
of
December
31,
2016,
the
Senior
Notes
due
2019
had
an
outstanding
balance
of
$1,388,036,
net
of
the
remaining
debt
discount
of
$9,963.
As
of
December
31,
2015,
the
Senior
Notes
due
2019
had
an
outstanding
balance
of
$1,436,214,
net
of
the
remaining
debt
discount
of
$13,832.
From
and
after
September
1,
2015,
we
may
redeem
all
or
part
of
the
Senior
Notes
due
2019
at
redemption
prices
starting
at
106.938%
of
the
principal
amount
thereof
and
decreasing
from
there
each
year
thereafter

275

Table
of
Contents

Note
9.
Debt
(Continued)

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

until
September
1,
2018,
plus
accrued
and
unpaid
interest.
From
and
after
September
1,
2018,
we
may
redeem
all
or
part
of
the
Senior
Notes
due
2019
at
a
redemption
price
of
100%,
plus
accrued
and
unpaid
interest.

The
interest
rate
for
the
Senior
Notes
due
2019
is
fixed
at
9.25%,
excluding
the
special
interest
discussed
below,
and
is
payable
semi-annually
in
arrears
on
March
1
and
September
1
each
year.

Registration of Senior Notes due 2019

Laureate
and
its
guarantors
agreed
to
(1)
file
a
registration
statement
with
the
SEC
with
respect
to
a
registered
offer
to
exchange
the
Senior
Notes
due
2019
for
new
notes
having
terms
substantially
identical
in
all
material
respects
to
the
outstanding
notes
(except
that
the
new
notes
will
not
contain
transfer
restrictions
or
provide
for
special
interest);
or
(2)
file
a
shelf
registration
for
the
resale
of
the
notes.
We
were
required
to
use
all
commercially
reasonable
efforts
to
cause
the
registration
statement
to
be
declared
effective
on
or
before
July
25,
2014.
Since
the
registration
statement
was
not
declared
effective
by
July
25,
2014,
we
have
incurred
special
interest
at
a
rate
equal
to
0.25%
per
annum
for
the
first
90-day
period
of
the
outstanding
indenture
indebtedness
on
the
outstanding
notes,
0.50%
per
annum
for
the
next
90-day
period,
and
0.75%
thereafter,
as
liquidated
damages
until
the
registration
statement
is
declared
effective
and
the
exchange
offer
is
completed.

The
requirement
to
register
the
Senior
Notes
due
2019
qualifies
as
a
"registration
payment
arrangement"
under
ASC
825-20,
"Financial
Instruments—
Registration
Payment
Arrangements."
ASC
825-20
requires
us
to
record
a
liability
if
we
determine
that
it
is
probable
that
consideration,
such
as
special
interest,
will
be
paid
to
the
counterparty
under
the
registration
payment
arrangement,
and
if
that
consideration
can
be
reasonably
estimated.
Accordingly,
we
have
recorded
a
liability
for
the
amount
of
special
interest
on
the
Senior
Notes
due
2019
that
we
have
determined
to
be
probable
and
estimable
based
on
our
expected
timing
of
registration
as
of
each
balance
sheet
date.
As
of
December
31,
2016
and
2015,
we
had
a
total
contingent
liability
for
special
interest
on
the
Senior
Notes
due
2019
of
$8,400
and
$8,100,
respectively,
recorded
in
Accrued
expenses
and
Other
long-term
liabilities
in
our
Consolidated
Balance
Sheets,
through
a
corresponding
adjustment
to
Interest
expense
in
our
Consolidated
Statement
of
Operations.

Senior Notes due 2019—Note Exchange Transaction

On
April
15,
2016,
Laureate
entered
into
separate,
privately
negotiated
note
exchange
agreements
(the
Note
Exchange
Agreements)
with
certain
existing
holders
(the
Existing
Holders)
of
our
outstanding
Senior
Notes
due
2019,
pursuant
to
which
we
will
exchange
$250,000
in
aggregate
principal
amount
of
Senior
Notes
for
shares
of
Company
common
stock.
We
expect
the
exchange
to
be
completed
within
one
year
after
the
consummation
of
an
initial
public
offering
of
our
common
stock
that
generates
gross
proceeds
of
at
least
$400,000
or
10%
of
the
equity
value
of
the
Company
(a
Qualified
Public
Offering).
The
number
of
shares
of
common
stock
issuable
will
equal
104.625%
of
the
aggregate
principal
amount
of
Senior
Notes
to
be
exchanged,
or
$261,600,
divided
by
the
initial
public
offering
price
per
share
of
common
stock
in
the
Qualified
Public
Offering,
and
the
shares
shall
be
identical
to
the
shares
issued
to
unaffiliated
investors
in
the
Qualified
Public
Offering.
Following
the
Qualified
Public
Offering,
but
prior
to
the
exchange,
the
Senior
Notes
subject
to
the
exchange
will
continue
to
receive
interest
at
the
same
rate
as
the
Senior
Notes
that
are
not
subject
to
the
exchange.

276

Table
of
Contents

Note
9.
Debt
(Continued)

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Pursuant
to
the
Note
Exchange
Agreements,
on
June
15,
2016,
Laureate
also
repurchased
from
the
Existing
Holders
$62,500
aggregate
principal
amount
of
Senior
Notes
at
par
value,
plus
accrued
and
unpaid
interest
and
special
interest.
In
connection
with
this
repayment
we
recorded
a
Loss
on
debt
extinguishment
of
$1,681
during
the
second
quarter
related
to
the
write
off
of
unamortized
deferred
financing
costs
and
discount.
The
Note
Exchange
Agreements
provided
that,
within
60
days
after
the
consummation
of
a
Qualified
Public
Offering,
at
the
option
of
the
Existing
Holders
or
their
transferees,
we
will
repurchase
up
to
an
additional
$62,500
aggregate
principal
amount
of
Senior
Notes
at
the
redemption
price
set
forth
in
Section
3.07
of
the
indenture
governing
the
Senior
Notes
that
is
applicable
as
of
the
date
of
pricing
of
the
Qualified
Public
Offering,
plus
accrued
and
unpaid
interest
and
special
interest
(the
Subsequent
Repurchase).
On
March
1,
2017,
in
accordance
with
the
Note
Exchange
Agreements,
we
repurchased
Senior
Notes
with
an
aggregate
principal
amount
of
$22,556
at
a
repurchase
price
of
104.625%
of
the
aggregate
principal
amount
for
a
total
payment
of
$23,599.

The
Note
Exchange
Agreements
would
have
terminated
if
a
Qualified
Public
Offering
had
not
been
consummated
on
or
before
August
15,
2017,
and
the
exchange
of
$250,000
in
aggregate
principal
amount
of
Senior
Notes
for
shares
of
common
stock
and
the
Subsequent
Repurchase
would
not
have
occurred.
As
discussed
in
Note
1,
Description
of
Business,
on
February
6,
2017,
the
Company
completed
an
initial
public
offering
of
its
common
stock,
at
an
initial
public
offering
price
per
share
of
$14.00,
that
qualified
as
a
Qualified
Public
Offering.
Upon
consummation
of
all
of
the
transactions
described
above,
we
will
retire
approximately
$335,000
in
aggregate
principal
amount
of
Senior
Notes.
The
Note
Exchange
Agreements
were
accounted
for
as
a
debt
modification.

Certain
Covenants

Our
senior
long-term
debt
contains
certain
negative
covenants
including,
among
others:
(1)
limitations
on
additional
indebtedness;
(2)
limitations
on
dividends;
(3)
limitations
on
asset
sales,
including
the
sale
of
ownership
interests
in
subsidiaries
and
sale-leaseback
transactions;
and
(4)
limitations
on
liens,
guarantees,
loans
or
investments.
In
connection
with
the
extension
of
our
revolving
line
of
credit
facility
in
July
2015,
we
are
now
subject
to
a
Consolidated
Senior
Secured
Debt
to
Consolidated
EBITDA,
as
defined
in
the
bank
agreement,
financial
maintenance
covenant
beginning
in
the
third
quarter
of
2015.
The
maximum
ratio,
as
defined,
is
5.30x,
4.50x
and
3.50x
at
December
31,
2015,
2016
and
2017,
respectively.
The
ratios
as
of
December
31,
2016
and
2015
were
2.79x
and
3.91x,
respectively.
In
addition,
notes
payable
at
some
of
our
locations
contain
financial
maintenance
covenants.
We
are
in
compliance
with
our
debt
covenants
and
expect
to
be
for
the
next
12
months.

Loss
on
Debt
Extinguishment

During
the
year
ended
December
31,
2016,
Laureate
recorded
a
Loss
on
debt
extinguishment
of
$17,363.
In
connection
with
the
Note
Exchange
Agreements
in
the
second
quarter
of
2016,
we
recorded
a
Loss
on
debt
extinguishment
of
$1,681
related
to
the
write
off
of
unamortized
deferred
financing
costs
and
discount.
In
connection
with
the
Fifth
Amendment
to
the
Amended
and
Restated
Credit
Agreement,
in
the
third
quarter
of
2016
we
recorded
a
Loss
on
debt
extinguishment
of
$15,682
related
to
the
write
off
of
unamortized
deferred
financing
costs.

During
the
year
ended
December
31,
2015,
Laureate
recorded
a
Loss
on
debt
extinguishment
of
$1,263,
of
which
$932
was
related
to
mortgage
breakage
fees
paid
as
a
part
of
the
Swiss
sale-leaseback

277

Table
of
Contents

Note
9.
Debt
(Continued)

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

transaction
discussed
in
Note
3,
Dispositions
and
Asset
Sales,
and
$331
which
was
related
to
the
July
2015
extension
of
the
maturity
date
for
the
revolving
line
of
credit
facility
under
the
Senior
Secured
Credit
Facility,
as
discussed
above.

During
the
year
ended
December
31,
2014,
Laureate
recorded
a
Loss
on
debt
extinguishment
of
$22,984
that
was
almost
entirely
related
to
the
purchase
of
previously
leased
property
in
Brazil
and
settlement
of
the
related
lease
obligation.
In
connection
with
the
2010
acquisition
of
Universidade
Potiguar
(UNP),
Laureate
entered
into
a
lease
agreement
for
certain
property,
which
was
accounted
for
as
a
failed
sale-leaseback
and
recorded
as
a
lease
asset
and
liability.
The
sellers
had
a
right
to
put
the
property
to
Laureate,
which
they
exercised
in
December
2014.
Laureate
recorded
the
excess
of
the
approximately
$29,300
purchase
price
over
the
capital
lease
liability
as
Loss
on
debt
extinguishment
in
accordance
with
ASC
470-50,
"Modifications
and
Extinguishments."

Debt
Issuance
Costs

Amortization
of
debt
issuance
costs
and
accretion
of
debt
discounts
that
are
recorded
in
Interest
expense
in
the
Consolidated
Statements
of
Operations
totaled
$23,200,
$26,100
and
$24,400
for
the
years
ended
December
31,
2016,
2015
and
2014,
respectively.
During
the
years
ended
December
31,
2016,
2015
and
2014,
we
paid
and
capitalized
a
total
of
$11,582,
$13,020
and
$3,282,
respectively,
in
debt
issuance
costs.
Certain
unamortized
debt
issuance
costs
were
written
off
in
2016
and
2015
in
connection
with
debt
agreement
amendments
discussed
above,
which
resulted
in
a
Loss
on
debt
extinguishment
of
$17,363
and
$1,263,
respectively.
As
of
December
31,
2016
and
2015,
our
unamortized
debt
issuance
costs
were
$44,648
and
$69,294,
respectively.

Currency
and
Interest
Rate
Swaps

The
interest
and
principal
payments
for
Laureate's
senior
long-term
debt
arrangements
are
to
be
paid
primarily
in
USD.
Our
ability
to
make
debt
service
payments
is
subject
to
fluctuations
in
the
value
of
the
USD
relative
to
foreign
currencies,
because
a
majority
of
our
operating
cash
used
to
make
these
payments
is
generated
by
subsidiaries
with
functional
currencies
other
than
USD.
As
part
of
our
overall
risk
management
policies,
Laureate
has
entered
into
a
foreign
currency
swap
contract
and
floating-to-fixed
interest
rate
swap
contracts.
See
Note
14,
Derivative
Instruments,
for
further
disclosures.

Other
Debt

Lines of Credit

Individual
Laureate
subsidiaries
have
the
ability
to
borrow
pursuant
to
unsecured
lines
of
credit
and
similar
short-term
borrowing
arrangements
(collectively,
lines
of
credit).
The
lines
of
credit
are
available
for
working
capital
purposes
and
enable
us
to
borrow
for
and
repay
until
those
lines
mature.

Interest
rates
on
our
lines
of
credit
ranged
from
1.75%
to
20.00%
at
December
31,
2016,
and
5.08%
to
20.00%
at
December
31,
2015.
Our
weighted-average
short-term
borrowing
rate
was
6.49%
and
7.98%
at
December
31,
2016
and
2015,
respectively.

278

Table
of
Contents

Note
9.
Debt
(Continued)

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Laureate's
aggregate
lines
of
credit
(outstanding
balances
plus
available
borrowing
capacity)
were
$125,681
and
$114,706
as
of
December
31,
2016
and
2015,
respectively.
At
December
31,
2016
and
2015,
the
aggregate
outstanding
balances
on
our
lines
of
credit
were
$66,081
and
$74,335,
respectively,
which
are
included
in
the
current
portion
of
long-term
debt.
Accordingly,
the
available
borrowing
capacity
under
our
lines
of
credit
was
$59,600
and
$40,371
at
December
31,
2016
and
2015,
respectively.

Notes Payable

Notes
payable
include
mortgages
payable
that
are
secured
by
certain
fixed
assets.
The
notes
payable
have
varying
maturity
dates
and
repayment
terms
through
2030.
These
loans
contain
certain
financial
maintenance
covenants
and
Laureate
is
in
compliance
with
these
covenants.
Interest
rates
on
notes
payable
ranged
from
3.00%
to
18.53%
and
2.30%
to
19.04%
at
December
31,
2016
and
2015,
respectively.

On
May
12,
2016,
two
of
UVM
Mexico's
outstanding
loans
that
originated
in
2007
and
2012
and
were
both
scheduled
to
mature
in
May
2021
were
refinanced
and
combined
into
one
loan.
The
maturity
date
of
the
combined
loan
was
extended
to
May
15,
2023.
Principal
repayments
were
suspended
until
May
15,
2018.
The
new
refinanced
loan
carries
a
variable
interest
rate
based
on
the
28-day
Mexican
Interbanking
Offer
Rate
(TIIE),
plus
the
applicable
margin.
The
applicable
margin
for
the
interest
calculation
is
established
based
on
the
ratio
of
debt
to
EBITDA,
as
defined
in
the
agreement.
Interest
is
paid
monthly
commencing
on
May
15,
2016.
The
outstanding
balance
of
the
loan
on
May
12,
2016
was
MXN
2,224,600
(US
$120,527
at
that
date).
As
of
December
31,
2016,
the
interest
rate
on
the
loan
was
8.94%
and
the
outstanding
balance
on
the
loan
was
$107,793.
As
of
December
31,
2015,
the
combined
outstanding
balance
on
these
loans
was
approximately
$128,800.

In
addition
to
the
loans
above,
in
August
2015,
UVM
Mexico
entered
into
an
agreement
with
a
bank
for
a
loan
of
MXN
1,300,000
(approximately
US
$79,000
at
the
time
of
the
loan).
The
loan
carries
a
variable
interest
rate
(8.09%
and
5.87%
at
December
31,
2016
and
2015,
respectively)
and
matures
in
August
2020.
As
of
December
31,
2016
and
2015,
the
outstanding
balance
of
this
loan
was
$62,992
and
$75,271,
respectively.

The
Company
has
also
obtained
financing
to
fund
the
construction
of
two
new
campuses
at
one
of
our
institutions
in
Peru,
Universidad
Peruana
de
Ciencias
Aplicadas.
As
of
December
31,
2016
and
2015,
the
outstanding
balance
on
the
loans
was
$47,833
and
$60,553,
respectively,
and
had
a
weighted
average
interest
rate
of
7.97%
and
7.74%,
respectively.
These
loans
have
varying
maturity
dates
with
the
final
payment
due
in
October
2022.
As
of
December
31,
2016
and
2015,
$22,365
and
$26,371,
respectively,
of
the
outstanding
balances
on
the
loans
were
payable
to
an
institutional
investor
that
is
a
minority
shareholder
of
Laureate.

In
May
2014,
the
Company
obtained
financing
to
fund
the
construction
of
a
new
campus
at
one
of
our
institutions
in
Panama.
As
of
both
December
31,
2016
and
2015,
the
outstanding
balance
on
this
loan
was
$25,000.
This
loan
is
payable
to
an
institutional
investor
that
is
a
minority
shareholder
of
Laureate.
It
has
a
fixed
interest
rate
of
8.11%
and
matures
in
2024.

Laureate
has
outstanding
notes
payable
at
HIEU
in
China.
As
of
December
31,
2016
and
2015,
the
outstanding
balance
on
the
loans
was
$61,862
and
$90,426,
respectively.
The
interest
rates
on
these

279

Table
of
Contents

Note
9.
Debt
(Continued)

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

loans
ranged
from
4.75%
to
4.99%
per
annum
as
of
December
31,
2016
and
from
4.75%
to
7.84%
per
annum
as
of
December
31,
2015.
These
notes
are
repayable
in
installments
with
the
final
installment
due
in
November
2019.

Laureate
has
outstanding
notes
payable
at
a
real
estate
subsidiary
in
Chile.
As
of
December
31,
2016
and
2015,
the
outstanding
balance
on
the
loans
was
$62,695
and
$55,047,
respectively.
The
interest
rates
on
these
loans
range
from
4.80%
to
8.08%
per
annum
as
of
December
31,
2016
and
from
5.64%
to
9.58%
per
annum
as
of
December
31,
2015.
These
notes
are
repayable
in
installments
with
the
final
installment
due
in
August
2028.

On
December
20,
2013,
Laureate
acquired
THINK
and
financed
a
portion
of
the
purchase
price
by
borrowing
AUD
45,000
(US
$32,310
at
December
31,
2016)
under
a
syndicated
facility
agreement
in
the
form
of
two
term
loans
of
AUD
22,500
each.
The
syndicated
facility
agreement
also
provided
for
additional
borrowings
of
up
to
AUD
20,000
(US
$14,360
at
December
31,
2016)
under
a
capital
expenditure
facility
and
a
working
capital
facility.
The
first
term
loan
(Facility
A)
had
a
term
of
five
years
and
principal
was
payable
in
quarterly
installments
of
AUD
1,125
(US
$808
at
December
31,
2016)
beginning
on
March
31,
2014.
The
second
term
loan
(Facility
B)
had
a
term
of
five
years
and
the
total
principal
balance
of
AUD
22,500
was
payable
at
its
maturity
date
of
December
20,
2018.
In
June
2016,
these
loan
facilities
were
amended
and
restated.
As
a
result
of
this
amendment
and
a
repayment
of
AUD
11,000
(approximately
$8,100
at
the
date
of
payment),
Facility
A
has
been
amended
to
be
a
term
loan
of
AUD
10,000
($7,180
at
December
31,
2016),
and
principal
is
repayable
in
quarterly
installments
of
AUD
833
($598
at
December
31,
2016)
beginning
on
September
30,
2016.
Facility
A
bears
interest
at
a
variable
rate
plus
a
margin
of
2.50%,
and
the
final
balance
is
payable
at
its
maturity
date
of
December
20,
2018.
Facility
B
has
been
amended
to
be
a
revolving
facility
of
up
to
AUD
15,000
($10,770
at
December
31,
2016)
and
any
balance
outstanding
is
repayable
at
its
maturity
date
of
December
20,
2018.
Facility
B
bears
interest
at
a
variable
rate
plus
a
margin
of
2.75%.
The
capital
expenditure
facility
and
working
capital
facility
now
provide
for
total
additional
borrowings
of
up
to
AUD
15,000
(US
$10,770
at
December
31,
2016).
As
of
December
31,
2016,
the
interest
rates
on
Facility
A
and
Facility
B
were
4.29%
and
4.55%,
respectively,
and
as
of
December
31,
2015,
the
interest
rates
on
Facility
A
and
Facility
B
were
4.68%
and
4.98%,
respectively.
The
terms
of
the
syndicated
facility
agreement
required
THINK
to
enter
into
an
interest
rate
swap
within
45
days
from
the
agreement's
December
20,
2013
effective
date,
in
order
to
convert
at
least
50%
of
the
AUD
45,000
of
term
loan
debt
from
a
variable
interest
rate
to
a
fixed
interest
rate.
Accordingly,
on
January
31,
2014,
THINK
executed
an
interest
rate
swap
agreement
to
satisfy
this
requirement
and
converted
AUD
22,500
(US
$16,155
at
December
31,
2016)
of
the
variable
rate
component
of
the
term
loan
debt
to
a
fixed
interest
rate
of
3.86%.
This
interest
rate
swap
was
not
designated
as
a
hedge
for
accounting
purposes.
As
of
December
31,
2016
and
2015,
$16,753
and
$25,696,
respectively,
was
outstanding
under
these
loan
facilities.

As
discussed
in
Note
4,
Acquisitions,
Laureate
acquired
FMU
on
September
12,
2014
and
financed
a
portion
of
the
purchase
price
by
borrowing
amounts
under
two
loans
that
totaled
BRL
259,139
(approximately
US
$110,310
at
the
borrowing
date).
The
loans
require
semi-annual
principal
payments
beginning
at
BRL
6,478
in
October
2014
and
increasing
to
a
maximum
of
BRL
22,027
beginning
in
October
2017
and
continuing
through
their
maturity
dates
in
April
2021.
As
of
December
31,
2016
and
2015,
the
outstanding
balance
of
these
loans
was
$59,841
and
$58,865,
respectively.
Both
loans
mature

280

Table
of
Contents

Note
9.
Debt
(Continued)

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

on
April
15,
2021
and
bear
interest
at
an
annual
variable
rate
of
CDI
plus
3.7%
(approximately
17%
and
18%
at
December
31,
2016
and
2015,
respectively).

On
November
18,
2015,
the
Company
entered
into
an
agreement
with
two
banks
to
borrow
a
total
of
EUR
100,000
(approximately
US
$106,500
at
the
agreement
date)
for
a
term
of
10
years
at
a
fixed
annual
interest
rate
of
3%.
The
loan
is
collateralized
by
real
estate
at
one
of
our
campuses
in
Spain
and
requires
40
quarterly
principal
payments
of
EUR
1,875
beginning
in
February
2016,
and
a
final
principal
payment
of
EUR
25,000
upon
maturity
of
the
loan,
in
November
2025.
As
of
December
31,
2016
and
2015,
the
outstanding
balance
on
this
loan
was
$96,570
and
$107,100,
respectively.

Laureate
has
outstanding
notes
payable
at
Universidad
Privada
del
Norte
(UPN),
one
of
our
institutions
in
Peru.
During
2016,
the
Company
borrowed
an
additional
$37,098
and
made
payments
of
$24,480.
These
loans
all
have
interest
rates
ranging
from
3.34%
to
8.70%
and
varying
maturity
dates
through
December
2024.
As
of
December
31,
2016
and
2015,
these
loans
had
a
balance
of
$44,452
and
$31,822,
respectively.

Capital Lease Obligations and Sale-Leaseback Financings

Capital
leases
and
sale-leaseback
financings,
primarily
relating
to
real
estate
obligations,
are
included
in
debt
and
have
been
recorded
using
interest
rates
ranging
from
1.00%
to
42.87%.
During
2016
and
2015,
we
had
additions
to
assets
and
liabilities
recorded
as
sale-leaseback
financings
and
build-to-suit
arrangements
of
$10,333
and
$8,147,
respectively.
We
had
assets
under
capital
leases
and
sale-leaseback
financings,
net
of
accumulated
amortization,
of
$193,767
and
$210,840
at
December
31,
2016
and
2015,
respectively,.
The
amortization
expense
for
capital
lease
assets
is
recorded
in
Depreciation
and
amortization
expense.

The
aggregate
maturities
of
our
total
future
value
and
present
value
of
the
minimum
capital
lease
payments
and
payments
related
to
sale-leaseback
financings
at
December
31,
2016
were
as
follows:

2017
2018
2019
2020
2021
Thereafter
Total

Future
Value

of
Payments

Interest

Present
Value

of
Payments

45,905
$
54,022

42,172

35,920

41,284

267,964

487,267
$ 236,425
$

30,142
$
29,554

27,913

26,780

24,990

97,046

15,763

24,468

14,259

9,140

16,294

170,918

250,842

281

Table
of
Contents

Note
10.
Leases

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Laureate
conducts
a
significant
portion
of
its
operations
from
leased
facilities.
These
facilities
include
our
corporate
headquarters,
other
office
locations,
and
many
of
Laureate's
higher
education
facilities.
The
terms
of
these
operating
leases
vary
and
generally
contain
renewal
options.
Some
of
the
operating
leases
provide
for
increasing
rents
over
the
terms
of
the
leases.
Laureate
also
leases
certain
equipment
under
noncancellable
operating
leases,
which
are
typically
for
terms
of
60
months
or
less.
Total
rent
expense
under
these
leases
is
recognized
ratably
over
the
initial
term
of
each
lease.
Any
difference
between
the
rent
payment
and
the
straight-line
expense
is
recorded
as
an
adjustment
to
the
liability
or
as
a
prepaid
asset.

Laureate
has
entered
into
sublease
agreements
for
certain
leased
office
space.
These
agreements
allow
us
to
annually
adjust
rental
income
to
be
received
for
increases
in
gross
operating
rent
and
related
expenses.

Future
minimum
lease
payments
and
sublease
income
at
December
31,
2016,
by
year
and
in
the
aggregate,
under
all
noncancellable
operating
leases
and
subleases
are
as
follows:

2017
2018
2019
2020
2021
Thereafter
Total

Lease
Payments

Sublease

Income

192,928
$
173,842

157,305

147,488

136,449

666,386

1,474,398
$

247

186

—

529

Rent
expense,
net
of
sublease
income,
for
all
cancellable
and
noncancellable
leases
was
$216,309,
$234,003
and
$230,941
for
the
years
ended
December
31,
2016,
2015
and
2014,
respectively.

Note
11.
Commitments
and
Contingencies

Noncontrolling
Interest
Holder
Put
Arrangements
and
Company
Call
Arrangements

The
following
section
provides
a
summary
table
and
description
of
the
various
noncontrolling
interest
holder
put
arrangements
that
Laureate
had
outstanding
as
of
December
31,
2016.
As
further
described
in
Note
2,
Significant
Accounting
Policies,
Laureate
has
elected
to
accrete
changes
in
the
arrangements'
redemption
values
over
the
period
from
the
date
of
issuance
to
the
earliest
redemption
date.
The
redeemable
noncontrolling
interests
are
recorded
at
the
greater
of
the
accreted
redemption
value
or
the
traditional
noncontrolling
interest.
Until
the
first
exercise
date,
the
put
instruments'
reported
values
may
be
lower
than
the
final
amounts
that
will
be
required
to
settle
the
minority
put
arrangements.
As
of
December
31,
2016,
the
carrying
value
of
all
noncontrolling
interest
holder
put
arrangements
was
$15,246,
which
includes
accreted
incremental
value
of
$15,537
in
excess
of
traditional
noncontrolling
interests.

282

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
11.
Commitments
and
Contingencies
(Continued)

If
the
minority
put
arrangements
were
all
exercisable
at
December
31,
2016,
Laureate
would
be
obligated
to
pay
the
noncontrolling
interest
holders
an
estimated
amount
of
$15,643,
as
summarized
in
the
following
table:

December
31,
2016
Noncontrolling
interest
holder
put
arrangements
INTI
Education
Holdings
Sdn
Bhd
(INTI)—10%
Pearl
Retail
Solutions
Private
Limited
and
Creative
Arts
Education

Society
(Pearl)—45%

Stamford
International
University
(STIU)—Puttable
preferred
stock
of

TEDCO

Total
noncontrolling
interest
holder
put
arrangements
Puttable
common
stock—currently
redeemable
Puttable
common
stock—not
currently
redeemable
Total
redeemable
noncontrolling
interests
and
equity

Nominal

Currency

First

Exercisable

Date

Estimated
Value
as

of
December
31,

2016
redeemable

within
12-months:

Reported

Value

MYR

INR

Current
June
30,
2017

THB

Current

USD

Current
*

9,070
$

9,070

6,517

6,120

15,643

—

15,246

8,625

15,648
$ 23,876

Contingently
redeemable

INR:
Indian
Rupee

THB:
Thai
Baht

Laureate's
noncontrolling
interest
put
arrangements
are
specified
in
agreements
with
each
noncontrolling
interest
holder.
The
terms
of
these
agreements
determine
the
measurement
of
the
redemption
value
of
the
put
options
based
on
a
non-GAAP
measure
of
earnings
before
interest,
taxes,
depreciation
and
amortization
(EBITDA,
or
recurring
EBITDA),
the
definition
of
which
varies
for
each
particular
contract.

Commitments
and
contingencies
are
generally
denominated
in
foreign
currencies.

INTI

As
part
of
the
acquisition
of
INTI,
formerly
known
as
Future
Perspective,
Sdn
Bhd,
the
noncontrolling
interest
holders
of
INTI
had
put
options
denominated
in
MYR
to
require
the
Company
to
purchase
the
remaining
noncontrolling
interest.
As
of
December
31,
2016,
there
is
one
put
option
remaining
for
the
holder
of
the
approximately
10%
minority
interest.
The
put
option
for
the
approximately
10%
noncontrolling
interest
holder
is
exercisable
for
the
30-day
period
commencing
after
issuance
of
the
audited
financial
statements
for
each
of
the
years
ending
December
31,
2012
through
December
31,
2025.
The
holder
may
exercise
his
option
to
sell
all
of
his
equity
interest
to
the
Company
for
a
purchase
price
that
is
equal
to
defined
multiples
of
recurring
EBITDA.
Purchase
price
multiples
have
been
defined
as
eight
times
up
to
the
first
MYR
40,000
(approximately
$8,900
at
December
31,
2016)
of
EBITDA
plus
six
times
EBITDA
above
this
amount.
This
put
option
expires
after
the
30-day

283

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
11.
Commitments
and
Contingencies
(Continued)

period
related
to
delivery
of
the
2025
audited
financial
statements.
As
of
December
31,
2016,
the
Company
recorded
$9,070
for
this
arrangement
in
Redeemable
noncontrolling
interests
and
equity
on
its
Consolidated
Balance
Sheet.

The
Company
has
call
options
to
purchase
any
or
all
of
the
remaining
10%
noncontrolling
interest.
The
call
option
for
the
noncontrolling
interest
can
be
exercised
during
the
30-day
period
commencing
after
the
issuance
of
the
audited
financial
statements
for
each
of
the
years
ending
December
31,
2012
through
December
31,
2025.
The
call
option
price
is
eight
times
recurring
EBITDA,
as
defined
in
the
agreement.
This
call
option
had
no
impact
on
the
Company's
financial
statements
as
of
December
31,
2016.

Pearl

As
part
of
the
acquisition
of
Pearl,
the
minority
owners
have
a
put
option
to
require
Laureate
to
purchase
the
remaining
45%
noncontrolling
interest,
and
Laureate
has
a
call
option
to
require
the
minority
owners
to
sell
to
Laureate
up
to
35%
of
the
total
equity
of
Pearl
that
is
still
owned
by
the
noncontrolling
interest
holders
(i.e.
approximately
78%
of
the
remaining
45%
noncontrolling
interest).
The
put
option
was
previously
exercisable
beginning
in
2015
and
the
call
option
was
previously
exercisable
beginning
in
2016.
However,
on
March
29,
2016,
Laureate
and
the
minority
owners
amended
the
put
and
call
option
agreements.
As
part
of
this
amendment,
Laureate
and
the
minority
owners
agreed
to
not
exercise
their
put
or
call
options
anytime
prior
to
the
date
that
Pearl's
audited
statutory
financial
statements
for
the
fiscal
year
ending
March
31,
2017
are
presented
to
Pearl's
board,
which
is
estimated
to
be
approximately
June
30,
2017.
The
put
option
is
then
initially
exercisable
for
a
period
of
15
days.

The
amended
put
option
allows
the
minority
owners
to
sell
a
portion
or
all
of
their
45%
equity
interest.
If
the
minority
owners
sell
more
than
a
35%
equity
interest
during
this
initial
exercise
period,
the
put
option
price
is
equal
to
6.5
times
EBITDA
for
the
first
35%,
and
6.0
times
EBITDA
for
the
remaining
percentage
up
to
10%,
less
long-term
liabilities
and
plus
net
current
assets
for
the
immediately
preceding
fiscal
year
ending
on
March
31,
multiplied
by
the
minority
interest
percentage
being
acquired.
Prior
to
this
change,
the
EBITDA
multiple
was
6.0
times
EBITDA
for
the
entire
45%
equity
interest.

The
amended
call
option
allows
the
Company
to
acquire
up
to
35%
of
the
equity
interest
from
the
minority
owners
at
the
same
purchase
price
as
that
of
the
minority
owners'
put
option
for
the
first
35%
equity
interest.
The
exercise
period
of
the
call
option
starts
from
the
date
on
which
Pearl's
audited
statutory
financial
statements
for
the
fiscal
year
ending
March
31,
2017
are
presented
to
Pearl's
board,
and
ends
15
days
from
the
date
on
which
Pearl's
audited
statutory
financial
statements
for
the
fiscal
year
ending
March
31,
2018
are
presented
to
Pearl's
board.

In
the
event
any
equity
shares
continue
to
be
held
by
the
minority
owners
after
the
exercise
of
above
put
and
call
options,
the
minority
owners
have
a
second
put
option
to
sell
to
Laureate
their
remaining
equity
interest,
up
to
10%,
at
a
price
of
6.5
times
EBITDA
less
long-term
liabilities
and
plus
net
current
assets
for
the
calendar
year
ending
December
31,
2020,
multiplied
by
the
minority
interest
percentage
being
acquired.
The
exercise
period
for
the
second
put
option
starts
from
the
date
on
which
Pearl's
audited
statutory
financial
statements
for
the
calendar
year
ending
December
31,
2020
are

284

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
11.
Commitments
and
Contingencies
(Continued)

presented
to
Pearl's
board,
and
ends
15
days
from
the
date
on
which
Pearl's
audited
statutory
financial
statements
for
the
calendar
year
ending
December
31,
2021
are
presented
to
Pearl's
board.

After
all
of
the
above,
in
the
event
any
equity
shares
continue
to
be
held
by
the
minority
owners,
Laureate
then
has
a
call
option
to
purchase
all
of
the
remaining
shares
held
by
the
minority
owners
at
a
price
of
6.5
times
EBITDA,
less
long-term
liabilities
and
plus
net
current
assets
for
the
immediately
preceding
calendar
year
ending
on
December
31,
2022,
multiplied
by
the
noncontrolling
interest
percentage
being
sold.
The
call
option
exercise
period
is
15
days
from
the
date
Pearl's
audited
statutory
financial
statements
for
the
calendar
year
ending
on
December
31,
2022
are
presented
to
Pearl's
board.

In
any
event,
the
put
option
and
call
option
prices
are
subject
to
a
floor
and
a
ceiling,
as
prescribed
in
the
agreement.
The
put
floor
and
ceiling
are
applicable
through
2017,
and
the
call
floor
and
ceiling
are
applicable
through
2018.
As
of
December
31,
2016,
the
amount
recorded
in
Redeemable
noncontrolling
interests
and
equity
on
the
Consolidated
Balance
Sheet
is
$6,120.
This
call
option
had
no
impact
on
the
Company's
financial
statements
as
of
December
31,
2016.

St. Augustine

On
March
24,
2016,
the
noncontrolling
interest
holders
of
St.
Augustine
notified
Laureate
of
their
election
to
exercise
their
put
option,
which
required
Laureate
to
purchase
the
remaining
noncontrolling
interest
of
20%.
Accordingly,
this
noncontrolling
interest
became
a
mandatorily
redeemable
financial
instrument
on
the
put
option
exercise
date
and
was
recognized
as
a
liability
at
its
estimated
redemption
value
in
accordance
with
ASC
480,
"Distinguishing
Liabilities
from
Equity."
Under
the
terms
of
the
agreement,
the
put
option
purchase
price
is
based
on
7.0
times
Adjusted
EBITDA
of
St.
Augustine,
as
defined
in
the
agreement,
for
the
twelve
months
ended
as
of
the
last
day
of
the
fiscal
quarter
most
recently
ended
prior
to
the
date
on
which
notice
of
exercise
is
given;
multiplied
by
the
percentage
interest
being
acquired.
In
June
2016,
we
acquired
the
remaining
20%
noncontrolling
interest
in
St.
Augustine
for
a
purchase
price
of
$24,997.
This
payment
was
included
in
Payments
to
purchase
noncontrolling
interests
in
the
Consolidated
Statement
of
Cash
Flows.

Uni IBMR

In
2015,
we
entered
into
a
commitment
to
purchase
the
remaining
10%
minority
interest
in
Uni
IBMR
for
a
purchase
price
of
BRL
2,500.
The
agreement
closed
on
March
10,
2016
and
we
paid
BRL
2,500
(US
$668
at
the
payment
date),
which
was
included
in
Payments
to
purchase
noncontrolling
interests
in
the
Consolidated
Statement
of
Cash
Flows.
Additional
purchase
price
could
be
paid
post
closing
if
certain
contingent
sale
conditions
are
met.

Puttable Common Stock—Termination Agreement (Currently Redeemable)

During
2008,
in
connection
with
a
termination
agreement,
a
Laureate
employee
who
held
shares
of
the
Company's
common
stock
was
granted
a
contractual
right
to
put
shares
back
to
Laureate
at
a
price
equal
to
the
fair
market
value
of
our
common
stock
at
the
time
of
exercise
(the
put
right).
This
put
right
is
exercisable
annually
during
the
45-day
period
subsequent
to
the
stockholder's
receipt
of
Laureate's
annual
appraisal,
and
we
account
for
the
puttable
common
stock
as
contingently
redeemable
securities.
The
put
right
terminated
upon
the
initial
public
offering
of
Laureate's
common
stock
on

285

Table
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Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
11.
Commitments
and
Contingencies
(Continued)

February
6,
2017.
Since
the
stock
was
currently
redeemable
at
December
31,
2016
and
2015,
we
recognized
its
fair
value,
the
maximum
redemption
amount,
as
temporary
equity.
As
of
December
31,
2016
and
2015,
$5
and
$6,
respectively,
of
puttable
common
stock
was
included
in
Redeemable
noncontrolling
interests
and
equity
on
the
Consolidated
Balance
Sheets,
and
one
thousand
shares
remained
outstanding
as
of
each
balance
sheet
date.

Puttable Common Stock—Director Stockholder Put (Not Currently Redeemable)

Each
of
the
individual
director
stockholders
of
Laureate
has
entered
into
a
stockholder's
agreement
with
Laureate
and
Wengen.
The
director
stockholder's
agreement
makes
all
shares
of
common
stock
subject
to
a
stockholder
put
option
at
the
fair
market
value
of
the
stock.
The
stockholder
put
option
is
only
exercisable
upon
the
loss
of
capacity
to
serve
as
a
director
due
to
death
or
disability
(as
defined
in
the
stockholder's
agreement).
The
director
stockholder
put
option
expires
only
upon
a
change
in
control
of
Laureate.

Since
the
put
option
can
only
be
exercised
upon
death
or
disability,
we
account
for
the
common
stock
as
contingently
redeemable
equity
instruments
that
are
not
currently
redeemable
and
for
which
redemption
is
not
probable.
Accordingly,
the
redeemable
equity
instruments
are
presented
in
temporary
equity
based
on
their
initial
measurement
amount,
as
required
by
ASC
480-10-S99,
"Distinguishing
Liabilities
from
Equity—SEC
Materials."
No
subsequent
adjustment
of
the
initial
measurement
amounts
for
these
contingently
redeemable
securities
is
necessary
unless
the
redemption
of
these
securities
becomes
probable.
Accordingly,
the
amount
presented
as
temporary
equity
for
the
contingently
redeemable
common
stock
outstanding
is
its
issuance-date
fair
value.

As
of
December
31,
2016
and
2015,
$3,125
and
$2,397,
respectively,
of
contingently
redeemable
common
stock
attributable
to
director
stockholder
puts
was
included
in
Redeemable
noncontrolling
interests
and
equity
on
the
Consolidated
Balance
Sheets.

Put Right on Share-Based Awards Granted to Executive (Not Currently Redeemable)

During
the
first
quarter
of
2015,
the
Company
and
an
executive
entered
into
an
agreement
whereby
this
executive
was
granted
certain
put
rights
on
his
share-
based
awards
once
they
become
vested.
The
put
right
would
have
become
exercisable
in
2018
if
certain
events
had
not
occurred
by
that
time.
As
a
result,
we
reclassified
permanent
equity
to
temporary
equity
for
equity
awards
relating
to
approximately
750
shares
of
common
stock
that,
as
of
December
31,
2016,
were
contingently
redeemable.
As
of
December
31,
2016,
$5,500
of
contingently
redeemable
common
stock
attributable
to
this
put
right
was
included
in
Redeemable
noncontrolling
interests
and
equity
on
the
Consolidated
Balance
Sheets.
This
put
right
expired
at
the
time
of
the
IPO
in
February
2017.

Series
A
Convertible
Redeemable
Preferred
Stock
Offering

On
December
4,
2016,
we
signed
a
subscription
agreement
with
six
investors,
including
KKR
and
Snow
Phipps,
both
of
which
are
affiliates
of
ours,
pursuant
to
which
we
agreed
to
issue
and
sell
to
those
investors
an
aggregate
of
400
shares
of
a
new
series
of
our
convertible
redeemable
preferred
stock
(the
Series
A
Preferred
Stock),
consisting
of
23
shares
of
Series
A-1
Preferred
Stock
and
377
shares
of
Series
A-2
Preferred
Stock,
in
a
private
offering
for
total
net
proceeds
of
approximately

286

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
11.
Commitments
and
Contingencies
(Continued)

$383,000.
Closing
of
this
transaction,
for
343
shares,
occurred
on
December
20,
2016
and
we
received
net
proceeds,
after
issuance
costs,
of
approximately
$328,000.
One
investor
funded
a
portion
of
its
purchase
price
for
57
shares,
equal
to
$57,000
(approximately
$55,000
net
of
issuance
costs),
on
January
18,
2017
and
the
remainder
on
January
23,
2017.
The
issuance
costs
will
be
accreted
to
the
carrying
value
of
the
Series
A
Preferred
Stock
over
the
five-year
redemption
period
described
below.
The
proceeds
from
the
Series
A
Preferred
Stock
offering
have
and
will
be
used
to,
among
other
things,
repay
a
portion
of
our
outstanding
debt,
including
our
revolving
credit
facility.
Since
the
Series
A
Preferred
Stock
issuance
generated
gross
proceeds
in
an
aggregate
amount
of
$400,000,
it
was
a
"qualified
equity
offering",
as
defined
in
the
Fifth
Amendment
to
our
Amended
and
Restated
Credit
Agreement.
See
Note
9,
Debt,
for
further
discussion.

Dividends
on
the
Series
A
Preferred
Stock
compound
quarterly
and,
if
not
paid
in
shares
of
Series
A
Preferred
Stock
on
a
quarterly
basis
or
in
cash,
accrue
when,
as
and
if
declared
by
the
board
of
directors
of
the
Company,
on
each
share
of
Series
A
Preferred
Stock
as
follows:
(i)
from
the
issue
date
and
continuing
through
and
including
the
second
anniversary
of
the
issue
date,
10.0%
per
year;
(ii)
from
the
second
anniversary
of
the
issue
date
and
continuing
through
and
including
the
third
anniversary
of
the
issue
date,
13.0%
per
year;
and
(iii)
from
the
third
anniversary
of
the
issue
date
and
thereafter,
16.0%
per
year.
Unless
we
elect
to
pay
the
dividend
in
cash,
dividends
are
automatically
paid
to
the
holder
thereof
in
shares
of
Series
A
Preferred
Stock
or
accrue.
For
any
period
in
which
dividends
on
the
Series
A
Preferred
Stock
are
paid
in
cash,
the
dividend
rate
is
reduced
by
75
basis
points.
The
Certificate
of
Designations
prohibits
the
Company
from
declaring
dividends
(other
than
stock
dividends
to
junior
securities
that
are
subordinated
in
all
respects
to
the
dividends
payable
to
shares
of
Series
A
Preferred
Stock,
all
in
accordance
with
the
Certificate
of
Designations)
on
any
other
class
or
series
of
its
capital
stock
as
long
as
the
Series
A
Preferred
Stock
is
outstanding.
The
defined
dividend
rate
in
the
Certificate
of
Designations
for
the
Series
A-2
Preferred
Stock
includes
a
provision
that
requires
the
Company
to
pay
a
higher
rate
than
the
dividend
rates
described
above
if
any
dividends
greater
than
those
rates
are
paid
on
the
Company's
Class
A
common
stock.
However,
in
the
calculation
of
earnings
per
share,
while
these
shares
of
Series
A-2
Preferred
Stock
are
deemed
for
accounting
purposes
only
as
participating
securities,
we
do
not
expect
any
impact
on
diluted
earnings
per
share
since
the
possibility
of
these
shares
receiving
the
higher
rate
dividend
is
considered
remote.

Each
holder
of
shares
of
Series
A
Preferred
Stock
may
elect
to
convert
all
of
its
shares
of
Series
A
Preferred
Stock
into
shares
of
our
Class
A
common
stock
upon
the
closing
of
a
sale
of
the
Company
or
Wengen
and
in
the
event
Wengen
no
longer
exclusively
controls
the
Company,
in
each
case
at
a
15%
discount
to
the
implied
equity
value
of
the
Company
at
the
closing
of
the
applicable
transaction.
In
addition,
both
the
Company
and
each
holder
of
shares
of
Series
A
Preferred
Stock
may
elect
to
convert
all
of
the
shares
of
Series
A
Preferred
Stock
into
shares
of
our
Class
A
common
stock
at
any
time
after
our
initial
public
offering
commencing
on
the
earlier
to
occur
of
one
day
following
the
first
anniversary
of
the
closing
of
our
initial
public
offering
and
the
Follow-on
Conversion
Date
(as
defined
in
the
Certificate
of
Designations).
The
shares
of
Series
A
Preferred
Stock
shall
generally
convert
at
a
15%
discount
to
the
lesser
of
the
price
per
share
at
which
the
Company's
shares
of
Class
A
common
stock
were
sold
to
the
public
in
the
Company's
initial
public
offering
or
the
30
day
trailing
price
per
share
of
our
Class
A
common
stock,
but
in
no
case
shall
the
conversion
price
be
less
than
75%
of
the
price
at
which
the
shares
of
our
Class
A
common
stock
are
sold
to
the
public.
As
described
in
Note
1,
Description
of
Business,
the
Company
consummated
a
qualified
initial
public
offering
(QIPO)
on

287

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
11.
Commitments
and
Contingencies
(Continued)

February
6,
2017,
and,
as
a
result,
any
shares
of
Series
A
Preferred
Stock
that
remain
outstanding
on
the
date
that
is
one
day
following
the
first
anniversary
of
the
closing
of
the
QIPO
are
automatically
converted
into
shares
of
our
Class
A
common
stock.
The
Certificate
of
Designations
defined
a
QIPO
as
an
initial
underwritten
public
offering
of
common
stock
by
the
Company
on
or
prior
to
August
15,
2017
with
net
cash
proceeds
to
the
Company
of
not
less
than
$450,000.
In
certain
circumstances,
the
Company
and
the
holders
of
the
Series
A
Preferred
Stock
have
the
right
to
delay
a
conversion
for
a
period
of
90
days
following
a
proposed
conversion
date.
We
are
not
permitted
to
convert
any
shares
of
Series
A
Preferred
Stock
until
there
is
an
effective
registration
statement
available
to
the
holders
of
the
Series
A
Preferred
Stock
which
provide
the
holders
the
opportunity
to
register
at
least
an
amount
of
shares
of
our
Class
A
common
stock
equal
to
the
Priority
Amount,
as
defined
in
the
Certificate
of
Designations.
The
QIPO
generated
net
cash
proceeds
of
approximately
$456,500.
For
the
period
from
the
December
20,
2016
issuance
date
through
December
31,
2016,
we
have
recorded
accretion
on
the
Series
A
Preferred
Stock
of
$1,719,
and
as
of
December
31,
2016
the
Series
A
Preferred
Stock
has
a
carrying
value
of
$332,957.

The
shares
of
Series
A
Preferred
Stock
are
redeemable
at
our
option
at
any
time
(subject
to
certain
limitations
involving
the
price
of
our
Class
A
common
stock)
and
by
the
holders
after
the
fifth
anniversary
of
the
issue
date
at
a
redemption
price
per
share
equal
to
1.15
multiplied
by
the
sum
of
the
issue
amount
per
share
plus
any
accrued
and
unpaid
dividends.
If
we
fail
to
redeem
the
shares
of
Series
A
Preferred
Stock
when
required
after
the
fifth
anniversary
of
the
issue
date,
the
holders
of
the
Series
A
Preferred
Stock
are
entitled
to
certain
remedies,
including
the
ability
to
take
control
of
a
majority
of
our
Board
of
Directors
and
cause
a
sale
of
the
Company
and/or
cause
us
to
raise
debt
or
equity
capital
in
an
amount
sufficient
to
redeem
the
remaining
outstanding
shares
of
Series
A
Preferred
Stock.
The
Series
A
Preferred
Stock
will
be
accreted
up
to
its
stated
redemption
value
using
a
constant
yield
approach.
The
Series
A
Preferred
Stock
also
includes
a
Beneficial
Conversion
Feature
(BCF)
that
was
contingent
on
a
QIPO,
as
defined
above,
which
was
consummated
on
February
6,
2017.
As
a
result,
the
Company
will
record
the
BCF
in
the
first
quarter
of
2017
at
its
estimated
fair
value
of
approximately
$260,000.
Beginning
in
the
first
quarter
of
2017,
the
accretion
of
this
BCF
will
reduce
net
income
available
to
common
stockholders
in
the
calculation
of
earnings
per
share.

Other
Loss
Contingencies

Laureate
is
subject
to
legal
actions
arising
in
the
ordinary
course
of
its
business.
In
management's
opinion,
we
have
adequate
legal
defenses,
insurance
coverage,
and/or
accrued
liabilities
with
respect
to
the
eventuality
of
such
actions.
We
do
not
believe
that
any
settlement
would
have
a
material
impact
on
our
Consolidated
Financial
Statements.
Refer
to
Note
19,
Legal
and
Regulatory
Matters,
for
a
discussion
of
certain
matters.

Contingent Liabilities for Taxes

In
May
2012,
a
Brazilian
state
supreme
court
ruling
declared
that
a
law
passed
by
one
of
its
municipal
governments
was
unconstitutional.
This
municipal
law,
passed
in
the
third
quarter
of
2010,
had
nullified
certain
tax
assessments
against
one
of
our
institutions
in
Brazil.
As
a
result
of
the
May
2012
state
supreme
court
ruling,
we
recorded
a
liability
for
these
tax
contingencies
of
approximately
$20,100.
During
2013,
the
Company
revised
its
estimate
for
this
Brazil
tax
contingency
and
recorded
an

288

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
11.
Commitments
and
Contingencies
(Continued)

additional
$3,800.
During
the
fourth
quarter
of
2013,
we
settled
this
tax
assessment
with
the
municipality
and
paid
the
entire
liability.
We
initiated
legal
proceedings
under
the
purchase
agreement
arbitration
provisions
against
the
former
owners
to
recover
the
amounts
paid
for
this
tax
contingency
as
the
liability
stems
exclusively
from
the
pre-acquisition
period.
During
the
year
ended
December
31,
2014,
we
reached
a
settlement
with
the
former
owners
and
recorded
a
gain
of
approximately
$6,700
in
Operating
income.

As
of
December
31,
2016
and
2015,
Laureate
has
recorded
cumulative
liabilities
totaling
$67,192
and
$73,775,
respectively,
for
taxes
other-than-income
tax,
principally
payroll-tax-related
uncertainties
due
to
acquisitions
of
companies
primarily
in
LatAm.
The
changes
in
this
recorded
liability
are
related
to
new
acquisitions,
interest
and
penalty
accruals,
changes
in
tax
laws,
expirations
of
statutes
of
limitations,
settlements
and
changes
in
foreign
currency
exchange
rates.
The
terms
of
the
statutes
of
limitations
on
these
contingencies
vary
but
can
be
up
to
10
years.
This
liability
is
included
in
Other
long-term
liabilities
on
the
Consolidated
Balance
Sheets.
We
have
also
recorded
current
liabilities
for
taxes
other-than-income
tax
of
$1,896
and
$4,217,
respectively,
as
of
December
31,
2016
and
2015,
in
Other
current
liabilities
on
the
Consolidated
Balance
Sheets.
The
recorded
value
of
contingent
liabilities
is
reduced
when
they
are
extinguished
or
the
related
statutes
of
limitations
expire.
Changes
in
the
recorded
values
of
non-income
tax
contingencies
and
the
related
indemnification
assets
impact
operating
income.
The
(decrease)
increase
to
operating
income
for
adjustments
to
non-income
tax
contingencies
and
indemnification
assets
were
approximately
$(18,800),
$(5,600)
and
$4,600
for
the
years
ended
December
31,
2016,
2015
and
2014,
respectively.

In
addition,
as
of
December
31,
2016
and
2015,
Laureate
has
recorded
cumulative
liabilities
for
income
tax
contingencies
of
$103,471
and
$139,160,
respectively.
In
addition,
we
have
identified
certain
tax-related
contingencies
that
we
have
assessed
as
being
reasonably
possible
of
loss,
but
not
probable
of
loss,
and
could
have
an
adverse
effect
on
the
Company's
results
of
operations
if
the
outcomes
are
unfavorable.
In
most
cases,
Laureate
has
received
indemnifications
from
the
former
owners
and/or
noncontrolling
interest
holders
of
the
acquired
businesses
for
contingencies,
and
therefore,
we
do
not
believe
we
will
sustain
an
economic
loss
even
if
we
are
required
to
pay
these
additional
amounts.
As
of
December
31,
2016
and
2015,
indemnification
assets
primarily
related
to
acquisition
contingencies
were
$97,607
and
$123,904,
respectively.
These
indemnification
assets
primarily
covered
contingencies
for
income
taxes
and
taxes
other-than-
income
taxes.

Income
tax
contingencies
are
disclosed
and
discussed
further
in
Note
15,
Income
Taxes.

Other Loss Contingencies

Laureate
has
accrued
liabilities
for
certain
civil
actions
against
our
institutions,
a
portion
of
which
existed
prior
to
our
acquisition
of
these
entities.
As
of
December
31,
2016
and
2015,
approximately
$18,000
and
$14,000,
respectively
of
loss
contingencies
were
included
in
Other
long-term
liabilities
and
Other
current
liabilities
on
the
Consolidated
Balance
Sheets.
Laureate
intends
to
vigorously
defend
against
these
lawsuits.

289

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
11.
Commitments
and
Contingencies
(Continued)

Settlement
of
Insurance
Claims

In
February
2010
and
April
2010,
earthquakes
struck
near
Concepción,
Chile
and
in
the
Baja
California
region
of
Mexico,
respectively,
resulting
in
damage
to
a
number
of
our
locations
in
those
areas.
All
significant
repair
work
has
since
been
completed,
and
we
filed
claims
with
our
insurance
carriers
for
both
property
damage
and
business
interruption
losses.
We
negotiated
in
good
faith
with
our
insurance
carriers
regarding
disputed
amounts
of
deductibles
applied
and
losses
covered;
however
we
were
unable
to
resolve
these
matters
through
negotiations.
As
a
result,
on
October
12,
2011,
we
filed
suit
against
the
relevant
insurance
carrier
in
the
U.S.
District
Court
for
the
Southern
District
of
New
York
(
Laureate Education, Inc. v. Insurance Company of the State of Pennsylvania, Case
No.
11
CIV
7175),
seeking
money
damages
in
excess
of
$11,000,
a
declaratory
judgment
that
the
carrier
was
obligated
to
indemnify
us
for
our
losses,
and
our
costs,
expenses
and
attorneys'
fees.
Discovery
in
this
proceeding
was
completed
and
the
parties
both
filed
motions
for
summary
judgment.
On
April
3,
2014,
the
court
granted
summary
judgment
for
the
carrier
with
respect
to
the
$5,000
in
property
damage
claims,
granted
summary
judgment
for
us
for
approximately
$900
with
respect
to
one
of
the
business
interruption
claims,
and
determined
that
a
trial
would
be
required
for
the
remaining
claims,
which
totaled
approximately
$4,800,
including
prejudgment
interest.
On
June
24,
2014,
Laureate
settled
these
remaining
claims
with
the
insurance
carrier
for
$3,350.
The
settlement
proceeds
were
received
by
Laureate
on
June
30,
2014
and
recorded
as
a
reduction
of
General
and
administrative
expenses
during
the
second
quarter
of
2014.
In
December
2014,
we
reached
a
final
settlement
agreement
with
another
party
for
one
of
the
property
damage
claims
discussed
above.
The
settlement
amount
was
$1,475,
and
was
recorded
as
a
reduction
of
General
and
administrative
expenses
during
the
fourth
quarter
of
2014.

Material
Guarantees—Student
Financing

Chile

The
accredited
Chilean
institutions
in
the
Laureate
network
also
participate
in
a
government-sponsored
student
financing
program
known
as
Crédito
con
Aval
del
Estado
(the
CAE
Program).
The
CAE
Program
was
formally
implemented
by
the
Chilean
government
in
2006
to
promote
higher
education
in
Chile
for
lower
socio-economic
level
students
in
good
academic
standing.
The
CAE
Program
involves
tuition
financing
and
guarantees
that
are
provided
by
our
institutions
and
the
government.
As
part
of
the
CAE
Program,
these
institutions
provide
guarantees
which
result
in
contingent
liabilities
to
third-party
financing
institutions,
beginning
at
90%
of
the
tuition
loans
made
directly
to
qualified
students
enrolled
through
the
CAE
Program
and
declining
to
60%
over
time.
The
guarantees
by
these
institutions
are
in
effect
during
the
period
in
which
the
student
is
enrolled,
and
the
guarantees
are
assumed
entirely
by
the
government
upon
the
student's
graduation.
When
a
student
leaves
one
of
Laureate's
institutions
and
enrolls
in
another
CAE-qualified
institution,
the
Laureate
institution
will
remain
guarantor
of
the
tuition
loans
that
have
been
granted
up
to
the
date
of
transfer,
and
until
the
student's
graduation
from
a
CAE-qualified
institution.
The
maximum
potential
amount
of
payments
our
institutions
could
be
required
to
make
under
the
CAE
Program
was
approximately
$479,000
and
$428,000
at
December
31,
2016
and
2015,
respectively.
This
maximum
potential
amount
assumes
that
all
students
in
the
CAE
Program
do
not
graduate,
so
that
our
guarantee
would
not
be
assigned
to
the
government,
and
that
all
students
default
on
the
full
amount
of
the
CAE-qualified
loan

290

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
11.
Commitments
and
Contingencies
(Continued)

balances.
As
of
December
31,
2016
and
2015,
we
recorded
$20,636
and
$18,829,
respectively,
as
estimated
long-term
guarantee
liabilities
for
these
obligations,
through
a
reduction
of
revenues.

On
October
4,
2012,
the
Chilean
Congress
approved
Law
No.
20.634
which
amended
Law
No.
20.027,
introducing
an
interest
rate
reduction
from
6%
to
2%
on
CAE
loans.
Current
students
could
benefit
from
the
reduction
starting
in
March
2013
if
they
were
current
on
their
payments.
The
Law
also
provides
that
CAE
loans
cannot
exceed
the
reference
price
established
by
the
government
for
the
program
in
which
the
student
is
enrolled,
that
the
student
begins
to
make
payments
18
months
after
graduation,
and
that
monthly
payments
may
not
exceed
10%
of
the
participant's
income
if
requested
by
the
student.
The
prior
government
in
Chile
had
proposed
other
changes
to
the
student
loan
program.
However,
in
the
second
quarter
of
2014
the
new
government
that
was
inaugurated
on
March
11,
2014
announced
the
withdrawal
of
all
of
the
prior
administration's
higher
education
proposals
and
its
intent
to
submit
new
bills
to
the
Chilean
Congress.
We
cannot
predict
the
extent
or
outcome
of
any
changes
to
the
student
loan
system
that
may
be
implemented
in
Chile
or
whether
any
such
changes
may
have
a
material
impact
on
our
Consolidated
Financial
Statements.
See
Note
2,
Significant
Accounting
Policies.

Material
Guarantees—Other

In
conjunction
with
the
purchase
of
UNP,
Laureate
pledged
all
of
the
acquired
shares
as
a
guarantee
of
our
payments
of
rents
as
they
become
due.
In
the
event
that
we
default
on
any
payment,
the
pledge
agreement
provides
for
a
forfeiture
of
the
relevant
pledged
shares.
In
the
event
of
forfeiture,
Laureate
may
be
required
to
transfer
the
books
and
management
of
UNP
to
the
former
owners.

As
discussed
in
Note
4,
Acquisitions,
Laureate
acquired
the
remaining
49%
ownership
interest
in
UAM
Brazil
in
April
2013.
As
part
of
the
agreement
to
purchase
the
49%
ownership
interest,
Laureate
pledged
49%
of
its
total
shares
in
UAM
Brazil
as
a
guarantee
of
our
payment
obligations
under
the
purchase
agreement.
In
the
event
that
we
default
on
any
payment,
the
agreement
provides
for
a
forfeiture
of
the
pledged
shares.

In
connection
with
the
purchase
of
FMU
on
September
12,
2014,
as
described
in
Note
4,
Acquisitions,
Laureate
pledged
75%
of
the
acquired
shares
to
third-
party
lenders
as
a
guarantee
of
our
payment
obligations
under
the
loans
that
financed
a
portion
of
the
purchase
price.
See
Note
9,
Debt,
for
further
description
of
the
loans.
Laureate
pledged
the
remaining
25%
of
the
acquired
shares
to
the
sellers
as
a
guarantee
of
our
payment
obligations
under
the
purchase
agreement
for
the
seller
notes
described
in
Note
5,
Due
to
Shareholders
of
Acquired
Companies.
In
the
event
that
we
default
on
any
payment
of
the
loans
or
seller
notes,
the
purchase
agreement
provides
for
a
forfeiture
of
the
relevant
pledged
shares.
Upon
maturity
and
payment
of
the
seller
notes
in
September
2017,
the
shares
pledged
to
the
sellers
will
be
pledged
to
the
third-party
lenders
until
full
payment
of
the
loans,
which
mature
in
April
2021.

Standby
Letters
of
Credit

As
of
December
31,
2016
and
2015,
Laureate
had
outstanding
letters
of
credit
(LOCs)
of
$154,400
and
$126,677,
respectively,
which
primarily
consisted
of
the
items
discussed
below.

291

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
11.
Commitments
and
Contingencies
(Continued)

As
of
December
31,
2016
and
2015,
we
had
$105,614
and
$86,599,
respectively,
posted
as
LOCs
in
favor
of
the
DOE.
These
LOCs
were
required
for
2016
to
allow
Walden,
Kendall,
NewSchool
and
St.
Augustine
and,
for
2015,
Walden,
Kendall,
NewSchool
and
NHU
LLC
to
continue
participating
in
the
DOE
Title
IV
program.
These
LOCs
are
fully
collateralized
with
cash
equivalents
and
certificates
of
deposit,
which
were
classified
as
Restricted
cash
and
investments
on
our
December
31,
2016
and
2015
Consolidated
Balance
Sheets.

As
of
December
31,
2016
and
2015,
we
had
$34,746
and
$36,527,
respectively,
posted
as
cash-collateralized
LOCs
related
to
the
Spain
Tax
Audits.
See
Note
15,
Income
Taxes,
for
further
detail.
The
cash
collateral
for
these
LOCs
was
classified
as
Restricted
cash
and
investments
on
our
December
31,
2016
and
2015
Consolidated
Balance
Sheets.

Surety
Bonds
and
Other
Commitments

As
part
of
our
normal
operations,
our
insurers
issue
surety
bonds
on
our
behalf,
as
required
by
various
state
education
authorities
in
the
United
States.
We
are
obligated
to
reimburse
our
insurers
for
any
payments
made
by
the
insurers
under
the
surety
bonds.
As
of
December
31,
2016
and
2015,
the
total
face
amount
of
these
surety
bonds
was
$12,162
and
$3,366,
respectively.
These
bonds
are
fully
collateralized
with
cash,
which
is
classified
as
Restricted
cash
and
investments
on
our
December
31,
2016
Consolidated
Balance
Sheet.

In
November
2016,
UAM
Brazil
had
a
deadline
to
enroll
in
Prouni,
a
federal
program
which
offers
tax
benefits
designed
to
increase
higher
education
participation
rates
in
Brazil.
It
provides
private
higher
education
institutions
with
an
exemption
from
certain
federal
taxes
in
exchange
for
granting
partial
and
full
scholarships
to
low-income
students
enrolled
in
traditional
and
technology
undergraduate
programs.
In
order
to
participate
in
the
program
for
the
next
five
years,
UAM
Brazil
had
to
issue
the
Federal
Tax
Debt
Clearance
Certificate.
Due
to
certain
pending
legal
matters,
the
issuance
of
this
certificate
required
UAM
Brazil
to
post
a
guarantee
in
the
amount
of
$15,300.
In
connection
with
the
issuance
of
the
guarantee,
UAM
Brazil
obtained
a
non-collateralized
surety
bond
from
a
third
party
in
order
to
secure
the
guarantee.
The
cost
of
the
surety
bond
was
$1,400
and
is
being
amortized
over
the
five-year
term.
The
Company
believes
that
this
matter
will
not
have
a
material
impact
on
our
Consolidated
Financial
Statements.

Note
12.
Financing
Receivables

Laureate's
financing
receivables
consist
primarily
of
trade
receivables
related
to
student
tuition
financing
programs
with
an
initial
term
in
excess
of
one
year.
We
have
offered
long-term
financing
through
execution
of
note
receivable
agreements
with
students
at
some
of
our
institutions.
Our
disclosures
include
financing
receivables
that
are
classified
in
our
Consolidated
Balance
Sheets
as
both
current
and
long-term,
reported
in
accordance
with
ASC
310,
"Receivables."

292

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
12.
Financing
Receivables
(Continued)

Laureate's
financing
receivables
balances
were
as
follows:

December
31,
Financing
receivables
Allowance
for
doubtful
accounts
Financing
receivables,
net
of
allowances

2016

$ 29,776
$
(9,175)

$ 20,601
$

2015
32,802

(10,576)
22,226

We
do
not
purchase
financing
receivables
in
the
ordinary
course
of
our
business.
We
may
sell
certain
receivables
that
are
significantly
past
due.
No
material
amounts
of
financing
receivables
were
sold
during
the
periods
reported
herein.

Delinquency
is
the
primary
indicator
of
credit
quality
for
our
financing
receivables.
Receivable
balances
are
considered
delinquent
when
contractual
payments
on
the
loan
become
past
due.
Delinquent
financing
receivables
are
placed
on
non-accrual
status
for
interest
income.
The
accrual
of
interest
is
resumed
when
the
financing
receivable
becomes
contractually
current
and
when
collection
of
all
remaining
amounts
due
is
reasonably
assured.
We
record
an
Allowance
for
doubtful
accounts
to
reduce
our
financing
receivables
to
their
net
realizable
value.
The
Allowance
for
doubtful
accounts
is
based
on
the
age
of
the
receivables,
the
status
of
past-due
amounts,
historical
collection
trends,
current
economic
conditions
and
student
enrollment
status.
Each
of
our
institutions
evaluates
its
balances
for
potential
impairment.
We
consider
impaired
loans
to
be
those
that
are
past
due
one
year
or
greater,
and
those
that
are
modified
as
a
troubled
debt
restructuring
(TDR).
The
aging
of
financing
receivables
grouped
by
country
portfolio
was
as
follows:

Chile

Other

Total

As
of
December
31,
2016
Amounts
past
due
less
than
one
year
Amounts
past
due
one
year
or
greater
Total
past
due
(on
non-accrual
status)
Not
past
due
Total
financing
receivables
As
of
December
31,
2015
Amounts
past
due
less
than
one
year
Amounts
past
due
one
year
or
greater
Total
past
due
(on
non-accrual
status)
Not
past
due
Total
financing
receivables

293

834
$

8,711
$
3,899

12,610

11,758

9,545

5,381

14,926

14,850

$ 24,368
$ 5,408
$ 29,776

1,482

2,316

3,092

$ 10,404
$ 1,166
$ 11,570

4,654

16,224

16,578

$ 25,611
$ 7,191
$ 32,802

4,048

14,452

11,159

606

1,772

5,419

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
12.
Financing
Receivables
(Continued)

The
following
is
a
rollforward
of
the
Allowance
for
doubtful
accounts
related
to
financing
receivables
from
December
31,
2013
through
December
31,
2016,
grouped
by
country
portfolio:

Balance
at
December
31,
2013
Charge-offs
Recoveries
Reclassifications
Provision
Currency
adjustments
Balance
at
December
31,
2014
Charge-offs
Recoveries
Reclassifications
Provision
Currency
adjustments
Balance
at
December
31,
2015
Charge-offs
Recoveries
Reclassifications
Provision
Currency
adjustments
Balance
at
December
31,
2016

Chile

Total

Other

$ (17,835) $ (4,449) $ (22,284)
7,582

—

(274)
(2,931)
2,667

(15,240)
3,880

(16)
(1,151)
1,947

(10,576)
5,291

(175)
—

(3,364)
(351)
(9,175)

782

—

(274)

(586)

350

(4,177)

232

(16)

(46)

667

(3,336)

660

(175)

—

(60)

(55)

(6,209) $ (2,966) $

6,800

—

(2,345)

2,317

(11,063)

3,648

—

(1,105)

1,280

(7,240)

4,631

—

(3,304)

(296)

Restructured
Receivables

A
TDR
is
a
financing
receivable
in
which
the
borrower
is
experiencing
financial
difficulty
and
Laureate
has
granted
an
economic
concession
to
the
student
debtor
that
we
would
not
otherwise
consider.
When
we
modify
financing
receivables
in
a
TDR,
Laureate
typically
offers
the
student
debtor
an
extension
of
the
loan
maturity
and/or
a
reduction
in
the
accrued
interest
balance.
In
certain
situations,
we
may
offer
to
restructure
a
financing
receivable
in
a
manner
that
ultimately
results
in
the
forgiveness
of
contractually
specified
principal
balances.
Our
only
TDRs
are
in
Chile.

The
number
of
financing
receivable
accounts
and
the
pre-
and
post-modification
account
balances
modified
under
the
terms
of
a
TDR
during
the
years
ended
December
31,
2016,
2015
and
2014
were
as
follows:

2016
2015
2014

Number
of

Financing

Receivable
Accounts

Pre-Modification

Balance

Outstanding

Post-Modification

Balance

Outstanding

676
$
1,044
$
1,070
$

3,665
$
5,251
$
7,002
$

3,165

4,796

6,452

294

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
12.
Financing
Receivables
(Continued)

The
preceding
table
represents
accounts
modified
under
the
terms
of
a
TDR
during
the
year
ended
December
31,
2016,
whereas
the
following
table
represents
accounts
modified
as
a
TDR
between
January
1,
2015
and
December
31,
2016
that
subsequently
defaulted
during
the
year
ended
December
31,
2016:

Total

Number
of

Financing

Receivable
Accounts

Balance
at
Default

360
$

1,352

The
following
table
represents
accounts
modified
as
a
TDR
between
January
1,
2014
and
December
31,
2015
that
subsequently
defaulted
during
the
year
ended
December
31,
2015:

Total

Number
of

Financing

Receivable
Accounts

Balance
at
Default

705
$

2,864

The
following
table
represents
accounts
modified
as
a
TDR
between
January
1,
2013
and
December
31,
2014
that
subsequently
defaulted
during
the
year
ended
December
31,
2014:

Total

Note
13.
Share-based
Compensation

Share-based
compensation
expense
was
as
follows:

For
the
years
ended
December
31,
Stock
options,
net
of
estimated
forfeitures
Restricted
stock
awards
Executive
profits
interest
plan
Total
non-cash
stock
compensation
Deferred
compensation
arrangement
Stock
options
liability
Total

295

Number
of

Financing

Receivable
Accounts

Balance
at
Default

726
$

4,376

2014

2016

2015

$ 27,543
$ 23,120
$ 25,772

14,806

115

40,693

7,653

844

$ 38,809
$ 39,021
$ 49,190

11,000

—

34,120

4,901

—

10,528

—

38,071

738

—

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
13.
Share-based
Compensation
(Continued)

Share-based
Deferred
Compensation
Arrangement

Immediately
prior
to
August
17,
2007
(the
Merger
Date),
Laureate's
Chief
Executive
Officer
and
another
then-member
of
the
Board
of
Directors
held
vested
equity-based
awards
which
they
exchanged
on
the
Merger
Date
for
unfunded,
nonqualified
share-based
deferred
compensation
arrangements
having
an
aggregate
fair
value
at
that
time
of
$126,739.
Prior
to
the
occurrence
of
an
initial
public
offering,
each
deferred
compensation
arrangement
allowed
the
participant
the
potential
to
earn
an
amount
(at
any
time,
a
Plan
Balance)
equal
to
the
product
of
(A)
the
number
of
"phantom
shares"
credited
to
the
participant's
account,
and
(B)
the
lesser
of
(i)
the
fair
market
value
per
"phantom
share"
on
the
Merger
Date
plus
a
5%
compounded
annual
return
thereon,
and
(ii)
the
fair
market
value
per
"phantom
share"
on
the
earlier
of
September
17,
2014
(the
Distribution
Date)
or
a
change
of
control.
On
and
after
the
occurrence
of
an
initial
public
offering,
each
deferred
compensation
arrangement
allowed
the
participant
the
potential
to
earn
a
Plan
Balance
equal
to
the
product
of
(A)
the
number
of
"phantom
shares"
credited
to
the
participant's
account
as
of
the
initial
public
offering
and
(B)
the
fair
market
value
per
"phantom
share"
on
the
Distribution
Date
or
a
change
of
control,
as
applicable.
Under
these
deferred
compensation
arrangements
$81,000
was
paid
out
on
the
Distribution
Date.
This
payment
was
included
in
Accounts
payable
and
accrued
expenses
within
the
operating
activities
section
of
the
Consolidated
Statement
of
Cash
Flows
for
the
year
ended
December
31,
2014.
The
Plan
Balances
remaining
after
the
Distribution
Date
accrued
interest
at
a
compound
annual
interest
rate
of
5%.
Under
the
terms
of
the
plan,
the
next
$81,000
plus
accrued
interest
on
the
Plan
Balances
remaining
after
the
Distribution
Date
would
be
paid
out
on
the
first
anniversary
of
the
Distribution
Date.
The
remaining
Plan
Balance
after
the
first
anniversary
distribution
would
be
paid
out
on
the
second
anniversary
from
the
Distribution
Date.

Since
Laureate
did
not
consummate
an
initial
public
offering
prior
to
the
first
or
second
anniversary
of
the
Distribution
Date,
as
applicable,
the
scheduled
distribution
was
made
in
cash.
Distributions
made
after
Laureate
had
consummated
an
initial
public
offering
would
generally
have
been
made
in
shares
of
Laureate
common
stock,
the
number
of
which
would
depend
on
the
value
of
the
shares
on
the
date
of
distribution.
Notwithstanding
the
foregoing,
immediately
upon
a
change
of
control,
the
arrangements
will
be
terminated
and
liquidated
and
the
Plan
Balances
will
be
distributed
in
a
lump
sum.
A
change
of
control
would
generally
occur
if
all
or
substantially
all
of
the
assets
of
Laureate
or
more
than
50%
of
our
equity
interests
are
sold.
Prior
to
the
Distribution
Date,
we
recognize
the
deferred
compensation
arrangement
expense
ratably
based
on
the
5%
compounded
annual
rate
of
return,
which
can
be
reduced
based
on
the
estimated
fair
value
of
Laureate's
common
stock
if
the
compounded
annual
rate
of
return
of
Laureate's
common
stock
is
less
than
a
5%
compounded
annual
growth
rate.
After
the
Distribution
Date,
we
recognized
the
deferred
compensation
arrangement
expense
ratably
based
on
the
5%
compounded
annual
interest
rate.
For
the
years
ended
December
31,
2016,
2015
and
2014,
Laureate
recorded
share-based
compensation
expense
for
this
deferred
compensation
arrangement
of
$738,
$4,901
and
$7,653,
respectively.

The
participants
agreed
to
extend
the
payment
due
on
September
17,
2015
(the
2015
Obligation),
the
first
anniversary
of
the
Distribution
Date,
until
December
31,
2015,
in
order
to
agree
with
the
Company
on
a
form
of
payment
that
we
believe
more
closely
aligns
with
the
long-term
interests
of
the
Company
and
our
securityholders.
On
December
29,
2015
(the
2015
Executive
DCP
Closing
Date),
we
satisfied
the
2015
Obligation
by
paying
the
participants
a
total
amount
of
$87,117,
including
$6,117
in

296

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
13.
Share-based
Compensation
(Continued)

interest
from
the
Distribution
Date
to
the
2015
Executive
DCP
Closing
Date.
The
payment
consisted
of
$37,071
in
cash
and
$50,046
in
aggregate
principal
amount
of
Senior
Notes
due
2019.
The
participants
agreed
not
to
offer
or
sell
their
Senior
Notes
due
2019,
other
than
to
the
Company,
until
12
months
after
the
2015
Executive
DCP
Closing
Date.
As
of
December
31,
2015,
the
total
liability
recorded
for
the
deferred
compensation
arrangement
was
$17,463,
which
was
payable
on
September
17,
2016,
the
second
anniversary
of
the
Distribution
Date,
and
was
therefore
recorded
as
a
current
liability
in
Deferred
compensation
on
the
2015
Consolidated
Balance
Sheet.
The
participants
in
the
deferred
compensation
arrangement
agreed
to
extend
the
payment
that
was
due
on
September
17,
2016
(the
2016
Executive
DCP
Obligation),
until
December
30,
2016.
On
December
30,
2016,
we
satisfied
the
2016
Executive
DCP
Obligation
by
paying
the
participants
a
total
amount
of
approximately
$18,200.
The
payment
consisted
of
approximately
$7,749
in
cash
and
$10,453
aggregate
principal
amount
of
Senior
Notes
due
2019.
Following
the
satisfaction
of
the
2016
Executive
DCP
Obligation,
the
Company's
obligations
under
the
DCPs
were
satisfied
in
full.
See
also
Note
9,
Debt
and
Note
17,
Related
Party
Transactions.

2007
Stock
Incentive
Plan

In
August
2007,
the
Board
of
Directors
approved
the
Laureate
Education,
Inc.
2007
Stock
Incentive
Plan
(2007
Plan).
The
total
shares
authorized
under
the
2007
Plan
were
9,232.
Shares
that
are
forfeited,
terminated,
canceled,
allowed
to
expire
unexercised,
withheld
to
satisfy
tax
withholding,
or
repurchased
are
available
for
re-issuance.
Any
awards
that
have
not
vested
upon
termination
of
employment
for
any
reason
are
forfeited.
Following
the
October
2,
2013
modification
discussed
further
below,
upon
voluntary
or
involuntary
termination
without
cause
(including
death
or
disability),
the
grantee
(or
the
estate)
has
a
period
of
time
after
termination
to
exercise
options
vested
prior
to
termination.
The
2007
Plan's
restricted
stock
awards
have
a
claw-back
feature
whereby
all
vested
shares,
or
the
gross
proceeds
from
the
sale
of
those
shares,
must
be
returned
to
Laureate
for
no
consideration
if
the
employee
does
not
abide
by
the
agreed-upon
restrictive
covenants
such
as
covenants
not
to
compete
and
covenants
not
to
solicit.

Stock Options Under 2007 Plan

Stock
option
awards
under
the
2007
Plan
have
a
contractual
life
of
10
years
and
were
granted
with
an
exercise
price
equal
to
the
fair
market
value
of
Laureate's
stock
at
the
date
of
grant.
Our
option
agreements
generally
divide
each
option
grant
equally
into
options
that
are
subject
to
time-based
vesting
(Time
Options)
and
options
that
are
eligible
for
vesting
based
on
achieving
pre-determined
performance
targets
(Performance
Options).
Prior
to
the
October
2013
modification,
discussed
below,
under
the
2007
Plan
these
performance
targets
were
Pro-rata
EBITDA
earnings
targets.
The
Time
Options
generally
vest
ratably
on
the
first
through
fifth
grant
date
anniversary.
The
Performance
Options
are
divided
into
tranches.
Each
tranche
is
eligible
to
vest
annually
upon
the
Board
of
Directors'
determination
that
Laureate
has
attained
fiscal
year
earnings
(Pro-rata
EBITDA,
as
defined
in
the
agreement)
that
equal
the
performance
targets
(Pro-rata
EBITDA
targets).
These
performance
targets
are
set
at
the
time
of
the
award's
issuance
and,
for
options
outstanding
at
the
time,
were
amended
in
August
2010
and
October
2013.
Our
option
agreements
provide
that
if
our
fiscal
year
earnings
are
at
least
95%,
at
least
90%,
or
below
90%,
of
the
applicable
earnings
target
then
75%,
50%,
or
0%,
respectively,
of
the
applicable
Performance
Option
tranche
will
vest.
The
Plan
includes
a

297

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
13.
Share-based
Compensation
(Continued)

"catch-up"
provision
such
that,
in
the
event
that
we
do
not
achieve
100%
of
the
performance
target
in
a
particular
fiscal
year,
the
Performance
Option
Tranche
may
vest
in
any
subsequent
year,
within
eight
years
from
the
date
of
the
grant,
if
and
to
the
extent
a
greater
percentage
of
a
subsequent
year's
earnings
target
is
achieved.
Certain
Performance
Option
awards
granted
prior
to
February
2,
2008
also
included
a
separate
tranche,
equal
to
30%
of
the
total
performance
award,
that
vested
upon
the
Board
of
Directors'
determination
that
Laureate
had
attained
a
higher
earnings
target
prior
to
August
17,
2017
(Special
30%
Performance
Vesting).
During
2013,
we
believed
it
was
probable
that
we
would
attain
the
predetermined
higher
earnings
target
for
the
Special
30%
Performance
Vesting
tranche
in
2014;
accordingly,
we
accrued
$4,499
additional
performance
option
expense
related
to
this
special
tranche
in
2013.
This
Special
30%
Performance
Vesting
tranche
was
fully
vested
as
of
December
31,
2014.

Stock
options
and
restricted
stock
awards
granted
under
the
2007
Plan
have
provisions
for
accelerated
vesting
if
there
is
a
change
in
control
of
Laureate.
As
defined
in
the
2007
Plan,
a
change
in
control
would
occur
if
substantially
all
of
the
assets
of
Laureate
or
more
than
50%
of
our
equity
interests
are
sold.
If
a
change
in
control
should
occur,
all
of
the
outstanding
Time
Options
and
unvested
restricted
stock
held
by
the
employees
would
become
fully
vested
and
immediately
exercisable.
The
Performance
Options
will
become
immediately
exercisable
in
the
event
of
a
change
in
control
only
if,
and
to
the
extent,
the
Board
of
Directors,
in
its
discretion,
elects
to
vest
them.

Compensation
expense
is
recognized
over
the
period
during
which
an
employee
is
required
to
provide
service
in
exchange
for
the
award,
which
is
usually
the
vesting
period.
For
Time
Options,
expense
is
recognized
ratably
over
the
five-year
vesting
period.
For
Performance
Options,
expense
is
recognized
under
a
graded
expense
attribution
method,
to
the
extent
that
it
is
probable
that
the
stated
annual
performance
target
will
be
achieved
and
options
will
vest
for
any
year.
We
assess
the
probability
of
each
option
tranche
vesting
throughout
the
life
of
each
grant.

2007 Plan Stock Option Modifications

On
October
2,
2013,
the
Compensation
Committee
of
Laureate's
Board
of
Directors
modified
the
2007
Plan.
The
modification
i)
changed
the
performance
metrics
and
targets
for
all
unvested
Performance
Options
to
match
the
targets
of
the
2013
Plan
beginning
with
the
2013
target;
ii)
modified
the
post
termination
exercise
provisions
for
resignation,
good
leaving,
death
and
disability,
and
retirement
to
match
the
termination
provision
under
the
2013
Plan,
which
is
a
post
termination
exercise
period
of:
90
days
for
resignation,
two
years
for
termination
due
to
death
or
disability
or,
after
an
initial
public
offering
of
our
common
stock,
good
leaving,
and
five
years
for
retirement;
iii)
reallocated
the
outstanding
unvested
2012
performance
tranche
to
vest
in
the
remaining
performance
years
of
the
grant
on
a
pro-rata
basis
for
only
those
employees
who
received
stock
options
awards
for
first
time
in
2012;
and
iv)
forfeit
all
other
outstanding
unvested
2012
performance
options,
disallowing
the
ability
to
catch
up
on
the
vesting,
as
the
performance
target
was
not
met.
As
a
result
of
this
modification,
we
recognized
additional
Performance
Option
expense
in
2013.

2013
Long-Term
Incentive
Plan

On
June
13,
2013,
Laureate's
Board
of
Directors
approved
the
Laureate
Education,
Inc.
2013
Long-Term
Incentive
Plan
(2013
Plan),
as
a
successor
plan
to
Laureate's
2007
Plan.
The
2013
Plan

298

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
13.
Share-based
Compensation
(Continued)

became
effective
in
June
2013,
following
approval
by
the
stockholders
of
Laureate.
No
further
awards
will
be
made
under
the
2007
Plan
now
that
the
2013
Plan
is
effective.
Under
the
2013
Plan,
the
Company
may
grant
stock
options,
stock
appreciation
rights,
unrestricted
common
stock
or
restricted
stock
(collectively,
"stock
awards"),
unrestricted
stock
units
or
restricted
stock
units,
and
other
stock-based
awards,
to
eligible
individuals
on
the
terms
and
subject
to
the
conditions
set
forth
in
the
2013
Plan.
As
of
the
effective
date,
the
total
number
of
shares
of
common
stock
issuable
under
the
2013
Plan
were
7,521,
which
is
equal
to
the
sum
of
(i)
7,074
shares
plus
(ii)
447
shares
of
common
stock
that
were
still
available
for
issuance
under
Laureate's
2007
Plan.
In
September
2015,
the
Board
of
Directors
approved
an
amendment
to
increase
the
total
number
of
shares
of
common
stock
issuable
under
the
2013
Plan
by
1,219.
Shares
that
are
forfeited,
terminated,
canceled,
allowed
to
expire
unexercised,
withheld
to
satisfy
tax
withholding,
or
repurchased
are
available
for
re-issuance.
Any
awards
that
have
not
vested
upon
termination
of
employment
for
any
reason
are
forfeited.
Holders
of
restricted
stock
shall
have
all
of
the
rights
of
a
stockholder
of
common
stock
including,
without
limitation,
the
right
to
vote
and
the
right
to
receive
dividends.
However,
dividends
declared
payable
on
performance-based
restricted
stock
shall
be
subjected
to
forfeiture
at
least
until
achievement
of
the
applicable
performance
target
related
to
such
shares
of
restricted
stock.
Any
accrued
but
unpaid
dividends
on
unvested
restricted
stock
shall
be
forfeited
upon
termination
of
employment.
Holders
of
stock
units
do
not
have
any
rights
of
a
stockholder
of
common
stock
and
are
not
entitled
to
receive
dividends.
All
awards
outstanding
under
the
2013
Plan
terminate
upon
the
liquidation,
dissolution
or
winding
up
of
Laureate.
The
2013
Plan
will
remain
in
effect
until
the
earlier
of
(a)
the
earliest
date
as
of
which
all
awards
granted
under
the
Plan
have
been
satisfied
in
full
or
terminated
and
no
shares
of
common
stock
are
available
to
be
granted
or
(b)
June
12,
2023.

Stock
options,
stock
appreciation
rights
and
restricted
stock
units
granted
under
the
2013
Plan
have
provisions
for
accelerated
vesting
if
there
is
a
change
in
control
of
Laureate.
As
defined
in
the
2013
Plan,
a
change
in
control
means
the
first
of
the
following
to
occur:
i)
a
change
in
ownership
of
Laureate
or
Wengen
or
ii)
a
change
in
the
ownership
of
assets
of
Laureate.
A
change
in
ownership
of
Laureate
or
Wengen
shall
occur
on
the
date
that
more
than
50%
of
the
total
voting
power
of
the
capital
stock
of
Laureate
is
sold
or
more
than
50%
of
the
partnership
interests
of
Wengen
is
sold
in
a
single
or
a
series
of
related
transactions.
A
change
in
the
ownership
of
assets
of
Laureate
would
occur
if
80%
or
more
of
the
total
gross
fair
market
value
of
all
of
the
assets
of
Laureate
are
sold
during
a
12-
month
period.
The
gross
fair
market
value
of
Laureate
is
determined
without
regard
to
any
liabilities
associated
with
such
assets.
Upon
consummation
of
the
change
in
control
and
an
employee's
"qualifying
termination"
(as
defined
in
the
employee's
award
agreement):
a)
those
time-based
stock
options
and
stock
appreciation
rights
that
would
have
vested
and
become
exercisable
on
or
prior
to
the
third
anniversary
of
the
effective
time
of
change
in
control
would
become
fully
vested
and
immediately
exercisable;
b)
those
performance-based
stock
options
and
stock
appreciation
rights
that
would
have
vested
and
become
exercisable
had
Laureate
achieved
the
performance
targets
in
the
three
fiscal
years
ending
coincident
with
or
immediately
subsequent
to
the
effective
time
of
such
change
in
control,
excluding
the
portion
of
awards
that
would
have
vested
only
pursuant
to
any
catch-up
provisions,
would
become
fully
vested
and
immediately
exercisable;
c)
those
time-based
restricted
stock
awards
that
would
have
become
vested
and
free
of
forfeiture
risk
and
lapse
restriction
on
or
prior
to
the
third
anniversary
of
the
effective
time
of
such
change
in
control
would
become
fully
vested
and
immediately
exercisable;
d)
those
performance-based
restricted
stock
awards
that
would
have
vested
and
become
free
of

299

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
13.
Share-based
Compensation
(Continued)

forfeiture
risk
and
lapse
restrictions
had
Laureate
achieved
the
target
performance
in
the
three
fiscal
years
ending
coincident
with
or
immediately
subsequent
to
the
effective
time
of
such
change
in
control
would
become
fully
vested
and
immediately
exercisable;
e)
those
time-based
restricted
stock
units
that
would
have
become
vested
or
earned
on
or
prior
to
the
third
anniversary
of
the
effective
time
of
such
change
in
control
would
become
vested
and
earned
and
be
settled
in
cash
or
shares
of
common
stock
as
promptly
as
practicable;
and
f)
those
performance-based
restricted
stock
units,
performance
shares
and
performance
units
that
would
have
become
vested
or
earned
had
Laureate
achieved
the
target
performance
in
the
three
fiscal
years
ending
coincident
with
or
immediately
subsequent
to
the
effective
time
of
such
change
in
control
would
become
vested
and
earned
and
be
settled
in
cash
or
shares
of
common
stock
as
promptly
as
practicable.
After
giving
effect
to
the
foregoing
change
in
control
acceleration,
any
remaining
unvested
time-based
and
performance-based
stock
options,
stock
appreciation
rights,
restricted
stock,
restricted
stock
units,
performance
shares
and
performance
share
units
shall
be
forfeited
for
no
consideration.

Share Increase for 2013 Plan

In
December
2016,
the
Board
of
Directors
and
Shareholders
approved
an
amendment
to
increase
the
total
number
of
shares
of
common
stock
issuable
under
the
2013
Plan
by
3,884.

Stock Options Under 2013 Plan

Stock
option
awards
under
the
2013
Plan
generally
have
a
contractual
term
of
10
years
and
are
granted
with
an
exercise
price
equal
to
the
fair
market
value
of
Laureate's
stock
at
the
date
of
grant.
During
2016,
2015
and
2014,
we
granted
various
employees
stock
options
for
303,
1,447
and
386
shares
respectively.
These
options
vest
over
a
period
of
five
or
three
years.
Of
the
options
granted
in
2016,
2015
and
2014,
254,
1,073
and
353,
respectively,
are
Time
Options
and
the
remainder
are
Performance
Options.
The
Performance
Options
granted
under
the
2013
Plan
are
eligible
for
vesting
based
on
achieving
annual
pre-determined
Equity
Value
performance
targets,
as
defined
in
the
plan,
and
the
continued
service
of
the
employee.
The
performance
based
awards
include
a
catch-up
provision,
allowing
the
grantee
to
vest
in
any
year
in
which
a
target
is
missed
if
a
following
year's
target
is
achieved
as
long
as
the
following
year
is
within
eight
years
from
the
grant
date.

Compensation
expense
is
recognized
over
the
period
during
which
an
employee
is
required
to
provide
service
in
exchange
for
the
award,
which
is
usually
the
vesting
period.
For
Time
Options,
expense
is
recognized
ratably
over
the
five-year
or
three-year
vesting
period.
For
Performance
Options,
expense
is
recognized
under
a
graded
expense
attribution
method,
to
the
extent
that
it
is
probable
that
the
stated
annual
earnings
target
will
be
achieved
and
options
will
vest
for
any
year.
We
assess
the
probability
of
each
option
tranche
vesting
throughout
the
life
of
each
grant.

Annual Equity Award Grant

On
May
2,
2016,
we
granted
174
and
136
time-based
restricted
stock
units
and
performance
share
units,
respectively,
with
vesting
periods
over
the
next
three
years.
The
performance
share
units
vest
based
on
achieving
a
pre-determined
annual
performance
target.
In
addition,
we
also
granted
132
Time
Options
with
an
exercise
price
equal
to
the
fair
market
value
of
Laureate's
stock
at
the
date
of
grant.

300

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
13.
Share-based
Compensation
(Continued)

These
options
vest
over
a
three-year
period
and
have
a
contractual
term
of
10
years.
The
total
grant
date
fair
value
of
these
awards
was
approximately
$8,800.

Special Retention Award to Executives

On
October
25,
2016,
we
granted
221
and
71
time-based
restricted
stock
units
and
performance
share
units,
respectively,
to
certain
executives
as
a
retention
initiative.
The
time-based
restricted
stock
units
vest
in
June
2018.
The
performance
share
units
vest
in
June
2018
upon
the
achievement
of
pre-determined
performance
targets.
In
addition,
we
granted
114
Time
Options
and
47
Performance
Options
with
an
exercise
price
of
$23.36,
the
estimated
fair
market
value
of
Laureate's
stock
at
the
grant
date.
These
options
have
a
contractual
term
of
10
years.
The
Time
Options
vest
in
June
2018.
The
Performance
Options
vest
in
June
2018
upon
the
achievement
of
the
same
pre-determined
performance
targets
mentioned
above.
The
total
grant
date
fair
value
of
these
awards
was
approximately
$8,800.

Equity
Award
Modifications

Stock Option Modification

In
June
2016,
we
modified
all
outstanding
stock
options
that
were
granted
under
the
2013
Plan,
except
for
stock
options
that
were
granted
during
2016.
The
exercise
price
of
the
modified
options
was
adjusted
to
$23.20,
the
estimated
fair
market
value
of
our
stock
at
the
date
of
modification.
As
a
result,
we
modified
the
exercise
price
of
approximately
5,338
stock
options
that
were
granted
under
the
2013
Plan.
This
modification
resulted
in
incremental
stock
compensation
expense
during
the
second
quarter
of
approximately
$6,000
for
options
that
were
vested
at
the
modification
date.
Additionally,
approximately
$5,000
of
incremental
stock
compensation
expense
related
to
options
that
were
not
yet
vested
at
the
modification
date
will
be
recognized
over
the
remaining
vesting
period.

Modification of a Former Executive's Award

In
2014,
the
Company
issued
a
note
payable
to
a
former
executive
for
$3,771
in
exchange
for
vested
share-based
compensation.
We
accounted
for
this
as
an
equity-to-liability
award
modification.
The
note
has
an
interest
rate
of
5%
and
is
payable
upon
the
earlier
of
the
occurrence
of
certain
contingent
events,
including
an
IPO,
or
July
31,
2019.

301

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
13.
Share-based
Compensation
(Continued)

Stock
Option
Activity
for
2007
and
2013
Plans

The
following
tables
summarize
the
stock
option
activity
and
the
assumptions
used
to
record
the
related
share-based
compensation
expense
for
the
years
ended
December
31,
2016,
2015
and
2014:

2016
Weighted

Average

Exercise

Price

Options

Aggregate

Intrinsic

Value

Options

2015
Weighted

Average

Exercise

Price

Aggregate

Intrinsic

Value

Options

2014
Weighted

Average

Exercise

Price

Aggregate

Intrinsic

Value

11,427
$
303
$
(245) $
(557) $

26.12
$ 20,339

23.29

19.57
$
23.78

899

10,919
$
1,447
$
(460) $
(479) $

25.84
$ 48,851

26.72

18.76
$
28.52

3,365

12,102
$
386
$
(841) $
(728) $

25.40
$ 57,094

27.76

19.36
$ 11,046

27.04

10,928
$

21.81
$

4,350

11,427
$

26.12
$ 20,339

10,919
$

25.84
$ 48,851

9,004
$

21.48
$

4,350

8,293
$

24.32
$ 20,328

7,600
$

22.88
$ 47,812

Outstanding
at
January
1

Granted
Exercised
Forfeited
or
expired
Outstanding
at
December
31

Exercisable
at

December
31
Vested
and
expected

to
vest

10,790
$

21.79
$

4,350

11,110
$

26.08
$ 20,339

10,499
$

25.56
$ 48,833

302

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
13.
Share-based
Compensation
(Continued)

Options
Outstanding

Options
Exercisable

Weighted

Average

Remaining

Contractual

Terms

(Years)

Number

Weighted

Average

Remaining

Contractual

Terms

(Years)

Number

Assumption
Range*

Risk-Free

Interest
Rate

Expected

Terms

in
Years

Expected

Volatility

3,601

353

438

320

6,216

3,790

353

516

344

2,634

3,788

4,308

376

550

354

1,322

4,008

0.8

1.7

3.8

3.1

7.1

1.8

2.7

4.8

4.1

8.2

7.8

2.8

3.7

5.8

5.1

7.7

8.8

3,601

353

438

320

4,291

3,790

353

512

344

1,108

2,184

4,308

376

470

317

590

1,537

0.8
0.32%
-
4.20%

1.7
0.42%
-
3.60%

3.8
0.68%
-
2.63%

3.1
0.57%
-
3.03%

6.7
0.73%
-
2.86%

1.90
-
6.95
26.85%
-
52.47%

2.11
-
6.52
33.24%
-
52.47%

3.38
-
6.58
38.16%
-
52.47%

2.18
-
6.52
36.78%
-
52.47%

4.00
-
7.12
39.03%
-
58.84%

1.8
0.32%
-
4.20%

2.7
0.42%
-
3.60%

4.8
0.68%
-
2.63%

4.1
0.57%
-
3.03%

7.1
0.73%
-
2.86%

7.8
1.76%
-
2.07%

1.90
-
6.95
26.85%
-
52.47%

2.11
-
6.52
33.24%
-
52.47%

3.38
-
6.58
38.16%
-
52.47%

2.18
-
6.52
36.78%
-
52.47%

4.00
-
6.52
39.03%
-
58.84%

6.02
-
7.12
51.51%
-
53.51%

2.8
0.32%
-
4.20%

3.7
0.42%
-
3.60%

5.8
0.68%
-
2.63%

5.1
0.57%
-
3.03%

7.2
0.73%
-
2.86%

8.8
1.76%
-
2.07%

1.90
-
6.95
26.85%
-
52.47%

2.11
-
6.52
33.24%
-
52.47%

3.38
-
6.58
38.16%
-
52.47%

2.18
-
6.52
36.78%
-
52.47%

4.00
-
6.52
39.03%
-
58.84%

6.02
-
7.12
51.51%
-
53.51%

Exercise
Prices
Year
Ended
December
31,

2016

$18.36
-
$19.56
$20.16
-
$21.28
$21.48
-
$21.52
$21.68
-
$22.32
$22.40
-
$31.92
Year
Ended
December
31,

2015

$18.36
-
$19.56
$20.16
-
$21.28
$21.48
-
$21.52
$21.68
-
$22.32
$22.88
-
$31.92
$34.52
Year
Ended
December
31,

2014

$18.36
-
$19.56
$20.16
-
$21.28
$21.48
-
$21.52
$21.68
-
$22.32
$22.88
-
$31.92
$34.52

The
expected
dividend
yield
is
zero
for
all
options
in
all
years.

The
weighted-average
estimated
fair
value
of
stock
options
granted
was
$12.03,
$13.80
and
$15.68
per
share
for
the
years
ended
December
31,
2016,
2015
and
2014,
respectively.

As
of
December
31,
2016,
Laureate
had
$26,556
of
unrecognized
share-based
compensation
costs
related
to
stock
options
outstanding.
Of
the
total
unrecognized
cost,
$23,763
relates
to
Time
Options
and
$2,793
relates
to
Performance
Options.
The
unrecognized
Time
Options
expense
is
expected
to
be
recognized
over
a
weighted-average
expense
period
of
1.89
years.

303

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
13.
Share-based
Compensation
(Continued)

Non-Vested Restricted Stock and Restricted Stock Units

The
following
table
summarizes
the
non-vested
restricted
stock
and
restricted
stock
units
activity
for
the
years
ended
December
31,
2016,
2015
and
2014:

Non-vested
at
January
1
Granted
Vested
Forfeited
Non-vested
at
December
31

2016

Weighted

Average

Grant
Date

Fair
Value

2015

Weighted

Average

Grant
Date

Fair
Value

2014

Weighted

Average

Grant
Date

Fair
Value

865
$
655
$
(386) $
(96) $

1,038
$

29.60

23.27

29.36

26.51

25.97

694
$
449
$
(215) $
(63) $
865
$

32.48

26.28

31.48

31.08

29.60

931
$
159
$
(337) $
(59) $
694
$

33.76

28.00

33.56

34.24

32.48

Restricted
stock
units
granted
under
the
2013
Plan
consist
of
time-based
restricted
stock
units
and
performance-based
restricted
stock
units
with
various
vesting
periods
over
the
next
five
years.
Performance-based
restricted
stock
units
are
eligible
to
vest
annually
upon
the
Board
of
Directors'
determination
that
the
annual
performance
targets
are
met.
The
performance
targets
are
the
same
as
for
Performance
Options,
as
defined
in
the
2013
Plan.
The
performance-based
restricted
stock
units
include
a
catch-up
provision,
allowing
the
grantee
to
vest
in
any
year
in
which
a
target
is
missed
if
a
following
year's
target
is
obtained
as
long
as
the
following
year
is
within
eight
years
from
the
grant
date.

Restricted
stock
granted
under
the
2007
Plan
consists
of
time-based
restricted
stock
with
vesting
periods
of
five
years.

The
fair
value
of
the
non-vested
restricted
stock
awards
in
the
table
above
is
measured
using
the
fair
value
of
Laureate's
common
stock
on
the
date
of
grant
or
the
most
recent
modification
date
whichever
is
later.

As
of
December
31,
2016,
unrecognized
share-based
compensation
expense
related
to
non-vested
restricted
stock
and
restricted
stock
units
awards
was
$18,747.
Of
the
total
unrecognized
cost,
$10,193
relates
to
time-based
restricted
stock
and
restricted
stock
units
and
$8,554
relates
to
performance-based
restricted
stock
units.
This
unrecognized
expense
for
time-based
restricted
stock
and
restricted
stock
units
will
be
recognized
over
a
weighted-average
expense
period
of
1.51
years.

Shares
of
Class
B
Common
Stock
Deferred
for
Directors'
Fees

Certain
directors
have
elected
to
defer
their
annual
compensation
in
accordance
with
the
provisions
of
our
directors'
Deferred
Compensation
Plan.
As
of
both
December
31,
2016
and
2015,
7
shares
of
Class
B
common
stock
remained
reserved
for
future
issuance
to
directors.

304

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
13.
Share-based
Compensation
(Continued)

Executive
Profits
Interests

On
behalf
of
Laureate,
Wengen
granted
to
our
CEO
the
Executive
Profits
Interests
award
(EPI
award).
The
EPI
award
contained
a
time-based
portion
that
vested
over
a
five-year
schedule
and
a
performance-based
portion
that
vested
to
the
extent
that
the
Company
achieved
predetermined
earnings
targets
similar
to
performance
options
over
a
five-year
period.
This
award
was
fully
vested
by
December
31,
2014.

Note
14.
Derivative
Instruments

In
the
normal
course
of
business,
our
operations
are
exposed
to
fluctuations
in
foreign
currency
values
and
interest
rate
changes.
We
may
seek
to
control
a
portion
of
these
risks
through
a
risk
management
program
that
includes
the
use
of
derivative
instruments.

The
interest
and
principal
payments
for
Laureate's
senior
long-term
debt
arrangements
are
to
be
paid
primarily
in
USD.
Our
ability
to
make
debt
payments
is
subject
to
fluctuations
in
the
value
of
the
USD
against
foreign
currencies,
since
a
majority
of
our
operating
cash
used
to
make
these
payments
is
generated
by
subsidiaries
with
functional
currencies
other
than
USD.
As
part
of
our
overall
risk
management
policies,
Laureate
has
entered
into
a
foreign
currency
swap
contract
and
floating-to-fixed
interest
rate
swap
contracts.
In
addition,
we
occasionally
enter
into
foreign
exchange
forward
contracts
to
reduce
the
earnings
impact
of
other
non-functional
currency-denominated
receivables
and
payables.

We
do
not
enter
into
speculative
or
leveraged
transactions,
nor
do
we
hold
or
issue
derivatives
for
trading
purposes.
We
generally
intend
to
hold
our
derivatives
until
maturity.

Laureate
reports
all
derivatives
at
fair
value.
These
contracts
are
recognized
as
either
assets
or
liabilities,
depending
upon
the
derivative's
fair
value.
Gains
or
losses
associated
with
the
change
in
the
fair
value
of
these
swaps
are
recognized
in
our
Consolidated
Statements
of
Operations
on
a
current
basis
over
the
term
of
the
contracts,
unless
designated
and
effective
as
a
hedge.
For
swaps
that
are
designated
and
effective
as
cash
flow
hedges,
gains
or
losses
associated
with
the
change
in
fair
value
of
the
swaps
are
recognized
in
our
Consolidated
Balance
Sheets
as
a
component
of
Accumulated
Other
Comprehensive
Income
(AOCI)
and
amortized
into
earnings
as
a
component
of
Interest
expense
over
the
term
of
the
related
hedged
items.

305

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
14.
Derivative
Instruments
(Continued)

The
reported
fair
value
of
our
derivatives,
which
are
primarily
classified
in
Derivative
instruments
on
our
Consolidated
Balance
Sheets,
were
as
follows:

December
31,
Derivatives
designated
as
hedging
instruments:

Current
liabilities:

Interest
rate
swaps

Long-term
liabilities:

Interest
rate
swaps

Derivatives
not
designated
as
hedging
instruments:

Current
assets:

Cross
currency
and
interest
rate
swaps

Long-term
assets:

Contingent
redemption
features—Series
A
Preferred
Stock

Current
liabilities:

Cross
currency
and
interest
rate
swaps

Long-term
liabilities:

Cross
currency
and
interest
rate
swaps
Interest
rate
swaps
Total
derivative
instrument
assets
Total
derivative
instrument
liabilities

2016

2015

5,218
$

—

13,250

—

4,464

—

238

—

688

7,420

330

4,464
$

5,662

414

238

$ 12,968
$ 20,014

Derivatives
Designated
as
Hedging
Instruments

Interest Rate Swaps

In
September
2011,
Laureate
entered
into
two
forward
interest
rate
swap
agreements
with
notional
amounts
of
$450,000
and
$300,000,
respectively.
We
have
designated
these
derivatives
as
cash
flow
hedges.
The
swaps
were
associated
with
existing
debt,
and
effectively
fix
interest
rates
on
existing
variable-rate
borrowings
in
order
to
manage
our
exposure
to
future
interest
rate
volatility.
Both
swaps
have
an
effective
date
of
June
30,
2014
and
mature
on
June
30,
2017.
The
terms
of
the
swaps
require
Laureate
to
pay
interest
on
the
basis
of
fixed
rates
of
2.61%
on
the
$450,000
notional
amount
swap
and
2.71%
on
the
$300,000
notional
amount
swap,
and
receive
interest
for
both
swaps
on
the
basis
of
three-month
LIBOR,
with
a
floor
of
1.25%.
The
gain
or
loss
on
these
swaps
is
deferred
in
AOCI
and
will
be
reclassified
into
earnings
as
a
component
of
Interest
expense
in
the
same
period
during
which
the
hedged
forecasted
transactions
will
affect
earnings.
Laureate
determines
the
effectiveness
of
these
swaps
using
the
hypothetical
derivative
method.
During
the
years
ended
December
31,
2016,
2015
and
2014,
the
amount
of
gain
or
loss
recognized
in
income
on
the
ineffective
portion
of
derivative
instruments
designated
as
hedging
instruments
was
$0,
as
the
swaps
were
100%
effective.
During
the
next
12
months,
approximately
$5,200
is
expected
to
be
reclassified
from
AOCI
into
income.
As
of
December
31,
2016
and
2015,
these
interest
rate
swaps
had
an
estimated
fair
value
of
$5,218
and
$13,250,
respectively.

306

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
14.
Derivative
Instruments
(Continued)

The
table
below
shows
the
total
recorded
unrealized
gain
(loss)
of
these
swaps
in
Comprehensive
income
(loss).
The
impact
of
derivative
instruments
designated
as
hedging
instruments
on
Comprehensive
income
(loss),
Interest
expense
and
AOCI
for
the
years
ended
December
31,
2016,
2015
and
2014
were
as
follows:

Gain
(Loss)

Recognized
in

Comprehensive

Income
(Loss)

(Effective
Portion)
2015

$ 8,032
$ 5,629
$ (733)

2016

2014

Interest
rate
swaps

Income
Statement

Location

Loss
Reclassified
from
AOCI
to

Income
(Effective
Portion)
2015

2016

2014

Interest
expense
$ (10,660) $ (10,660) $ (5,374)

Derivatives
Not
Designated
as
Hedging
Instruments

Derivatives related to Series A Preferred Stock Offering

The
Company
has
identified
several
derivatives
associated
with
the
issuance
of
the
Series
A
Preferred
Stock
that
is
discussed
in
Note
11,
Commitments
and
Contingencies.
The
embedded
derivatives
are
related
to
certain
contingent
redemption
features
of
the
Series
A
Preferred
Stock.
On
December
20,
2016,
the
date
of
closing
for
the
first
tranche
of
funding
for
the
Series
A
Preferred
Stock,
the
fair
value
of
these
derivatives
was
estimated
to
be
an
asset
of
$2,729,
which
was
bifurcated
from
the
carrying
value
of
the
Series
A
Preferred
Stock.
As
of
December
31,
2016,
the
fair
value
of
these
derivatives
was
estimated
to
be
an
asset
of
$4,464
and
was
recorded
in
Other
assets
on
the
Consolidated
Balance
Sheet.
The
increase
in
estimated
fair
value
from
the
December
20,
2016
issuance
date
to
December
31,
2016
of
$1,735
was
recorded
as
unrealized
gain
on
derivatives
in
the
Consolidated
Statement
of
Operations,
since
these
derivatives
are
not
designated
as
hedges
for
accounting
purposes.

CLP to Unidad de Fomento (UF) Cross Currency and Interest Rate Swaps

The
cross
currency
and
interest
rate
swap
agreements
are
intended
to
provide
a
better
correlation
between
our
debt
obligations
and
operating
currencies.
In
2010,
one
of
our
subsidiaries
in
Chile
entered
into
four
cross
currency
and
interest
rate
swap
agreements.
One
of
the
swaps
matures
on
December
1,
2024,
and
the
remaining
three
mature
on
July
1,
2025
(the
CLP
to
UF
cross
currency
and
interest
rate
swaps).
The
UF
is
a
Chilean
inflation-adjusted
unit
of
account.
The
four
swaps
have
an
aggregate
notional
amount
of
approximately
$31,000,
and
convert
CLP-denominated,
floating-rate
debt
to
fixed-rate
UF-denominated
debt.
The
CLP
to
UF
cross
currency
and
interest
rate
swaps
were
not
designated
as
hedges
for
accounting
purposes.
As
of
December
31,
2016
and
2015,
these
swaps
had
an
estimated
fair
value
of
$7,420
and
$5,662,
respectively.

THINK Interest Rate Swaps

Laureate
acquired
THINK
on
December
20,
2013,
and
financed
a
portion
of
the
purchase
price
by
borrowing
AUD
45,000
(US
$32,310
at
December
31,
2016)
under
a
syndicated
facility
agreement
in
the
form
of
two
term
loans
of
AUD
22,500
each.
The
terms
of
the
syndicated
facility
agreement
required
THINK
to
enter
into
an
interest
rate
swap
within
45
days
from
the
agreement's
December
20,

307

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
14.
Derivative
Instruments
(Continued)

2013
effective
date,
in
order
to
convert
at
least
50%
of
the
AUD
45,000
of
term
loan
debt
from
a
variable
interest
rate
based
on
the
BBSY
bid
rate,
an
Australia
bank
rate,
to
a
fixed
interest
rate.
Accordingly,
on
January
31,
2014,
THINK
executed
an
interest
rate
swap
agreement
with
an
original
notional
amount
of
AUD
22,500
to
satisfy
this
requirement
and
converted
AUD
22,500
(US
$16,155
at
December
31,
2016)
of
the
variable
rate
component
of
the
term
loan
debt
to
a
fixed
interest
rate
of
3.86%.
The
notional
amount
of
the
swap
decreases
quarterly
based
on
the
terms
of
the
agreement,
and
the
swap
matures
on
December
20,
2018.
This
interest
rate
swap
was
not
designated
as
a
hedge
for
accounting
purposes,
and
had
an
estimated
fair
value
of
$330
and
$414
at
December
31,
2016
and
2015,
respectively,
which
was
recorded
in
Derivative
instruments
as
a
long-term
liability.

USD to Swiss Franc (CHF) Foreign Currency Forward Swaps

In
March
2016,
Laureate
entered
into
a
CHF
to
USD
deal-contingent
forward
exchange
swap
agreement
with
a
notional
amount
of
CHF
320,000.
The
purpose
of
the
swap
was
to
mitigate
risk
of
foreign
currency
exposure
related
to
the
sale
of
Glion
and
Les
Roches
Hospitality
Management
Schools,
as
discussed
in
Note
3,
Dispositions
and
Asset
Sales.
The
forward
contract
matured
on
June
14,
2016,
the
closing
date
of
the
sale,
resulting
in
a
realized
loss
of
$10,297.
The
deal
contingent
forward
exchange
swap
was
not
designated
as
a
hedge
for
accounting
purposes.

In
November
2015,
Laureate
entered
into
a
USD
to
CHF
foreign
exchange
forward
swap
agreement.
We
executed
an
initial
conversion
of
CHF
14,000
to
US
$14,113.
In
December
2015,
Laureate
entered
into
two
USD
to
CHF
foreign
exchange
forward
swap
agreements.
We
executed
an
initial
conversion
of
CHF
16,000
to
US
$16,470
using
two
swaps.
For
accounting
purposes,
the
swaps
were
not
designated
as
a
hedging
instrument.
These
swaps
were
settled
during
the
year
ended
December
31,
2016
for
a
net
realized
loss
of
approximately
$100.

In
May
2015,
Laureate
entered
into
a
USD
to
CHF
foreign
exchange
forward
swap
agreement.
The
swap
was
intended
to
hedge
the
currency
effects
of
the
strengthening
USD
for
anticipated
cash
outlays
in
CHF
over
the
seven
months
subsequent
to
the
execution
date
for
a
tax
payment,
along
with
expected
working
capital
requirements.
We
executed
an
initial
conversion
of
CHF
9,700
to
US
$10,325.
The
swap
matured
during
the
first
quarter
of
2016
for
a
realized
loss
of
$635.
For
accounting
purposes,
the
swap
was
not
designated
as
a
hedging
instrument.

USD to Euro Foreign Currency Forward Swaps

In
connection
with
the
sale
of
the
institutions
in
France
that
is
discussed
in
Note
3,
Dispositions
and
Asset
Sales,
Laureate
entered
into
EUR
to
USD
foreign
exchange
forward
contracts,
in
order
to
lock
in
the
amount
of
USD
proceeds
that
we
will
receive
upon
closing
of
the
transaction.
The
total
forward
contracts
were
EUR
200,000,
of
which
EUR
100,000
was
deal
contingent
and
EUR
100,000
was
not
contingent
on
the
deal
closing.
The
contracts
discussed
above
matured
and
were
settled
by
July
20,
2016,
the
closing
date
of
the
sale,
resulting
in
a
total
realized
gain
on
derivatives
of
$4,634.

308

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
14.
Derivative
Instruments
(Continued)

Components
of
the
reported
Loss
on
derivatives
not
designated
as
hedging
instruments
in
the
Consolidated
Statements
of
Operations
were
as
follows:

For
the
years
ended
December
31,
Unrealized Gain (Loss)
Contingent
redemption
features—Series
A
Preferred
Stock
Cross
currency
and
interest
rate
swaps
Interest
rate
swaps

Realized Loss
Contingent
redemption
features—Series
A
Preferred
Stock
Cross
currency
and
interest
rate
swaps
Interest
rate
swaps

Total Gain (Loss)
Contingent
redemption
features—Series
A
Preferred
Stock
Cross
currency
and
interest
rate
swaps
Interest
rate
swaps
Loss
on
derivatives,
net

2016

2015

2014

1,735
$
(873)

946

—
$
(2,133)

145

(1,988)

—

25,725

4,076

29,801

—

(6,811)

(219)

(7,030)

—

(407)

(212)

(619)

—

(27,788)
(5,114)
(32,902)

1,735

(7,684)

(135)

—

(2,540)

(67)

$ (6,084) $ (2,607) $

—

(2,063)
(1,038)
(3,101)

Credit
Risk
and
Credit-Risk-Related
Contingent
Features

Laureate's
derivatives
expose
us
to
credit
risk
to
the
extent
that
the
counterparty
may
possibly
fail
to
perform
its
contractual
obligation.
The
amount
of
our
credit
risk
exposure
is
equal
to
the
fair
value
of
the
derivative
when
any
of
the
derivatives
are
in
a
net
gain
position.
As
of
December
31,
2016,
the
fair
value
of
derivatives
in
a
gain
position
were
$4,464.
As
of
December
31,
2015,
our
derivatives
in
a
gain
position
were
immaterial.

Laureate
has
limited
its
credit
risk
by
only
entering
into
derivative
transactions
with
highly
rated
major
financial
institutions.
We
have
not
entered
into
collateral
agreements
with
our
derivatives'
counterparties.
At
December
31,
2016,
two
institutions,
which
were
rated
A1,
one
institution
which
was
rated
A3,
and
one
institution
which
was
rated
Aa2
by
the
global
rating
agency
of
Moody's
Investors
Service,
accounted
for
all
of
Laureate's
derivative
credit
risk
exposure.

Laureate's
agreements
with
its
derivative
counterparties
contain
a
provision
under
which
we
could
be
declared
in
default
on
our
derivative
obligations
if
repayment
of
the
underlying
indebtedness
is
accelerated
by
the
lender
due
to
a
default
on
the
indebtedness.
As
of
December
31,
2016
and
2015,
we
had
not
breached
any
default
provisions
and
had
not
posted
any
collateral
related
to
these
agreements.
If
we
had
breached
any
of
these
provisions,
we
could
have
been
required
to
settle
the
obligations
under
the
derivative
agreements
for
an
amount
that
we
believe
would
approximate
their
estimated
fair
value
of
$12,968
as
of
December
31,
2016
and
$20,014
as
of
December
31,
2015.

309

Table
of
Contents

Note
15.
Income
Taxes

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Significant
components
of
the
Income
tax
(expense)
benefit
on
earnings
from
continuing
operations
were
as
follows:

For
the
years
ended
December
31,
Current:
United
States
Foreign
State
Total
current
Deferred:
United
States
Foreign
State
Total
deferred
Total
income
tax
(expense)
benefit

2016

2015

2014

(3,414) $
(91,571)

(166)

(95,151)

(6,304) $
(126,597)

(392)

(133,293)

(4,749)
(119,190)
(258)
(124,197)

(3,323)

32,300

1,173

30,150

(4,629)

19,319

873

15,563

$ (65,001) $ (117,730) $

(99)
164,426

(1,070)
163,257

39,060

For
the
years
ended
December
31,
2016,
2015
and
2014,
foreign
income
from
continuing
operations
before
income
taxes
was
$923,636,
$105,919
and
$83,760,
respectively.
For
the
years
ended
December
31,
2016,
2015
and
2014,
domestic
loss
from
continuing
operations
before
income
taxes
was
$492,539,
$306,528
and
$285,431,
respectively.

Significant
components
of
deferred
tax
assets
and
liabilities
arising
from
continuing
operations
were
as
follows:

December
31,
Deferred
tax
assets:
Net
operating
loss
carryforwards
Depreciation
Deferred
revenue
Allowance
for
doubtful
accounts
Deferred
compensation
Unrealized
loss
Nondeductible
reserves
Interest
Total
deferred
tax
assets
Deferred
tax
liabilities:
Investment
in
subsidiaries
Amortization
of
intangible
assets

Other

Total
deferred
tax
liabilities
Net
deferred
tax
assets
Valuation
allowance
for
net
deferred
tax
assets
Net
deferred
tax
liabilities

310

2016

2015

983,202
$
72,159

52,693

30,379

61,837

71,587

40,690

10,728

1,323,275

908,664

54,227

48,669

24,005

66,687

82,464

31,537

18,311

1,234,564

107,400

371,668

153

479,221

844,054

(1,154,008)

(309,954) $

111,761

376,764

1,226

489,751

744,813

(1,092,951)
(348,138)

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
15.
Income
Taxes
(Continued)

At
December
31,
2016
and
2015,
undistributed
earnings
from
foreign
subsidiaries
totaled
$1,827,228
and
$1,153,953,
respectively.
We
have
not
recognized
deferred
tax
liabilities
for
these
undistributed
earnings
because
we
believe
that
they
will
be
indefinitely
reinvested
outside
of
the
United
States.
These
earnings
could
become
subject
to
additional
taxes
if
they
are
remitted
as
dividends,
loaned
to
us
or
to
one
of
our
United
States
affiliates,
or
if
we
sold
our
interests
in
the
subsidiaries.
It
is
not
practicable
for
us
to
determine
the
amount
of
additional
taxes
that
might
be
payable
on
the
unremitted
earnings.

Approximately
76%
(66%
federal
and
10%
states)
of
our
worldwide
net
operating
loss
carryforwards
(NOLs)
as
of
December
31,
2016
originated
in
the
United
States,
derived
from
both
federal
and
various
state
jurisdictions.
The
United
States
federal
NOLs
will
begin
to
expire
in
2025.

The
valuation
allowance
relates
to
the
uncertainty
surrounding
the
realization
of
tax
benefits
primarily
attributable
to
NOLs
of
the
parent
company
and
of
certain
foreign
subsidiaries,
and
future
deductible
temporary
differences
that
are
available
only
to
offset
future
taxable
income
of
subsidiaries
in
certain
jurisdictions.

The
Company
assesses
the
realizability
of
deferred
tax
assets
by
examining
all
available
evidence,
both
positive
and
negative.
A
valuation
allowance
is
recorded
if
negative
evidence
outweighs
positive
evidence.
A
company's
three-year
cumulative
loss
position
is
significant
negative
evidence
in
considering
whether
deferred
tax
assets
are
realizable.
Accounting
guidance
restricts
the
amount
of
reliance
the
Company
can
place
on
projected
taxable
income
to
support
the
recovery
of
the
deferred
tax
assets.
In
2014,
valuation
allowances
were
released
at
entities
in
Chile
and
Mexico
of
approximately
$22,000
and
$66,000,
respectively,
due
to
the
change
from
a
three-year
cumulative
loss
position
to
a
three-year
cumulative
income
position,
as
well
as
other
positive
factors
including
projections
of
future
profitability.

During
2016,
objective
and
verifiable
negative
evidence,
such
as
continued
United
States
operating
losses,
continued
to
outweigh
positive
evidence.
The
Company
recorded
a
Federal
and
State
Net
Operating
Loss
deferred
tax
asset
of
approximately
$68,911
and
a
corresponding
increase
in
the
valuation
allowance
of
the
same
amount,
as
a
result
of
the
negative
evidence
cited
above.
Recording
the
valuation
allowance
does
not
restrict
the
Company's
ability
to
utilize
the
future
deductions
and
net
operating
losses
associated
with
the
deferred
tax
assets
if
taxable
income
is
generated
in
future
periods.
The
most
significant
United
States
deferred
tax
assets
are
federal
net
operating
losses,
totaling
$644,022,
that
begin
to
expire
in
2025.

311

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
15.
Income
Taxes
(Continued)

The
reconciliations
of
the
reported
Income
tax
expense
to
the
amount
that
would
result
by
applying
the
United
States
federal
statutory
tax
rate
of
35%
to
income
from
continuing
operations
before
income
taxes
were
as
follows:

For
the
years
ended
December
31,
Tax
(expense)
benefit
at
the
United
States
statutory
rate
Permanent
differences
State
income
tax
benefit
(expense),
net
of
federal
tax
effect
Tax
effect
of
foreign
income
taxed
at
lower
rate
Change
in
valuation
allowance
Settlements
with
taxing
authorities
Investment
in
subsidiaries
Effect
of
tax
contingencies
Tax
credits
Withholding
taxes
United
States
tax
on
repatriated
earnings
Impairments
Sale
of
subsidiaries
Other
Total
income
tax
(expense)
benefit

2016

$ (150,885) $
(29,345)

654

87,161

(52,758)

2015
70,213
$
(23,483)

312

29,267

(148,912)

—

28,536

19,414

(33,791)

(64,316)

(8,230)

139,335

(776)

—

(34,572)

25,557

(35,332)

(1,451)

(36)

—

707

(65,001) $ (117,730) $

2014
70,585

4,529

(1,238)
37,370

(31,502)
(3,456)
(538)
(5,704)
25,968

(35,865)
(1,114)
(19,975)
—

—

39,060

The
reconciliations
of
the
beginning
and
ending
amount
of
unrecognized
tax
benefits
were
as
follows:

For
the
years
ended
December
31,
Beginning
of
the
period
Additions
for
tax
positions
related
to
prior
years
Decreases
for
tax
positions
related
to
prior
years
Additions
for
tax
positions
related
to
current
year
Decreases
for
unrecognized
tax
benefits
as
a
result
of
a
lapse
in
the
statute
of
limitations

Settlements
for
tax
positions
related
to
prior
years
End
of
the
period

2016
82,522
$
12,865

(3,474)

15,231

(11,389)

(9,370)

86,385
$

2015
67,804
$
32,388

(12,640)

233

(4,919)

(344)

82,522
$

2014
57,404

28,613

(17,131)
4,732

(4,245)
(1,569)
67,804

Laureate
records
interest
and
penalties
related
to
uncertain
tax
positions
as
a
component
of
Income
tax
expense.
During
the
years
ended
December
31,
2016,
2015
and
2014,
Laureate
recognized
interest
and
penalties
related
to
income
taxes
of
$9,245,
$16,270
and
$11,225,
respectively.
Laureate
had
$42,444
and
$60,186
of
accrued
interest
and
penalties
at
December
31,
2016
and
2015,
respectively.
During
the
years
ended
December
31,
2016,
2015
and
2014,
Laureate
derecognized
$25,911,
$8,090
and
$5,116,
respectively,
of
previously
accrued
interest
and
penalties.
Approximately
$61,000
of
unrecognized
tax
benefits,
if
recognized,
will
affect
the
effective
income
tax
rate.
It
is
reasonably
possible
that
Laureate's
unrecognized
tax
benefits
may
decrease
within
the
next
12
months
by
up
to
approximately
$14,600
as
a
result
of
the
lapse
of
statutes
of
limitations
in
various
jurisdictions.

312

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
15.
Income
Taxes
(Continued)

Laureate
and
various
subsidiaries
file
income
tax
returns
in
the
United
States
federal
jurisdiction,
and
in
various
states
and
foreign
jurisdictions.
With
few
exceptions,
Laureate
is
no
longer
subject
to
United
States
federal,
state
and
local,
or
foreign
income
tax
examinations
by
tax
authorities
for
years
before
2010.
United
States
federal
and
state
statutes
are
generally
open
back
to
2013;
however,
the
Internal
Revenue
Service
(the
IRS)
has
the
ability
to
challenge
2005
through
2012
net
operating
loss
carryforwards.
Statutes
of
other
major
jurisdictions,
such
as
Brazil,
Chile
and
Spain
are
open
back
to
2012,
and
Mexico
is
open
back
to
2006.

During
2010
and
2013,
Laureate
was
notified
by
the
Spain
Tax
Authorities
(STA)
that
two
tax
audits
of
our
Spanish
subsidiaries
were
being
initiated
for
2006
through
2007,
and
for
2008
through
2010,
respectively.
On
June
29,
2012,
the
STA
issued
a
final
assessment
to
Iniciativas
Culturales
de
España,
S.L.
(ICE),
our
Spanish
holding
company,
for
EUR
11,051
(US
$11,537
at
December
31,
2016),
including
interest,
for
the
2006
through
2007
period.
Laureate
has
appealed
this
final
assessment
related
to
the
2006
through
2007
period,
and
issued
a
cash-collateralized
letter
of
credit
in
July
2012,
in
order
to
continue
the
appeal
process.
In
October
2015,
the
STA
issued
a
final
assessment
to
ICE
for
the
2008
through
2010
period
for
approximately
EUR
17,187
(approximately
US
$17,943
at
December
31,
2016),
including
interest,
for
those
three
years.
In
order
to
continue
the
appeals
process,
we
have
issued
cash-collateralized
letters
of
credit
for
the
2008
to
2010
period
assessment
amount,
plus
interest
and
surcharges.
In
total,
as
of
December
31,
2016
we
have
issued
cash-collateralized
letters
of
credit
for
the
ICE
tax
audit
matters
of
EUR
33,282
(US
$34,746
at
December
31,
2016),
as
also
described
in
Note
11,
Commitments
and
Contingencies.

During
the
quarter
ended
June
30,
2015,
the
Company
reassessed
its
position
regarding
the
ICE
tax
audit
matters
as
a
result
of
recent
adverse
decisions
from
the
Spanish
Supreme
Court
and
the
Spanish
National
Court
on
cases
for
taxpayers
with
similar
facts,
and
determined
that
it
could
no
longer
support
a
more-likely-
than-not
position.
As
a
result,
during
2015,
the
Company
has
recorded
a
provision
totaling
EUR
37,610
(approximately
US
$42,100)
for
the
period
January
1,
2006
through
December
31,
2016.
The
Company
plans
to
continue
the
appeals
process
for
the
periods
already
audited
and
assessed.
During
the
second
quarter
of
2016,
we
were
notified
by
the
STA
that
tax
audits
of
the
Spanish
subsidiaries
were
also
being
initiated
for
2011
and
2012;
no
assessments
have
yet
been
issued
for
these
years.
Also
during
the
second
quarter
of
2016,
the
Regional
Administrative
Court
issued
a
decision
against
the
Company
on
its
appeal.
The
Company
has
further
appealed
at
the
Highest
Administrative
Court
level.
The
Company
plans
to
continue
the
appeals
process
for
the
periods
already
audited
and
assessed.

Chile
Tax
Reform

On
September
29,
2014,
Chile
enacted
major
income
tax
law
changes.
The
significant
change
affecting
the
Company
is
the
increase
in
income
tax
rates,
which
are
retroactive
to
January
2014.
The
tax
rates
are
increasing
from
21%
to
22.5%
in
2015,
24%
in
2016,
25.5%
in
2017
and
27%
in
2018
and
beyond.
Deferred
taxes
were
revalued
and
a
benefit
of
approximately
$850,
$2,700
and
$6,100
was
recorded
in
2016,
2015
and
2014,
respectively.
Prior
to
2015,
the
law
also
included
two
alternative
methods
for
computing
shareholder-level
income
taxation.
During
2015,
the
law
changed
to
include
one
method
for
computing
shareholder-level
income
taxation.

313

Table
of
Contents

Note
15.
Income
Taxes
(Continued)

Spanish
Tax
Reform

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

During
2014,
Spain
enacted
major
income
tax
law
changes.
One
change
decreased
the
corporate
income
tax
rate
from
30%
to
28%
in
2015
and
to
25%
beginning
in
2016.
The
impact
of
the
rate
changes
was
a
benefit
to
income
tax
expense
of
approximately
$600
and
$6,700
in
2015
and
2014,
respectively.

Note
16.
Earnings
(Loss)
Per
Share

Laureate
computes
basic
earnings
per
share
(EPS)
by
dividing
income
available
to
common
shareholders
by
the
weighted
average
number
of
common
shares
outstanding
for
the
reporting
period.
Diluted
EPS
reflects
the
potential
dilution
that
would
occur
if
share-based
compensation
awards/arrangements
or
contingently
issuable
shares
were
exercised
or
converted
into
common
stock.
To
calculate
the
diluted
EPS,
the
basic
weighted
average
number
of
shares
is
increased
by
the
dilutive
effect
of
stock
options,
restricted
stock,
and
other
share-based
compensation
arrangements
determined
using
the
treasury
stock
method.

The
following
table
summarizes
the
computations
of
basic
and
diluted
earnings
per
share:

For
the
years
ended
December
31,
Numerator
used
in
basic
and
diluted
earnings
(loss)
per
common
share:
Income
(loss)
from
continuing
operations
attributable
to
Laureate
Education,
Inc.

Accretion
of
redemption
value
of
redeemable
noncontrolling
interests
and
equity
Accretion
of
redemption
value
of
Series
A
Preferred
Stock
Adjusted
for:
accretion
related
to
noncontrolling
interests
and
equity
redeemable
at

fair
value

Distributed
and
undistributed
earnings
to
participating
securities
Net
income
(loss)
available
to
common
stockholders

2016

2015

2014

$ 371,847
$ (316,248) $ (158,291)
(9,187)
—

263

(1,719)

(13,041)

—

(114)

743

(3)

$ 370,310
$ (322,421) $ (166,738)

(11)

6,879

Denominator
used
in
basic
and
diluted
earnings
(loss)
per
common
share:
Basic
weighted
average
shares
outstanding
Effect
of
dilutive
stock
options
Effect
of
dilutive
restricted
stock
units
Dilutive
weighted
average
shares
outstanding

133,295

833

278

134,406

132,950

—

132,950

132,616

—

132,616

Basic
and
diluted
earnings
(loss)
per
share:
Basic
earnings
(loss)
per
share
Diluted
earnings
(loss)
per
share

2.78
$
2.76
$

(2.44) $
(2.44) $

(1.24)
(1.24)

The
following
table
summarizes
the
number
of
stock
options
and
shares
of
restricted
stock
outstanding
for
the
years
ended
December
31,
2016,
2015
and
2014,
which
were
excluded
from
the

314

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
16.
Earnings
(Loss)
Per
Share
(Continued)

diluted
EPS
calculations
because
the
effect
would
have
been
antidilutive,
due
to
net
losses
for
the
periods
presented:

For
the
years
ended
December
31,
Stock
options
Restricted
stock

2016

5,773

181

2015

10,743

430

2014

10,263

464

As
discussed
in
Note
1,
Description
of
Business,
the
Company
completed
an
initial
public
offering
on
February
6,
2017
and
issued
an
additional
35,000
shares
of
common
stock,
which
are
not
included
in
the
EPS
calculations
above.

Note
17.
Related
Party
Transactions

Corporate

Transactions between Laureate and Santa Fe University of Arts and Design (SFUAD)

During
2014,
Laureate
entered
into
a
new
shared
services
agreement
with
SFUAD
that
replaced
the
shared
services
agreement
previously
entered
into
in
2009.
Laureate
provides
SFUAD
with
certain
management
consulting,
legal,
tax,
finance,
accounting,
treasury,
human
resources,
and
network
entry
services.
The
shared
services
agreement
had
a
term
of
five
years.
For
the
years
ended
December
31,
2016,
2015
and
2014,
total
costs
and
expenses
charged
to
SFUAD
were
$10,921,
$14,205
and
$13,477,
respectively.
As
of
December
31,
2016
and
2015,
Laureate
recorded
a
Related
party
receivable
from
SFUAD
of
$52
and
$658,
respectively.
In
addition,
as
of
December
31,
2016,
we
recorded
a
related
party
payable
to
SFUAD
for
an
advance
payment
of
$515
received
during
the
fourth
quarter
of
2016
related
to
the
shared
services
agreement.

During
the
third
quarter
of
2013,
fourteen
Laureate
institutions
entered
into
partnership
agreements
with
SFUAD
(the
Global
Partnership
agreements).
These
Global
Partnership
agreements
had
an
initial
term
of
five
years
and
provided
Laureate
students
with
educational
opportunities
to
study
certain
academic
programs
at
SFUAD.
Under
the
terms
of
these
agreements,
the
partnering
Laureate
institutions
committed
to
pay
SFUAD
an
annual
amount
each
calendar
year,
which
SFUAD
then
billed
to
the
Laureate
institutions
on
a
quarterly
basis.
The
Global
Partnership
agreements
could
be
unilaterally
canceled
by
either
SFUAD
or
the
Laureate
institutions
with
at
least
six
months'
prior
written
notice;
however
any
remaining
unpaid
commitment
amount
for
that
calendar
year
was
still
contractually
owed
to
SFUAD.
These
partnership
agreements
were
phased
out
during
2016.
For
the
years
ended
December
31,
2016,
2015
and
2014,
the
total
amounts
paid
under
the
Global
Partnership
agreements
were
$736,
$3,556
and
$4,571,
respectively.
As
of
December
31,
2016
and
2015,
Laureate
recorded
a
related
party
payable
to
SFUAD
of
$85
and
$193,
respectively.
On
May
18,
2016,
SFUAD
announced
that
it
had
signed
an
agreement
to
be
acquired
by
a
private
education
provider
with
a
global
network
of
colleges
and
universities
that
focus
on
art
and
design
education.
SFUAD
and
the
counterparty
plan
to
terminate
the
agreement.

Transactions between Laureate and HSM

On
March
5,
2015,
Laureate
completed
the
sale
of
its
interest
in
HSM,
an
equity-method
investment.
The
total
purchase
price
was
approximately
$9,500,
less
HSM's
bank
debt
and
other

315

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
17.
Related
Party
Transactions
(Continued)

adjustments.
Upon
closing
of
the
sale
on
March
5,
2015,
Laureate
received
cash
proceeds
of
approximately
$5,000,
which
are
included
in
Proceeds
from
affiliates
on
the
2015
Consolidated
Statement
of
Cash
Flows.
As
required
by
the
agreement,
Laureate's
loans
receivable
from
HSM,
along
with
all
unpaid
interest,
took
first
priority
in
the
allocation
of
the
sale
proceeds.
After
collection
of
the
loans
receivable
and
accrued
interest,
which
totaled
approximately
$2,300,
and
payment
of
certain
costs
related
to
the
sale,
Laureate
recognized
a
net
gain
of
approximately
$2,000
in
Equity
in
net
income
of
affiliates,
net
of
tax,
on
the
Consolidated
Statement
of
Operations
for
the
year
ended
December
31,
2015.

Transactions between Laureate and Entities Affiliated with Executive Officers, Directors and Wengen

For
the
years
ended
December
31,
2016,
2015
and
2014,
we
incurred
costs
of
$63,
$313
and
$184,
respectively,
for
the
business
use
of
a
private
airplane
that
is
owned
in
part
by
our
CEO.

We
have
agreements
in
place
with
I/O
Data
Centers,
LLC
(I/O)
pursuant
to
which
I/O
provides
modular
data
center
solutions
to
the
Company.
One
of
our
directors
is
also
a
director
of
I/O.
Additionally,
this
director,
our
CEO,
and
Sterling
Partners
(a
private
equity
firm
co-founded
by
the
director,
our
CEO,
and
others)
maintain
an
ownership
interest
in
I/O.
During
the
years
ended
December
31,
2016,
2015
and
2014,
we
incurred
costs
for
these
agreements
of
approximately
$900,
$500
and
$500,
respectively.

During
the
years
ended
December
31,
2016,
2015
and
2014,
we
made
payments
of
approximately
$185,
$700
and
$0,
respectively,
to
an
entity
affiliated
with
one
of
the
Wengen
investors
for
services
rendered
in
connection
with
the
Company's
refinancing
of
its
debt
and
new
debt
issuances.

During
the
years
ended
December
31,
2016,
2015
and
2014,
we
made
payments
of
approximately
$0,
$196
and
$400,
respectively,
to
a
consulting
firm
that
works
with
one
of
the
Wengen
investors
and
its
portfolio
companies,
for
consulting
services
provided
in
connection
with
our
EiP
initiative.

As
part
of
the
issuance
and
sale
of
shares
of
the
Company's
Series
A
Preferred
Stock
in
December
2016,
KKR
and
Snow
Phipps,
affiliates
of
Wengen,
purchased
from
the
Company
60
and
15
shares
of
Series
A-2
Preferred
Stock,
respectively.

As
part
of
our
initial
public
offering
in
February
2017,
an
affiliate
of
one
of
the
Wengen
investors
purchased
from
the
underwriters
3,571
shares
of
Class
A
common
stock
at
the
initial
public
offering
price.

In
addition,
an
affiliate
of
one
of
the
Wengen
investors
acted
as
a
financial
adviser
in
connection
with
our
initial
public
offering
and
we
paid
this
affiliate
a
one-time
fee
of
$1,500
for
its
services.

As
discussed
in
Note
9,
Debt,
and
Note
13,
Share-based
Compensation,
on
December
29,
2015
we
issued
$50,046
aggregate
principal
amount
of
Senior
Notes
due
2019
to
the
participants
of
the
nonqualified
share-based
deferred
compensation
arrangement,
who
are
Laureate's
Chief
Executive
Officer
and
a
former
member
of
our
Board
of
Directors.
The
issuance
of
the
Senior
Notes
due
2019,
along
with
a
cash
payment
of
$37,071,
satisfied
the
2015
Obligation
to
the
participants.
On
December
30,
2016,
we
issued
$10,453
aggregate
principal
amount
of
Senior
Notes
due
2019
to
the
participants
of
the
nonqualified
share-based
deferred
compensation
arrangement.
The
issuance
of
the

316

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
17.
Related
Party
Transactions
(Continued)

Senior
Notes
due
2019
on
December
30,
2016,
along
with
a
cash
payment
of
$7,749,
satisfied
the
2016
Obligation
to
the
participants
in
full.

On
December
16,
2015,
Laureate
entered
into
a
term
loan
agreement
with
its
parent,
Wengen,
for
approximately
$11,000.
The
note
payable
accrued
interest
at
an
annual
rate
of
LIBOR
plus
4.25%,
with
a
1.25%
floor
on
the
LIBOR,
and
interest
was
payable
quarterly.
The
term
of
the
loan
was
three
years,
with
the
last
payment
due
on
December
31,
2018.
As
of
December
31,
2015,
the
principal
balance
outstanding
on
this
loan
was
$11,000,
of
which
$6,000
matured
in
2016
and
was
classified
as
Current
portion
of
long-term
debt;
the
remainder
was
classified
as
Long-term
debt,
less
current
portion.
Early
repayment
was
permitted
under
the
loan
agreement,
and
the
loan
was
fully
repaid
during
the
year
ended
December
31,
2016.

LatAm

Transactions between Laureate and Entities Affiliated with a Former Executive

For
the
years
ended
December
31,
2016,
2015
and
2014,
Laureate
made
payments
of
$617,
$497
and
$545,
respectively,
for
clinical
studies
and
$0,
$158
and
$11,
respectively,
for
consulting
and
market
research
to
companies
that
are
affiliated
with
an
individual
who
served
as
one
of
our
executives
until
the
third
quarter
of
2014.

Ecuador

Transactions between Laureate and a VIE formerly consolidated

In
the
second
half
of
2010,
Ecuador
adopted
a
new
Higher
Education
Law
(the
New
Law)
that,
if
implemented,
would
require
Laureate
to
modify
the
governance
structure
of
our
institution
in
that
country,
UDLA
Ecuador,
to
implement
a
system
of
co-governance
that
would
cause
us
to
lose
the
ability
to
control
that
institution.
In
the
fourth
quarter
of
2012,
the
Consejo
de
Educación
Superior
(CES),
the
relevant
regulatory
body,
commenced
reviewing
and
issuing
comments
on
bylaws
submitted
by
other
Ecuadorian
higher
education
institutions,
implementing
and
enforcing
the
co-governance
provisions
of
the
New
Law.
In
accordance
with
ASC
810-10-15-10,
the
Company
believed
that
control
no
longer
resided
with
Laureate
given
the
governmentally
imposed
uncertainties.
As
a
result,
UDLA
Ecuador
was
deconsolidated
in
the
fourth
quarter
of
2012.

Certain
for-profit
entities
of
Laureate
continue
to
provide
services
and/or
intellectual
property
to
UDLA
Ecuador
through
contractual
arrangements
at
market
rates.
However,
only
earnings
that
are
realized
through
these
various
contractual
arrangements
are
being
recognized
by
the
Company.
During
the
years
ended
December
31,
2016,
2015
and
2014,
the
total
amounts
recognized
through
these
contractual
arrangements,
primarily
as
other
revenues,
were
$13,970,
$13,879
and
$18,132,
respectively.
As
of
December
31,
2016
and
2015,
we
had
payables
to
UDLA
Ecuador
of
$9,190
and
$11,119,
respectively,
and
receivables
from
UDLA
Ecuador
of
$3,273
and
$4,141,
respectively.
In
prior
years,
UDLA
Ecuador
made
capital
contributions
to
an
education-related
real
estate
subsidiary
of
Laureate
in
Chile.
As
of
December
31,
2016
and
2015,
UDLA
Ecuador's
investment
in
this
Chilean
real
estate
subsidiary
was
approximately
$22,000
and
$21,000,
respectively.
During
the
years
ended
December
31,
2016,
2015
and
2014,
the
Chilean
real
estate
subsidiary
made
dividend
payments
to
UDLA
Ecuador
of
$955,
$1,047
and
$811,
respectively,
related
to
this
investment.

317

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
17.
Related
Party
Transactions
(Continued)

Europe

Morocco

Transactions between Laureate and Noncontrolling Interest Holder of Laureate Somed Education Holding SA (LSEH)

LSEH
is
60%
owned
and
consolidated
by
Laureate
and
is
the
entity
that
operates
Université
Internationale
de
Casablanca,
our
institution
in
Morocco.
During
the
years
ended
December
31,
2016,
2015
and
2014,
the
40%
noncontrolling
interest
holder
made
loans
to
LSEH
totaling
Moroccan
Dirhams
(MAD)
8,000
(US
$802),
MAD
27,200
(US
$2,772)
and
MAD
28,000
(US
$4,754),
respectively.
These
loans
each
bear
interest
at
4.5%
per
annum
and
have
varying
maturity
dates
through
December
2017.
The
proceeds
from
these
loans
have
been
included
in
the
financing
activities
section
of
the
Consolidated
Statement
of
Cash
Flows
as
Noncontrolling
interest
holder's
loan
to
subsidiaries.
As
the
60%
majority
owner,
Laureate
has
also
made
loans
to
LSEH
for
60%
of
the
total
amount
borrowed,
which
eliminates
in
consolidation.

During
2016,
the
maturity
date
of
a
loan
made
by
the
noncontrolling
interest
holder
in
2014
was
extended
from
October
2015
to
April
2017.
The
outstanding
balance
of
this
loan,
including
accrued
interest,
at
the
time
of
the
extension
was
MAD
45,028
(US
$4,424
at
December
31,
2016).
This
loan
bears
an
interest
rate
of
4.5%
per
annum.

During
2016,
the
noncontrolling
interest
holder
converted
a
portion
of
their
loans
and
accrued
interest
to
capital
(approximately
US
$6,220
at
the
time
of
conversion),
which
was
a
non-cash
transaction.
Laureate
also
converted
a
pro
rata
portion
of
these
loans
that
it
had
made
as
the
60%
majority
owner
of
LSEH,
resulting
in
no
change
in
our
ownership
percentage.

At
December
31,
2016,
we
had
total
related
party
payables
of
$7,936
to
the
noncontrolling
interest
holder
for
the
outstanding
balance
of
and
accrued
interest
on
the
loans
described
above,
all
of
which
was
recorded
as
current.
At
December
31,
2015,
we
had
total
related
party
payables
of
$13,354
to
the
noncontrolling
interest
holder,
of
which
$9,305
and
$4,049
were
recorded
as
current
and
noncurrent,
respectively.

AMEA

China

Transactions between China businesses and Noncontrolling Interest Holders

HIEU
has
entered
into
various
cost-sharing
agreements
and
other
related
party
transactions
with
entities
owned
by
a
noncontrolling
interest
holder
of
HIEU.
As
of
December
31,
2016
and
2015,
the
amounts
payable
to
this
related
party
were
$1,865
and
$2,501,
respectively,
and
the
amounts
receivable
from
this
related
party
were
$1,348
and
$1,490,
respectively.

In
June
2010,
HIEU
entered
into
an
entrustment
loan
agreement
with
Hunan
New
Lieying
Education
Technologies
Ltd.
(HNLET),
which
had
a
balance
of
$2,854
and
$3,059
as
of
December
31,
2016
and
2015,
respectively.
One
of
the
noncontrolling
interest
holders
in
HIEU
is
an
owner
of
HNLET.
The
loan
had
an
interest
rate
of
7.5%
and
its
original
maturity
date
of
June
2012
was
extended
several
times
until
June
2014.
The
entrustment
loan
receivable
was
fully
secured
by
the

318

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
17.
Related
Party
Transactions
(Continued)

amount
due
to
the
noncontrolling
interest
holders
of
HIEU;
however
Laureate
was
contractually
released
from
that
seller
note
payable
during
2014
and
removed
the
liability,
as
discussed
in
Note
5,
Due
to
Shareholders
of
Acquired
Companies.
During
2014,
Laureate
concluded
that
collection
of
the
entrustment
loan
was
not
reasonably
assured
and
placed
a
full
allowance
on
this
related
party
receivable.
Accordingly,
as
of
December
31,
2016,
the
balance
of
this
loan
receivable
from
HNLET
was
fully
offset
by
a
reserve
recorded
in
Allowance
for
doubtful
accounts,
resulting
in
a
net
carrying
value
of
$0.

A
portion
of
real
property
that
HIEU
has
paid
for,
including
land
and
buildings,
is
mortgaged
as
collateral
for
corporate
loans
that
entities
controlled
by
or
previously
associated
with
certain
noncontrolling
interest
holders
of
HIEU
entered
into
with
third-party
banks.
The
balances
owed
on
these
corporate
loans
in
December
2013
totaled
approximately
$20,000.
In
December
2013,
the
noncontrolling
interest
holders
of
HIEU
signed
an
agreement
with
Laureate
and
committed
to:
(1)
remove
all
encumbrances
on
HIEU's
real
property
no
later
than
September
30,
2014
and
(2)
cause
the
entity
to
complete
the
transfer
of
title
relating
to
the
encumbered
real
property
to
HIEU
no
later
than
December
31,
2014.
Under
the
terms
of
this
agreement,
the
noncontrolling
interest
holders
also
agreed
to
pay
any
and
all
transfer
taxes,
fees
and
other
costs
that
are
required
in
connection
with
the
removal
of
the
encumbrances
and
the
transfer
of
titles,
which
were
estimated
to
be
approximately
$2,000.
As
collateral
for
their
performance
under
the
agreement,
the
noncontrolling
interest
holders
pledged
to
Laureate
their
30%
equity
interest
in
the
sponsoring
entity
of
HIEU.
The
noncontrolling
interest
holders
of
HIEU
have
not
completed
their
commitment
to
remove
the
encumbrances
over
the
real
property
or
completed
the
transfer
of
the
real
property.
Under
the
terms
of
the
agreement,
Laureate
has
the
right
to
receive
the
sale
proceeds
of
the
noncontrolling
interest
holders'
30%
equity
interest,
up
to
the
amount
owing
to
it
under
the
equity
pledge,
in
priority
to
other
creditors
of
the
noncontrolling
interest
holders.
On
February
22,
2016,
one
of
the
creditors
of
the
noncontrolling
interest
holders
initiated
an
enforcement
process
against
the
noncontrolling
interest
holders.
Since
the
noncontrolling
interest
holders
failed
to
repay
the
debts
owed
to
the
creditor,
the
creditor
requested
the
court
to
auction
a
portion
of
the
equity
interest
of
the
noncontrolling
interest
holders.
The
court
auction
was
originally
scheduled
for
March
12,
2017;
however,
no
bids
were
received
at
the
originally
scheduled
court
auction
and
therefore
another
auction
date
will
be
set,
which
is
expected
to
be
during
the
second
quarter
of
2017.
As
the
registered
pledgee,
Laureate
has
the
right
to
receive
the
sale
proceeds
of
the
noncontrolling
interest
holders'
30%
equity
interest,
up
to
the
amount
owing
to
it
under
the
equity
pledge,
in
priority
to
other
creditors
of
the
noncontrolling
interest
holders.
Management
is
currently
evaluating
its
options
in
this
matter.
As
of
December
31,
2016
and
2015,
Laureate's
net
carrying
value
of
the
encumbered
real
property
was
approximately
$12,200
and
$13,700,
respectively.

In
addition
to
the
performance
obligations
in
the
December
2013
agreement
for
the
encumbered
property
as
described
above,
the
noncontrolling
interest
holders
are
required
under
the
2009
HIEU
purchase
agreement
(PA)
to
obtain
the
titles
of
certain
other
buildings
for
HIEU.
The
noncontrolling
interest
holders
are
also
obligated
to
pay
any
and
all
government
fees
and
other
costs,
which
are
estimated
to
be
approximately
$4,200,
required
in
connection
with
obtaining
the
titles
for
these
buildings.
These
buildings
are
not
encumbered
and
HIEU
has
title
to
the
land.
The
noncontrolling
interest
holders
also
occupy
and
conduct
other
non-
HIEU
business
in
five
buildings
that
we
have
title
to,
and
do
not
pay
rent
to
HIEU
for
the
use
of
these
facilities.

319

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
17.
Related
Party
Transactions
(Continued)

Additionally,
during
2014,
HIEU
recorded
an
approximately
$4,350
loss
to
write
off
the
carrying
value
of
several
parcels
of
land
for
which
it
no
longer
has
land
use
rights.
The
loss
of
land
use
rights
was
a
breach
of
the
PA
and
we
determined
our
claim
to
be
uncollectible
in
2014.

Dubai

Transactions between Laureate and Laureate-Obeikan Ltd.

Laureate-Obeikan
Ltd.,
is
a
joint
venture
in
Dubai
that
is
50%
owned
by
Laureate
and
consolidated.
During
the
first
quarter
of
2016,
we
entered
into
an
agreement
for
the
assignment
of
amounts
due
to
Laureate-Obeikan
Ltd.
from
Higher
Institute
for
Paper
and
Industrial
Technologies
(HIPIT),
a
third
party,
to
Obeikan
Paper
Industries
(OPI),
a
related-party
subsidiary
of
the
noncontrolling
interest
holder
of
Laureate-Obeikan
Ltd.,
in
the
amount
of
Saudi
Riyals
(SAR)
14,279
(US
$3,805
at
December
31,
2016)
as
a
settlement
of
amounts
owed
from
OPI
to
an
affiliate
of
HIPIT.
Payment
was
originally
due
in
five
installments
of
SAR
2,856
(US
$761
at
December
31,
2016)
beginning
in
March
2016
through
July
2016.
Subsequently,
an
amended
payment
plan
was
entered
into
for
the
remaining
amounts
due.
Under
this
new
plan,
the
remaining
balance
is
due
in
four
payments
beginning
in
October
2016
through
March
2017.
As
of
December
31,
2016,
the
amount
receivable
was
$2,245.
Installments
totaling
SAR
5,380
(US
$1,434
at
December
31,
2016)
were
paid
during
2016.
These
receivables
are
fully
reserved.

Malaysia

Transactions between Malaysian Businesses and Noncontrolling Interest Holders

Exeter
Street
Holdings
Sdn
Bhd
(Exeter
Malaysia),
one
of
Laureate's
subsidiaries,
extended
a
loan
to
one
of
its
noncontrolling
interest
holders
to
assist
in
the
financing
of
their
approximately
16.5%
initial
investment
in
INTI.
The
original
maturity
date
of
this
loan
was
December
31,
2013.
The
loan
was
collateralized
by
a
pledge
of
the
noncontrolling
interest
holder's
INTI
shares
having
a
value
of
150%
of
the
outstanding
amount
of
the
loan,
or
at
the
Company's
option,
other
forms
of
collateral
acceptable
to
it,
equal
to
100%
of
the
outstanding
amount
of
the
loan.
Dividends
or
option
proceeds
shall
be
applied
first
to
any
unpaid
interest
and
then
to
reduce
all
principal
amounts
under
the
loan
facility.
As
discussed
in
Note
4,
Acquisitions,
in
the
fourth
quarter
of
2014
Laureate
settled
this
note
receivable
and
the
accrued
interest
receivable
in
connection
with
the
purchase
of
6.4%
of
this
minority
owner's
noncontrolling
interest.
As
a
result,
the
loan
was
no
longer
outstanding
as
of
December
31,
2014.

Dividends to Noncontrolling Interest Holders

During
the
years
ended
December
31,
2016,
2015
and
2014,
INTI
made
contractual
dividend
payments
to
its
noncontrolling
holders
of
$550,
$450
and
$444,
respectively,
which
were
included
within
Payments
of
dividends
in
the
financing
activities
section
of
the
Consolidated
Statements
of
Cash
Flows.

320

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
17.
Related
Party
Transactions
(Continued)

Singapore

Loan from Affiliate

On
February
8,
2013,
Laureate's
wholly
owned
subsidiary,
LEI
Singapore
Holdings
Private
Ltd,
which
is
the
Singapore-based
parent
entity
of
several
of
our
AMEA
subsidiaries,
borrowed
EUR
3,254
(US
$4,478
at
December
31,
2013)
from
LEI
International
Holdings
B.V.
(LIHBV),
a
Wengen
subsidiary
that
is
an
affiliate
of
Laureate.
The
loan
has
a
maturity
date
of
February
7,
2022,
and
carries
an
annual
interest
rate
of
7%.
As
of
December
31,
2013,
the
total
principal
and
interest
payable
for
the
loan
was
$4,758.
Effective
March
31,
2014,
the
board
of
LIHBV
forgave
this
loan
to
LEI
Singapore
Holdings
Private
Ltd,
which
was
recognized
as
a
capital
contribution
of
$4,821
during
the
year
ended
December
31,
2014.

South
Africa

Transactions between Laureate and Noncontrolling Interest Holders of MSA

As
of
December
31,
2016
and
2015,
Laureate
had
a
related
party
payable
recorded
of
$2,020
and
$1,897,
respectively,
that
was
owed
to
the
noncontrolling
interest
holder
of
MSA.

GPS

United
States

Transactions between Laureate and Noncontrolling Interest Holder of St. Augustine

In
December
2013,
subsequent
to
the
acquisition
of
St.
Augustine,
a
$10,000
capital
contribution
was
made
to
St.
Augustine,
80%
of
which
was
contributed
by
Laureate
and
20%
by
the
noncontrolling
interest
holder.
Laureate
loaned
$2,000
to
the
noncontrolling
interest
holder
in
the
form
of
a
non-interest
bearing
promissory
note
for
its
portion
of
the
capital
contribution.
The
note
had
a
maturity
date
of
November
21,
2018,
and
Laureate
had
the
right
to
offset
against
this
receivable
the
noncontrolling
interest
holder's
20%
share
of
any
future
distributions
that
are
made
by
St.
Augustine.
During
the
fourth
quarter
of
2014,
St.
Augustine
declared
and
paid
a
distribution
to
its
owners
of
$10,000,
of
which
$2,000
was
paid
to
the
20%
noncontrolling
interest
holder.
The
noncontrolling
interest
holder
then
repaid
the
related
party
promissory
note
to
Laureate.

During
the
year
ended
December
31,
2015,
St.
Augustine
made
tax
distributions
to
its
20%
noncontrolling
interest
holder
of
$3,952,
as
provided
for
in
St.
Augustine's
operating
agreement,
which
were
included
in
Distributions
to
noncontrolling
interest
holders
in
the
financing
activities
section
of
the
Consolidated
Statement
of
Cash
Flows.
No
tax
distributions
were
made
in
2016.
As
discussed
in
Note
11,
Commitments
and
Contingencies,
we
acquired
the
remaining
20%
noncontrolling
interest
in
St.
Augustine
in
June
2016
for
a
purchase
price
of
$24,997.
This
payment
was
included
in
Payments
to
purchase
noncontrolling
interests
in
the
Consolidated
Statement
of
Cash
Flows.

Transactions between Laureate and NHU NFP

In
connection
with
the
acquisition
of
NHU
LLC
in
2010,
Laureate
entered
into
a
lease
for
the
San
Jose
campus
owned
by
NHU
NFP.
Laureate
also
subleases
a
portion
of
the
premises
to
NHU
NFP
for

321

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
17.
Related
Party
Transactions
(Continued)

its
charter
school.
At
June
30,
2015,
Laureate
ceased
using
its
leased
property
at
NHU
and
recorded
a
liability
for
the
present
value
of
the
remaining
lease
costs,
less
estimated
sublease
rentals,
of
approximately
$3,100.
During
the
six
months
ended
June
30,
2015,
Laureate
incurred
rent
expense
of
$1,384
and
received
sublease
income
of
$437.

Switzerland

As
of
December
31,
2015
we
had
recorded
royalty
receivables
of
$1,023
and
recorded
exchange
student
payables
of
$319
from
Les
Roches
Jin
Jiang,
a
50%
equity-method
investee
that
operates
a
hospitality
and
culinary
institution
in
China.
As
discussed
further
in
Note
3,
Dispositions
and
Asset
Sales,
we
completed
the
sale
of
our
Hospitality
entities
in
June
2016
and
therefore
no
outstanding
related
party
receivables
or
payables
are
recorded
as
of
December
31,
2016.

Note
18.
Benefit
Plans

Domestic
Defined
Contribution
Retirement
Plan

Laureate
sponsors
a
defined
contribution
retirement
plan
in
the
United
States
under
section
401(k)
of
the
Internal
Revenue
Code.
The
plan
offers
employees
a
traditional
"pre-tax"
401(k)
option
and
an
"after-tax"
Roth
401(k)
option,
providing
the
employees
with
choices
and
flexibility
for
their
retirement
savings.
All
employees
are
eligible
to
participate
in
the
plan
after
meeting
certain
service
requirements.
Participants
may
contribute
up
to
a
maximum
of
80%
of
their
annual
compensation
and
100%
of
their
annual
cash
bonus,
as
defined
and
subject
to
certain
annual
limitations.
Laureate
may,
at
its
discretion,
make
matching
contributions
that
are
allocated
to
eligible
participants.
The
matching
on
the
"after-tax"
Roth
contributions
is
the
same
as
the
matching
on
the
traditional
"pre-tax"
contributions.
Laureate
made
discretionary
contributions
in
cash
to
this
plan
of
$4,737,
$4,501
and
$4,174
for
the
years
ended
December
31,
2016,
2015
and
2014,
respectively.

Non-United
States
Pension
Benefit
Plans

Laureate
has
defined
benefit
pension
(pension)
plans
at
several
non-United
States
institutions.
The
projected
benefit
obligation
(PBO)
is
determined
as
the
actuarial
present
value
as
of
the
measurement
date
of
all
benefits
calculated
by
the
pension
benefit
formula
for
employee
service
rendered.
The
amount
of
benefits
to
be
paid
depends
on
a
number
of
future
events
incorporated
into
the
pension
benefit
formula,
including
estimates
of
the
average
life
expectancy
of
employees/survivors
and
average
years
of
service
rendered.
The
PBO
is
measured
based
on
assumptions
concerning
future
interest
rates
and
future
employee
compensation
levels.
The
expected
net
periodic
benefit
cost
for
Laureate
in
each
year
can
vary
from
the
subsequent
year's
actual
net
periodic
benefit
cost
due
to
the
acquisition
of
entities
with
plans,
plan
amendments,
and
the
impacts
of
foreign
currency
translation.
The
combined
unfunded
status
of
these
plans
is
reported
as
a
component
of
Other
current
liabilities
and
Other
long-term
liabilities.

322

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
18.
Benefit
Plans
(Continued)

The
net
periodic
benefit
cost
for
those
entities
with
pension
plans
was
as
follows:

For
the
years
ended
December
31,
Service
cost
Interest
Expected
return
on
assets
Amortization
of
prior
service
costs
Recognition
of
actuarial
items
Net
periodic
benefit
cost

2016

2014

2015

$ 3,921
$ 6,021
$ 5,229

1,805

(765)
278

173

$ 5,765
$ 7,884
$ 6,720

1,387

(400)

903

(27)

1,036

(144)

279

673

The
estimated
net
periodic
benefit
cost
for
the
year
ending
December
31,
2017
is
approximately
$3,172.

The
weighted
average
assumptions
were
as
follows:

For
the
years
ended
December
31,
Discount
rate
for
obligations
Discount
rate
for
net
periodic
benefit
costs
Rate
of
compensation
increases
Expected
return
on
plan
assets

2015

2016

2014
1.00
-
9.75%

2.50
-
11.60%
0.75
-
10.10%

0.75
-
10.10%

1.00
-
9.75%
2.25
-
10.50%

2.50
-
13.00%
2.00
-
13.00%
2.00
-
14.00%

2.50%

0.75%

1.00%

323

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
18.
Benefit
Plans
(Continued)

The
change
in
PBO,
change
in
plan
assets
and
funded
(unfunded)
status
for
those
entities
with
pension
plans
were
as
follows:

For
the
years
ended
December
31,
Change
in
PBO:
PBO
at
beginning
of
year
Service
cost
Interest
Actuarial
loss
(gain)
Benefits
paid
by
plan
Participant
contributions
Curtailment
gain
Settlements
Administrative
expenses
Foreign
exchange
PBO
at
end
of
year
Change
in
plan
assets:
Fair
value
of
assets
at
beginning
of
year
Actual
return
on
assets
Employer
contributions
Participant
contributions
Benefits
paid
by
plan
Administrative
expenses
Settlements
Foreign
exchange
Fair
value
of
assets
at
end
of
year
Unfunded
status
Actuarial
loss
Prior
service
cost
Amount
recognized
in
AOCI,
pre-tax
Accumulated
benefit
obligation

2016

2015

70,417
$ 67,149

6,021

3,921

1,387

1,036

(173)
1,361

(3,200)
(2,045)

2,712

1,024

—

(18,474)

—

(44,234)

(917)
(2,562)
12,207
$ 70,417

—

(799)

359

1,369

1,025

(449)

—

42,000
$ 37,462

1,208

3,465

2,712

(2,025)
(917)
—

(44,234)

173

243
$ 42,000

11,964
$ 28,417

849
$ 11,011

164

869
$ 11,175

7,266
$ 58,465

As
discussed
in
Note
3,
Dispositions
and
Asset
Sales,
we
completed
the
sale
of
our
hospitality
management
school
entities
in
June
2016
and
the
sale
of
our
French
entities
in
July
2016.
Certain
institutions
that
were
a
part
of
these
sales
had
pension
plans
and
the
curtailment
gain
and
settlement
lines
presented
in
the
table
above
relate
to
the
removal
of
these
plans
as
a
result
of
the
sales.
The
pension
plans
related
to
the
hospitality
management
schools
also
represented
substantially
all
of
the
pension
plan
assets
as
of
December
31,
2015,
and
the
fair
value
of
those
plan
assets
related
almost
entirely
to
insurance
contracts
for
our
Switzerland
institutions'
plans.
The
fair
value
measurements
were
based
on
inputs
that
are
not
observable
to
active
markets
and,
as
such,
would
be
deemed
a
"Level
3"
fair
value
measurement
as
defined
in
Note
20,
Fair
Value
Measurement.

324

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
18.
Benefit
Plans
(Continued)

The
Company
estimates
that
employer
contributions
to
plan
assets
during
2017
will
be
approximately
the
same
as
during
the
year
ended
December
31,
2016.
The
estimated
future
benefit
payments
for
the
next
10
fiscal
years
are
as
follows:

For
the
year
ending
December
31,
2017
2018
2019
2020
2021
2022
through
2026

$ 1,631

1,590

811

859

1,058

6,815

Laureate
Education,
Inc.
Deferred
Compensation
Plan

Laureate
maintains
a
deferred
compensation
plan
to
provide
certain
executive
employees
and
members
of
our
Board
of
Directors
with
the
opportunity
to
defer
their
salaries,
bonuses,
and
Board
of
Directors
retainers
and
fees
in
order
to
accumulate
funds
for
retirement
on
a
pre-tax
basis.
Participants
are
100%
vested
in
their
respective
deferrals
and
the
earnings
thereon.
Laureate
does
not
make
contributions
to
the
plan
or
guarantee
returns
on
the
investments.
Although
plan
investments
and
participant
deferrals
are
kept
in
a
separate
trust
account,
the
assets
remain
Laureate's
property
and
are
subject
to
claims
of
general
creditors.

The
plan
assets
are
recorded
at
fair
value
with
the
earnings
(losses)
on
those
assets
recorded
in
Other
income
(expense).
The
plan
liabilities
are
recorded
at
the
contractual
value,
with
the
changes
in
value
recorded
in
operating
expenses.
As
of
December
31,
2016
and
2015,
plan
assets
included
in
Other
assets
in
our
Consolidated
Balance
Sheets
were
$10,449
and
$10,139,
respectively.
As
of
December
31,
2016
and
2015,
the
plan
liabilities
reported
in
our
Consolidated
Balance
Sheets
were
$16,036
and
$14,995,
respectively,
which
are
almost
entirely
noncurrent
and
recorded
in
Other
long-term
liabilities.

Supplemental
Employment
Retention
Agreement

In
November
2007,
Laureate
established
a
Supplemental
Employment
Retention
Agreement
(SERA)
for
one
of
its
executive
officers.
Since
Laureate
achieved
certain
Pro-rata
EBITDA
targets,
as
defined
in
the
SERA,
from
2007
to
2011
and
this
officer
remained
employed
through
December
31,
2012,
this
individual
receives
an
annual
SERA
payment
of
$1,500.
The
SERA
provides
annuity
payments
to
the
executive
over
the
course
of
his
lifetime,
and
annuity
payments
would
be
made
to
his
spouse
for
the
course
of
her
life
in
the
event
of
the
executive's
death
on
or
prior
to
December
31,
2026.
The
SERA
is
administered
through
a
Rabbi
Trust,
and
its
assets
are
subject
to
the
claims
of
creditors.
Laureate
purchases
annuities
to
provide
funds
for
our
future
SERA
obligations.

As
of
December
31,
2016
and
2015,
the
total
SERA
assets
were
$8,621
and
$10,336,
respectively,
which
were
recorded
in
Other
assets
in
our
Consolidated
Balance
Sheets.
As
of
December
31,
2016
and
2015,
the
total
SERA
liability
recorded
in
our
Consolidated
Balance
Sheets
was
$15,628
and
$16,380,
respectively,
of
which
$1,500
and
$1,500,
respectively,
was
recorded
in
Accrued
compensation
and
benefits,
and
$14,128
and
$14,880,
respectively,
was
recorded
in
Deferred
compensation.

325

Table
of
Contents

Note
18.
Benefit
Plans
(Continued)

Mexico
Profit-Sharing

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

The
Fiscal
Reform
that
was
enacted
in
Mexico
in
December
2013
subjects
Laureate's
Mexico
entities
to
corporate
income
tax
and
also
requires
them
to
comply
with
profit-sharing
legislation,
whereby
10%
of
the
taxable
income
of
Laureate's
Mexican
entities
will
be
set
aside
as
employee
compensation.
As
a
result
of
the
Fiscal
Reform,
in
2013
the
Company
had
established
an
asset
for
a
deferred
benefit
related
to
this
matter.
During
2014,
the
Company
revised
its
estimate
regarding
the
realizability
of
this
asset
and,
accordingly,
recorded
a
net
decrease
in
operating
expense
for
the
year
ended
December
31,
2014
of
$22,755.
During
2015,
the
Company
revised
its
estimate
regarding
the
realizability
of
this
asset
and,
accordingly,
recorded
a
net
increase
in
operating
expense
for
the
year
ended
December
31,
2015
of
$937.
During
2016,
the
Company
revised
its
estimate
regarding
the
realizability
of
this
asset,
and
accordingly,
recorded
a
net
increase
in
operating
expense
for
the
year
ended
December
31,
2016
of
$462.

Labor
Unions

Certain
Laureate
employees
at
Universidad
Europea
de
Madrid
(UEM),
Universidad
Europea
de
Valencia
(UEV)
and
Universidad
Europea
de
Canarias
(UEC)
in
Spain,
UVM
Mexico
and
all
of
the
Brazilian
institutions
are
covered
by
labor
agreements.

The
agreement
for
UEM,
UEV
and
UEC
in
Spain
was
negotiated
in
May
2016
between
a
national
union
and
an
employer
association
committee
representing
all
of
the
private,
for-profit
institutions
in
the
country.
This
agreement
remains
legally
applicable
until
December
31,
2018.

Substantially
all
of
the
faculty
members
at
UVM
Mexico
are
represented
by
a
union.
The
labor
agreement
governs
salaries,
benefits
and
working
conditions
for
all
union
members
at
UVM
Mexico.

As
required
by
Brazilian
Labor
Law,
all
of
Brazil's
employees
are
represented
by
a
union
and
the
institutions
are
part
of
an
employers'
union.
These
two
groups
negotiate
standard
city
or
regional
contracts
and
it
is
the
responsibility
of
our
Brazil
institutions
to
comply
with
these
agreements.
In
some
cases
where,
for
example,
there
is
no
city-wide
or
regional
labor
union
to
conduct
the
negotiation,
the
institutions
and
labor
union
have
agreed
to
permit
the
local
institution
to
negotiate
directly
with
the
respective
union.
Such
union
agreements
typically
have
a
duration
of
one
year.

Laureate
considers
itself
to
be
in
good
standing
with
these
unions
and
with
all
of
its
employees.

Note
19.
Legal
and
Regulatory
Matters

Laureate
is
subject
to
legal
proceedings
arising
in
the
ordinary
course
of
business.
In
management's
opinion,
we
have
adequate
legal
defenses,
insurance
coverage,
and/or
accrued
liabilities
with
respect
to
the
eventuality
of
these
actions.
Management
believes
that
any
settlement
would
not
have
a
material
impact
on
Laureate's
financial
position,
results
of
operations,
or
cash
flows.

United
States
Postsecondary
Education
Regulation

The
Company,
through
its
GPS
segment,
operates
four
postsecondary
educational
institutions
in
the
United
States
(U.S.
Institutions)
and
provides
contractual
services
to
another.
The
U.S.
Institutions
are
subject
to
extensive
regulation
by
federal
and
state
governmental
entities
as
well
as
accrediting

326

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
19.
Legal
and
Regulatory
Matters
(Continued)

bodies.
The
Higher
Education
Act
(HEA),
and
the
regulations
promulgated
thereunder
by
the
DOE,
subject
the
U.S.
Institutions
to
ongoing
regulatory
review
and
scrutiny.
The
U.S.
Institutions
must
also
comply
with
a
myriad
of
requirements
in
order
to
participate
in
Title
IV
federal
financial
aid
programs
under
the
HEA
(Title
IV
programs).

In
particular,
to
participate
in
the
Title
IV
programs
under
currently
effective
DOE
regulations,
an
institution
must
be
authorized
to
offer
its
educational
programs
by
the
relevant
state
agencies
in
the
states
in
which
it
is
located,
accredited
by
an
accrediting
agency
that
is
recognized
by
the
DOE,
and
also
certified
by
the
DOE.
In
determining
whether
to
certify
an
institution,
the
DOE
closely
examines
an
institution's
administrative
and
financial
capability
to
administer
Title
IV
program
funds.
Based
on
Laureate's
consolidated
audited
financial
statements
for
its
fiscal
year
ended
December
31,
2015,
the
DOE
required
us
to
either:
1)
provide
a
letter
of
credit
in
an
amount
equal
to
50%
of
Title
IV
program
funds
received
by
Laureate
in
the
fiscal
year
ended
December
31,
2015
(calculated
by
the
DOE
to
be
$351,995)
and
qualify
as
financially
responsible;
or
2)
provide
a
letter
of
credit
in
an
amount
equal
to
15%
of
the
Title
IV
program
funds
received
by
Laureate
in
the
fiscal
year
ended
December
31,
2015
(calculated
by
the
DOE
to
be
$105,599)
and
for
our
U.S.
Institutions
to
remain
provisionally
certified
for
a
period
of
up
to
three
complete
Title
IV
program
award
years.
The
DOE
also
required
us
to
comply
with
additional
notification
and
reporting
requirements.
We
have
provided
the
DOE
with
a
letter
of
credit
in
the
amount
of
$105,599
and
we
are
complying
with
the
additional
notification
and
reporting
requirements.
See
Note
11,
Commitments
and
Contingencies,
for
further
description
of
the
outstanding
DOE
letters
of
credit
as
of
December
31,
2016
and
2015.

Pursuant
to
DOE
requirements,
the
U.S.
Institutions
conduct
periodic
reviews
and
audits
of
their
compliance
with
the
Title
IV
program
requirements.
None
of
the
U.S.
Institutions
have
been
notified
of
any
significant
noncompliance
that
might
result
in
loss
of
its
certification
to
participate
in
the
Title
IV
programs.
Management
believes
that
there
are
no
matters
of
regulatory
noncompliance
that
could
have
a
material
effect
on
the
accompanying
Consolidated
Financial
Statements.

Changes
in
or
new
interpretations
of
applicable
laws,
DOE
rules,
or
regulations
could
have
a
material
adverse
effect
on
the
U.S.
Institutions'
eligibility
to
participate
in
the
Title
IV
programs.
On
October
29,
2010,
the
DOE
published
a
Final
Rule
amending
its
regulations
in
a
number
of
areas
related
to
an
institution's
eligibility
to
participate
in
the
Title
IV
programs.
Most
of
these
regulatory
changes
became
effective
July
1,
2011,
with
others
becoming
effective
as
of
July
1,
2012.
On
October
30,
2014,
the
DOE
issued
a
final
rule
establishing
specific
standards
for
purposes
of
the
HEA
requirement
that,
to
be
eligible
for
Title
IV
program
funds,
certain
programs
of
study
prepare
students
for
"gainful
employment
in
a
recognized
occupation,"
which
became
effective
July
1,
2015.
The
final
regulations
define
this
concept
using
two
ratios,
one
based
on
annual
debt-to-annual
earnings
("DTE")
and
another
based
on
annual
debt-to-discretionary
income
("DTI")
ratio.
Under
the
final
regulations,
an
educational
program
with
a
DTE
ratio
at
or
below
8%
or
a
DTI
ratio
at
or
below
20%
is
considered
"passing."
An
educational
program
with
a
DTE
ratio
greater
than
8%
but
less
than
or
equal
to
12%
or
a
DTI
ratio
greater
than
20%
but
less
than
or
equal
to
30%
is
considered
to
be
"in
the
zone."
An
educational
program
with
a
DTE
ratio
greater
than
12%
and
a
DTI
ratio
greater
than
30%
is
considered
"failing."
An
educational
program
will
cease
to
be
eligible
for
students
to
receive
Title
IV
program
funds
if
its
DTE
and
DTI
ratios
are
failing
in
two
out
of
any
three
consecutive
award
years
or
if
both
of
those
rates
are
failing
or
in
the
zone
for
four
consecutive
award
years.
In
January

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(Continued)

(Dollars
and
shares
in
thousands)

Note
19.
Legal
and
Regulatory
Matters
(Continued)

2017,
the
DOE
issued
to
institutions
final
DTE
rates.
Among
the
Classification
of
Instructional
Programs
reported
within
NewSchool
of
Architecture
and
Design,
Kendall
College
and
Walden
University,
we
had
one
program
fail
and
five
in
the
zone.
St.
Augustine
had
no
programs
that
failed
or
were
in
the
zone.
We
are
currently
examining
and
implementing
options
for
each
of
these
programs
and
their
students.

On
October
30,
2015,
the
DOE
published
final
regulations
regarding
cash
management
of
Title
IV
funds,
the
eligibility
of
repeated
coursework
for
purposes
of
a
student's
enrollment
status
and
receipt
of
Title
IV
funds,
and
the
measurement
of
programs
in
credit
hours
versus
clock
hours
for
Title
IV
purposes.
A
majority
of
the
provisions
of
the
regulations
took
effect
on
July
1,
2016,
and
others
will
take
effect
on
later
dates
in
2016
and
2017.
The
final
regulations
concerning
cash
management
require,
among
other
things,
that
institutions
subject
to
heightened
cash
monitoring
procedures
for
disbursements
of
Title
IV
funds
must,
effective
July
1,
2016,
pay
to
students
any
applicable
Title
IV
credit
balances
before
requesting
such
funds
from
the
DOE.
On
December
19,
2016,
the
DOE
published
final
regulations
regarding
state
authorization
for
programs
offered
through
distance
education
and
state
authorization
for
foreign
locations
of
institutions.
Among
other
provisions,
these
final
regulations
require
that
an
institution
participating
in
the
Title
IV
federal
student
aid
programs
and
offering
postsecondary
education
through
distance
education
be
authorized
by
each
state
in
which
the
institution
enrolls
students,
if
such
authorization
is
required
by
the
state.
The
DOE
would
recognize
authorization
through
participation
in
a
state
authorization
reciprocity
agreement,
if
the
agreement
does
not
prevent
a
state
from
enforcing
its
own
laws.
The
final
regulations
also
require
that
foreign
additional
locations
and
branch
campuses
be
authorized
by
the
appropriate
foreign
government
agency
and
if
at
least
50%
of
a
program
can
be
completed
at
the
location/branch,
be
approved
by
the
institution's
accrediting
agency
and
be
reported
to
the
state
where
the
main
campus
is
located.
The
final
regulations
would
also
require
institutions
to
document
the
state
process
for
resolving
complaints
from
students
enrolled
in
programs
offered
through
distance
education
or
correspondence
courses,
and
make
certain
public
and
individualized
disclosures
to
enrolled
and
prospective
students
about
their
distance
education
programs.
These
final
regulations
are
effective
July
1,
2018.

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Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
19.
Legal
and
Regulatory
Matters
(Continued)

prohibits
schools
from
using
any
pre-dispute
arbitration
agreements,
prohibits
schools
from
prohibiting
relief
in
the
form
of
class
actions
by
student
borrowers,
and
invalidates
clauses
imposing
requirements
that
students
pursue
an
internal
dispute
resolution
process
before
contacting
authorities
regarding
concerns
about
an
institution.
For
proprietary
institutions,
the
final
rule
describes
the
threshold
for
loan
repayment
rates
that
will
require
specific
disclosures
to
current
and
prospective
students
and
the
applicable
loan
repayment
rate
methodology.
The
final
rule
also
establishes
important
new
financial
responsibility
and
administrative
capacity
requirements
for
both
not-for-profit
and
for-profit
institutions
participating
in
the
Title
IV
programs.
For
example,
certain
events
would
automatically
trigger
the
need
for
a
school
to
obtain
a
letter
of
credit
including,
for
publicly
traded
institutions,
if
the
SEC
warns
the
school
that
it
may
suspend
trading
on
the
school's
stock,
the
school
failed
to
timely
file
a
required
annual
or
quarterly
report
with
the
SEC,
or
the
exchange
on
which
the
stock
is
traded
notifies
the
school
that
it
is
not
in
compliance
with
exchange
requirements
or
the
stock
is
delisted.
Other
events
would
require
a
recalculation
of
a
school's
composite
score
of
financial
responsibility,
including,
for
a
proprietary
institution
whose
score
is
less
than
1.5,
any
withdrawal
of
an
owner's
equity
by
any
means,
including
by
declaring
a
dividend
unless
the
equity
is
transferred
within
the
affiliated
entity
group
on
whose
basis
the
composite
score
was
calculated.
The
final
rule
also
sets
forth
events
that
are
discretionary
triggers
for
letters
of
credit,
meaning
that
if
any
of
them
occur,
the
DOE
may
choose
to
require
a
letter
of
credit,
increase
an
existing
letter
of
credit
requirement
or
demand
some
other
form
of
surety
from
the
institution.
The
final
rule
provides
that
if
an
institution
fails
to
meet
the
composite
score
requirement
for
longer
than
three
years
under
provisional
certification,
the
DOE
may
mandate
additional
financial
protection
from
the
institution
or
any
party
with
"substantial
control"
over
the
institution.
Such
parties
with
"substantial
control"
must
agree
to
jointly
and
severally
guarantee
the
Title
IV
liabilities
of
the
institution
at
the
end
of
the
three-year
provisional
certification
period.
Under
current
regulations,
a
party
may
be
deemed
to
have
"substantial
control"
over
an
institution
if,
among
other
factors,
the
party
directly
or
indirectly
holds
an
ownership
interest
of
25%
or
more
of
an
institution,
or
is
a
member
of
the
board
of
directors,
a
general
partner,
the
chief
executive
officer
or
other
executive
officer
of
the
institution.
If
we
are
required
to
repay
the
DOE
for
any
successful
DTR
claims
by
students
who
attended
our
U.S.
Institutions,
or
we
are
required
to
obtain
additional
letters
of
credit
or
increase
our
current
letter
of
credit,
it
could
materially
affect
our
business,
financial
conditions
and
results
of
operations.
We
are
currently
assessing
the
impact
of
these
final
regulations
on
our
U.S.
Institutions.

On
October
31,
2016,
the
DOE
published
final
regulations
teacher
preparation
program
accountability
systems
under
the
HEA,
and
additionally
proposed
amendments
on
teacher
preparation
program
eligibility
for
TEACH
Grant
participation.
We
are
currently
assessing
the
eligibility
of
Walden
University
to
continue
to
access
TEACH
Grant
funds
under
the
new
regulations.
On
March
8,
2017,
the
U.S.
Congress
enacted
a
joint
resolution
disapproving
these
October
31,
2016
final
regulations
pursuant
to
the
Congressional
Review
Act.
If
signed
by
the
President,
the
joint
resolution
will
nullify
these
final
regulations
and
prohibit
the
DOE
from
reissuing
regulations
in
substantially
the
same
form,
or
from
issuing
new
regulations
that
are
substantially
the
same,
unless
such
reissued
or
new
regulations
are
specifically
authorized
by
the
U.S.
Congress
subsequent
to
its
joint
resolution
disapproving
the
October
31,
2016
final
regulations.

We
are
unable
to
predict
what
additional
actions
the
DOE
may
take,
or
the
effect
of
its
rulemaking
processes
on
our
business.
Additionally,
the
United
States
Congress
has
initiated
a
series
of

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Notes
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Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
19.
Legal
and
Regulatory
Matters
(Continued)

hearings
regarding
its
prospective
reauthorization
of
the
HEA
and
potential
changes
to
the
Title
IV
programs.
Any
new
or
changed
regulations
from
the
DOE,
or
changes
to
the
HEA
and
Title
IV
programs,
could
reduce
enrollments,
impact
tuition
prices,
increase
the
cost
of
doing
business
and
otherwise
have
additional
material
adverse
effects
on
the
financial
condition,
cash
flows
and
operations
of
some
or
all
of
the
U.S.
Institutions.

In
recent
years,
the
proprietary
education
industry
has
experienced
broad-based,
intensifying
scrutiny
in
the
form
of
increased
investigations
and
enforcement
actions.
In
October
2014,
the
DOE
announced
an
interagency
task
force
composed
of
the
DOE,
the
U.S.
Federal
Trade
Commission
(the
"FTC"),
the
U.S.
Departments
of
Justice,
Treasury
and
Veterans
Affairs,
the
Consumer
Financial
Protection
Bureau
("CFPB"),
the
SEC,
and
numerous
state
attorneys
general.
The
FTC
has
also
recently
issued
civil
investigative
demands
to
several
other
U.S.
proprietary
educational
institutions,
which
require
the
institutions
to
provide
documents
and
information
related
to
the
advertising,
marketing,
or
sale
of
secondary
or
postsecondary
educational
products
or
services,
or
educational
accreditation
products
or
services.
The
CFPB
has
also
initiated
a
series
of
investigations
against
other
U.S.
proprietary
educational
institutions
alleging
that
certain
institutions'
lending
practices
violate
various
consumer
finance
laws.
In
addition,
attorneys
general
in
several
states
have
become
more
active
in
enforcing
consumer
protection
laws,
especially
related
to
recruiting
practices
and
the
financing
of
education
at
proprietary
educational
institutions.
In
addition,
several
state
attorneys
general
have
recently
partnered
with
the
CFPB
to
review
industry
practices.
In
the
event
that
any
of
our
past
or
current
business
practices
are
found
to
violate
applicable
consumer
protection
laws,
or
if
we
are
found
to
have
made
misrepresentations
to
our
current
or
prospective
students
about
our
educational
programs,
we
could
be
subject
to
monetary
fines
or
penalties
and
possible
limitations
on
the
manner
in
which
we
conduct
our
business,
which
could
materially
adversely
affect
our
business,
financial
condition,
results
of
operations
and
cash
flows.
To
the
extent
that
more
states
or
government
agencies
commence
investigations,
act
in
concert,
or
direct
their
focus
on
our
U.S.
Institutions,
the
cost
of
responding
to
these
inquiries
and
investigations
could
increase
significantly,
and
the
potential
impact
on
our
business
would
be
substantially
greater.

State Higher Education Agency Program Review for Walden University

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Notes
to
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Financial
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(Continued)

(Dollars
and
shares
in
thousands)

Note
19.
Legal
and
Regulatory
Matters
(Continued)

Brazilian
Regulation

Through
our
LatAm
segment,
we
operate
13
post-secondary
education
institutions
in
Brazil.
The
responsibility
of
the
federal
government
in
regulating,
monitoring
and
evaluating
higher
education
institutions
and
undergraduate
programs
is
exercised
by
the
Brazilian
Ministry
of
Education
(the
MEC),
along
with
a
number
of
related
federal
agencies
and
offices.
The
MEC
is
the
highest
authority
of
the
higher
education
system
in
Brazil
and
has
the
power
to:
regulate
and
monitor
the
federal
system
of
higher
education
in
terms
of
its
quality
and
standards,
confirm
decisions
regarding
the
accreditation
and
reaccreditation
of
institutions
of
higher
education;
confirm
evaluation
criteria;
confirm
regulatory
proposals;
and
issue
and
implement
rules
that
govern
the
delivery
of
higher
education
services,
including
aspects
like
adherence
by
higher
education
institutions
to
the
rules
for
federal
education
subsidy
programs
like
Pronatec,
Prouni
and
the
Fundo
de
Financiamento
ao
Estudante
do
Ensino
Superior
(the
FIES
program,
or
FIES),
through
one
or
more
of
which
all
of
our
institutions
enroll
students.
Additionally,
Brazilian
law
requires
that
almost
all
change-of-control
transactions
by
Laureate
receive
the
prior
approval
of
the
Brazilian
antitrust
authority,
the
Conselho
Administrativo
de
Defesa
Econômica
(CADE).

As
noted
above,
Laureate's
institutions
in
Brazil
participate
in
the
FIES
program,
which
targets
students
from
low
socio-economic
backgrounds
enrolled
at
private
post-secondary
institutions.
Eligible
students
receive
loans
with
below-market
interest
rates
that
are
required
to
be
repaid
after
an
18-month
grace
period
upon
graduation.
FIES
pays
participating
educational
institutions
tax
credits
which
can
be
used
to
pay
certain
federal
taxes
and
social
contributions.
FIES
also
repurchases
excess
credits
for
cash.
As
part
of
the
FIES
program,
our
institutions
are
obligated
to
pay
up
to
15%
of
any
student
default.
The
default
obligation
increases
to
up
to
30%
of
any
student
default
if
the
institution
is
not
current
with
its
federal
taxes.
FIES
withholds
between
1%
and
3%
of
tuition
paid
to
the
institutions
to
cover
any
potential
student
defaults
("holdback").
If
the
student
pays
100%
of
their
loan,
the
withheld
amounts
will
be
paid
to
the
participating
education
institutions.

Since
February
2014,
all
new
students
who
participate
in
FIES
must
also
enroll
in
the
Fundo
de
Garantia
de
Operações
de
Crédito
Educativo
(FGEDUC).
FGEDUC
is
a
government-mandated,
private
guarantee
fund
administered
by
the
Bank
of
Brazil
that
allows
participating
educational
institutions
to
insure
themselves
for
90%
(or
13.5%
of
15%)
of
their
losses
related
to
student
defaults
under
the
FIES
program.
The
cost
of
the
program
is
5.63%
of
a
student's
full
tuition.
Similar
to
FIES,
the
administrator
withholds
5.63%
of
a
student's
full
tuition
to
fund
the
guarantee
by
FGEDUC.
The
Company
believes
that
the
FIES
holdback
described
above,
along
with
the
FGEDUC
guarantee,
will
be
sufficient
to
cover
potential
student
defaults,
in
all
material
respects.

As
of
December
31,
2016,
approximately
20%
of
our
total
students
in
Brazil
participate
in
FIES,
representing
approximately
29%
of
our
2016
Brazil
revenues.

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Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
19.
Legal
and
Regulatory
Matters
(Continued)

repurchase
of
credits
as
well
as
limits
the
opportunities
for
post-secondary
institutions
to
sell
any
unused
credits
such
that
there
is
a
significant
delay
between
the
time
the
post-secondary
institution
provides
the
educational
services
to
the
students
and
the
time
it
receives
payment
from
the
government
for
2015.
In
addition
to
these
rule
changes,
FNDE
implemented
a
policy
for
current
students'
loan
renewals
for
2015,
which
provides
that
returning
students
may
not
finance
an
amount
that
increases
by
more
than
6.41%,
which
was
later
increased
to
8.5%,
from
the
amount
financed
in
the
previous
semester,
regardless
of
any
increases
in
tuition
or
in
the
number
of
courses
in
which
the
student
is
enrolled,
a
policy
that
we
believe
violates
the
applicable
law.
For
2016,
MEC
announced
that
there
will
be
no
limitation
to
the
tuition
increase.
Moreover,
in
the
first
and
second
intakes
of
2015,
the
online
enrollment
and
re-enrollment
system
that
all
post-secondary
institutions
and
students
must
use
to
access
the
program
has
experienced
numerous
technical
and
programming
faults
that
have
also
interfered
with
the
enrollment
and
re-enrollment
process.
Numerous
challenges
to
these
changes
and
requests
for
judicial
relief
from
the
system's
faults
have
been
filed
in
the
Brazilian
courts,
most
of
which
are
pending.
The
2016
enrollment
and
re-enrollment
schedule
has
been
released
and,
so
far,
the
system
has
not
presented
any
major
issues.

In
October
2015,
FNDE
initiated
negotiations
with
the
Brazilian
Association
of
Post-Secondary
Institutions
(ABRAES)
aiming
at
settling
the
FIES
payments
that
were
delayed
in
2015.
The
proposal
from
MEC,
which
was
accepted
by
ABRAES,
was
to
divide
the
total
amount
due
in
three
annual
installments
to
be
paid
one
fourth
in
2016,
one
fourth
in
2017
and
half
in
2018.
The
parties
also
agreed
that
the
yearly
installments
will
be
paid
in
June
of
each
year,
and
the
amounts
will
be
adjusted
to
reflect
an
inflation
index
(the
IPCA)
from
the
date
of
the
respective
maturity
until
the
effective
payment.
FNDE
also
agreed
not
to
take
any
discriminatory
measures
in
the
future
related
to
the
payment
due
to
the
post-secondary
institutions,
and
not
to
impose
any
limitation
on
the
issuance
of
certificates
and
repurchase
of
credits
due
to
the
post-secondary
institutions,
which
basically
means
that
all
certificates
will
be
issued
and
repurchased
in
their
respective
fiscal
years,
except
for
those
intended
to
be
issued
and
repurchased
in
December,
which
will
be
paid
in
January
of
the
following
year.
The
parties
executed
the
settlement
agreement
on
January
28,
2016
and
it
was
approved
by
the
office
of
the
Attorney
General
of
Brazil
on
February
3,
2016.
The
Federal
Court
of
Brasilia
ratified
the
settlement
agreement
on
March
17,
2016.
We
received
the
first
FIES
installment
payment
in
June
2016.
Our
post-secondary
institutions
in
Brazil
are
associated
with
ABRAES
and
signed
the
settlement
agreement;
therefore,
it
will
apply
to
us.
The
long-term
portion
of
the
FIES
receivables
are
recorded
in
Notes
receivable,
net
as
of
December
31,
2016.

MEC
released
new
FIES
regulations
in
July
2015,
which
supplement
and
amend
rules
that
were
previously
released.
Among
other
changes,
these
regulations
revised
the
rules
for
student
eligibility
and
classification,
higher
education
institution
participation
and
selection
of
the
vacancies
that
will
be
offered
to
the
students.

On
December
11,
2015,
MEC
issued
new
FIES
regulations
(Normative
Ordinance
No.
13),
which
supersede
in
all
significant
aspects
the
rules
released
in
July
2015.
Normative
Ordinance
No.
13
defined
and
clarified
some
rules
for
student
eligibility
and
classification,
higher
education
institution
participation
and
selection
of
the
vacancies
offered
to
the
students
in
the
first
intake
of
2016.

332

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
19.
Legal
and
Regulatory
Matters
(Continued)

The
rules
for
student
eligibility
are
to
have
a
gross
household
income
of
not
more
than
2.5
times
the
minimum
wage
per
capita
(which
was
raised
by
the
MEC
to
3.0
times
on
June
17,
2016)
and
to
have
taken
the
National
High
School
Proficiency
Exam
at
least
once
since
2010,
with
a
minimum
score
of
450
points,
and
have
a
score
greater
than
zero
in
the
test
of
writing.

Regarding
the
participation
of
post-secondary
institutions
in
FIES,
institutions
must
sign
a
participation
agreement
that
contains
their
proposal
of
the
number
of
vacancies
offered
and
the
following
information
per
shift
(morning,
evening)
and
campus
location:
(i)
tuition
gross
amount
for
the
entire
course,
including
all
semesters;
(ii)
total
tuition
gross
amount
per
course
for
the
first
semester,
which
must
reflect
at
least
a
five
percent
discount
to
the
course
list
price;
and
(iii)
the
number
of
vacancies
that
will
be
offered
through
the
FIES
selection
process.
Also,
only
courses
with
scores
of
3,
4
or
5
in
the
National
Higher
Education
Evaluation
System
(SINAES)
evaluation
are
eligible
to
receive
FIES
students.

The
Brazilian
government's
changes
to
the
FIES
program
resulted
in
a
substantial
increase
in
the
total
number
of
new
FIES
contracts
in
that
country
in
2014,
an
election
year,
and
then
a
reduction
in
the
total
number
of
new
FIES
contracts,
from
over
700,000
in
2014
to
approximately
300,000
in
2015.
As
a
result,
Laureate's
new
enrollments
of
students
in
the
FIES
program
also
decreased
similarly
in
2015;
however,
this
did
not
have
a
material
impact
on
our
2015
results
of
operations
since
total
enrollments
for
all
students
increased
in
2015.
Any
potential
impact
on
total
enrollment
would
not
occur
until
the
FIES
students
from
the
expansion
of
the
program
have
graduated,
and
would
depend
on
the
Brazilian
government's
commitment
to
the
FIES
program.
In
addition,
as
discussed
above,
the
Brazilian
government
reduced
the
frequency
of
payments
to
participating
institutions
during
2015.
In
2017,
a
new
rule
was
adopted
as
part
of
the
FIES
regulations
that
limits
the
total
amount
financed
each
semester
to
BRL
30
per
student
and
allows
the
students
to
pay
any
amount
in
excess
of
such
limit
directly
to
the
HEI
(Normative
Ordinance
No.
04/2017)

All
of
our
Brazil
Higher
Education
Institutions
(HEI)
adhere
to
Prouni.
Prouni
is
a
federal
program
of
tax
benefits
designed
to
increase
higher
education
participation
rates
by
making
college
more
affordable.

333

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
19.
Legal
and
Regulatory
Matters
(Continued)

HEI
may
join
Prouni
by
signing
a
term
of
membership
valid
for
ten
years
and
renewable
for
the
same
period.
This
term
of
membership
shall
include
the
number
of
scholarships
to
be
offered
in
each
program,
unit
and
class,
and
a
percentage
of
scholarships
for
degree
programs
to
be
given
to
indigenous
and
Afro-
Brazilians.
To
join
Prouni,
an
educational
institution
must
maintain
a
certain
relationship
between
the
number
of
scholarships
granted
to
regular
paying
students.
The
relationship
between
the
number
of
scholarships
and
regular
paying
students
is
tested
annually.
If
this
relationship
is
not
observed
during
a
given
academic
year
due
to
the
departure
of
students,
the
institution
must
adjust
the
number
of
scholarships
in
a
proportional
manner
the
following
academic
year.

Prouni
provides
private
HEI
with
an
exemption
from
certain
federal
taxes
in
exchange
for
granting
partial
and
full
scholarships
to
low-income
students
enrolled
in
traditional
and
technology
undergraduate
programs.
For
the
years
ended
December
31,
2016,
2015
and
2014,
our
HEI
granted
Prouni
scholarships
that
resulted
in
tax
credits
of
approximately
$83,900,
$55,000
and
$49,400,
respectively.

Proposed
Chilean
Regulation

On
July
4,
2016,
the
Chilean
President
submitted
to
the
Chilean
Congress
a
bill
(the
Higher
Education
Bill)
that,
if
approved,
would
change
the
entire
regulatory
landscape
of
higher
education
in
Chile,
as
it
would
amend
and/or
replace
most
of
the
currently
applicable
legislation,
including
repealing
the
current
laws
governing
universities,
professional
institutes
and
technical
training
centers.
The
changes
contemplated
in
the
Higher
Education
Bill
that
are
most
relevant
to
us
are:

(1)

The
creation
of
an
Undersecretary
of
Higher
Education,
which
would
replace
and
be
the
legal
successor
to
the
current
Higher
Education
Division
of
the
MINEDUC
and
whose
functions
would
be:
(i)
to
propose
to
the
MINEDUC
policies
on
higher
education,
including
policies
on
access,
inclusion,
retention
and
graduation
of
higher
education
students,
on
the
promotion,
development,
support
and
continuous
improvement
of
the
quality
of
higher
education
institutions
and
their
relationship
with
the
needs
of
the
country,
and
on
the
allocation
of
public
funds;
(ii)
to
manage
the
procedures
relating
to
the
granting
and
revocation
of
the
official
recognition
of
higher
education
institutions;
(iii)
to
take
custody
of
the
academic
records
of
higher
education
institutions
that
have
lost
their
official
recognition;
(iv)
to
manage
the
Common
Access
System
for
Higher
Education
Institutions;
(v)
to
manage
the
National
Higher
Education
Information
System;
(vi)
to
coordinate
the
various
public
institutions
and
services
that
have
authority
on
higher
education
matters;
(vii)
to
establish
coordination
mechanisms
for
the
members
of
the
boards
of
directors
of
state-owned
universities
who
are
appointed
by
the
President;
(viii)
to
generate
and
coordinate
with
regional
and
local
governments
instances
of
participation
and
dialogue
with
and
among
higher
education
institutions
as
well
as
the
collaboration
and
transfer
of
best
practices
among
them,
and
between
such
institutions
and
secondary
schools;
(ix)
to
develop
studies
on
the
higher
education
system;
(x)
to
maintain
a
registry
of
higher
education
institutions
with
access
to
public
funding;
and
(xi)
and
to
have
any
other
function
that
the
law
may
assign
to
it.

(2)

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of
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Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
19.
Legal
and
Regulatory
Matters
(Continued)

would
be
mandatory
at
all
higher
education
institutions
that
receive
public
funding
through
the
MINEDUC.

(3)

(4)

The
Higher
Education
Quality
Council,
whose
purpose
would
be
to
evaluate,
accredit
and
promote
the
quality
of
autonomous
higher
education
institutions
and
of
the
careers
and
study
programs
they
offer,
and
which
would
be
responsible
for
executing
the
institutional
accreditation
processes
and
undergraduate
and
graduate
career
and
study
programs
accreditation
processes,
would
be
composed
of
11
directors,
nine
of
which
would
be
appointed
by
the
President
of
the
Republic.
The
functions
of
the
Higher
Education
Quality
Council
would
include:
(i)
managing
and
resolving
the
accreditation
processes;
(ii)
proposing
the
quality
criteria
and
standards
for
institutional
accreditation
and
accreditation
of
undergraduate
and
graduate
careers
and
study
programs
to
the
MINEDUC;
(iii)
maintaining
public
information
systems
that
contain
relevant
decisions
regarding
the
different
accreditation
processes;
(iv)
executing
and
promoting
actions
for
continuous
improvement
of
the
quality
of
higher
education
institutions;
(v)
keeping
a
registry
of
peer
reviewers
who
are
part
of
the
accreditation
process;
(vi)
training
peer
reviewers;
and
(vii)
submitting
data
to
the
National
Higher
Education
Information
System.

335

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
19.
Legal
and
Regulatory
Matters
(Continued)

accreditation
process
would
include
the
evaluation,
for
all
campuses
and
for
the
undergraduate
careers
and
programs
selected
by
the
board
of
the
Higher
Education
Quality
Council,
of
the
management
and
institutional
resources,
internal
quality
assurance,
teaching
and
results
of
the
education
process,
generation
of
knowledge,
creation
and
innovation,
and
association
with
the
environment,
of
the
respective
higher
educational
institutions.
Accredited
institutions
would
be
classified
under
one
of
three
different
categories.
Category
C
institutions
would
need
to
obtain
prior
approval
of
the
Higher
Education
Quality
Council
to
open
new
campuses
or
programs,
while
Category
B
institutions
would
need
to
obtain
such
approval
only
to
open
careers
or
programs
in
a
field
of
knowledge
not
regularly
offered
by
the
institution
or
which
has
not
been
offered
in
the
last
two
years,
and
Category
A
institutions
would
not
need
to
obtain
any
approval
to
open
new
campuses,
careers
or
programs.

The
bill
also
provides
that
certain
careers
and
study
programs,
i.e.,
medical
and
education
programs,
as
well
as
doctorate-level
programs
be
mandatorily
accredited.

Accreditation
decisions
would
not
be
appealable
although
reconsideration
could
be
sought
before
the
Higher
Education
Quality
Council
not
later
than
15
days
after
the
notification
of
decision.

(5)

336

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
19.
Legal
and
Regulatory
Matters
(Continued)

claims,
and
mediate
claims,
when
applicable;
(xi)
investigate
and
resolve
complaints
that
arise;
(xii)
bring
charges,
process
them,
adopt
provisional
measures,
and
resolve
the
proceedings
underway
regarding
any
infraction
that
comes
to
its
attention;
(xiii)
apply
penalties
in
accordance
with
the
law;
(xiv)
apply
and
provide
administrative
interpretations
of
the
applicable
law,
and
issue
general
instructions
to
the
sector
subject
to
its
enforcement;
(xv)
send
information
brought
to
its
attention
in
the
exercise
of
its
duties
and
powers
to
the
Higher
Education
Quality
Council
when
such
information
indicates
violations
within
the
scope
of
the
matters
it
regulates;
(xvi)
remit
information
brought
to
its
attention
in
the
exercise
of
its
duties
to
the
Public
Prosecutor
when
such
information
indicates
that
a
crime
has
been
committed;
(xvii)
manage
the
information
it
compiles
in
the
exercise
of
its
duties,
in
a
coordinated
effort
with
the
Undersecretary
of
Higher
Education,
for
adequate
development
of
the
National
Higher
Education
Information
System;
(xviii)
reach
agreements
with
other
public
services
regarding
electronic
transfers
of
information
to
facilitate
execution
of
their
functions;
(xix)
generate
indexes,
statistics
and
studies
with
the
information
delivered
by
the
institutions
it
inspects,
and
produce
publications
within
the
scope
of
its
powers;
and
(xx)
provide
technical
advisory
services
to
the
MINEDUC
and
other
entities
within
the
scope
of
its
powers.

Sanctions
imposed
by
the
Superintendence
of
Higher
Education
would
be
appealable
to
the
courts.

(6)

(7)

337

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
19.
Legal
and
Regulatory
Matters
(Continued)

implement
vulnerable
student
support
programs
that
promote
their
retention,
providing
that
at
least
20%
of
the
total
admissions
of
the
university
are
granted
to
students
from
homes
within
the
country's
four
lowest-income
deciles.
The
institutions
that
would
be
part
of
the
public
funding
system
would
be
subject
to
regulation
of
fees
charged
which
would
be
set
by
the
Undersecretary
of
Higher
Education.

UDLA Chile Reaccreditation

The
National
System
of
Quality
Assurance
in
Higher
Education
is
a
law
that
establishes
a
system
of
institutional
accreditation
and
a
process
of
accreditation
of
courses
of
study
or
programs.
The
National
Accreditation
Commission
is
an
autonomous
entity
that
delivers
opinions
on
the
institutional
accreditation
of
higher
education
institutions
and
authorizes
the
private
agencies
in
charge
of
accreditation.
Institutional
accreditation
is
required
for
new
students
to
be
eligible
to
participate
in
the
CAE
Program.
On
October
17,
2013,
UDLA
Chile
was
notified
by
the
National
Accreditation
Commission
that
its
institutional
accreditation
would
not
be
renewed.
UDLA
Chile
appealed
this
decision
but
received
a
final
determination
that
the
appeal
was
denied
on
January
22,
2014.
UDLA
Chile
began
a
new
accreditation
process
during
the
last
quarter
of
2015.
On
March
16,
2016,
UDLA
Chile
was
notified
that
it
had
been
reaccredited
for
three
years,
from
March
2016
to
March
2019.

Turkish
Regulation
and
Internal
Investigation

Through
our
European
segment,
we
operate
Istanbul
Bilgi
University,
a
network
institution
located
in
Turkey
that
consolidates
under
the
variable
interest
entity
model.
Istanbul
Bilgi
University
is
established
as
a
"Foundation
High
Education
Institution"
(a
"Foundation
University")
under
the
Turkish
higher
education
law,
sponsored
by
an
educational
foundation
(the
"Bilgi
Foundation").
As
such,
it
is
subject
to
regulation,
supervision
and
inspection
by
the
Turkish
Higher
Education
Council
(the
"YÖK").
In
2014,
the
Turkish
parliament
amended
the
higher
education
law
to
provide
expanded
authority
to
the
YÖK
with
respect
to
Foundation
Universities,
including
authorizing
additional
remedies
for
violations
of
the
higher
education
law
and
of
regulations
adopted
by
the
YÖK.
On
November
19,
2015,
the
YÖK
promulgated
an
"Ordinance
Concerned
with
Amendment
to
Foundation
High
Education
Institutions"
(the
"Ordinance")
the
principal
effects
of
which
relate
to
the
supervision
and
inspection
of
Foundation
Universities
by
the
YÖK.
Under
the
Ordinance,
the
YÖK
has
expanded
authority
to
inspect
accounts,
transactions,
activities
and
assets
of
Foundation
Universities,
as
well
as
their
academic
units,
programs,
projects
and
subjects.
The
Ordinance
establishes
a
progressive
series
of
five
remedies
that
the
YÖK
can
take
in
the
event
it
finds
a
violation
of
the
Ordinance,
ranging
from
(1)
a
warning
and
request
for
correction
to
(2)
the
suspension
of
the
Foundation
University's
ability
to
establish
new
academic
units
or
programs
to
(3)
limiting
the
number
of
students
the
Foundation

338

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
19.
Legal
and
Regulatory
Matters
(Continued)

During
the
fourth
quarter
of
2014,
we
recorded
an
operating
expense
of
$18,000
(the
value
of
40,000
Turkish
Liras
at
the
date
of
donation)
for
a
donation
by
our
network
institution
in
Turkey
to
a
charitable
foundation.
We
believed
the
donation
was
encouraged
by
the
Turkish
government
to
further
a
public
project
supported
by
the
government
and
expected
that
it
would
enhance
the
position
and
ongoing
operations
of
our
institution
in
Turkey.
The
Company
has
learned
that
the
charitable
foundation
which
received
the
donation
disbursed
the
funds
at
the
direction
of
a
former
senior
executive
at
our
network
institution
in
Turkey
and
other
external
individuals
to
a
third
party
without
our
knowledge
or
approval.

In
June
2016,
the
Audit
Committee
of
the
Board
of
Directors
initiated
an
internal
investigation
into
this
matter
with
the
assistance
of
external
counsel.
The
investigation
concerns
the
facts
surrounding
the
donation,
violations
of
the
Company's
policies,
and
possible
violations
of
the
U.S.
Foreign
Corrupt
Practices
Act
(FCPA)
and
other
applicable
laws
in
what
appears
to
be
a
fraud
perpetrated
by
the
former
senior
executive
at
our
network
institution
in
Turkey
and
other
external
individuals.
This
includes
an
investigation
to
determine
if
the
diversion
was
part
of
a
scheme
to
misappropriate
the
funds
and
whether
any
portion
of
the
funds
was
paid
to
government
officials.
As
of
the
date
of
this
prospectus,
we
have
not
identified
that
any
other
officers
or
employees
outside
of
Turkey
were
involved
in
the
diversion
of
the
intended
donation.
Although
we
are
pursuing
efforts
to
recover
the
diverted
funds,
including
through
legal
proceedings,
there
is
no
assurance
that
we
will
be
successful.

339

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
19.
Legal
and
Regulatory
Matters
(Continued)

We
have
been
advised
by
Turkish
counsel
that,
under
Turkish
law,
a
Foundation
University
may
not
make
payments
that
cause
a
decrease
in
the
university's
wealth
or
do
not
otherwise
benefit
the
university.
Given
the
uncertainty
of
recovery
of
the
diverted
donation
and
to
mitigate
any
potential
regulatory
issues
in
Turkey
relating
to
the
donation,
certain
Laureate-owned
entities
that
are
members
of
the
foundation
that
controls
our
network
institution
in
Turkey
have
contributed
an
amount
of
approximately
$13,000
(the
value
of
40,000
Turkish
Liras
on
November
4,
2016,
the
date
of
contribution)
to
our
network
institution
in
Turkey
to
reimburse
it
for
the
donation.
As
a
result
of
the
investigation,
which
is
ongoing,
we
took
steps
to
remove
the
former
senior
executive
at
our
network
institution
in
Turkey.
Because
of
the
complex
organizational
structure
in
Turkey,
this
took
approximately
one
month
and
during
that
period
our
access
to
certain
aspects
of
the
business
including
the
financial
and
other
records
of
the
university
was
interrupted.
The
former
senior
executive
is
now
no
longer
affiliated
with
our
network
institution
and
we
again
have
access
to
the
financial
and
other
records
of
the
university.

The
YÖK
conducts
annual
audits
on
the
operations
of
Istanbul
Bilgi
University
and
currently
is
in
the
process
of
completing
its
most
recent
audit.
We
cannot
yet
determine
the
impact
of
this
audit
on
our
business,
financial
condition
or
results
of
operations.

Note
20.
Fair
Value
Measurement

Fair
value
is
defined
as
the
price
that
would
be
received
to
sell
an
asset
or
paid
to
settle
a
liability
in
an
orderly
transaction
between
market
participants
at
the
measurement
date.
Accounting
standards
utilize
a
fair
value
hierarchy
that
prioritizes
the
inputs
to
valuation
techniques
used
to
measure
fair
value
into
three
levels,
which
are
described
below:

•

Level
1—Quoted
prices
(unadjusted)
for
identical
assets
or
liabilities
in
active
markets;

Level
2—Observable
inputs
other
than
quoted
prices
that
are
either
directly
or
indirectly
observable
for
the
asset
or
liability;

Level
3—Unobservable
inputs
that
are
supported
by
little
or
no
market
activity.

These
levels
are
not
necessarily
an
indication
of
the
risk
of
liquidity
associated
with
the
financial
assets
or
liabilities
disclosed.
Assets
and
liabilities
are
classified
in
their
entirety
based
on
the
lowest
level
of
input
that
is
significant
to
the
fair
value
measurement,
as
required
under
ASC
820-10,
"Fair
Value
Measurement."
Effective
January
1,
2016,
we
adopted
ASU
2015-07.
Under
ASU
2015-07,
assets
for
which
fair
value
is
measured
at
net
asset
value
per
share
using
the
practical
expedient,
such
as
the
Company's
deferred
compensation
plan
assets,
should
not
be
categorized
in
the
fair
value
hierarchy.

340

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
20.
Fair
Value
Measurement
(Continued)

Laureate's
derivative
instruments
are
its
only
assets
and
liabilities
that
are
adjusted
to
fair
value
each
reporting
period.

Derivative
instruments
—Laureate
uses
derivative
instruments
as
economic
hedges
for
bank
debt
and
interest
rate
risk.
Their
values
are
derived
using
valuation
models
commonly
used
for
derivatives.
These
valuation
models
require
a
variety
of
inputs,
including
contractual
terms,
market
prices,
forward-price
yield
curves,
notional
quantities,
measures
of
volatility
and
correlations
of
such
inputs.
Our
valuation
models
also
reflect
measurements
for
credit
risk.
Laureate
concluded
that
the
fair
values
of
our
derivatives
are
based
on
unobservable
inputs,
or
Level
3
assumptions.
The
significant
unobservable
input
used
in
the
fair
value
measurement
of
the
Company's
derivative
instruments
is
our
own
credit
risk.
Holding
other
inputs
constant,
a
significant
increase
(decrease)
in
our
own
credit
risk
would
result
in
a
significantly
lower
(higher)
fair
value
measurement
for
the
Company's
derivative
instruments.

Laureate's
financial
assets
and
liabilities
that
are
measured
at
fair
value
on
a
recurring
basis
as
of
December
31,
2016
were
as
follows:

Assets
Derivative
instruments
Liabilities
Derivative
instruments

Total

Level
1

Level
2

Level
3

4,464
$ —
$ —
$

4,464

$ 12,968
$ —
$ —
$ 12,968

Laureate's
financial
assets
and
liabilities
that
are
measured
at
fair
value
on
a
recurring
basis
as
of
December
31,
2015
were
as
follows:

Assets
Derivative
instruments
Liabilities
Derivative
instruments

Total

Level
1

Level
2

Level
3

238
$ —
$ —
$

238

$ 20,014
$ —
$ —
$ 20,014

341

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
20.
Fair
Value
Measurement
(Continued)

The
changes
in
our
Level
3
instruments
measured
at
fair
value
on
a
recurring
basis
for
the
year
ended
December
31,
2016
were
as
follows:

Balance
December
31,
2015
Gains
(losses)
included
in
earnings:
Unrealized
gains,
net
Realized
losses,
net
Included
in
other
comprehensive
income
Included
in
issuance
of
Series
A
convertible
redeemable
Preferred
Stock
Purchases
and
settlements:
Purchases
Settlements
Currency
translation
adjustment
Balance
December
31,
2016
Unrealized
gains,
net
relating
to
assets
and
liabilities
held
at
December
31,
2016

Total
Assets

(Liabilities)

(19,776)

946

(7,030)
8,032

2,729

—

7,030

(435)
(8,504)
946

The
changes
in
our
Level
3
instruments
measured
at
fair
value
on
a
recurring
basis
for
the
year
ended
December
31,
2015
were
as
follows:

Balance
December
31,
2014
Losses
included
in
earnings:
Unrealized
losses,
net
Realized
losses,
net
Included
in
other
comprehensive
income
Purchases
and
settlements:
Purchases
Settlements
Currency
translation
adjustment
Balance
December
31,
2015
Unrealized
losses,
net
relating
to
assets
and
liabilities
held
at
December
31,
2015

342

Total
Assets

(Liabilities)

(24,255)

(1,988)
(619)
5,629

—

619

838

(19,776)
(1,988)

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
20.
Fair
Value
Measurement
(Continued)

The
following
table
presents
quantitative
information
regarding
the
significant
unobservable
inputs
utilized
in
the
fair
value
measurements
of
the
Company's
assets
and
liabilities
classified
as
Level
3
for
the
year
ended
December
31,
2016:

Fair
Value
at

December
31,

2016

Valuation
Technique

Unobservable
Input

Range/

Input
Value

Contingent
redemption
features—

Series
A
Preferred
Stock

Cross
currency
and
interest
rate
swaps

4,464
Monte
Carlo
Simulation
Method
Own
credit
risk

Own
credit
risk

12,968

Discounted
Cash
Flow

4.00%
4.00%

Note
21.
Restructuring
Costs

During
the
fourth
quarter
of
2015,
Laureate
approved
a
plan
of
restructuring,
which
primarily
included
workforce
reductions
in
order
to
reduce
operating
costs
in
response
to
overcapacity
at
certain
locations.
The
Company
recorded
the
estimated
cost
of
the
restructuring
of
$15,476,
which
consisted
of
employee
severance,
in
Direct
costs
in
the
2015
Consolidated
Statement
of
Operations.
Of
the
total
restructuring
liability
recorded
during
2015,
$10,912
represented
one-time
employee
termination
benefits
recognized
in
accordance
with
ASC
420,
"Exit
or
Disposal
Cost
Obligations"
and
$4,564
represented
contractual
employee
termination
costs
recognized
in
accordance
with
ASC
712,
"Compensation—Nonretirement
Postemployment
Benefits."
We
paid
$5,810
during
the
fourth
quarter
of
2015,
and
the
remaining
liability
at
December
31,
2015,
after
currency
adjustments
of
$567,
was
$10,233.
Substantially
all
of
this
balance
was
paid
during
2016
and
the
remaining
liability
is
expected
to
be
settled
during
the
first
quarter
of
2017.
The
restructuring
liability
is
included
in
Accrued
expenses
in
our
December
31,
2016
and
2015
Consolidated
Balance
Sheets.

The
following
is
a
rollforward
of
the
restructuring
liability
from
December
31,
2015
through
December
31,
2016:

Balance
at

December
31,
2015

Expense

Adjustments

Cash

Payments

Currency

Adjustments

Balance
at

December
31,
2016

Employee
severance—one
time
termination
$
Employee
severance—contractual

6,259
$

(405) $ (5,901) $

145
$

termination

Total

3,974

10,233
$

(333)

(3,649)

(738) $ (9,550) $

231
$

176

Note
22.
Quarterly
Financial
Data
(Unaudited)

The
following
quarterly
financial
information
reflects
all
normal
recurring
adjustments
that
are,
in
the
opinion
of
management,
necessary
for
a
fair
statement
of
the
results
of
the
interim
periods.

343

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
22.
Quarterly
Financial
Data
(Unaudited)
(Continued)

Earnings
per
share
are
computed
independently
for
each
of
the
quarters
presented.
Per
share
amounts
may
not
sum
due
to
rounding.
Summarized
quarterly
operating
data
were
as
follows:

2016
Quarters
Ended

Per
share
amounts
in
whole
dollars
Revenues
Operating
costs
and
expenses
Operating
income
(loss)
Income
(loss)
from
continuing
operations
Net
(income)
loss
attributable
to
noncontrolling
interests
Net
income
(loss)
attributable
to
Laureate
Education,
Inc.

December
31

$ 1,175,893
$

1,004,913

170,980

38,464

2,844

41,308

September
30

June
30

March
31

929,855
$ 1,231,910
$
917,353

12,502

80,930

5,387

86,317

1,021,342

210,568

349,238

(1,849)

347,389

906,534

917,691

(11,157)
(102,446)
(721)
(103,167)

Earnings
(loss)
per
share:
Basic
net
income
(loss)
per
share
attributable
to
common

stockholders

Diluted
net
income
(loss)
per
share
attributable
to
common

stockholders

0.27
$

0.66
$

2.60
$

(0.76)

0.27
$

0.66
$

2.59
$

(0.76)

2015
Quarters
Ended

Per
share
amounts
in
whole
dollars
Revenues
Operating
costs
and
expenses
Operating
income
(loss)
(Loss)
income
from
continuing
operations
Net
(income)
loss
attributable
to
noncontrolling
interests
Net
(loss)
income
attributable
to
Laureate
Education,
Inc.

December
31

$ 1,150,503
$

1,025,572

124,931

(16,140)

(527)

(16,667)

September
30

June
30

March
31

985,395
$ 1,270,177
$
952,076

33,319

(130,397)

1,785

(128,612)

1,037,537

232,640

56,932

(1,871)

55,061

885,584

939,517

(53,933)
(226,240)
210

(226,030)

Earnings
(loss)
per
share:
Basic
net
(loss)
income
per
share
attributable
to
common

stockholders

Diluted
net
(loss)
income
per
share
attributable
to
common

stockholders

(0.16) $

(0.96) $

0.40
$

(1.72)

(0.16) $

(0.96) $

0.40
$

(1.72)

Note
23.
Other
Financial
Information

Accumulated
Other
Comprehensive
Income

AOCI
in
our
Consolidated
Balance
Sheets
includes
the
accumulated
translation
adjustments
arising
from
translation
of
foreign
subsidiaries'
financial
statements,
the
unrealized
losses
on
derivatives

344

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
23.
Other
Financial
Information
(Continued)

designated
as
cash
flow
hedges,
and
the
accumulated
net
gains
or
losses
that
are
not
recognized
as
components
of
net
periodic
benefit
cost
for
our
minimum
pension
liability.
The
components
of
these
balances
were
as
follows:

December
31,
Foreign
currency
translation

Laureate

Education,
Inc.

2016
Noncontrolling

Interests

Total

Laureate

Education,
Inc.

Noncontrolling

Interests

Total

2015

loss

(1,044,222) $

(2,304) $ (1,046,526) $

(928,421) $

(2,420) $ (930,841)

Unrealized
losses
on

derivatives

Minimum
pension
liability

adjustment

Accumulated
other

comprehensive
(loss)
income

(5,218)

(2,615)

—

(5,218)

(13,250)

(2,615)

(11,006)

—

(13,250)

(11,006)

(1,052,055) $

(2,304) $ (1,054,359) $

(952,677) $

(2,420) $ (955,097)

Laureate
reports
changes
in
AOCI
in
our
Consolidated
Statements
of
Stockholders'
Equity.
See
also
Note
14,
Derivative
Instruments,
and
Note
18,
Benefit
Plans,
for
the
effects
of
reclassifications
out
of
AOCI
into
net
income.

Foreign Currency Exchange of Certain Intercompany Loans

Laureate
periodically
reviews
its
investment
and
cash
repatriation
strategies
to
ensure
that
we
meet
our
liquidity
requirements
in
the
United
States.
Laureate
recognized
currency
exchange
adjustments
attributable
to
intercompany
loans
that
are
not
designated
as
indefinitely
invested
as
Foreign
currency
exchange
gain
(loss),
net,
of
$42,592,
$(119,473)
and
$(96,617)
in
the
Consolidated
Statements
of
Operations
for
the
years
ended
December
31,
2016,
2015
and
2014,
respectively.

Supplemental
Schedule
for
Transactions
with
Noncontrolling
Interest
Holders

Transactions
with
noncontrolling
interest
holders
had
the
following
effects
on
the
equity
attributable
to
Laureate:

For
the
years
ended
December
31,
Net
income
(loss)
attributable
to
Laureate
Education,
Inc.

Increase
(decrease)
in
equity
for
purchases
of
noncontrolling
interests
Change
from
net
income
(loss)
attributable
to
Laureate
Education,
Inc.
and
net

2016

2015

$ 371,847
$ (316,248) $ (158,291)
(4,498)

(1,554)

1,003

2014

transfers
to
the
noncontrolling
interests

$ 372,850
$ (317,802) $ (162,789)

345

Table
of
Contents

Laureate
Education,
Inc.
and
Subsidiaries

Notes
to
Consolidated
Financial
Statements
(Continued)

(Dollars
and
shares
in
thousands)

Note
23.
Other
Financial
Information
(Continued)

Write
Off
of
Accounts
and
Notes
Receivable

During
the
years
ended
December
31,
2016,
2015
and
2014,
Laureate
wrote
off
approximately
$88,000,
$83,000
and
$94,000,
respectively,
of
fully
reserved
accounts
and
notes
receivable
that
were
deemed
uncollectible.

Note
24.
Supplemental
Cash
Flow
Information

Cash
interest
payments
were
$367,334,
$351,430
and
$321,015
for
the
years
ended
December
31,
2016,
2015
and
2014,
respectively.
Net
income
tax
cash
payments
were
$128,709,
$108,295
and
$68,676
for
the
years
ended
December
31,
2016,
2015
and
2014,
respectively.

On
November
6,
2015,
Laureate's
Board
of
Directors
declared
a
cash
distribution
totaling
$18,975,
which
represented
approximately
$0.14264
per
share
of
common
stock.
The
cash
distribution
was
paid
from
capital
in
excess
of
par
value,
following
shareholders'
approval.

On
December
12,
2014,
Laureate's
Board
of
Directors
authorized
the
declaration
and
payment
of
a
cash
distribution
totaling
$5,271,
which
represented
approximately
$0.04
per
share
of
common
stock,
subject
to
shareholder
approval
as
required
by
our
bylaws.
The
cash
distribution
was
paid
from
capital
in
excess
of
par
value
on
December
31,
2014,
following
shareholders'
approval.

Note
25.
Subsequent
Events

Stock
Option
Grant

In
connection
with
the
Executive
Profits
Interests
(EPI)
agreement,
on
January
31,
2017,
the
Company
granted
to
its
CEO
options
(the
EPI
Options)
to
purchase
2,773
shares
of
its
Class
B
common
stock.
The
EPI
Options
vested
upon
consummation
of
the
initial
public
offering
(IPO)
on
February
6,
2017.
The
exercise
price
of
the
EPI
Options
is
equal
to
(i)
$17.00
with
respect
to
50%
of
the
shares
of
our
Class
B
common
stock
subject
to
the
EPI
Option
and
(ii)
$21.32
with
respect
to
50%
of
the
shares
of
our
Class
B
common
stock
subject
to
the
EPI
Option,
and
the
EPI
Options
shall
remain
exercisable
until
December
31,
2019.
The
Company
will
record
share-based
compensation
expense
for
the
EPI
options
in
the
first
quarter
of
2017,
which
is
estimated
to
be
approximately
$14,600.

Flooding
in
Peru

In
2017,
Peru's
normally
arid
regions
experienced
significant
rainfall
and
subsequent
flooding.
At
least
one
of
our
campuses
located
there
suffered
flood-
related
damage;
however,
any
loss
from
damages
is
not
expected
to
be
material.
There,
as
elsewhere
in
the
country,
the
flood-related
damage
caused
a
range
of
disruptions,
including
in
our
case
a
delay
in
the
regularly
scheduled
start
of
classes
for
the
semester,
which
may
cause
revenue
anticipated
to
occur
in
the
first
quarter
of
2017
not
to
be
recognized
until
the
second
quarter.

346

Table
of
Contents

Laureate
Education,
Inc.

Supplemental
Financial
Schedule
II—Valuation
and
Qualifying
Accounts

(In
Thousands)

Description
Deducted
from
asset
accounts:

Year
ended
December
31,
2016:
Allowance
for
doubtful
accounts
receivable(1)(2)
Valuation
allowance
on
deferred
tax
assets(4)

(5)

Total
deducted
from
asset
accounts
Deducted
from
asset
accounts:

Year
ended
December
31,
2015:
Allowance
for
doubtful
accounts
receivable(2)
Valuation
allowance
on
deferred
tax
assets(3)

Total
deducted
from
asset
accounts
Deducted
from
asset
accounts:

Year
ended
December
31,
2014:
Allowance
for
doubtful
accounts
receivable(1)(2)
Valuation
allowance
on
deferred
tax
assets(3)

Total
deducted
from
asset
accounts

Additions

Balance
at

Beginning

of
Period

Charges
to

Costs
and

Expenses

Charges
to

Other

Accounts

Deductions

Balance
at

End
of

Period

161,658
$ 108,019
$

6,908
$

(80,315) $

196,270

1,092,951

45,972

$ 1,254,609
$ 153,991
$

15,085

21,993
$

—

1,154,008

(80,315) $ 1,350,278

170,140
$ 107,162
$
994,434

157,960

$ 1,164,574
$ 265,122
$

161,658

—
$ (115,644) $
—

(59,443)
1,092,951

—
$ (175,087) $ 1,254,609

167,521
$ 110,302
$
907,203

94,791

$ 1,074,724
$ 205,093
$

170,140

4,736
$ (112,419) $
994,434

(7,560)

4,736
$ (119,979) $ 1,164,574

—

Notes:

(1)

(2)

(3)

(4)

(5)

Charges
to
Other
Accounts
includes
reclassifications.

Deductions
includes
accounts
receivable
written
off
against
the
allowance
(net
of
recoveries),
reclassifications,
and
foreign
currency
translation.
The
beginning
and
ending
balances
of
the
allowance
for
doubtful
accounts
receivable
includes
the
current
portion,
as
shown
on
the
face
of
Consolidated
Balance
Sheets,
in
addition
to
the
noncurrent
portion
that
is
included
in
notes
receivable,
net
on
the
Consolidated
Balance
Sheets.

Deductions
includes
reclassifications
and
foreign
currency
translation.

Charges
to
Costs
and
Expenses
includes
immaterial
corrections
recorded
in
2016
related
to
prior
years'
valuation
allowance
and
deferred
tax
assets.
The
adjustments
affect
deferred
tax
assets
with
an
equal
and
offsetting
effect
to
valuation
allowance,
and
have
no
impact
on
the
Consolidated
Balance
Sheets,
Consolidated
Statements
of
Operations
or
Consolidated
Statements
Cash
Flows.

Charges
to
Other
Accounts
includes
reclassifications
and
foreign
currency
translation.

347

Table
of
Contents

ITEM
9.

CHANGES
IN
AND
DISAGREEMENTS
WITH
ACCOUNTANTS
ON
ACCOUNTING
AND
FINANCIAL
DISCLOSURE

None.

ITEM
9A.

CONTROLS
AND
PROCEDURES

This
Form
10-K
does
not
include
the
conclusions
of
management
regarding
the
effectiveness
of
the
Company's
disclosure
controls
and
procedures,
a
report
of
management's
assessment
regarding
internal
controls
over
financial
reporting,
or
an
attestation
report
of
the
Company's
registered
public
accounting
firm
due
to
a
transition
period
established
by
the
rules
of
the
Securities
and
Exchange
Commission
for
newly
public
companies.

ITEM
9B.

OTHER
INFORMATION

None.

ITEM
10.

DIRECTORS,
EXECUTIVE
OFFICERS,
AND
CORPORATE
GOVERNANCE

Directors
and
Executive
Officers

PART
III

The
following
table
sets
forth
information
regarding
our
current
directors,
director
designees
and
executive
officers,
including
their
ages.
Our
directors
are
elected
in
accordance
with
the
provisions
of
the
Wengen
Securityholders'
Agreement.
See
"Item
13—Certain
Relationships
and
Related
Transactions,
and
Director
Independence—Information
Regarding
the
Laureate
Board."
Executive
officers
serve
at
the
request
of
the
board
of
directors.
There
are
no
family
relationships
among
any
of
our
current
directors,
director
designees
and
executive
officers.

Name
Douglas
L.
Becker
Eilif
Serck-Hanssen
Ricardo
Berckemeyer
Miguel
Carmelo
Timothy
F.
Daniels
Jonathan
A.
Kaplan
Alfonso
Martinez
Richard
J.
Patro
Karl
D.
Salnoske
Paula
Singer
Robert
W.
Zentz
Brian
F.
Carroll
Andrew
B.
Cohen
William
L.
Cornog
Pedro
del
Corro
George
Muñoz
Dr.
Judith
Rodin
Ian
K.
Snow
Steven
M.
Taslitz
Quentin
Van
Doosselaere
Robert
B.
Zoellick

Position

Age

51
Director,
Chairman
of
the
Board,
Chief
Executive
Officer

51
President,
Chief
Administrative
Officer
and
Chief
Financial
Officer

47
Chief
Operating
Officer
and
Chief
Executive
Officer,
LatAm

60
Chief
Executive
Officer,
Europe

54
Chief
Executive
Officer,
Asia,
Middle
East
and
Africa

52
President/CEO
of
Walden
University
and
CEO
of
Laureate
Online

58
Chief
Human
Resources
Officer

56
Chief
Executive
Officer,
Global
Products
and
Services

63
Chief
Information
Officer

62
Chief
Network
Officer

63
Senior
Vice
President,
Secretary,
General
Counsel

45
Director

46
Director

52
Director

59
Director

65
Director

72
Director

47
Director

58
Director

55
Director

63
Director

348

Table
of
Contents

Effective
March
31,
2017,
Mr.
Carmelo
will
retire
as
Chief
Executive
Officer,
Europe,
upon
the
combination
of
our
Europe
operations
with
our
AMEA
operations,
and
will
no
longer
be
an
executive
officer.
At
that
time,
Mr.
Daniels
will
become
the
Chief
Executive
Officer
of
the
combined
Europe
and
AMEA
operations.
See
"Presentation
of
Financial
Information."
Mr.
Patro
plans
to
retire
from
the
Company
not
later
than
December
31,
2017.

Douglas L. Becker has
served
as
our
Chairman
and
Chief
Executive
Officer
since
February
2000.
Mr.
Becker
served
as
President
from
June
2011
until
September
2015.
From
April
1993
until
February
2000,
Mr.
Becker
served
as
the
Company's
President
and
Co-Chief
Executive
Officer.
Mr.
Becker
has
been
a
director
of
the
Company
since
December
1989.
Mr.
Becker
was
a
director
of
Constellation
Energy
Corporation
from
April
1999
through
May
2009.
From
2004
to
June
2015,
Mr.
Becker
served
as
a
director
of
Meritas
LLC,
a
privately
owned
family
of
college
preparatory
schools.
Mr.
Becker
also
serves
on
the
boards
of
two
nonprofit
companies:
International
Youth
Foundation,
a
nonprofit
Global
NGO
focusing
on
youth
employment,
education
and
civic
engagement,
for
which
Mr.
Becker
serves
as
Chairman
and
as
a
member
of
its
audit
committee;
and
Port
Discovery
Children's
Museum,
located
in
Baltimore,
Maryland.

Eilif Serck-Hanssen serves
as
President,
Chief
Administrative
Officer
and
Chief
Financial
Officer,
a
position
he
has
held
since
March
2017.
From
July
2008
through
March
2017,
Mr.
Serck-Hanssen
served
as
our
Executive
Vice
President,
Chief
Financial
Officer.
From
February
2008
until
July
2008,
Mr.
Serck-Hanssen
served
as
chief
financial
officer
and
president
of
international
operations
at
XOJET,
Inc.
In
January
2005,
Mr.
Serck-Hanssen
was
part
of
the
team
that
founded
Eos
Airlines,
Inc.,
a
premium
airline,
and
until
February
2008,
Mr.
Serck-Hanssen
served
as
its
executive
vice
president
and
chief
financial
officer.
Prior
to
starting
Eos
Airlines,
Mr.
Serck-Hanssen
served
in
several
financial
executive
positions
at
US
Airways,
Inc.
(now
American
Airlines,
Inc.)
and
Northwest
Airlines,
Inc.
(now
Delta
Airlines,
Inc.),
including
serving
as
a
senior
vice
president
and
Treasurer
of
US
Airways,
Inc.
Prior
to
joining
the
airline
industry,
Mr.
Serck-Hanssen
spent
over
five
years
with
PepsiCo,
Inc.,
in
various
international
locations
and
three
years
with
PricewaterhouseCoopers
LLP
(formerly
Coopers
&
Lybrand
Deloitte)
in
London.
Mr.
Serck-Hanssen
earned
his
M.B.A.
in
finance
at
the
University
of
Chicago
Booth
School
of
Business,
a
B.A.
in
management
science
from
the
University
of
Kent
at
Canterbury
(United
Kingdom),
and
a
B.S.
in
civil
engineering
from
the
Bergen
University
College
(Norway).
He
is
an
Associate
Chartered
Accountant
(ACA)
and
a
member
of
the
Institute
of
Chartered
Accountants
in
England
and
Wales.

Ricardo Berckemeyer serves
as
Chief
Operating
Officer
and
Chief
Executive
Officer,
Latin
America,
a
position
he
has
held
since
March
2017.
From
May
2012
through
March
2017,
Mr.
Berckemeyer
served
as
our
Chief
Executive
Officer,
Latin
America.
From
January
2011
through
April
2012,
Mr.
Berckemeyer
served
as
Chief
Executive
Officer
of
Laureate's
Andean
Region.
From
2002,
when
Mr.
Berckemeyer
joined
the
Company,
through
December
2010,
he
served
as
Senior
Vice
President—South
America
within
Laureate's
Latin
American
operations,
where
he
had
responsibility
for
business
development
in
South
America.
Mr.
Berckemeyer
received
a
bachelor's
degree
in
economics
from
Universidad
del
Pacifico
(Peru)
and
an
M.B.A.
from
the
University
of
North
Carolina
at
Chapel
Hill.

Miguel Carmelo has
served
as
Chief
Executive
Officer,
Europe
since
May
2012,
and
as
President
of
Universidad
Europea
de
Madrid
since
1999.
From
1999
until
May
2012,
Mr.
Carmelo
served
as
President
of
the
Mediterranean
Region
of
Laureate
International
Universities.
Mr.
Carmelo
received
a
Ph.D.
in
economics
from
Universidad
Autónoma,
Madrid.

Timothy F. Daniels serves
as
Chief
Executive
Officer,
Asia,
the
Middle
East
and
Africa,
a
position
he
has
held
since
August
2013.
From
2011
through
2013,
Mr.
Daniels
was
the
president
of
Apollo
Global,
where
he
focused
on
developing
an
international
network
of
postsecondary
operations
for
a
joint
venture
between
Apollo
Group
and
The
Carlyle
Group.
From
2003
through
2010,
Mr.
Daniels
was
the
chairman
and
chief
executive
officer
of
Wall
Street
Institute
International,
where
he
led
the

349

Table
of
Contents

turnaround
of
the
leading
global
provider
of
English
language
instruction.
From
2000
through
2003,
Mr.
Daniels
served
as
the
managing
director
for
Sylvan
Ventures,
where
he
was
responsible
for
all
aspects
of
K-12
sector
investments.
Mr.
Daniels
received
a
B.A.
in
business
administration
from
the
University
of
Wisconsin
and
an
M.B.A.
from
the
University
of
Chicago.

Jonathan A. Kaplan has
served
as
President/CEO
of
Walden
University
and
CEO
of
Laureate
Online
since
January
2017.
Mr.
Kaplan
has
served
as
President
and/or
CEO
of
Walden
University
since
2007
and
during
that
period
he
has
also
served
as
the
CEO
of
various
business
units
within
our
GPS
segment.
Mr.
Kaplan
received
an
A.B.
from
Harvard
College
and
a
J.D.
from
Boston
University.

Alfonso Martinez serves
as
our
Chief
Human
Resources
Officer.
Mr.
Martinez
joined
the
Company
in
2013
as
the
head
of
Human
Resources
for
our
GPS
segment.
From
2008
to
2013,
Mr.
Martinez
was
the
executive
vice
president
of
human
resources
for
NII
Holdings,
Inc.,
a
provider
of
wireless
communication
services.
From
2005
to
2008,
Mr.
Martinez
held
various
management
positions
with
Sodexho,
Inc.,
an
integrated
food
and
facilities
management
service
provider,
and
was
most
recently
the
group
vice
president
of
global
talent.
From
2003
to
2005,
Mr.
Martinez
was
the
chief
executive
officer
of
the
Hispanic
Association
on
Corporate
Responsibility.
Prior
to
2003,
Mr.
Martinez
held
various
positions
with
Marriott
International,
Inc.
Mr.
Martinez
earned
a
B.S.
from
the
University
of
Denver
and
a
M.S.
in
organizational
psychology
from
Johns
Hopkins
University.

Richard J. Patro serves
as
Chief
Executive
Officer,
Global
Products
and
Services,
a
position
he
has
held
since
January
2016.
From
January
2015
to
December
2015,
he
served
as
President,
Global
Products
and
Services,
and
from
January
2008
to
December
2015,
he
served
as
Chief
Operating
Officer,
Global
Products
and
Services,
and
its
predecessor
businesses.
Mr.
Patro
joined
the
Company
as
a
finance
director
in
1995
and
served
in
finance
positions
of
increasing
importance
prior
to
his
appointment
as
Chief
Operating
Officer,
Global
Products
and
Services.
Mr.
Patro
earned
a
B.S.
in
accounting
from
Loyola
University
Maryland.

Karl D. Salnoske has
served
as
our
Chief
Information
Officer
since
March
2014.
From
2010
to
2014,
Mr.
Salnoske
was
the
executive
vice
president
and
CIO
of
GXS,
a
leading,
multinational
business-to-business
software
company
where
he
oversaw
all
aspects
of
the
company's
internal
and
external
IT
systems,
data
center
operations,
customer
support
and
quality
assurance.
From
2004
to
2009,
Mr.
Salnoske
was
the
vice
president
and
CIO
at
Schering-Plough,
where
he
directed
the
planning,
acquisition,
development
and
operation
of
computer
and
IT
systems
for
all
facilities
globally.
Mr.
Salnoske
also
previously
served
as
a
general
manager
for
Software
Solutions
at
IBM
as
well
as
a
senior
IT
specialist
at
McKinsey
&
Company.
Mr.
Salnoske
earned
a
B.S.
in
electrical
engineering
from
Virginia
Polytechnic
Institute.

Paula Singer joined
Laureate
in
1993.
Ms.
Singer
has
served
as
Chief
Network
Officer
since
January
2015.
From
2011
to
December
2015,
she
served
as
Chief
Executive
Officer
of
Global
Products
and
Services.
From
July
2001
to
January
2011,
Ms.
Singer
served
as
President
of
the
Laureate
Higher
Education
Group.
Ms.
Singer
earned
a
B.S.
in
education
from
the
University
of
Connecticut.

Robert W. Zentz has
served
as
Senior
Vice
President,
General
Counsel,
Chief
Legal
Officer
and
Secretary
of
Laureate
since
joining
the
Company
in
1998.
Mr.
Zentz
oversees
all
of
Laureate's
legal
affairs
worldwide
and
has
been
the
architect
of
Laureate's
international
structure
and
its
expansion
into
28
countries.
Prior
to
joining
Laureate,
Mr.
Zentz
served
as
North
American
general
counsel
for
A.C.
Nielsen,
Inc.,
the
global
marketing
and
media
research
company
and
directed
the
legal
work
for
the
sale
of
Dun
&
Bradstreet's
Donnelley
Marketing
yellow
pages
business.
Prior
to
AC
Nielsen,
Mr.
Zentz
was
general
counsel
of
A.S.
Hansen,
Inc.,
a
global
compensation
and
benefits
firm
headquartered
in
Chicago
and
negotiated
the
sale
of
that
business
to
Mercer,
Inc.
Mr.
Zentz
earned
a
B.S.
in
accounting
from
Indiana
University
and
a
J.D.
from
Valparaiso
University
Law
School.

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Brian F. Carroll is
the
Managing
Partner
of
Carroll
Capital
LLC.
He
was,
through
2016,
a
Member
of
KKR,
a
global
alternative
asset
manager.
He
joined
KKR
in
1995
and
was
head
of
the
Consumer
and
Retail
teams
in
Europe.
He
was
also
a
member
of
the
European
Investment
Committee.
In
addition
to
serving
as
a
director
of
Laureate,
in
the
past
five
years
he
has
served
as
a
member
of
the
board
of
directors
of
Pets
at
Home
Group
Plc,
Cognita,
Northgate
Information
Solutions,
SMCP
and
Afriflora.
Prior
to
joining
KKR,
Mr.
Carroll
was
with
Donaldson,
Lufkin
&
Jenrette
where
he
worked
on
a
broad
range
of
high
yield
financing,
corporate
finance
and
merchant
banking
transactions.
He
has
a
B.S.
and
B.A.S.
from
the
University
of
Pennsylvania,
and
an
M.B.A.
from
Stanford
University
Graduate
School
of
Business.
Mr.
Carroll
has
been
a
director
and
chairman
of
the
compensation
committee
of
our
board
of
directors
since
July
2007.

Andrew B. Cohen is
a
Managing
Director
at
Cohen
Private
Ventures,
which
invests
long-term
capital,
primarily
in
direct
private
investments
and
other
opportunistic
transactions,
on
behalf
of
Steven
A.
Cohen.
Prior
to
his
position
with
Cohen
Private
Ventures,
Mr.
Cohen
was
a
managing
director,
director
and
analyst
at
S.A.C.
Capital
Advisors,
L.P.,
an
investment
management
firm,
and
its
predecessor
from
2002
to
2005
and
2010
to
2014.
From
2005
to
2010,
Mr.
Cohen
was
a
managing
director
and
partner
of
Dune
Capital
Management
LP,
an
investment
management
firm.
Mr.
Cohen
began
his
career
at
Morgan
Stanley
where
he
was
an
analyst
in
the
real
estate
department
and
principal
investing
group
(MSREF)
and
then
an
associate
in
the
mergers
and
acquisitions
group
after
business
school.
Mr.
Cohen
received
his
B.A.
from
the
University
of
Pennsylvania
and
his
M.B.A.
from
the
Wharton
School
of
the
University
of
Pennsylvania.
Mr.
Cohen
is
a
director
of
Kadmon
Holdings,
Inc.
He
also
serves
on
the
boards
of
several
private
companies.
He
also
serves
on
the
National
Advisory
Board
of
the
Johns
Hopkins
Berman
Institute
of
Bioethics,
and
the
Painting
and
Sculpture
Committee
of
The
Whitney
Museum
of
American
Art.
Mr.
Cohen
has
been
a
director
since
June
2013.

William L. Cornog Mr.
Cornog
joined
KKR
Capstone,
a
consulting
firm
that
provides
services
to
KKR
portfolio
companies,
in
2002
and
currently
serves
as
Global
Head
of
KKR
Capstone.
Mr.
Cornog
serves
as
a
member
of
KKR's
Americas,
EMEA
and
APAC
Portfolio
Management
Committees.
Prior
to
joining
KKR
Capstone,
Mr.
Cornog
was
with
Williams
Communications
Group
as
the
senior
vice
president
and
general
manager
of
Network
Services.
Prior
to
Williams
Communications
Group,
Mr.
Cornog
was
a
partner
at
The
Boston
Consulting
Group.
Mr.
Cornog
has
also
worked
in
direct
marketing
with
Age
Wave
Communications
and
in
marketing
and
sales
positions
with
SmithKline
Beckman.
Mr.
Cornog
holds
a
B.A.
from
Stanford
University
and
an
M.B.A.
from
Harvard
Business
School.
Mr.
Cornog
has
been
a
director
since
February
2017.

Pedro del Corro Mr.
del
Corro
is
a
Member
of
Torreal,
S.A.,
one
of
the
largest
private
investment
firms
in
Spain.
He
joined
Torreal
in
1990
and
is
currently
a
Managing
Director
and
Member
of
the
Board.
In
addition
to
serving
as
a
director
of
Laureate,
he
is
currently
a
member
of
the
board
of
directors
of
Universidad
Europea
de
Madrid,
a
member
of
the
Laureate International Universities network
located
in
Spain,
Imagina,
Saba
Infraestructuras
and
Arbarin.
Prior
to
joining
Torreal,
Mr.
del
Corro
held
various
positions
with
Procter
&
Gamble
in
Spain,
Belgium,
the
United
Kingdom
and
Portugal.
He
has
a
law
degree
from
the
Universidad
de
Deusto
and
a
business
administration
degree
from
ICADE
Business
School—Universidad
Pontificia
Comillas.
Mr.
del
Corro
has
been
a
director
since
February
2017.

George Muñoz has
been
a
principal
in
the
Washington,
D.C.-based
investment
banking
firm
Muñoz
Investment
Banking
Group,
LLC
since
2001.
Mr.
Muñoz
has
also
been
a
partner
in
the
Chicago-based
law
firm
Tobin
&
Muñoz,
LLC
since
2002.
Mr.
Muñoz
served
as
President
and
Chief
Executive
Officer
of
the
Overseas
Private
Investment
Corporation
from
1997
to
January
2001.
Mr.
Muñoz
was
Chief
Financial
Officer
and
Assistant
Secretary
of
the
U.S.
Treasury
Department
from
1993
until
1997.
Mr.
Muñoz
is
a
certified
public
accountant
and
an
attorney.
Mr.
Muñoz
is
a
director
of
Marriott
International,
Inc.
(and
a
member
of
its
audit
committee),
Altria
Group,
Inc.
and
Anixter

351

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International,
Inc.,
and
a
trustee
of
the
National
Geographic
Society.
Mr.
Muñoz
has
been
a
director
since
March
2013
and
chairman
of
the
audit
committee
of
the
board
of
directors
since
August
2013.
Mr.
Muñoz
served
three
terms
as
president
of
the
Chicago
Board
of
Education
in
the
mid-1980s.
Mr.
Muñoz
has
taught
courses
in
globalization
at
Georgetown
University
in
Washington
D.C.
and
is
co-author
of
the
book
"Renewing
the
American
Dream:
A
Citizen's
Guide
for
Restoring
of
Competitive
Advantage."
Mr.
Muñoz
has
a
B.B.A.
in
Accounting
from
the
University
of
Texas,
a
J.D.
and
a
Master
of
Public
Policy
from
Harvard
University,
and
a
LL.M.
in
Taxation
from
DePaul
University.

Dr. Judith Rodin served
as
President
of
The
Rockefeller
Foundation
from
March
2005
to
January
2017.
The
foundation
supports
efforts
to
combat
global
social,
economic,
health
and
environmental
challenges.
From
1994
to
2004,
Dr.
Rodin
served
as
President
of
the
University
of
Pennsylvania.
Before
that,
Dr.
Rodin
chaired
the
Department
of
Psychology
at
Yale
University,
and
also
served
as
Dean
of
the
Graduate
School
of
Arts
and
Sciences
and
Provost,
and
served
as
a
faculty
member
at
the
university
for
22
years.
Dr.
Rodin
is
also
a
director
of
Citigroup
Inc.
and
Comcast
Corporation.
Dr.
Rodin
served
as
a
director
of
AMR
Corporation
from
1997
to
2013.
Dr.
Rodin
holds
a
B.A.
from
the
University
of
Pennsylvania
and
a
Ph.D.
from
Columbia
University.
Dr.
Rodin
has
been
a
director
since
December
2013.

Ian K. Snow is
chief
executive
officer
and
a
co-founding
Partner
of
Snow
Phipps
Group,
LLC,
a
private
equity
firm.
Prior
to
the
formation
of
Snow
Phipps
in
April
2005,
Mr.
Snow
was
a
Managing
Director
at
Ripplewood
Holdings
L.L.C.,
a
private
equity
firm,
where
he
worked
from
its
inception
in
1995
until
March
2005.
Mr.
Snow
received
a
B.A.,
with
honors,
in
history
from
Georgetown
University.
He
currently
serves
as
a
director
of
the
following
private
companies
in
which
Snow
Phipps
holds
an
equity
interest:
EnviroFinance
Group,
LLC,
a
company
specializing
in
financing
the
acquisition,
cleanup
and
redevelopment
of
contaminated
properties;
Velocity
Commercial
Capital,
Inc.,
a
small
balance
commercial
real
estate
lender;
ZeroChaos,
LLC,
a
provider
of
contingent
workforce
management
solutions;
Velvet,
Inc.,
a
designer,
manufacturer
and
wholesaler
of
upscale
apparel
brands;
and
Service
Champ,
Inc.,
a
vehicle
products
distributor.
In
addition,
from
1996
until
2007,
Mr.
Snow
was
a
director
(and,
from
2006
until
2007,
a
member
of
the
audit
committee
of
the
board
of
directors)
of
Asbury
Automotive
Group,
Inc.
Mr.
Snow
has
been
a
director
since
July
2007.

Steven M. Taslitz has
served
since
1983
as
a
Senior
Managing
Director
of
Sterling
Partners,
a
private
equity
firm
he
co-founded
with
Mr.
Becker
and
others.
Mr.
Taslitz
received
his
B.A.,
with
honors,
in
accounting
from
the
University
of
Illinois.
Mr.
Taslitz
currently
serves
as
a
director
of
the
following
privately
held
companies
in
which
Sterling
Partners
holds
an
equity
interest:
Conversant
Intellectual
Property,
Inc.,
an
intellectual
property
management
company;
Innovation
Holdings,
LLC,
parent
to
I/O
Data
Centers,
LLC
and
Baselayer,
LLC,
data
center
and
data
center
operating
systems
companies;
Prospect
Mortgage,
LLC,
a
retail
mortgage
origination
company;
Wengen
Investments
Limited;
Sterling
Fund
Management,
LLC;
Secondary
Opportunity
Book,
LLC;
Sterling
Venture
Partners,
LLC;
Sterling
Capital
Partners,
LLC;
Sterling
Capital
Partners
II,
LLC;
Sterling
Capital
Partners
III,
LLC;
SC
Partners
III
AIV
One
GP
Corporation;
Sterling
Partners
2009,
LLC;
and
Sterling
Capital
Partners
IV,
LLC.
In
addition,
from
April
2005
to
October
2012,
Mr.
Taslitz
was
a
director
of
Ameritox
Ltd.,
a
prescription
monitoring
solution
provider
and
Ameritox
Testing
Management,
Inc.,
a
laboratory
services
company;
Mr.
Taslitz
also
serves
on
the
compensation
committees
of
the
boards
of
directors
of
each
of
these
companies
other
than
Conversant
Intellectual
Property,
Inc.
and
serves
as
a
member
of
the
audit
committee
of
the
board
of
directors
of
Ameritox,
Ltd.
Mr.
Taslitz
has
been
a
director
since
July
2007.

Quentin Van Doosselaere is
Co-Chief
Executive
Officer
of
Bregal
Investments,
Inc.,
a
private
equity
investment
business.
Mr.
Van
Doosselaere
joined
Bregal
in
January
2009.
Following
his
business
school
graduation
in
1984,
he
moved
to
New
York
and
began
his
career
at
Drexel
Burnham
Lambert.
He
then
joined
Bankers
Trust
Co.
as
a
Managing
Director
and
ran
various
global
capital
markets
businesses.
In

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the
mid-nineties,
he
held
executive
positions
in
a
number
of
non-profit
organizations
before
going
into
academia.
He
was
affiliated
with
Columbia
University
and
Oxford
University
when
he
joined
Bregal.
Mr.
Van
Doosselaere
serves
as
a
member
on
the
investment
committees
of
Bregal
Capital,
Bregal
Sagemount,
Bregal
Partners,
Bregal
Freshstream,
Bregal
Energy,
Bregal
Private
Equity
Partners,
Ranch
Capital
Investment
and
Birchill
Exploration.
Mr.
Van
Doosselaere
holds
a
degree
from
the
Solvay
Brussels
School
of
Economics
of
the
Université
Libre
de
Bruxelles
(Belgium)
and
a
Ph.D.
from
Columbia
University.
Mr.
Van
Doosselaere
has
been
a
director
since
January
2015.

Robert B. Zoellick is
a
Senior
Fellow
at
the
Belfer
Center
for
Science
and
International
Affairs
at
Harvard
University.
He
is
a
director
of
Temasek
Holdings
(Private)
Ltd.
("Temasek"),
a
Singapore
corporation,
which
is
principally
engaged
in
the
business
of
investment
holding.
Mr.
Zoellick
has
been
a
director
of
Temasek
since
August
2013.
He
is
also
a
member
of
the
international
advisory
board
for
Rolls
Royce.
From
2007
to
2012,
Mr.
Zoellick
was
president
of
the
World
Bank
Group.
From
2006
to
2007,
Mr.
Zoellick
was
vice
chairman,
International,
of
Goldman
Sachs
and
from
2013
to
2016,
he
chaired
Goldman
Sachs's
International
Advisors.
He
also
served
as
a
strategic
advisor
to
the
Chairman
and
CEO
of
AXA,
the
global
insurance
firm
headquartered
in
Paris,
from
2013
to
2016.
Mr.
Zoellick
was
the
deputy
secretary
of
the
U.S.
Department
of
State
from
2005
to
2006
and
the
U.S.
Trade
Representative
from
2001
to
2005.
From
1993
to
2001,
Mr.
Zoellick
served
in
various
academic
and
executive
posts
at
the
U.S.
Naval
Academy,
Harvard
University,
Goldman
Sachs,
Fannie
Mae
and
the
Center
for
Strategic
and
International
Studies.
From
1985
to
1993,
Mr.
Zoellick
served
in
senior
posts
at
the
Treasury
and
State
departments,
as
well
as
White
House
deputy
chief
of
staff.
Mr.
Zoellick
received
his
B.A.
(Phi
Beta
Kappa)
from
Swarthmore
College
and
a
J.D.
(magna
cum
laude)
and
Master
of
Public
Policy
from
Harvard
University.
Mr.
Zoellick
has
been
a
director
since
December
2013.

During
the
past
ten
years,
none
of
Laureate,
its
executive
officers,
its
current
directors
or
its
director
designees
has
(i)
been
convicted
in
a
criminal
proceeding
(excluding
traffic
violations
and
similar
misdemeanors)
or
(ii)
been
a
party
to
any
judicial
or
administrative
proceeding
(except
for
matters
that
were
dismissed
without
sanction
or
settlement)
that
resulted
in
a
judgment,
decree
or
final
order
enjoining
such
person
from
future
violations
of,
or
prohibiting
activities
subject
to,
federal
or
state
securities
laws,
or
a
finding
of
any
violation
of
federal
or
state
securities
laws.

Except
as
described
below,
during
the
past
ten
years
(i)
no
petition
has
been
filed
under
federal
bankruptcy
laws
or
any
state
insolvency
laws
by
or
against
any
of
our
executive
officers,
current
directors
or
director
designees,
(ii)
no
receiver,
fiscal
agent
or
similar
officer
was
appointed
by
a
court
for
the
business
or
property
of
any
of
our
executive
officers,
current
directors
or
director
designees
and
(iii)
none
of
our
executive
officers,
current
directors
or
director
designees
was
an
executive
officer
of
any
business
entity
or
a
general
partner
of
any
partnership
at
or
within
two
years
before
the
filing
of
a
petition
under
the
federal
bankruptcy
laws
or
any
state
insolvency
laws
by
or
against
such
entity.

In
January
2005,
Mr.
Serck-Hanssen
joined
the
team
that
founded
Eos
Airlines,
Inc.
Eos
Airlines
was
an
all
first-class
shuttle
between
New
York
and
London.
Mr.
Serck-Hanssen
left
Eos
in
February
2008,
and
Eos
filed
for
protection
under
Chapter
11
of
the
U.S.
Bankruptcy
Code
in
late
April
2008,
after
the
collapse
of
Bear
Stearns
&
Co.,
its
largest
single
client,
and
the
start
of
the
U.S.
economic
downturn,
which
caused
funding
commitments
from
its
financial
sponsors
to
be
withdrawn.
In
December
2008,
Mr.
Martinez
joined
NII
Holdings,
Inc.
("NII
Holdings")
as
vice
president
of
human
resources.
Mr.
Martinez
left
NII
Holdings
in
2013
and
NII
Holdings
filed
for
protection
under
Chapter
11
of
the
U.S.
Bankruptcy
Code
in
September
2014.

With
the
exception
of
Mr.
Van
Doosselaere,
who
holds
Belgian
citizenship,
Mr.
del
Corro,
who
holds
Spanish
citizenship,
Mr.
Serck-Hanssen,
who
is
a
Norwegian
citizen
and
a
permanent
resident
of
the
United
States,
Mr.
Berckemeyer,
who
holds
dual
citizenship
in
Peru
and
the
United
States,
and

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Mr.
Carmelo,
who
holds
Spanish
citizenship,
all
of
the
current
directors,
director
designees
and
executive
officers
listed
above
are
U.S.
citizens.

Each
current
director
and
director
designee
brings
a
strong
and
unique
background
and
set
of
skills
to
the
board
of
directors,
giving
the
board
of
directors
as
a
whole
competence
and
experience
in
a
wide
variety
of
areas,
including
corporate
governance
and
board
service,
executive
management,
higher
education
industry
experience,
accounting
and
finance,
and
risk
assessment.
Set
forth
below
is
a
brief
description
of
certain
experience,
qualifications,
attributes
or
skills
of
each
director
and
director
designee
that
led
the
board
of
directors
to
conclude
that
such
person
should
serve
as
one
of
our
directors:

•

Mr.
Becker
has
led
our
Company
since
1989
and
has
been
instrumental
in
our
transformation
into
the
largest
private
international
network
of
degree
granting
higher
education
institutions.
His
current
responsibilities
as
Chairman
and
Chief
Executive
Officer
make
him
well
qualified
to
serve
on
the
board
of
directors.

Messrs.
Carroll,
Cohen,
Cornog,
del
Corro,
Snow,
Taslitz
and
Van
Doosselaere
are
affiliated
with
private
equity
and
other
similar
types
of
investment
funds
and
have
significant
experience
making
and
managing
private
equity
investments
on
behalf
of
their
respective
funds.
Each
of
the
investment
funds
they
represent
have
been
intimately
involved
in
the
management
of
Laureate
since
2007,
making
them
well
qualified
to
serve
on
the
board
of
directors.

Mr.
Muñoz
has
extensive
knowledge
in
the
fields
of
finance
and
accounting
and
his
knowledge
of
investment
banking,
legal
experience,
corporate
governance
experience
and
audit
oversight
experience
gained
from
his
membership
on
the
boards
and
audit
committees
of
other
public
companies
support
his
qualifications
to
serve
on
the
board
of
directors.

Dr.
Rodin
is
an
experienced
leader
in
the
not-for-profit
sector
and
has
extensive
experience
in
the
areas
of
corporate
affairs,
financial
reporting,
risk
management,
compensation
and
legal
matters,
which
supports
her
qualifications
to
serve
on
the
board
of
directors.

Mr.
Zoellick
has
extensive
knowledge,
insight
and
experience
on
international
trade,
development,
and
finance
issues
and
his
educational
and
government
experience
provide
important
insights
for
our
global
business
model.
In
addition,
his
current
positions
with
international
financial
and
investment
firms
as
a
director
of
an
international
investment
company
make
him
well
qualified
to
serve
on
the
board
of
directors.

Laureate
Board
Committees

Our
board
of
directors
has
four
standing
committees:
an
Audit
Committee,
a
Compensation
Committee,
a
Nominating
and
Corporate
Governance
Committee
and
a
Committee
on
Education.

The
Audit
Committee
meets
with
our
independent
auditors
to:
(i)
review
whether
satisfactory
accounting
procedures
are
being
followed
by
us
and
whether
our
internal
accounting
controls
are
adequate;
(ii)
monitor
audit
and
non-audit
services
performed
by
the
independent
auditors;
(iii)
approve
fees
charged
by
the
independent
auditors;
and
(iv)
perform
all
other
oversight
and
review
of
the
Company's
financial
reporting
process.
The
Audit
Committee
also
reviews
the
performance
of
the
independent
auditors
and
annually
selects
the
firm
of
independent
auditors
to
audit
the
Company's
financial
statements.
The
Audit
Committee
currently
consists
of
Messrs.
Muñoz,
Snow
and
Taslitz
and
the
board
of
directors
has
determined
that
Mr.
Muñoz
is
an
"audit
committee
financial
expert"
for
purposes
of
Regulation
S-K,
Item
407(d)(5).
Mr.
Muñoz
will
be
independent
for
purposes
of
Rule
10A-3
under
the
Exchange
Act
and
corporate
governance
standards.
We
expect
a
second
independent
member
to
be
appointed
to
the
Audit
Committee
within
90
days
of
the
completion
of
our
initial
public
offering
to
replace
either
Mr.
Snow
or
Mr.
Taslitz
and
a
third
new
independent
member
to
be
appointed
to
the
Audit
Committee
to
replace
either
Mr.
Snow
or
Mr.
Taslitz,
whoever
remains,

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Table
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within
one
year
of
the
completion
of
our
initial
public
offering
so
that
all
of
our
Audit
Committee
members
will
be
independent
as
such
term
is
defined
in
Rule
10A-3(b)(i)
under
the
Exchange
Act
and
under
the
rules
of
Nasdaq.
The
board
of
directors
has
affirmatively
determined
that
Mr.
Muñoz
meets
the
definition
of
"independent
director"
for
purposes
of
the
Nasdaq
rules
and
the
independence
requirements
of
Rule
10A-3
of
the
Exchange
Act.
There
were
ten
meetings
of
the
Audit
Committee
during
2016.

The
Compensation
Committee
establishes
the
compensation
for
the
Chief
Executive
Officer
and
the
other
executive
officers
of
Laureate
and
generally
reviews
benefits
and
compensation
for
all
officers
and
employees.
The
Compensation
Committee
also
administers
our
2007
Plan
and
our
2013
Plan.
The
Compensation
Committee
currently
consists
of
Mr.
Carroll,
Mr.
Cohen,
Mr.
Cornog,
Mr.
del
Corro
and
Mr.
Muñoz.
There
were
six
meetings
of
the
Compensation
Committee
during
2016
and
one
action
by
written
consent.

The
Nominating
and
Corporate
Governance
Committee
reviews
and
monitors
corporate
governance
matters.
The
Nominating
and
Corporate
Governance
Committee
currently
consists
of
Dr.
Rodin,
Mr.
Snow
and
Mr.
Van
Doosselaere.
The
Nominating
and
Corporate
Governance
Committee
did
not
meet
during
2016.

Each
of
the
above
committees
has
adopted
a
written
charter,
which
has
been
approved
by
our
board
of
directors.
Copies
of
each
charter
are
posted
on
our
website.

The
Committee
on
Education
reviews
and
advises
our
board
of
directors
regarding
academic
matters
and
policies
as
well
as
new
education
products
and
technologies.
The
Committee
on
Education
works
closely
with
our
Board
Advisory
Committee
on
Education,
which
also
includes
distinguished
outside
educational
experts.
The
Committee
on
Education
currently
consists
of
Mr.
Becker,
Dr.
Rodin
and
Mr.
Van
Doosselaere.
There
were
three
meetings
of
the
Committee
on
Education
during
2016.

Code
of
Ethics

Laureate
has
adopted
a
code
of
ethics
that
applies
its
all
of
its
employees,
including
the
Chief
Executive
Officer,
Chief
Financial
Officer
and
Chief
Accounting
Officer.
The
Code
of
Ethics
is
posted
on
our
website.

Section
16(a)
Beneficial
Ownership
Reporting
Compliance

We
did
not
have
any
class
of
equity
securities
registered
pursuant
to
Section
12
of
the
Exchange
Act
during
our
most
recent
fiscal
year.
As
a
result,
none
of
our
directors,
officers
or
other
affiliated
persons
were
subject
to
Section
16
of
the
Exchange
Act
during
such
year.

ITEM
11.

EXECUTIVE
COMPENSATION

Compensation
Discussion
and
Analysis

This
Compensation
Discussion
and
Analysis
provides
an
overview
of
our
executive
compensation
philosophy,
the
overall
objectives
of
our
executive
compensation
program,
and
each
material
element
of
compensation
for
the
fiscal
year
ended
December
31,
2016
that
we
provided
to
each
person
who
served
as
our
principal
executive
officer
or
principal
financial
officer
during
2016
and
our
three
most
highly
compensated
executive
officers
employed
at
the
end
of
2016
other
than
those
persons,
all
of
whom
we
refer
to
collectively
as
our
Named
Executive
Officers.

Our
Named
Executive
Officers
for
the
fiscal
year
ended
December
31,
2016
were
as
follows:

•

Douglas
L.
Becker,
Chairman
and
Chief
Executive
Officer;

Eilif
Serck-Hanssen,
President,
Chief
Administrative
Officer
and
Chief
Financial
Officer;

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Table
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•

Ricardo
M.
Berckemeyer,
Chief
Operating
Officer
and
Chief
Executive
Officer,
Latin
America
Region;

Enderson
Guimarães,
President
and
Chief
Operating
Officer*;
and

Paula
Singer,
Chief
Network
Officer.

Mr.
Guimarães
served
as
President
and
Chief
Operating
Officer
until
March
23,
2017.
On
March
28,
2017,
Mr.
Serck-Hanssen
was
appointed
President,
Chief
Administrative
Officer
and
Chief
Financial
Officer,
and
Mr.
Berckemeyer
was
appointed
Chief
Operating
Officer
and
Chief
Executive
Officer,
Latin
America.

The
Compensation
Committee
is
responsible
for
establishing,
implementing,
and
evaluating
our
employee
compensation
and
benefit
programs.
The
Compensation
Committee
periodically
reviews
and
makes
recommendations
to
the
board
of
directors
with
respect
to
the
adoption
of,
or
amendments
to,
all
equity-
based
incentive
compensation
plans
for
employees,
and
cash-based
incentive
plans
for
executive
officers,
and
evaluates
whether
the
relationship
between
the
incentives
associated
with
these
plans
and
the
level
of
risk-taking
by
executive
officers
in
response
to
such
incentives
is
reasonably
likely
to
have
a
material
adverse
effect
on
the
Company.
The
Compensation
Committee
annually
evaluates
the
performance
of
our
Chief
Executive
Officer
and
our
other
executive
officers,
establishes
the
annual
salaries
and
annual
cash
incentive
awards
for
our
Chief
Executive
Officer
and
our
other
executive
officers,
and
approves
all
equity
awards.
The
Compensation
Committee's
objective
is
to
ensure
that
the
total
compensation
paid
to
the
Named
Executive
Officers
as
well
as
our
other
senior
officers
is
fair,
reasonable,
and
competitive.
Generally,
the
types
of
compensation
and
benefits
provided
to
our
Named
Executive
Officers
are
like
those
provided
to
other
senior
members
of
our
management
team.

Executive Compensation Philosophy

The
goal
of
our
executive
compensation
program
is
to
create
long-term
value
for
our
investors
while
at
the
same
time
rewarding
our
executives
for
superior
financial
and
operating
performance
and
encouraging
them
to
remain
with
us
for
long,
productive
careers.
We
believe
the
most
effective
way
to
achieve
this
objective
is
to
design
an
executive
compensation
program
rewarding
the
achievement
of
specific
annual,
long-term
and
strategic
goals
and
aligning
executives'
interests
with
those
of
our
investors
by
further
rewarding
performance
above
established
goals.
We
use
this
philosophy
as
the
foundation
for
evaluating
and
improving
the
effectiveness
of
our
executive
pay
program.
The
following
are
the
core
elements
of
our
executive
compensation
philosophy:

•

Market
Competitive
:
Compensation
levels
and
programs
for
executives,
including
the
Named
Executive
Officers,
should
be
competitive
relative
to
the
appropriate
markets
in
which
we
operate.
We
are
a
unique
network
of
organizations,
and
we
believe
that
competitive
pay
programs
must
be
locally
driven.
It
is
important
for
our
local
organizations
to
leverage
an
understanding
of
what
constitutes
competitive
pay
in
their
markets
and
build
unique
strategies
to
attract
the
high
caliber
talent
we
require
to
manage
and
grow
our
fast-paced
organization;

Performance
Based
:
Most
executive
compensation
should
be
performance-based
pay
that
is
"at
risk,"
based
on
short-term
and
long-term
goals,
which
reward
both
organizational
and
individual
performance;

Investor
Aligned
:
Incentives
should
be
structured
to
create
a
strong
alignment
between
executives
and
investors
on
both
a
short-term
and
a
long-
term
basis;
and

Financially
Efficient
:
Pay
programs
and
features
should
attempt
to
minimize
the
impact
on
our
earnings
and
maximize
our
tax
benefits,
all
other
things
being
equal.

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Table
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By
incorporating
these
elements,
we
believe
our
executive
compensation
program
is
responsive
to
our
investors'
objectives
and
effective
in
attracting,
motivating,
and
retaining
the
level
of
talent
necessary
to
grow
and
manage
our
business
successfully.

Process for Determining Compensation

Our
compensation
process
for
each
fiscal
year
begins
in
the
preceding
September,
when
senior
management
meets
to
set
the
next
year's
budgets.
Using
the
budgets
developed
during
October
and
November,
each
year
in
December,
the
board
of
directors
approves
our
revenue,
earnings,
and
student
enrollment
goals
for
the
following
year.
These
goals
serve
as
the
target
metrics
in
our
Annual
Incentive
Plan
("AIP"),
a
non-equity
short-term
incentive
plan
designed
to
create
a
link
between
executive
compensation
and
company
performance,
and
our
cash
Long
Term
Incentive
Plans
("LTIP")
with
certain
Named
Executive
Officers,
which
are
designed
to
reward
superior
performance
over
a
longer
period
and
thereby
provide
an
incentive
for
these
executives
to
remain
with
us.
See
"—Elements
of
Laureate's
2016
Compensation
Program—Incentive
Opportunity."
In
March,
the
Compensation
Committee
meets
to
review
the
Named
Executive
Officers'
prior
year's
performance,
set
their
base
salary
levels
for
the
current
fiscal
year,
approve
the
AIP
for
the
current
year,
and
approve
or
modify
individual
goals
for
the
Named
Executive
Officers
that
were
recommended
by
management
for
the
discretionary
portion
of
our
AIP.
In
March,
the
Compensation
Committee
assesses
performance
and
certifies
the
extent
to
which
the
prior
year's
performance
goals
have
been
achieved
and
authorizes
the
payment
of
any
earned
incentive
compensation.

The
Compensation
Committee
has
not
yet
assessed
2016
performance
under
any
of
our
performance-based
compensation
programs.
Accordingly,
2016
payouts
under
our
performance-based
incentive
awards
have
not
been
determined
at
this
time.
The
Company
intends
to
file
a
Current
Report
on
Form
8-K
or
otherwise
disclose
the
2016
performance-based
compensation
after
the
Compensation
Committee
has
assessed
2016
performance
under
our
performance-based
compensation
programs
and
individual
incentive
awards
are
determined.

Prior
to
the
March
Compensation
Committee
meeting,
the
CEO
and
the
Chief
Human
Resources
Officer
("CHRO")
review
the
prior
year's
performance
of
each
Named
Executive
Officer
(other
than
the
CEO,
whose
performance
is
reviewed
only
by
the
Compensation
Committee).
The
conclusions
reached
and
recommendations
based
on
these
reviews,
including
with
respect
to
salary
adjustments
and
AIP
cash
award
amounts,
are
presented
to
the
Compensation
Committee
at
its
March
meeting.
The
Compensation
Committee
determines
salary
adjustments
and
AIP
cash
awards
for
our
Named
Executive
Officers,
considering
the
CEO's
recommendations.
The
CEO
and
CHRO
are
not
members
of
the
Compensation
Committee
and
do
not
participate
in
deliberations
regarding
their
own
compensation.

Relationship of Compensation Practices to Risk Management

We
have
reviewed
and
considered
our
compensation
plans
and
practices
for
all
our
employees
and
do
not
believe
that
our
compensation
policies
and
practices
create
risks
that
are
reasonably
likely
to
have
a
material
adverse
effect
on
the
Company.
We
utilize
many
design
features
that
mitigate
the
possibility
of
encouraging
excessive
risk
taking
behavior.
Among
these
design
features
are:

•

reasonable
goals
and
objectives
that
are
well-defined
and
communicated;

a
strong
recoupment
("clawback")
policy;

balance
of
short-and
long-term
variable
compensation
tied
to
a
mix
of
financial
and
operational
objectives;

double-trigger
severance
and
equity
arrangements;

357

Table
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•

an
independent
compensation
consultant
for
the
Compensation
Committee;
and

the
Compensation
Committee's
ability
to
exercise
downward
discretion
in
determining
payouts.

Role of Independent Compensation Consultant

During
2016,
the
CHRO
and
members
of
his
staff
met
several
times
with
Frederic
W.
Cook
&
Co.,
Inc.
("FW
Cook"),
an
independent
executive
compensation
consulting
firm
retained
by
the
Compensation
Committee,
for
advice
and
perspective
regarding
market
trends
that
could
affect
our
decisions
about
our
executive
compensation
program
and
practices.
During
this
time,
FW
Cook
assessed
our
compensation
philosophy
and
the
structure
of
our
programs
and
reviewed
our
existing
equity
and
variable
pay
compensation
documents.
FW
Cook
then
advised
management
about
alternatives
it
could
consider
before
recommending
executive
compensation
design
and
amounts
to
the
Compensation
Committee.
The
Compensation
Committee
assessed
the
independence
of
FW
Cook
pursuant
to
SEC
rules
and
concluded
that
the
work
performed
by
FW
Cook
does
not
raise
any
conflicts
of
interest.

Compensation Peer Group

In
its
capacity
as
the
Compensation
Committee's
independent
compensation
consultant,
FW
Cook
has
provided
insight
to
the
Compensation
Committee
on
certain
regulatory
requirements
and
concerns
of
our
investors,
assisting
with
the
development
of
conceptual
designs
for
future
equity
and
cash
incentive
compensation
programs
and
providing
the
Compensation
Committee
with
relevant
market
data
and
alternatives
to
consider
when
making
compensation
decisions
for
the
CEO
and
other
Named
Executive
Officers.
Additionally,
the
Compensation
Committee
requested
FW
Cook
to
identify
a
framework
of
comparators
that
adequately
reflects
the
unique
nature
of
our
operations.
The
Compensation
Committee
used
this
Compensation
Peer
Group,
which
was
updated
in
2014,
as
part
of
the
2016
compensation
process
to
evaluate
the
competitiveness
of
the
compensation
targets
for
our
executive
team.
The
Compensation
Peer
Group
includes
three
distinct
elements,
each
representing
a
key
Laureate
characteristic.
These
business
characteristics
include:
(1)
industry,
(2)
size
and
complexity
and
(3)
growth
and
profitability.
The
Compensation
Committee
has
defined
these
characteristics
and
selected
peer
companies
for
each
group
as
follows:

•

Industry:

Companies
in
the
S&P
1500
and
the
educational
services
industry
with
total
revenue
of
at
least
$1
billion,
including
Apollo
Education
Group,
Career
Education,
DeVry
Education
Group,
Education
Management
Corporation
and
ITT
Educational
Services.

Size/Complexity:

Companies
in
the
S&P
1500
with
total
revenue
ranging
from
$2.5
billion
to
$5.5
billion,
with
at
least
70%
of
total
revenue
derived
from
foreign
sources,
including
Analog
Devices,
Inc.
The
Brinks
Company,
Cabot
Corporation,
FMC
Technologies,
Inc.,
First
Solar,
Inc.,
Harman
International
Industries,
Incorporated,
International
Flavors
&
Fragrances
Inc.,
Molson
Coors
Brewing
Company,
Nabors
Industries
Ltd.,
Nvidia
Corporation,
Sandisk
Corp.,
Terex
Corporation,
and
Universal
Corporation.

High
Growth/Profitability:

Companies
in
the
S&P
1500
with
total
revenue
ranging
from
$1
billion
to
$10
billion,
three-year
total
revenue
CAGR
of
at
least
15%,
three-year
average
EBITDA
margins
of
at
least
20%,
at
least
30%
of
total
revenue
generated
from
foreign
sources,
including
Altera
Corporation,
BlackRock,
Inc.,
Celgene
Corporation,
Cliffs
Natural
Resources
Inc.,
Discovery
Communications,
Inc.,
Equinix,
Inc.,
FLIR
Systems,
Inc.,
Gilead
Sciences,
Inc.,
Global
Payments
Inc.,
Intercontinental
Exchange,
Inc.,
Mylan
N.V.,
Newmont
Mining
Corporation,
The
Priceline
Group
Inc.,
ResMed
Inc.
and
Visa
Inc.

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Table
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Since
the
peer
group
was
updated
in
2014,
three
companies
(one
from
each
sub-category),
Corinthian
Colleges,
LSI
Corporation
and
Life
Technologies,
Inc.,
have
been
removed
because
they
have
ceased
to
be
independently
operated
entities.

The
Compensation
Committee
used
data
derived
from
our
Compensation
Peer
Group
to
inform
its
decisions
about
overall
compensation,
compensation
elements,
optimum
pay
mix
and
the
relative
competitive
landscape
of
our
executive
compensation
program.
The
committee
used
multiple
reference
points
when
establishing
target
compensation
levels.
Because
comparative
compensation
information
is
just
one
of
several
analytic
tools
the
Compensation
Committee
uses
in
setting
executive
compensation,
it
has
discretion
in
determining
the
nature
and
extent
of
its
use.
Moreover,
given
the
limitations
associated
with
comparative
pay
information
for
setting
individual
executive
compensation,
the
Compensation
Committee
may
elect
not
to
use
the
comparative
compensation
information
at
all
while
making
individual
compensation
decisions.

Considerations in Setting 2016 Compensation

In
approving
2016
compensation
for
the
Named
Executive
Officers,
the
Compensation
Committee
took
under
advisement
the
recommendation
of
the
CEO
and
CHRO
relating
to
the
total
compensation
package
for
the
Named
Executive
Officers
and,
based
on
company-wide
operating
results
and
the
extent
to
which
individual
performance
objectives
were
met,
the
Compensation
Committee
determined
2016
compensation
for
each
of
the
Named
Executive
Officers.
In
determining
whether
to
approve
or
modify
management-recommended
compensation
for
the
Named
Executive
Officers
in
2016,
the
Compensation
Committee
reviewed
non-financial
factors
as
part
of
the
overall
evaluation
of
performance.
Such
non-financial
factors
included
judging
the
extent
to
which
each
Named
Executive
Officer
identified
business
opportunities,
maximized
network
synergies
for
Laureate,
shared
best
practices
and
maximized
the
mix
of
our
geographic
revenues,
programs,
modalities
and
levels
of
study.
The
Compensation
Committee
believes
non-financial
measures
are
often
"leading
indicators"
of
financial
performance
and
are
especially
important
to
a
rapidly
growing
and
geographically
dispersed
company
like
Laureate.
The
Compensation
Committee
believes
that
the
total
2016
compensation
opportunity
for
our
Named
Executive
Officers
was
competitive
while
at
the
same
time
being
responsible
to
our
investors
because
a
significant
percentage
of
total
compensation
in
2016
was
allocated
to
variable
compensation,
paid
only
upon
achievement
of
both
individual
and
Company
performance
objectives.

The
following
is
a
summary
of
key
considerations
that
affected
the
development
of
2016
compensation
targets
and
2016
compensation
decisions
for
our
Named
Executive
Officers
(and
which
the
Compensation
Committee
believes
will
continue
to
affect
its
compensation
decisions
in
future
years):

Market
Targets
.

We
target
base
salary
for
our
Named
Executive
Officers
generally
near
the
50
th

percentile
of
the
Compensation
Peer
Group.
Total
cash
and
total
direct
compensation
(base
salary,
AIP
award
at
target
and
the
value
of
equity
grants)
are
generally
near
the
75
th

percentile
of
the
Compensation
Peer
Group.
Although
historically
a
specific
pay
mix
for
our
Named
Executive
Officers
has
not
been
set,
it
has
been
and
will
continue
to
be
our
policy
to
allocate
a
significantly
larger
portion
of
the
Named
Executive
Officers'
compensation
in
the
form
of
variable
or
"at-risk"
compensation
than
is
allocated
to
junior
members
of
management.
By
targeting
our
Named
Executive
Officers'
base
salaries
and
total
cash
and
total
direct
compensation
near
the
50
th

and
the
75
th

percentiles,
respectively,
most
of
our
Named
Executive
Officers'
pay
is
at
risk,
consistent
with
strategies
followed
by
other
high-growth
companies
and
the
Compensation
Committee's
pay-for-performance
philosophy.
Market
targets
are
periodically
reviewed
to
ensure
competitiveness
with
other
companies'
executives
with
like
responsibilities
to
our
Named
Executive
Officers.

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Table
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Emphasis
on
Performance
.

Laureate's
compensation
program
provides
increased
pay
opportunity
correlated
with
superior
performance
over
the
long
term.
When
evaluating
base
salary,
individual
performance
is
the
primary
driver
that
determines
the
Named
Executive
Officer's
annual
increase,
if
any.
In
our
AIP,
both
organizational
and
individual
performance
are
key
drivers
in
determining
the
Named
Executive
Officer's
non-equity
incentive
award.
Of
the
outstanding
unvested
options,
performance
share
units,
and
restricted
stock
units
currently
held
by
our
Named
Executive
Officers,
approximately
50%
are
performance-based.

The
Importance
of
Organizational
Results
.

Laureate's
AIP
uses
the
achievement
of
specific
organizational
metrics
in
determining
approximately
80%
of
the
Named
Executive
Officers'
target
annual
cash
incentive
award.
This
is
because
the
Compensation
Committee
believes
it
is
important
to
hold
the
Named
Executive
Officers
accountable
for
both
the
results
of
their
organization
and
overall
company
results.
Our
2016
AIP
was
designed
to
emphasize
and
reward
the
Named
Executive
Officers
for
corporate
performance.
The
Compensation
Committee
believes
that
individual
contributions
by
the
Named
Executive
Officers
significantly
affect
both
regional
and
overall
corporate
results.
The
payment
of
LTIP
awards
and
the
vesting
of
performance
options
and
performance
share
units
granted
under
our
2013
Plan
are
dependent
on
the
Company
achieving
overall
corporate
financial
goals.

2016 Stock Option Repricing/Retention Equity Grant

Effective
June
17,
2016,
upon
the
recommendation
of
the
Compensation
Committee,
the
board
of
directors
approved
a
modification
in
the
exercise
price
of
all
outstanding
stock
options
granted
under
the
2013
Plan,
other
than
options
granted
in
2016,
to
reduce
the
exercise
price
per
share
to
$23.20
per
share,
which
was
the
estimated
fair
market
value
of
the
common
stock
on
the
effective
date
of
the
repricing.
Stock
options
granted
under
the
2013
Plan
during
2016,
as
well
as
stock
options
granted
under
the
2007
Plan
were
excluded
from
this
repricing,
and
will
maintain
their
original
exercise
prices.
The
stock
options
that
were
repriced
had
been
granted
with
an
exercise
price
greater
than
the
estimated
fair
market
value
on
June
17,
2016
(i.e.,
exercise
prices
ranging
from
$34.52
to
$25.76
per
share).
Because
the
exercise
prices
of
these
stock
options
exceeded
the
estimated
fair
market
value
of
the
Company's
common
stock
on
the
modification
date,
the
Compensation
Committee
determined
that
the
retentive
value
of
these
awards
had
substantially
diminished
from
the
time
they
had
been
granted.
The
Compensation
Committee
determined
that
this
repricing
was
in
the
best
interests
of
the
Company
and
its
stockholders
to
provide
a
continued
incentive
for
highly
qualified
employees
with
substantial
experience
in
the
Company's
business
to
remain
employed
during
a
critical
period
for
the
Company.

Effective
October
25,
2016,
the
Compensation
Committee
approved
incremental
equity
grants
under
the
2013
Plan
to
45
senior
employees,
including
the
Named
Executive
Officers
other
than
Mr.
Guimarães,
each
of
whom
had
previously
received
equity
awards
under
the
2007
Plan
and
2013
Plan
in
2013
and
prior
years.
These
retention
awards
were
the
only
equity
awards
made
to
any
of
the
Named
Executive
Officers
during
2016
and
were
designed
to
provide
an
additional
incentive
for
these
employees
to
remain
with
the
Company.
Mr.
Becker
received
114,790
time-based
vesting
stock
options
and
47,477
performance-based
vesting
stock
options
because
the
Compensation
Committee
wanted
to
provide
an
incentive
to
Mr.
Becker
that
was
tied
an
increase
in
the
overall
equity
value
of
the
Company,
and
the
other
44
senior
employees
received
restricted
stock
units
("RSUs")
and/or
performance
share
units
("PSUs").
The
time-based
vesting
stock
options
and
RSUs
granted
on
October
25,
2016
will
become
vested
on
June
17,
2018,
if
the
recipient
continuously
remains
employed
by
the
Company
through
that
date.
50%
of
the
performance-based
vesting
stock
options
and
PSUs
granted
on
October
25,
2016
will
become
vested
if
the
Company
achieves
applicable
equity
value
targets
("Equity
Value
Targets")
in
2016
and
50%
will
become
vested
if
the
Company
achieves
the
applicable
Equity
Value
Targets
in
2017,
in
each
case,
subject
to
the
recipient
remaining
continuously
employed
by
the
Company
through
June
17,
2018.
See
"—Grants
of
Plan-Based
Awards
in
2016"
for
more
information
on
these
grants.

360

Table
of
Contents

Elements of Laureate's 2016 Compensation Program

There
are
three
key
components
of
our
executive
compensation
program
for
our
Named
Executive
Officers:
base
salary,
AIP
awards,
and
long-term
equity
incentive
awards.
Four
of
our
Named
Executive
Officers,
Messrs.
Serck-Hanssen,
Berckemeyer
and
Guimarães
and
Ms.
Singer
have
also
participated
in
our
Long-
term
cash
incentive
opportunity
("LTIP").
The
components
of
incentive
compensation
(the
AIP
awards,
equity
awards
and
LTIPs)
are
significantly
"at-risk,"
as
the
degree
to
which
the
AIP
awards
and
LTIPs
are
paid
and
the
performance
vesting
and
the
intrinsic
value
of
the
equity
awards
all
depend
on
the
extent
to
which
certain
of
our
operating
and
financial
goals
are
achieved.
In
addition
to
these
key
compensation
elements,
the
Named
Executive
Officers
are
provided
certain
other
compensation.
See
"—Other
Compensation."
When
reviewing
compensation
levels,
each
component
of
compensation
is
reviewed
independently,
and
the
total
pay
package
is
reviewed
in
the
aggregate.
However,
the
Compensation
Committee
believes
that
an
important
component
of
aligning
the
interests
of
investors
and
executives
is
to
place
a
strong
emphasis
on
"at
risk"
compensation
linked
to
overall
Company
performance.

In
2016,
approximately
67%
of
the
compensation
for
the
CEO
was
"at
risk."
See
"—Arrangements
with
Certain
Named
Executive
Officers—Chairman
and
Chief
Executive
Officer
Compensation"
below
for
a
discussion
relating
to
Mr.
Becker's
long-term
incentive
compensation.

Base
Salary
.

We
pay
our
Named
Executive
Officers
base
salaries
to
compensate
them
for
services
rendered
each
year.
Base
salary
is
a
regular,
fixed-cash
payment,
the
amount
of
which
is
based
on
position,
experience,
and
performance
after
considering
the
following
primary
factors—internal
review
of
the
executive's
compensation,
relative
to
both
U.S.
national
market
targets
and
other
executives'
salaries,
and
the
Compensation
Committee's
assessment
of
the
executive's
individual
prior
performance.
Salary
levels
are
typically
considered
annually
as
part
of
our
performance
review
process
but
can
be
adjusted
in
connection
with
a
promotion
or
other
change
in
job
responsibility.
Merit-based
increases
to
salaries
of
the
Named
Executive
Officers
are
determined
each
March
by
the
Compensation
Committee
after
the
Compensation
Committee
assesses
performance
by
each
executive
during
the
preceding
fiscal
year.
Each
of
the
Named
Executive
Officers
received
a
2.0%
salary
increase
from
2015
to
2016,
except
for
Mr.
Guimarães,
who
received
an
increase
of
0.7%
from
2015
to
2016
because
his
employment
with
the
Company
began
on
September
1,
2015.

The
salary
increases
for
the
Named
Executive
Officers
from
2015
to
2016
were:

Executive
Douglas
L.
Becker
Eilif
Serck-Hanssen
Ricardo
M.
Berckemeyer
Enderson
Guimarães(2)
Paula
Singer

Salary
as
of

December
31,
2015

Salary
Increase

from
2015

to
2016(1)

2016
Salary

998,278

582,329

682,906

900,000

682,906

2.0% $ 1,018,244

593,975

2.0% $
696,564

2.0% $
906,017

0.7% $
696,564

2.0% $

(1)

(2)

Salary
increases
effective
March
1,
2016.

Mr.
Guimarães
served
as
President
and
Chief
Operating
Officer
until
March
23,
2017.

Incentive
Opportunity
.

In
addition
to
receiving
base
salaries,
the
Named
Executive
Officers
participate
in
the
AIP
each
year.
Messrs.
Serck-Hanssen,
Berckemeyer
and
Guimarães
also
participate
in
LTIPs
in
2016.
The
Compensation
Committee
has
identified
several
factors
that
it
believes
are

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Table
of
Contents

critical
to
the
success
of
our
business
and
these
factors,
in
various
combinations,
are
incorporated
into
the
2013
Plan,
the
AIP
and
the
LTIPs:

•

Adjusted Financing EBITDA:

EBITDA
equals
revenues
minus
expenses
(excluding
interest,
taxes,
depreciation
and
amortization).
Financing
EBITDA
excludes
non-cash
compensation
expenses,
including
expenses
relating
to
long-term
incentive
plans,
acquisition
costs,
support
charges,
and
royalty/network
fees.
For
2016,
the
Compensation
Committee
used
an
Adjusted
Financing
EBITDA
target
for
purposes
of
the
AIP,
which
is
like
Adjusted
EBITDA
described
elsewhere
in
this
Form
10-K
but
excludes
the
impact
of
foreign
currency
exchange
rates
and
certain
extraordinary
or
non-recurring
items,
which
the
Compensation
Committee
believes
are
not
indicative
of
ongoing
results
("Adjusted
Financing
EBITDA").
The
Compensation
Committee
believes
that
Adjusted
Financing
EBITDA
is
an
important
measure
in
evaluating
management's
success
in
positioning
the
Company
for
sustainable
profitability,
which
is
a
primary
goal
of
the
Company.

Revenue:

Revenues
are
the
fees
generated
from
our
provision
of
educational
services
and
products
before
any
costs
or
expenses
are
deducted.
Year-to-year
growth
in
revenues
indicates
a
strong
base
for
future
growth.

Operating EBITDA Margin:

EBITDA
Margin
is
EBITDA
as
a
percentage
of
total
revenues.
In
2016,
we
calculated
the
EBITDA
Margin
using
Operating
EBITDA.
Operating
EBITDA
is
Adjusted
Financing
EBITDA
excluding
the
value
added
tax
from
royalty/network
fees.
Operating
EBITDA
Margin
is
a
means
by
which
the
Compensation
Committee
can
monitor
the
extent
to
which
the
Company's
growth
in
revenues
results
in
increased
profitability.
The
target
for
2016
was
based
on
2015
results
plus
40
basis
points.

New Enrollment:

New
enrollment
is
defined
as
students
who
enroll
in
an
academic
program
for
the
first
time
or
students
who
return
to
their
academic
program
after
an
absence
of
at
least
two
years.
New
enrollment
indicates
that
there
is
continued
interest
in
the
Laureate International
Universities network
and
can
be
a
leading
indicator
of
future
revenue
levels.
Total
enrollment
is
tied
to
total
revenues
and
can
be
a
leading
indicator
of
continued
good
student
outcomes.

Certain adjustments in measuring performance.

In
measuring
financial
performance
for
purposes
of
our
incentive
compensation
programs,
the
Compensation
Committee
focuses
on
the
fundamentals
of
the
underlying
business
performance
and
adjusts
for
items
that
are
not
indicative
of
ongoing
results.
For
example,
revenue
and
Adjusted
Financing
EBITDA
measures
are
expressed
in
constant
currencies
(i.e.,
excluding
the
effects
of
foreign
currency
translation)
because
we
believe
that
period-to-period
changes
in
foreign
exchange
rates
can
cause
our
reported
results
to
appear
more
or
less
favorable
than
business
fundamentals
indicate.
The
Compensation
Committee's
approach
to
other
types
of
adjustments
is
subject
to
pre-established
guidelines,
including
materiality,
to
provide
clarity
and
consistency
on
how
it
views
the
business
when
evaluating
performance.
Charges/credits
that
may
be
excluded
from
Adjusted
Financing
EBITDA
include:
strategic
items
(such
as
restructurings,
acquisitions
and
divestitures);
regulatory
items
(changes
in
law,
or
tax
or
accounting
rules);
and
external
items
(extraordinary,
non-recurring
events
such
as
natural
disasters).
For
example,
among
other
things,
the
Compensation
Committee
expects
to
adjust
2016
performance
to
give
effect
to
the
divestitures
of
our
French
and
Swiss
hospitality
businesses
during
2016.

Annual Cash Incentive Opportunity.

Our
AIP
is
an
annual
cash
incentive
program
designed
to
create
a
link
between
executive
compensation
and
performance
of
the
participants
and
the
Company.
The
AIP
provides
metrics
for
the
calculation
of
annual
incentive-based
cash
compensation
after
assessing
the
executive's
performance
against
pre-determined
quantitative
and
qualitative
measures
within
the
context
of
our
overall
performance.
For
purposes
of
compliance
with
the
Internal
Revenue
Code
("Code"),
awards
under
the
AIP
will
not
be
paid
to
individuals
subject
to
Section
162(m)
of
the
Code
unless
attainment
of
performance
goals
is
certified
by
the
Compensation
Committee.
In
the
event

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Table
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of
attainment
of
minimum
performance
goals
under
the
AIP,
the
Compensation
Committee
will
exercise
negative
discretion
to
adjust
awards
downwards
from
a
potential
maximum
amount
to
satisfy
requirements
under
Section
162(m)
of
the
Code,
while
still
providing
for
awards
based
on
Company
and
individual
performance
in
accordance
with
our
AIP
program.
In
addition,
a
significant
portion
of
each
Named
Executive
Officer's
2016
AIP
awards
will
be
determined
based
on
individual
performance.
In
evaluating
individual
performance,
the
Compensation
Committee
reviews
the
annual
objectives
set
for
each
of
the
Named
Executive
Officers
at
the
start
of
the
year
(by
the
Compensation
Committee
for
the
CEO
and
by
the
CEO
for
all
other
Named
Executive
Officers)
and
uses
its
judgment
to
determine
whether
the
objectives
were
achieved.
Individual
performance
is
weighted
at
20%
of
the
overall
AIP
opportunity
at
target.
Individual
results
for
the
year
are
rated
by
the
Compensation
Committee
on
a
scale
from
0%
to
200%
based
on
the
recommendation
of
the
CEO,
except
with
respect
to
his
own
performance,
which
is
determined
by
the
Compensation
Committee.
Considerations
affecting
evaluation
of
individual
performance
may
include
extraordinary
economic
or
business
conditions,
the
state
of
the
business,
deviations
from
forecasted
business
targets
that
are
unrelated
to
the
executive's
performance
and
other
external
factors
that,
in
the
CEO's
judgment
(or
the
Compensation
Committee's
judgment
in
the
case
of
the
CEO's
individual
performance),
may
have
affected
our
financial
and
operating
results.
The
Compensation
Committee
also
considers
constructive
strategic
issues
that
have
long-term
consequences
such
as:
positive
student
outcomes
like
job
placement
and
on-time
graduation,
achieving
the
highest
academic
and
operational
standards
and
regulatory
compliance.
The
Named
Executive
Officers
are
also
rewarded
for
important
strategic
contributions
like
building
succession
plan
pipelines
and
high-performance
cultures.
In
reviewing
the
compensation
of
the
Named
Executive
Officers,
the
Compensation
Committee
considers
the
executive's
performance,
the
importance
of
his
or
her
position
to
us
and
the
executive's
future
leadership
potential.
For
all
Named
Executive
Officers,
other
than
the
CEO,
the
CEO
gives
guidance
to
the
Compensation
Committee
as
to
whether
he
believes
each
of
the
Named
Executive
Officers
has
achieved
the
individual
performance
goals
set
at
the
beginning
of
the
year.
After
his
review,
the
CEO
presents
AIP
award
and
salary
adjustment
recommendations
for
the
Named
Executive
Officers
to
the
Compensation
Committee
for
approval.
The
Compensation
Committee
determines
the
compensation
of
the
Named
Executive
Officers,
considering
the
CEO's
assessment
of
each
executive's
performance.
The
Compensation
Committee
determines
whether
the
CEO
has
achieved
the
individual
performance
goals
the
Compensation
Committee
set
for
the
CEO,
taking
into
account
the
CEO's
assessment
of
his
own
performance.

AIP
award
levels
for
the
Named
Executive
Officers
are
dependent
on
the
extent
to
which
specified
levels
of
the
above
metrics
and
certain
individual
goals
have
been
achieved.
The
goals
specified
in
the
AIP
for
each
of
the
above
metrics
derive
from
management's
annual
business
plan
(the
"annual
plan")
and
management's
plan
for
the
next
five
fiscal
years
(the
"long-range
plan"),
both
of
which
are
reviewed
by
the
board
of
directors
each
December.
The
CEO
and
CHRO
work
with
the
Compensation
Committee
to
set
target
metrics
for
the
AIP
based
on
our
board-approved
annual
plan
and
the
financial
goals
contained
therein,
which
the
directors
believe
should
be
attainable
but
only
with
considerable
effort.

In
February
2016,
the
Compensation
Committee
adopted
the
2016
AIP.
Weighting
under
the
2016
AIP
consisted
of:
Adjusted
Financing
EBITDA,
40%;
Revenue,
15%;
Operating
EBITDA
Margin,
10%;
New
Enrollments,
15%;
and
Individual
Performance,
20%.
If
at
least
95%
of
the
corporate
and/or
regional
Adjusted
Financing
EBITDA
target
was
not
achieved
for
the
year,
the
maximum
AIP
payment
for
Named
Executive
Officers
would
be
capped
at
100%
of
target.
If
at
least
80%
of
the
corporate
Adjusted
Financing
EBITDA
was
not
achieved
for
the
year,
the
AIP
plan
pool
for
the
Company's
executive
officers,
which
includes
the
Named
Executive
Officers,
would
not
be
funded.
If
at
least
85%
of
the
corporate
and/or
regional
Adjusted
Financing
EBITDA
target
was
not
achieved
for
the
year,
the
Compensation
Committee
could
elect
not
to
pay
any
awards
to
any
participant
under
the
2016
AIP.
As
of
the
date
of
this
Form
10-K,
the
Compensation
Committee
has
not
yet
assessed
2016
performance
under
any
of
our
performance-based
compensation
programs.
Accordingly,
2016

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Table
of
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performance-based
incentive
awards,
including
the
AIP,
has
not
been
determined
at
this
time.
The
Company
intends
to
file
an
amendment
to
this
Form
10-Kor
otherwise
disclose
the
2016
performance-based
compensation
within
four
business
days
after
the
date
the
Compensation
Committee
makes
such
determinations.

In
2016,
AIP
target
award
opportunities
ranged
from
85%
to
130%
of
the
base
salary
of
each
Named
Executive
Officer,
depending
on
the
executive's
level
of
responsibility
and
the
effect
the
Compensation
Committee
perceived
the
Named
Executive
Officer
to
have
on
Company
operations.
The
Compensation
Committee
took
into
consideration
Compensation
Peer
Group
competitiveness
and
compensation
equity
across
various
Company
executive
positions
when
setting
the
range
of
target
2016
AIP
award
opportunities
for
our
Named
Executive
Officers.
The
Compensation
Committee
also
gave
each
Named
Executive
Officer
the
opportunity
to
earn
a
2016
AIP
award
above
the
target
opportunity
up
to
a
maximum
of
200%
of
his
or
her
AIP
target
opportunity,
if
the
Company
achieved
certain
levels
of
performance
and
the
Compensation
Committee
determined
that
the
individual
had
achieved
certain
goals,
as
well.

AIP
awards
granted
to
our
Named
Executive
Officers
for
2016
performance
will
reflect
the
Compensation
Committee's
assessment
of
each
Named
Executive
Officer's
individual
performance
and
our
overall
performance
when
measured
against
the
Compensation
Committee-established
goals
for
2016
of
Adjusted
Financing
EBITDA,
revenue,
Operating
EBITDA
margin,
new
enrollments,
and
individual
objectives.
The
2016
AIP
was
designed
so
that
a
multiplier
will
be
applied
to
the
respective
weight
of
each
metric,
which
proportionally
reduces
or
increases
the
Named
Executive
Officer's
award
depending
on
the
extent
to
which
the
goal
for
each
metric
is
missed
or
exceeded,
as
applicable
and
as
set
forth
in
the
table
below
for
each
Named
Executive
Officer.
Except
as
described
below,
for
performance
percentages
between
the
levels
set
forth
in
the
table,
the
resulting
payout
percentage
would
be
adjusted
on
a
linear
basis.
Because
the
Compensation
Committee's
intent
in
designing
the
2016
AIP
was
for
the
Named
Executive
Officers
to
stress
improved
profitability,
the
2016
AIP
provided
that:
(i)
had
we
achieved
80%
or
less
of
the
2016
corporate
and/or
regional
Adjusted
Financing
EBITDA
goal,
as
applicable,
none
of
the
Named
Executive
Officers
would
have
received
any
2016
AIP
Award,
and
(ii)
had
the
Company
achieved
less
than
95%
of
the
2016
corporate
and/or
regional
Adjusted
Financing
EBITDA
goal,
as
applicable,
none
of
the
Named
Executive
Officers
would
have
received
more
than
his
or
her
target
award
opportunity,
regardless
of
whether
the
goal
for
any
of
the
other
metrics
had
been
exceeded.
Additionally,
the
2016
AIP
provided
that
if
the
Company
achieved
85%
or
less
of
the
established
goal
for
new
enrollments,
90%
or
less
of
the
established
goal
for
revenues
or
if
Operating
EBITDA
Margin
was
less
than
or
equal
to
the
applicable
2015
result,
then
the
portion
of
the
Named
Executive
Officer's
AIP
award
dependent
on
that
metric
would
be
entirely
deducted
from
his
or
her
total
2016
AIP
award
opportunity.

Percent

Payout
Weight

200%

100%

Performance

Against
Plan

Percent
of
Target

Value
for
100%
payout

Percent
of
Target

Adjusted

Financing

EBITDA

40%

110%

Target

90%

Revenue

15%

110%

Target

90%

Operating

EBITDA
Margin

New

Enrollments

15%

10%

2015
result
+
80
bps

2015
result
+
40
bps

2015
Result

115%
Target
85%

Although
the
Compensation
Committee
has
not
yet
assessed
performance
under
the
2016
AIP,
the
tables
below
contain
the
goal
for
each
metric
used
in
the
2016
AIP.
2016
AIP
awards
for
all
Named
Executive
Officers,
apart
from
Mr.
Berckemeyer,
will
be
based
on
corporate
results,
which
goals
and
results
are
shown
in
the
first
table
below.
Mr.
Berckemeyer's
2016
AIP
goals
were
based
on
LatAm
regional
results,
which
goals
are
shown
in
the
second
table
below.
Of
the
four
financial
metrics
used
to
determine
2016
AIP
awards,
Adjusted
Financing
EBITDA
was
weighted
the
heaviest
because
of
the
Compensation
Committee's
focus
on
profitability.
While
each
of
Operating
EBITDA
margin,
revenue,
and
new
enrollment
are
critical
to
our
ability
to
grow
over
the
long
term,
the
Compensation
Committee
believes
Adjusted
Financing
EBITDA
is
the
most
important
measure
of
sustainable
profitability.

364

Table
of
Contents

Corporate
2016
AIP

LatAm
2016
AIP

Target

$
781.4

$ 4,365.5

18.7%

536,353

Weighted

Target
as
%

of
Award

40%
15%
10%
15%
20%
100%

Target

$
495.0

$ 2,396.1

21.9%

416,348

Weighted

Target
as
%

of
Award

40%
15%
10%
15%
20%
100%

Performance
Metric
Adjusted
Financing
EBITDA(1)
Revenue(1)
Op
EBITDA
Margin
New
Enrollments
Individual
Performance

(1)

In
thousands

Performance
Metric
Adjusted
Financing
EBITDA(1)
Revenue(1)
Op
EBITDA
Margin
New
Enrollments
Individual
Performance

(1)

In
thousands

The
table
below
provides
information
relating
to
the
2016
AIP
target
for
each
of
the
Named
Executive
Officers,
both
in
dollar
amounts
and
as
a
percentage
of
year-end
base
salary.

Executive
Douglas
L.
Becker
Eilif
Serck-Hanssen
Ricardo
M.
Berckemeyer
Enderson
Guimarães(1)
Paula
Singer

Year-End
2016

Base
Salary

Amount
($)

AIP
Target

Award
as
%
of

2016
Year-End

Salary

Target
2016

AIP
Award

($)

1,018,243

593,975

696,564

906,017

696,564

120%
1,221,891

504,879

85%

835,877

120%

130%
1,177,821

696,564

100%

(1)

Mr.
Guimarães
served
as
President
and
Chief
Operating
Officer
until
March
23,
2017.

Long-Term Cash Incentive Opportunity.

Messrs.
Serck-Hanssen,
Berckemeyer
and
Guimarães
each
participated
in
a
LTIP
in
2016,
and
Ms.
Singer
also
participated
in
a
LTIP
in
2015.
The
LTIPs
are
multi-year
cash
incentive
plans
designed
to
motivate
and
reward
participants
for
the
achievement
of
performance
goals
over
a
multi-year
period
by
offering
them
the
opportunity
to
receive
cash
payments
based
on
the
achievement
of
such
goals.
The
multi-year
performance
period
is
designed
to
provide
an
additional
incentive
for
the
Named
Executive
Officers
to
remain
with
Laureate
through
the
performance
period
and
beyond.
The
LTIP
awards
are
conditioned
on
the
achievement
of
Company
financial
performance
goals
and
are
earned
over
separate
one-year
periods
subject
to
continued
employment.
LTIP
payouts
for
2015
appear
in
the
Summary
Compensation
Table.
As
of
the
date
of
this
Form
10-K,
the
Compensation
Committee
has
not
yet
assessed
2016
performance
under
any
of
our

365

Table
of
Contents

performance-based
compensation
programs.
Accordingly,
2016
performance-based
incentive
awards,
including
the
LTIPs,
have
not
been
determined
at
this
time.
We
expect
the
Compensation
Committee
to
assess
2016
performance
under
our
performance-based
compensation
programs
and
determine
the
LTIP
awards
in
April
2017.
The
Company
intends
to
file
Current
Report
on
Form
8-K
or
otherwise
disclose
the
2016
performance-based
compensation
within
four
business
days
after
the
Compensation
Committee
has
assessed
2016
performance
under
our
performance-based
compensation
programs
and
individual
incentive
awards
are
determined.

The
LTIPs
initially
had
two
separate
one-year
performance
periods
commencing
January
1,
2014
and
continuing
through
December
31,
2015,
with
the
payouts
for
each
year
under
the
plan
payable
as
soon
as
practicable
after
the
Compensation
Committee
assessed
whether
the
applicable
target
had
been
achieved
based
on
the
audited
financial
statements
for
that
year.
Payouts
under
the
LTIPs
are
based
on
the
achievement
of
Corporate
Adjusted
Financing
EBITDA
targets,
and
in
the
case
of
Mr.
Berckemeyer
only,
LatAm
Adjusted
Financing
EBITDA
targets.

In
September
2014,
the
Compensation
Committee
approved
a
change
to
Mr.
Berckemeyer's
LTIP
arrangement
to
add
an
additional
$1,000,000
award
opportunity
for
2016.
Payments
of
awards
to
Mr.
Berckemeyer
in
2016
are
subject
(a)
50%
to
continued
employment
on
the
applicable
annual
payment
date,
and
(b)
50%
to
achievement
of
the
annual
performance
targets
set
by
the
Compensation
Committee.
Payment
of
the
performance-based
component
will
be
based
on
achievement
of
at
least
98%
of
the
Adjusted
Financing
EBITDA
target
for
2016.
For
Mr.
Berckemeyer,
the
performance
targets
for
2016
are
based
on
the
goals
contained
in
the
Company's
2014
long
range
plan
on
a
foreign
currency
exchange
neutral
basis
at
2015
budget
exchange
rates,
based
75%
on
LatAm
Adjusted
Financing
EBITDA,
which
is
$723,859,021,
and
25%
on
Corporate
Adjusted
Financing
EBITDA,
which
is
$1,033,673,322.
Payment,
if
earned,
will
be
made
as
soon
as
administratively
practicable
after
the
end
of
the
performance
period.

In
May
2015,
the
Compensation
Committee
approved
an
additional
year
for
Mr.
Serck-Hanssen's
LTIP.
If
at
least
98%
of
the
applicable
2016
Corporate
Adjusted
Financing
EBITDA
target
is
achieved,
Mr.
Serck-Hanssen
will
be
eligible
to
receive
a
$500,000
payment.
For
Mr.
Serck-Hanssen,
the
2016
performance
target
is
based
on
the
goals
contained
in
the
Company's
2015
long
range
plan,
on
a
foreign
currency
exchange
neutral
basis
at
2015
budget
exchange
rates,
which
is
$942,449,981.
Payment,
if
earned,
will
be
made
as
soon
as
administratively
practicable
after
the
end
of
the
performance
period.

Pursuant
to
his
offer
letter,
Mr.
Guimarães
is
eligible
to
participate
in
a
cash
LTIP
plan
valued
at
$1,000,000
in
2016
and
$1,500,000
in
2017,
subject
to
the
terms
of
the
plan
as
amended
from
time
to
time.
LTIP
goals
are
tied
to
achievement
of
Adjusted
Financing
EBITDA
goals
in
the
Company's
2016
budget
and
2017
long
range
plan.
Payment
will
be
based
on
achievement
of
at
least
98%
of
the
Adjusted
Financing
EBITDA
target
for
each
year.
For
Mr.
Guimarães,
the
2016
performance
target
is
based
on
the
goals
contained
in
the
Company's
2016
budget
on
a
foreign
currency
neutral
basis
at
2016
budget
exchange
rates,
which
was
$781,355,195.
Payment,
if
earned,
will
be
made
as
soon
as
administratively
practicable
after
the
end
of
the
performance
period.

Executive
Eilif
Serck-Hanssen
Ricardo
M.
Berckemeyer
Enderson
Guimarães(1)

2016

Payment
Target

500,000

1,000,000

(1)

Mr.
Guimarães
served
as
President
and
Chief
Operating
Officer
until
March
23,
2017.

Long-Term Equity Incentive Opportunity.

The
use
of
long-term
equity
incentives
creates
a
link
between
executive
compensation
and
Laureate's
long-term
performance,
thereby
creating
alignment

366

Table
of
Contents

between
executive
and
investor
interests.
In
2013,
our
board
of
directors
and
the
stockholders
of
the
Company
approved
the
2013
Plan,
which
is
an
omnibus
plan
providing
the
flexibility
to
grant
a
variety
of
long-term
equity
incentive
awards,
including
stock
options,
restricted
stock,
restricted
stock
units
and
stock
appreciation
rights.
In
September
2015
and
December
2016,
our
board
of
directors
and
the
stockholders
of
the
Company
approved
amendments
to
the
2013
Plan
to
increase
the
aggregate
number
of
shares
of
common
stock
issuable
pursuant
to
awards
that
may
be
granted
under
the
2013
Plan.
As
of
December
31,
2016,
only
stock
options,
RSUs
and
PSUs
had
been
granted
to
any
of
the
Named
Executive
Officers
under
the
2013
Plan.
In
connection
with
the
adoption
of
the
2013
Plan,
the
Compensation
Committee
made
long-term
equity
incentive
awards
to
the
Named
Executive
Officers
that
were
intended
to
provide
five
years
of
long
term
incentive
on
an
up-front
basis.
The
Compensation
Committee
did
not
make
any
equity
grants
to
any
Named
Executive
Officer
during
2016
other
than
the
October,
2016
retention
awards
described
above
in
"—2016
Stock
Option
Repricing/Retention
Equity
Grant"
and
included
in
"—Grants
of
Plan-Based
Awards
in
2016."

Equity
awards
granted
to
the
Named
Executive
Officers
under
the
2013
Plan
were
determined
based
on
market
competitiveness,
criticality
of
position
and
individual
performance
(both
historical
and
expected
future
performance)
and,
in
the
case
of
Mr.
Guimarães,
recruitment.
There
is
no
set
weight
given
to
these
factors.
Performance
awards
granted
to
our
Named
Executive
Officers
under
the
2013
Plan
can
vest
subject
to
an
annual
corporate
Equity
Value
Target.
The
Equity
Value
Target
was
based
on
15%
cumulative
annual
growth
over
2012
results.
Equity
Value
is
generally
defined
as
Adjusted
EBITDA,
minus
noncontrolling
interests
equity
value,
multiplied
by
10,
minus
net
debt
all
calculated
on
a
foreign
currency
neutral
basis.
The
targets
also
contain
a
catch-up
provision.
If
the
performance-vesting
target
is
missed
for
a
year,
that
performance
tranche
can
vest
in
any
subsequent
year
after
which
the
targeted
result
is
achieved
for
the
current
year.
The
Compensation
Committee
uses
its
discretion
in
determining
appropriate
equity
award
levels
for
the
Named
Executive
Officers.

Commencing
with
the
annual
equity
grants
made
in
2016,
the
Compensation
Committee
refined
the
Company's
long
term
incentive
award
program
to
make
it
more
consistent
with
market
practice,
appropriately
aligning
pay
with
performance,
and
maximizing
share
usage
under
our
2013
Plan.
Because
the
Named
Executive
Officers
each
received
front
loaded
awards
in
2013,
or
in
the
case
of
Mr.
Guimarães
in
2015
upon
his
recruitment,
none
of
the
Named
Executive
Officers
received
an
annual
equity
award
in
2016
with
these
new
features.
Certain
of
the
Named
Executive
Officers
did,
however,
receive
the
October
2016
retention
grant
described
above
in
"—2016
Stock
Option
Repricing/Retention
Equity
Grant",
which
did
not
incorporate
the
new
annual
refinements.
It
is
anticipated
Named
Executive
Officers
may
receive
grants
with
the
new
features
in
future
periods.

The
principal
long-term
equity
incentive
design
features
adopted
in
2016
included:

•

Move
from
plan
designed
to
deliver
market-competitive
long-term
incentives
in
up
front
fashion
to
senior
executives
and
on
an
annual
basis
to
other
employees
to
one
designed
to
deliver
market-competitive
long-term
incentives
on
an
annual
basis
to
all
eligible
employees;

Move
from
awards
vesting
over
5
years
to
awards
vesting
over
3
years,
generally
as
follows:

•

Stock
options
33.3%
of
the
total
number
of
options
in
each
annual
grant
vesting
each
year,

RSUs
33.3%
of
the
total
number
of
units
in
each
annual
grant
vesting
each
year,
and

PSUs:
a
percentage
of
target
determined
based
on
corporate
performance
on
the
third
anniversary
of
the
grant
date
against
an
Adjusted
EBITDA
performance
goal
set
annually
by
the
Compensation
Committee;

Reduce
or
eliminate
use
of
performance
stock
options;
and

Change
from
Equity
Value
Target
performance
goal
to
Adjusted
EBITDA
performance
goal.

367

Table
of
Contents

The
following
is
a
description
of
equity
awards
granted
to
our
Named
Executive
Officers
since
2013:

Stock Options :

Historically,
stock
options
have
been,
and
we
expect
they
will
continue
to
be,
a
core
element
of
long-term
incentive
opportunity
for
our
Named
Executive
Officers.
The
Compensation
Committee
believes
that
the
best
way
to
align
compensation
of
our
Named
Executive
Officers
with
long-term
growth
and
profitability
is
to
design
long-term
incentive
compensation
that
is,
to
a
great
degree,
dependent
on
Company
performance.
Time-based
stock
options
granted
to
our
Named
Executive
Officers
(other
than
those
granted
to
Mr.
Becker
in
October
2016)
vest
in
equal
annual
installments
over
a
five-year
period,
subject
to
continued
employment
on
each
applicable
vesting
date.
Performance-based
stock
options
granted
to
our
Named
Executive
Officers
(other
than
those
granted
to
Mr.
Becker
in
October
2016)
under
our
2013
Plan
vest
in
equal
annual
installments
over
a
five-year
period
based
on
satisfaction
of
the
annual
Equity
Value
Target
described
above,
subject
to
continued
employment
on
each
applicable
vesting
date.
See
"—2016
Stock
Option
Repricing/Retention
Equity
Grant"
and
"—2016
Grants
of
Plan-Based
Awards"
for
more
information
on
the
stock
options
granted
to
Mr.
Becker
in
October
2016.
See
"—Outstanding
Equity
Awards"
for
information
about
the
vesting
terms
of
our
outstanding
stock
options.

See
"—Arrangements
with
Certain
Named
Executive
Officers—Chairman
and
Chief
Executive
Officer
Compensation"
for
more
information
concerning
options
the
Company
granted
to
Mr.
Becker.

Performance Share Units :

Each
of
the
Named
Executive
Officers
(other
than
Mr.
Guimarães)
received
a
grant
of
PSUs
in
2013.
The
PSUs
vest
in
equal
annual
installments
over
a
five-year
period
subject
to
satisfaction
of
the
Equity
Value
Target
described
above.
The
portion
of
the
initial
grant
of
PSUs
subject
to
achievement
of
each
of
the
2013
and
2014
Equity
Value
Targets
was
first
eligible
to
vest
after
the
publication
of
audited
financial
statements
for
2014.
The
remaining
portion
of
the
PSUs
is,
or
was,
as
applicable,
eligible
to
vest
based
on
achievement
of
the
applicable
2015,
2016,
and
2017
Equity
Value
Targets.
The
grant
agreements
contain
the
catch-up
provision
discussed
above.
Mr.
Guimarães
received
grants
of
174,392
PSUs
in
September
2015
and
30,518
PSUs
in
December
2015,
which
will
be,
or
was,
as
applicable,
eligible
to
vest
based
on
achievement
of
the
applicable
2015,
2016,
2017,
2018
and
2019
Equity
Value
Targets.
The
Named
Executive
Officers
(other
than
Messrs.
Becker
and
Guimarães)
also
received
PSUs
in
October
2016.
See
"—2016
Stock
Option
Repricing/Retention
Equity
Grant"
and
"—2016
Grants
of
Plan-Based
Awards"
for
more
information
on
these
grants.
See
"—Outstanding
Equity
Awards"
for
information
about
the
vesting
terms
of
our
outstanding
PSUs.

In
March
2015,
the
Compensation
Committee
determined,
based
on
the
Company's
audited
consolidated
financial
statements
for
2013
and
2014,
that
the
Equity
Value
Targets
for
2013
and
2014
had
been
achieved,
and
the
PSUs
subject
to
those
Equity
Value
Targets
vested
and
were
settled
in
shares
of
common
stock
in
April
2015.
In
March
2016,
the
Compensation
Committee
determined,
based
on
the
Company's
audited
consolidated
financial
statements
for
2015,
that
the
Equity
Value
Target
for
2015
had
been
achieved
and
the
PSUs
subject
to
that
Equity
Value
Target
vested
and
were
settled
in
shares
of
common
stock
in
April
2016.
PSUs
are
affected
by
all
changes
in
the
fair
market
value
of
our
common
stock
and,
therefore,
the
value
to
the
Named
Executive
Officers
is
affected
by
both
increases
and
decreases
in
the
fair
market
value.
Except
as
provided
in
an
individual
agreement,
all
unvested
PSUs
are
forfeitable
upon
termination
of
employment
prior
to
vesting.
PSUs
do
not
provide
voting
or
dividend
rights
until
the
units
are
vested
and
settled
in
shares
of
common
stock.

Restricted Stock Units :

On
May
14,
2015,
Mr.
Serck-Hanssen
received
a
grant
20,380
RSUs
under
the
2013
Plan,
all
of
which
will
vest
on
May
14,
2018,
subject
to
continued
employment
through
such
date.
On
September
17,
2015,
Mr.
Guimarães
received
a
grant
of
62,500
RSUs
and
on
December
16,
2015,
Mr.
Guimarães
received
an
additional
grant
of
10,937
RSUs,
all
of
which
will
vest
on
December
31,
2017,
subject
to
continued
employment.
If
Mr.
Guimarães's
employment
is
terminated

368

Table
of
Contents

without
cause
(other
than
due
to
death
or
disability)
prior
to
December
31,
2017,
the
73,437
RSUs
granted
to
Mr.
Guimarães
in
2015
will
vest
immediately,
provided
Mr.
Guimarães
signs
a
required
separation
and
release
agreement
within
the
time
period
specified
in
the
agreements.
The
Named
Executive
Officers
(other
than
Messrs.
Becker
and
Guimarães)
also
received
RSUs
in
October
2016.
See
"—2016
Stock
Option
Repricing/Retention
Equity
Grant"
and
"—2016
Grants
of
Plan-Based
Awards"
for
more
information
on
these
grants.
See
"—Outstanding
Equity
Awards"
for
information
about
the
vesting
terms
of
our
outstanding
RSUs.

Except
as
provided
in
an
individual
agreement,
all
unvested
RSUs
are
forfeitable
upon
termination
of
employment
prior
to
vesting.
RSUs
do
not
provide
voting
or
dividend
rights
until
the
units
are
vested
and
settled
in
shares
of
common
stock.

Other
Compensation

Deferred Compensation.

The
Post-2004
DCP
is
intended
to
promote
executive
retention
by
providing
a
long-term
savings
opportunity
on
a
tax-efficient
basis
to
approximately
82
eligible
Company
employees
for
the
2016
Plan
year,
including
certain
of
the
Named
Executive
Officers.
The
Post-2004
DCP
allows
participants
to
defer
up
to
85%
of
their
base
salaries
and
100%
of
any
AIP
awards,
with
interest
earned
at
market
rates
on
deferred
amounts
and
payout
following
termination
of
employment
or
another
selected
payout
schedule.
Payouts
of
Post-2004
DCP
balances
are
made
in
a
lump
sum
or
in
installments,
at
the
election
of
the
participants.
Each
year,
we
have
the
ability,
but
not
the
obligation,
to
make
matching
employer
contributions
to
each
participant's
Post-2004
DCP
account
if
the
participant
made
salary
reduction
contributions
to
the
401(k)
Retirement
Savings
Plan,
received
less
than
the
full
match
under
the
401(k)
Retirement
Savings
Plan
on
the
salary
reduction
contribution
because
of
the
limit
in
Section
401(a)(17)
of
the
Code
on
compensation
and
made
at
least
a
$5,000
minimum
contribution
to
his
or
her
401(k)
Retirement
Savings
Plan
account.
To
date,
we
have
not
made
any
matching
contributions
to
any
participant
Post-2004
DCP
account,
nor
have
we
chosen
to
make
any
other
discretionary
employer
contributions
permitted
to
be
made
to
participants
pursuant
to
the
Post-2004
DCP.
See
"—2016
Nonqualified
Deferred
Compensation"
below
for
information
relating
to
the
2014
Post-2004
DCP
accounts
of
certain
of
our
Named
Executive
Officers.
All
amounts
deferred
under
the
Post-2004
DCP
are
unfunded
and
unsecured
obligations
of
Laureate,
receive
no
preferential
creditors'
standing
and
are
subject
to
the
same
risks
as
any
of
our
other
general
obligations.

Benefits.

We
provide
various
employee
benefit
programs
to
our
Named
Executive
Officers,
including
medical,
dental,
life/accidental
death
and
dismemberment
disability
insurance
benefits
and
our
401(k)
Retirement
Savings
Plan.
These
benefit
programs
are
generally
available
to
all
of
our
U.S.-based
employees.
Executive
Officers,
including
the
Named
Executive
Officers
other
than
Mr.
Guimarães,
also
were
provided
access
to
a
Medical
Expense
Reimbursement
Program
until
December
31,
2014.
Through
this
program
they
could
receive
reimbursement
for
health
care
charges
not
covered
by
our
health
care
plan.
This
program
only
covered
eligible
health
expenses
as
defined
by
Section
213
of
the
Code.
Some
runout
expense
reimbursement
claims
were
paid
in
2015.
Executive
Officers
are
also
provided
with
individual
supplemental
executive
long-term
disability
coverage
and
may
participate
in
the
Pinnacle
Care
Health
Consulting
Service,
a
medical
concierge
service
that
provides
advice
and
other
assistance
with
health
care
decisions
and
gives
them
access
to
medical
services
around
the
world.
In
connection
with
his
recruitment
we
agreed
to
provide
Mr.
Guimarães
with
relocation
benefits.
These
benefits
are
provided
to
the
Named
Executive
Officers
to
eliminate
potential
distractions
from
performing
their
regular
job
duties.
We
believe
the
cost
of
these
programs
is
counterbalanced
by
an
increase
in
productivity
by
the
executives
receiving
access
to
them.

Clawback Policy

In
October
2013,
the
Compensation
Committee
adopted
an
Executive
Incentive
Compensation
Recoupment
Policy,
also
known
as
a
"clawback."
Under
these
clawback
provisions,
executives
that

369

Table
of
Contents

violate
confidentiality,
non-competition,
and
non-solicitation
agreements
forfeit
any
outstanding
awards
under
the
2013
Plan
and
return
any
gains
realized
from
awards
prior
to
the
violation.
These
provisions
serve
to
protect
our
intellectual
property
and
human
capital,
and
help
ensure
that
executives
act
in
the
best
interests
of
Laureate
and
its
stockholders.
We
plan
to
revise
the
Executive
Incentive
Compensation
Recoupment
Policy
to
be
consistent
with
the
final
rules
implementing
the
requirements
of
the
Dodd-Frank
Act.

Tax
and
Accounting
Implications

As
part
of
its
role,
the
Compensation
Committee
considers
the
tax
and
accounting
impacts
reflected
in
our
financial
statements
when
establishing
our
compensation
plans.
The
forms
of
compensation
it
selects
are
intended
to
be
cost-efficient.
Under
GAAP,
the
cash
AIP
awards,
LTIP
awards,
and
performance-
based
equity
awards
result
in
"accrual"
accounting,
which
means
that
the
estimated
payout
of
the
award,
along
with
any
changes
in
that
estimate,
are
recognized
over
the
performance
period.
Our
ultimate
expense
will
equal
the
value
earned
by
and
paid
to
the
executives.
Therefore,
the
ultimate
expense
is
not
determinable
until
the
end
of
the
performance
period.

Section
162(m)
of
the
Code
generally
provides
that
publicly
held
corporations
may
not
deduct
in
any
taxable
year
specified
compensation
of
more
than
$1,000,000
paid
to
the
CEO
and
the
next
three
most
highly
compensated
executive
officers,
excluding
the
chief
financial
officer.
However,
performance-based
compensation
more
than
$1,000,000
is
deductible
if
specified
criteria
are
met,
including
shareholder
approval
of
the
material
terms
of
applicable
plans.

As
we
have
not
been
subject
to
Section
162(m)
of
the
Code
since
the
leveraged
buyout,
the
Compensation
Committee
did
not
consider
the
impact
of
this
rule
when
developing
and
implementing
our
executive
compensation
programs
through
2015.
Section
162(m)
of
the
Code
provides
for
a
transition
period
for
IPO
companies.
However,
beginning
in
2016,
the
Compensation
Committee's
intention
is
to
comply
with
the
requirements
for
deductibility
under
Section
162(m)
of
the
Code,
unless
the
Committee
concludes
that
adherence
to
the
limitations
imposed
by
these
provisions
would
not
be
in
the
best
interest
of
the
Company
or
its
shareholders.
While
base
salaries
of
more
than
$1,000,000
are
not
deductible,
payments
made
under
our
AIP
and
LTIP
programs,
and
the
grants
of
PSUs
and
stock
options
are
intended
to
qualify
for
deductibility
under
Section
162(m)
of
the
Code
as
qualified
performance-based
compensation.

For
purposes
of
compliance
with
the
Code,
awards
under
applicable
programs
will
not
be
made
to
individuals
subject
to
Section
162(m)
of
the
Code
unless
attainment
of
performance
goals
is
certified
by
the
Compensation
Committee.
In
the
event
of
attainment
of
minimum
performance
goals
under
these
programs,
the
Compensation
Committee
will
exercise
negative
discretion
to
adjust
awards
downward
from
a
potential
maximum
amount
in
order
to
satisfy
requirements
under
Section
162(m)
of
the
Code,
while
still
providing
for
awards
based
on
Company
and
individual
performance
in
accordance
with
our
AIP,
LTIP
and
equity
compensation
programs.

Summary
Compensation
Table

The
following
table
summarizes
the
total
compensation
earned
in
2014
(except
for
Mr.
Guimarães,
who
was
not
a
Named
Executive
Officer
in
that
year),
in
2015
and
in
2016
by
the
CEO
and
Chief
Financial
Officer
during
the
fiscal
year
and
the
three
other
persons
serving
as
executive
officers
at
the
end
of
fiscal
2016
who
were
the
most
highly
compensated
executive
officers
of
the
Company
in
fiscal
2016.

The
Compensation
Committee
has
not
yet
assessed
2016
performance
under
any
of
our
performance-based
compensation
programs.
Accordingly,
2016
awards
have
not
been
determined
at
this
time.
We
expect
the
Compensation
Committee
to
assess
2016
performance
under
our
performance-based
compensation
programs
and
determine
the
LTIP
awards
in
April
2017.
The
Company
intends
to

370

Table
of
Contents

file
a
Current
Report
on
Form
8-K
or
otherwise
disclose
the
2016
performance-based
compensation
within
four
business
days
after
the
Compensation
Committee
has
assessed
2016
performance
under
our
performance-based
compensation
programs
and
individual
incentive
awards
are
determined.

We
have
omitted
from
this
table
the
columns
for
Change
in
Pension
Value
and
Nonqualified
Deferred
Compensation
Earnings,
because
no
Named
Executive
Officer
received
such
types
of
compensation
during
2016.

SUMMARY
COMPENSATION
TABLE

Name
and
Principal
Position
Year
Douglas
L.
Becker

Salary

($)

1,014,916

994,220

969,970

Bonus

($)

Stock

Awards

Option

Awards
4,071,544(4)

2016

2015

2014

2016

2015

592,034

579,962

706,640(6)

524,989(9)

672,613(7)

Non-Equity

Incentive
Plan

Compensation

($)(1)

All
Other

Compensation

($)(2)

Total

($)(3)
5,130,275

2,460,158

2,767,888

43,815(5)

45,477(5)

41,105(5)

11,559(8)

12,272(8)

1,982,846

2,278,397

1,420,461

1,756,813

1,161,174

Founder,
Chairman
&
CEO

Eilif
Serck-Hanssen

President,
Chief
Administrative
Officer
and
Chief
Financial
Officer

Ricardo
M.
Berckemeyer
Chief
Operating
Officer
and
CEO,
LatAm

Enderson
Guimarães

President
&
Chief(15)
Operating
Officer

Paula
Singer

Chief
Network
Officer

2014

565,816

1,140,505

11,806(8)

1,718,127

2016

694,288

706,640(6)

676,500(7)

2015

2014

2016

2015

—

2016

2015

2014

680,130

663,542

905,014

300,000

746,890(7)

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

694,288

680,130

663,542

350,400(6)

676,500(7)

2,117,978

2,201,808

963,718

1,309,763

1,368,257

40,903(10)

2,118,331

50,012(10)

2,848,120

35,682(10)

2,901,032

12,093(11)

1,663,997

98,427(11)
19,500,424

15,252(14)

16,322(14)

31,649(14)

1,736,440

2,006,215

2,063,448

(1)

(2)

(3)

(4)

As
of
the
date
of
this
Form
10-K,
the
Compensation
Committee
has
not
yet
assessed
2016
performance
under
any
of
our
performance-based
compensation
programs.
Accordingly,
2016
AIP
and
2016
LTIP
awards
have
not
been
determined
at
this
time.
We
expect
the
Compensation
Committee
to
assess
2016
performance
under
our
performance-based
compensation
programs
and
determine
the
LTIP
awards
in
March
2017.
The
Company
intends
to
file
a
Current
Report
on
Form
8-K
or
otherwise
disclose
the
2016
performance-
based
compensation
within
four
business
days
after
the
Compensation
Committee
has
assessed
2016
performance
under
our
performance-based
compensation
programs
and
individual
incentive
awards
are
determined.
See
"—2016
Grants
of
Plan-Based
Awards"
for
a
description
of
amounts
potentially
payable
under
the
AIP.
For
2014
and
2015
for
Mr.
Becker
the
amounts
shown
in
this
column
represent
awards
under
our
AIP
only.
For
Mr.
Serck-Hanssen
the
2015
amount
represents
$661,174
under
the
AIP
and
$500,000
under
his
LTIP
and
the
2014
amount
represents
$640,505
under
the
AIP
and
$500,000
under
his
LTIP.
For
Mr.
Berckemeyer
the
2015
the
amount
represents
$1,117,978
under
the
AIP
and
$1,000,000
under
his
LTIP
and
the
2014
amount
represents
$1,201,808
under
the
AIP
and
$1,000,000
under
his
LTIP.
For
Mr.
Guimarães
the
2015
amount
represents
$463,718
under
the
AIP
and
$500,000
under
his
LTIP.
For
Ms.
Singer
the
2015
amount
represents
$809,763
under
the
AIP
and
$500,000
under
her
LTIP
and
the
2014
amount
represents
$868,257
under
the
AIP
and
$500,000
under
her
LTIP.

"All
Other
Compensation"
for
each
Named
Executive
Officer
includes
$7,950
for
2016
and
2015,
and
$7,800
for
2014,
contributed
by
us
pursuant
to
our
401(k)
matching
program.
For
Mr.
Guimarães
only,
the
2015
401(k)
match
was
$0.

Total
amounts
reported
for
2016
do
not
include
amounts
payable
in
connection
with
the
2016
AIP
and
2016
LTIP
awards,
which
amounts
are
expected
to
be
determined
in
April
2017.

For
Mr.
Becker,
$2,117,841
represents
the
incremental
fair
value
on
the
modification
date
in
accordance
with
Financial
Accounting
Standards
Board
Accounting
Standards
Codification
Topic
718
("ASC
718")
with
respect
to
the
reduction
to
$23.20
of
the
exercise
price
per
share
of
certain
options
granted
under
the
2013
Plan.
See
"—2016
Stock
Option
Repricing/Retention
Equity
Grant"
and
"—2016
Grants
of
Plan-Based
Awards"
for
more
information.
$1,953,704
represents
the
grant
date
fair
value,
which
is
an
estimated
value
computed
in
accordance
with
ASC
718,
of
option
awards
granted
to
Mr.
Becker
in
2016.
See
"—2016
Grants
of
Plan-Based
Awards"
for
more
information.
Please
refer
to
Note
13,
Share-based
Compensation,
in
our
consolidated
financial
statements
included
elsewhere
in
this
Form
10-K
for
a
discussion
of
the
assumptions
related
to
the
calculation
of
such
value.

371

Table
of
Contents

(5)

(6)

(7)

(8)

(9)

(10)

(11)

(12)

(13)

(14)

(15)

For
2016,
includes
$24,987
for
executive
supplemental
disability
plan
premium
paid
by
us,
$10,750
for
medical
concierge
services,
as
well
as
other
personal
expense
reimbursement.
For
2015,
includes
$24,987
for
executive
supplemental
disability
plan
premiums
paid
by
us
and
$10,000
for
medical
concierge
services,
as
well
as
transportation
and
personal
expense
reimbursement.
For
2014,
includes
$20,934
for
executive
supplemental
disability
plan
premiums
paid
by
us,
$2,371
for
medical
expense
reimbursement
and
$10,000
for
medical
concierge
services.

The
amounts
reported
represent
the
grant
date
fair
value,
which
is
an
estimated
value
computed
in
accordance
with
ASC
718,
of
RSUs
and
PSUs
granted
to
the
NEOs
in
2016.
For
Mr.
Serck-Hanssen
this
amount
represents
$504,740
for
RSUs,
which
vest
over
time,
subject
to
continued
employment
and
$201,900
for
PSUs
which
vest
based
on
achievement
of
certain
Corporate
performance
targets
and
continued
employment
through
June
17,
2018.
For
Mr.
Berckemeyer,
this
amount
represents
$504,740
for
RSUs,
which
vest
over
time,
subject
to
continued
employment
and
$201,900
for
PSUs
which
vest
based
on
achievement
of
certain
corporate
performance
targets
and
continued
employment
through
June
17,
2018.
For
Ms.
Singer
this
amount
represents
$250,285
for
RSUs,
which
vest
over
time,
subject
to
continued
employment
and
$100,115
for
PSUs
which
vest
based
on
achievement
of
certain
corporate
performance
targets
and
continued
employment
through
June
17,
2018.
Please
refer
to
Note
13,
Share-based
Compensation,
in
our
consolidated
financial
statements
included
elsewhere
in
this
Form
10-K
for
a
discussion
of
the
assumptions
related
to
the
calculation
of
such
value.

Represents
the
incremental
fair
value
on
the
modification
date
in
accordance
with
ASC
718
with
respect
to
the
reduction
to
$23.20
of
the
exercise
price
per
share
of
certain
options
granted
under
the
2013
Plan.
See
"—2016
Stock
Option
Repricing/Retention
Equity
Grant"
and
"—2016
Grants
of
Plan-Based
Awards"
for
more
information.
Please
refer
to
Note
13,
Share-based
Compensation,
in
our
consolidated
financial
statements
included
elsewhere
in
this
Form
10-K
for
a
discussion
of
the
assumptions
related
to
the
calculation
of
such
value.

For
2016,
includes
$3,609
for
executive
supplemental
disability
plan
premiums
paid
by
us.
For
2015,
includes
$3,609
for
executive
supplemental
disability
plan
premiums
paid
by
us
and
$713
in
distributions
on
unvested
restricted
shares.
For
2014,
includes
$3,609
for
executive
supplemental
disability
plan
premiums
paid
by
us
and
$397
in
distributions
on
unvested
restricted
shares.

The
amounts
reported
represent
the
grant
date
fair
value,
which
is
an
estimated
value
computed
in
accordance
with
ASC
718,
of
RSUs
and
PSUs,
as
applicable,
granted
to
the
NEOs
in
2015.
For
Mr.
Serck-Hanssen
this
amount
represents
RSUs,
which
vest
over
time,
subject
to
continued
employment.
For
Mr.
Guimarães
this
amount
includes
RSUs
and
PSUs.
PSUs
vest
based
on
achievement
of
certain
corporate
performance
targets.
In
accordance
with
ASC
718
we
account
for
PSUs
based
on
the
amount
probable
to
vest
at
each
period
end
date.
If
we
were
to
assume
the
highest
level
of
performance
on
these
PSUs,
Mr.
Guimarães's
total
Stock
Award
grant
date
fair
value
would
be
$7,163,617.
Please
refer
to
Note
13,
Share-based
Compensation,
in
our
consolidated
financial
statements
included
elsewhere
in
this
Form
10-K
for
a
discussion
of
the
assumptions
related
to
the
calculation
of
such
value.

For
2016,
includes
$4,639
for
executive
supplemental
disability
plan
premiums
paid
by
us
and
$28,314
for
family
transportation.
For
2015
includes
$4,639
for
executive
supplemental
disability
plan
premiums
paid
by
us,
personal
expense
reimbursement
and
$35,306
for
family
transportation.
For
2014,
includes
$4,639
for
executive
supplemental
disability
plan
premiums
paid
by
us,
$298
in
distributions
on
unvested
restricted
shares,
and
for
medical
expense
reimbursement,
personal
expense
reimbursement
and
$21,356
for
family
transportation.

For
2016,
includes
$4,143
for
executive
supplemental
disability
plan
premiums
paid
by
us.
The
2015
amount
represents
$98,427
for
relocation
expenses.

Represents
an
amount
equivalent
to
the
forfeited
long-term
bonus
at
target
Mr.
Guimarães
would
have
received
from
his
prior
employer
and
eight
months'
cash
long-term
incentive,
as
specified
in
his
offer
letter.

For
Mr.
Guimarães,
the
amount
shown
in
the
Option
Awards
column
represents
the
grant
date
fair
value,
which
is
an
estimated
value
computed
in
accordance
with
ASC
718,
of
stock
options,
granted
to
Mr.
Guimarães
in
2015.
Performance-vested
stock
options
vest
based
on
achievement
of
certain
corporate
performance
targets.
In
accordance
with
ASC
718
we
account
for
performance-vested
stock
options
based
on
the
amount
probable
to
vest
at
each
period
end
date.
If
we
were
to
assume
the
highest
level
of
performance
on
these
performance-vested
stock
options
Mr.
Guimarães's
total
Option
Award
grant
date
fair
value
would
be
$13,050,927.
Please
refer
to
Note
13,
Share-based
Compensation,
in
our
consolidated
financial
statements
included
elsewhere
in
this
Form
10-K
for
a
discussion
of
the
assumptions
related
to
the
calculation
of
such
value.

For
2016,
includes
$7,302
for
executive
supplemental
disability
plan
premiums
paid
by
us.
For
2015
includes
$7,302
for
executive
supplemental
disability
plan
premiums
paid
by
us
and
$1,070
distributions
on
unvested
restricted
shares.
For
2014,
includes
$7,302
for
executive
supplemental
disability
plan
premiums
paid
by
us,
$596
distributions
on
unvested
restricted
shares,
$8,012
for
medical
expense
reimbursement,
and
other
personal
expense
reimbursement.

Mr.
Guimarães
served
as
President
and
Chief
Operating
Officer
until
March
23,
2017.

372

Table
of
Contents

Arrangements with Certain Named Executive Officers

Chairman
and
Chief
Executive
Officer
Compensation
.

While
our
CEO
plays
an
important
role
in
advising
the
Compensation
Committee
with
respect
to
compensation
decisions
for
the
other
Named
Executive
Officers,
the
Compensation
Committee
evaluates
the
performance
of
our
CEO
using
its
sole
discretion.
The
Compensation
Committee
believes
that
our
CEO's
compensation
package
is
market-based
and
performance-aligned
and
that
it
facilitates
Mr.
Becker's
retention
and
motivation,
which
the
Compensation
Committee
believes
to
be
critical
to
our
continued
success.
In
March
2016,
the
Compensation
Committee
evaluated
our
and
our
CEO's
2015
financial
and
non-financial
performance.
Overall,
the
Compensation
Committee
believes
that
the
performance
of
our
CEO
during
2015
was
exceptional
and
that,
with
his
continued
leadership,
the
Company
is
well
positioned
for
continued
growth
and
investor
value
creation.
Because
of
its
assessment
of
Mr.
Becker's
overall
performance
during
2015,
in
March
2016,
the
Compensation
Committee
awarded
Mr.
Becker
a
cash
award
under
the
AIP
as
described
above
under
"—Annual
Incentive
Compensation
Opportunity"
and
awarded
Mr.
Becker
a
merit-based
salary
increase
for
2016.

Executive DCP.

Prior
to
the
leveraged
buyout
in
2007,
Mr.
Becker
had
options
to
purchase
shares
of
our
common
stock
and
PSUs,
and
another
founder
of
Sterling
Partners
had
options
to
purchase
shares
of
our
common
stock,
which,
based
on
a
value
of
$60.50
per
share,
would
have
entitled
Mr.
Becker
to
$78,116,588
and
such
other
founder
of
Sterling
Partners
to
$48,622,060
if
such
options,
and
in
Mr.
Becker's
case,
PSUs,
were
cashed
out
in
connection
with
the
leveraged
buyout.
Pursuant
to
Mr.
Becker's
letter
agreement
with
L
Curve
Sub
Inc.,
Wengen
and
us,
dated
August
16,
2007,
and
an
Amended
and
Restated
Commitment
Letter,
dated
June
3,
2007,
among
another
founder
of
Sterling
Partners,
Wengen
and
the
other
parties
thereto,
Mr.
Becker
and
one
of
the
other
founders
of
Sterling
Partners
agreed
to
cancel
such
options
and,
in
Mr.
Becker's
case,
PSUs,
in
exchange
for
us
establishing
a
deferred
compensation
plan
for
each
of
them,
under
which
plans
these
two
individuals
had
rights
to
receive
cash
payments
in
subsequent
years.
We
established
a
deferred
compensation
account
balance
plan
(each
an
"Executive
DCP")
with
an
account
value
of
$78,116,588
for
the
benefit
of
Mr.
Becker
and
an
Executive
DCP
with
an
account
value
of
$48,622,060
for
the
benefit
of
one
of
the
other
founders
of
Sterling
Partners.
Since
2007
each
Executive
DCP
has
been
administered
as
described
below.
On
the
closing
date
of
the
leveraged
buyout,
each
Executive
DCP
was
credited
with
a
number
of
phantom
shares
of
our
common
stock
equal
to
the
number
of
shares
that
Mr.
Becker
or
such
other
founder
of
Sterling
Partners,
as
applicable,
could
have
acquired
in
the
leveraged
buyout
if
all
of
the
options
and
PSUs,
as
applicable,
had
been
cancelled
in
exchange
for
a
number
of
shares
(the
"Phantom
Shares"),
equal
to
the
quotient
of
(x)
the
aggregate
cash
payment
that
Mr.
Becker
and
such
other
founder
of
Sterling
Partners,
as
the
case
may
be,
would
have
received
(based
on
a
per
share
value
of
$60.50)
on
a
pre-tax
basis,
in
respect
of
such
cancelled
options
and
PSUs,
as
applicable,
on
the
closing
date
of
leveraged
buyout
divided
by
(y)
the
value
of
one
share
of
Laureate
common
stock
as
it
existed
immediately
after
giving
effect
to
the
leveraged
buyout.

Each
of
Mr.
Becker
and
one
of
the
other
founders
of
Sterling
Partners
have
been
fully
vested
at
all
times
since
the
leveraged
buyout
in
his
respective
Executive
DCP.
Pursuant
to
the
Executive
DCP,
the
value
of
Mr.
Becker's
Executive
DCP
was
based
on
the
underlying
value
of
our
common
stock,
subject
to
a
maximum
5%
compound
annual
return
until
the
earliest
of
an
initial
public
offering
of
our
shares
of
common
stock,
September
17,
2014
or
a
change
in
control
of
the
Company.
On
December
30,
2016,
the
Company's
obligations
under
the
Executive
DCP
were
satisfied
in
full.

On
September
17,
2014
(the
"Distribution
Date"),
we
made
a
cash
payment
to
Mr.
Becker
in
the
amount
of
$50
million
and
the
number
of
Phantom
Shares
in
his
Executive
DCP
was
reduced
accordingly.
The
remaining
Phantom
Shares
in
Mr.
Becker's
Executive
DCP
had
an
imputed
value
of
$61.4
million
as
of
December
31,
2014.
Under
the
terms
of
the
arrangement,
$53.0
million
was
payable
on
September
17,
2015,
and
the
remainder
was
payable
on
September
17,
2016.
The
participants
agreed
to
extend
the
payment
due
on
September
17,
2015
(the
"2015
Executive
DCP
Obligation"),
the
first

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Table
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Contents

anniversary
of
the
Distribution
Date,
until
December
31,
2015.
The
participants
also
agreed
to
extend
the
payment
due
on
September
17,
2016
(the
"2016
Executive
DCP
Obligation")
until
December
31,
2016,
in
order
to
agree
with
us
on
a
form
of
payment
that
we
believe
more
closely
aligns
with
our
long-term
interests
and
the
long-term
interests
of
our
securityholders.

In
accordance
with
an
agreement
we
entered
into
with
Mr.
Becker
on
December
24,
2015,
on
December
29,
2015
(the
"2015
Executive
DCP
Closing
Date"),
we
satisfied
the
2015
Executive
DCP
Obligation
to
Mr.
Becker
by
paying
him
$53.8
million,
including
$3.8
million
in
interest
from
the
Distribution
Date
to
the
2015
Executive
DCP
Closing
Date.
The
payment
consisted
of
$22.6
million
in
cash
and
$31.2
million
aggregate
principal
amount
of
Senior
Notes.
Any
remaining
Phantom
Shares
in
Mr.
Becker's
Executive
DCP
were
to
have
been
distributed
to
Mr.
Becker
on
September
17,
2016.
The
remaining
Phantom
Shares
in
Mr.
Becker's
Executive
DCP
had
an
imputed
value
of
$10.6
million
as
of
December
31,
2015.

In
accordance
with
an
agreement
we
entered
into
with
Mr.
Becker
on
December
30,
2016,
on
December
30,
2016
(the
"2016
Executive
DCP
Closing
Date"),
we
satisfied
the
2016
Executive
DCP
Obligation
to
Mr.
Becker
by
paying
him
$11.1
million,
including
$0.5
million
in
interest
from
September
17,
2015
to
the
2016
Executive
DCP
Closing
Date.
The
payment
consisted
of
$4.6
million
in
cash
and
$6.4
million
aggregate
principal
amount
of
Senior
Notes.
See
"—2016
Nonqualified
Deferred
Compensation."
Following
the
satisfaction
of
the
2016
Executive
DCP
Obligation,
the
Company's
obligations
under
the
Executive
DCPs
were
satisfied
in
full.

Incentive Profits Interests.

Additionally,
in
connection
with
the
leveraged
buyout
and
in
connection
with
Mr.
Becker's
service
as
Chairman
and
Chief
Executive
Officer
of
Laureate,
Wengen
granted
Mr.
Becker
a
profits
interest
in
Wengen
("Executive
Profits
Interests"
or
"EPI"),
allowing
Mr.
Becker
the
potential
to
share
in
a
portion
of
Wengen's
profits.
As
of
December
31,
2014,
all
the
Executive
Profits
Interests
were
vested.
Upon
the
consummation
of
our
initial
public
offering,
all
of
Mr.
Becker's
Executive
Profits
Interests
were
liquidated
and
exchanged
for
a
number
of
shares
of
our
Class
B
common
stock
currently
held
by
Wengen
having
an
aggregate
fair
market
value
equal
to
that
portion
of
Wengen's
share
in
us
to
which
Mr.
Becker
would
have
been
entitled
on
account
of
the
liquidated
Executive
Profits
Interests
(the
"EPI
Shares").
At
the
initial
public
offering
price
of
$14.00
per
share,
Mr.
Becker
received
zero
EPI
Shares.
On
the
date
of
our
initial
public
offering,
the
Company
granted
to
Mr.
Becker
options
(the
"EPI
Options")
to
purchase
2,773,098
shares
(representing
that
number
of
shares
of
our
Class
B
common
stock
necessary,
when
added
to
the
shares
to
be
transferred
by
Wengen
pursuant
to
the
previous
sentence
above,
for
Mr.
Becker
to
have
the
same
ownership
percentage
of
us
that
the
Executive
Profits
Interests
represented
in
the
profits
of
Wengen)
of
the
Company's
Class
B
common
stock.
The
exercise
price
of
the
EPI
Options
is
equal
to
(i)
$17.00
with
respect
to
50%
of
the
shares
of
our
Class
B
common
stock
subject
to
the
EPI
Options
and
(ii)
$21.32
with
respect
to
50%
of
the
shares
of
our
Class
B
common
stock
subject
to
the
EPI
Options
and
the
EPI
Options
fully
vested
upon
consummation
of
our
initial
public
offering
and
remain
exercisable
until
December
31,
2019,
unless
earlier
terminated
in
accordance
with
the
terms
of
the
EPI
Option
agreements
or
the
2013
Plan,
as
applicable.

In
connection
with
the
leveraged
buyout,
an
entity
affiliated
with
the
Sterling
Founders,
of
which
Mr.
Becker
owns
approximately
24%,
received
profits
interests
in
Wengen
as
compensation
for
services
provided
in
connection
with
the
leveraged
buyout.
Effective
upon
completion
of
our
initial
public
offering,
all
of
these
profits
interests
were
liquidated
in
exchange
for
the
transfer
to
this
affiliated
entity
by
Wengen
of
zero
shares
of
our
Class
B
common
stock
held
by
Wengen.

Pursuant
to
an
agreement
the
Sterling
Founders
entered
into
on
January
20,
1999
in
connection
with
a
partnership
formed
by
them
(the
"Founders'
Agreement"),
the
Sterling
Founders
share
equally,
on
a
net
after-tax
basis,
in
certain
equity-based
compensation
they
receive,
in
the
aggregate,
in
connection
with
services
rendered
by
any
of
them
to
certain
entities,
including
Laureate.
The
Founders'

374

Table
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Contents

Agreement
provides,
in
certain
circumstances,
and
subject
to
contractual
restrictions,
that
securities
received
by
a
Sterling
Founder
as
compensation
for
services
rendered
by
him
to
certain
entities
shall
be
assigned
or
transferred
to
the
Sterling
Founders
pro-rata,
or
a
partnership
they
form,
as
soon
as
practicable
after
such
assignment
or
transfer
is
permitted
by
contract
and
applicable
law.
The
Founders'
Agreement
further
provides
that
if
such
securities
or
other
property
are
not
transferable
or
assignable,
the
rights
to
receive
the
net
proceeds
of
such
property
upon
disposition
shall
be
so
transferred
or
assigned.
Prior
to
any
such
transfer
or
assignment,
each
Sterling
Founder
controls
the
voting
and
disposition
of
any
such
securities
received
by
such
Sterling
Founder.

As
a
result,
each
Sterling
Founder
has
an
economic
interest
in
any
share-based
compensation
received
by
Mr.
Becker
in
connection
with
his
employment
by
the
Company
or
any
holdings
he
has
in
the
Company,
including
any
dividends
on,
or
the
proceeds
from
the
sale
of,
the
shares
of
Class
B
common
stock
issuable
upon
the
exercise
of
the
EPI
Options
by
Mr.
Becker.

President
and
Chief
Operating
Officer
Compensation
.

On
July
6,
2015,
the
Company
entered
into
an
offer
letter
with
Enderson
Guimarães
pursuant
to
which
Mr.
Guimarães
agreed
to
serve
as
the
Company's
President
and
Chief
Operating
Officer,
effective
as
of
September
1,
2015.
The
following
description
of
the
offer
letter
is
qualified
in
its
entirety
by
the
full
terms
and
conditions
of
the
offer
letter.
The
offer
letter
is
filed
as
an
exhibit
to
the
registration
statement
of
which
this
Form
10-K
forms
a
part
and
is
incorporated
herein
by
reference.

Salary and Incentive Compensation.

Pursuant
to
the
offer
letter,
Mr.
Guimarães's
base
salary
was
$900,000
annually
and
his
target
AIP
award
is
130%
of
annual
base
salary.
Effective
March
1,
2016,
the
Compensation
Committee
increased
Mr.
Guimarães's
annual
base
salary
to
$906,017.

LTIP.

Mr.
Guimarães
is
also
eligible
to
participate
in
a
cash
LTIP
plan
valued
at
$1,000,000
in
2016
and
$1,500,000
in
2017,
subject
to
the
terms
of
the
plan
as
amended
from
time
to
time.
Goals
are
tied
to
achievement
of
Adjusted
Financing
EBITDA
goals
in
the
Laureate
long
range
plans
for
2016
and
2017.
Payment
will
be
based
on
achievement
of
at
least
98%
of
the
Adjusted
Financing
EBITDA
target
for
each
year.
Payment,
if
earned,
will
be
made
as
soon
as
administratively
practicable
after
the
end
of
the
performance
period.

Equity Grant.

Mr.
Guimarães
is
eligible
to
participate
in
the
2013
Plan,
as
amended
from
time
to
time.
Pursuant
to
the
offer
letter,
his
annual
long
term
equity
incentive
target
is
equal
to
408%
of
annual
base
salary.
Mr.
Guimarães's
offer
letter
provided,
subject
to
approval
by
the
Compensation
Committee,
for
an
equity
award
to
be
valued
at
$18.36
million
on
the
date
of
grant,
representing
the
first
five
years
of
annual
long-term
equity
incentive
awards
delivered
on
a
"front-
loaded"
basis,
in
a
mixture
of
time
and
performance
vesting
stock
options
and
PSUs,
each
with
respect
to
our
common
stock
(with
the
value
for
the
stock
options
to
be
determined
using
the
Company's
standard
Black-Scholes
assumptions
applied
as
of
the
date
of
grant
and
the
value
for
the
PSUs
to
be
determined
by
dividing
the
target
value
for
the
PSUs
by
the
fair
market
value
of
our
common
stock
on
the
grant
date
as
determined
by
the
Compensation
Committee
in
accordance
with
its
equity
grant
policy).
These
equity
awards
vest
ratably
over
a
five-year
period,
subject
to
continued
employment.
In
addition
to
the
forgoing,
Mr.
Guimarães's
offer
letter
also
provided
for
a
grant
of
62,500
time-based
vesting
RSUs
under
the
2013
Plan
that
will
vest
in
full
on
December
31,
2017.

On
September
17,
2015,
the
Compensation
Committee
approved
the
grant
of
650,141
time-based
stock
options,
332,608
performance-based
stock
options,
174,392
PSUs,
and
62,500
RSUs
to
Mr.
Guimarães.
The
time-based
stock
options
granted
to
Mr.
Guimarães
vest
in
equal
annual
installments
over
a
five
year
period
beginning
on
December
31,
2015,
subject
to
continued
employment
on
each
applicable
vesting
date.
Performance
based
stock
options
granted
to
Mr.
Guimarães
vest
in
equal
annual
installments
over
a
five-year
period
based
on
satisfaction
of
the
annual
Equity
Value
Target
described
above,
subject
to
continued
employment
on
each
applicable
vesting
date.
See

375

Table
of
Contents

"—Outstanding
Equity
Awards"
for
information
about
the
vesting
terms
of
our
outstanding
options.
The
PSUs
granted
to
Mr.
Guimarães
vest
in
equal
annual
installments
over
a
five-year
period
subject
to
satisfaction
of
the
Equity
Value
Target
described
above,
subject
to
continued
employment.
The
portion
of
the
initial
grant
of
PSUs
subject
to
achievement
of
each
of
the
2015
and
2016
Equity
Value
Targets
will
first
be
eligible
to
vest
after
the
publication
of
audited
financial
statements
for
2016.
The
remaining
portion
of
the
PSUs
is
eligible
to
vest
based
on
achievement
of
the
applicable
2017,
2018,
and
2019
Equity
Value
Targets.
All
the
RSUs
granted
to
Mr.
Guimarães
will
vest
on
December
31,
2017,
subject
to
continued
employment.
In
consideration
of
a
decrease
in
the
estimated
fair
market
value
of
the
Company's
common
stock
after
the
September
2015
equity
grant,
on
December
16,
2015
the
Compensation
Committee
approved
an
additional
grant
of
10,937
RSUs
and
30,518
PSUs
to
Mr.
Guimarães.
The
terms
of
the
December
2015
grants
are
substantially
the
same
as
the
terms
of
the
September
2015
grants.
If
Mr.
Guimarães's
employment
is
terminated
without
cause
(other
than
due
to
death
or
disability)
prior
to
December
31,
2017,
the
73,437
RSUs
granted
to
Mr.
Guimarães
in
2015
will
vest
immediately,
provided
Mr.
Guimarães
signs
a
required
separation
and
release
agreement
within
the
time
period
specified
in
the
agreements.

Severance.

Mr.
Guimarães
will
receive
severance
equal
to
one
year
of
base
salary
and
target
bonus
if
his
employment
is
terminated
without
cause
within
24
months
of
the
beginning
of
his
employment,
provided
he
signs
a
required
separation
and
release
agreement
within
the
time
period
specified
in
the
offer
letter.

Benefits.

Mr.
Guimarães
was
eligible
for
our
standard
U.S.
employee
benefits
package
on
the
first
day
of
the
month
following
one
full
calendar
month
of
employment.
We
provided
provisional
housing
for
up
to
six
months
and
reasonable
relocation
expenses.

Eilif
Serck-Hanssen
Offer
Letter
.

At
the
time
Mr.
Serck-Hanssen
was
hired
as
our
Executive
Vice
President,
Chief
Financial
Officer
in
July
2008,
our
other
executive
officers
were
parties
to
retention
agreements
entered
into
in
connection
with
the
leveraged
buyout,
which
have
since
expired,
that
provided,
among
other
things,
for
a
lump
sum
severance
benefit
in
the
event
we
terminated
the
executive's
employment
without
cause.
Because
Mr.
Serck-Hanssen
was
being
hired
as
an
executive
officer
at
a
time
when
these
retention
agreements
were
still
in
effect,
the
Compensation
Committee
thought
it
appropriate
to
authorize
Mr.
Serck-
Hanssen's
written
offer
of
employment
to
include
a
provision
entitling
Mr.
Serck-Hanssen
to
the
same
lump
sum
severance
benefit
in
the
event
we
terminate
his
employment
without
cause.
See
"—Potential
Payouts
Upon
Termination
or
Change
in
Control—Involuntary
Termination
Without
Cause"
for
a
discussion
of
the
severance
benefits
available
to
Mr.
Serck-Hanssen.

Grants
of
Plan-Based
Awards
in
2016

The
table
below
sets
forth
information
regarding
grants
of
plan-based
awards
to
our
Named
Executive
Officers
in
2016.
The
grants
include
award
opportunities
for
our
Named
Executive
Officers
under
our
AIP
for
performance
during
2016,
equity
awards
made
in
October
to
the
Named
Executive
Officers
other
than
Mr.
Guimarães
and
Berckemeyer,
and
the
incremental
fair
value
on
the
modification
date
of
June
17
of
repricing
certain
stock
options
granted
under
the
2013
Plan.
See
"—Compensation
Discussion
and
Analysis—Elements
of
Laureate's
Compensation
Program—Incentive
Opportunity"
and
"—2016
Stock
Option
Repricing/Retention
Equity
Grant"
above
for
further
discussion
of
these
grants.

376

Table
of
Contents

Name
Douglas
L.
Becker

Eilif
Serck-
Hanssen

Ricardo
M.

Berckemeyer

GRANTS
OF
PLAN
-
BASED
AWARDS

Estimated
Future
Payouts

Under
Non-Equity
Incentive

Plan
Awards

Estimated
Future
Payouts

Under
Equity
Incentive

Plan
Awards

Grant
Date

Award
Type

Threshold
($)

Target

($)

Maximum
($)

Threshold
(#)

Target

(#)

Maximum
(#)

All
Other

Stock

Awards:
Number

of
Shares

of
Stock

or
Units

(#)

All
Other

Option

Awards:

Number
of

Securities

Underlying
Options

(#)

Exercise
or
Base

Price
of

Option

Awards

($/share)

Grant

Date
Fair

Value
of

Stock
and
Option

Awards

($)

802,212

23.20

2,117,841

114,790

23.36

1,382,072

2/10/16

AIP(1)(2)

10/2/13
Options(3)

10/25/16

Time
Options(4)
Performance
Options(5)

2/10/16

AIP(1)(2)

10/2/13
Options(3)

10/25/16

RSUs(6)

10/25/16

PSUs(7)

2/10/16

AIP(1)(2)

10/2/13
Options(3)

10/25/16

RSUs(6)

10/25/16

PSUs(7)

1,221,892

2,443,784

504,879

1,009,758

835,877

1,671,755

23,739

47,477

23.36

571,632

4,321

8,643

21,607

504,739

201,900

254,777

23.20

672,613

4,321

8,643

8,642

21,607

504,745

201,895

256,250

23.20

676,500

Enderson

Guimarães(8)

2/10/16

AIP(1)(2)

1,177,821

2,355,643

9/17/15
Options(3)

982,750

23.20

746,890

Paula
Singer

2/10/16

AIP(1)(2)

696,564

1,393,129

10/2/13
Options(3)

10/25/16

RSUs(6)

10/25/16

PSUs(7)

2,143

4,285

10,714

250,285

100,115

256,250

23.20

676,500

(1)

(2)

(3)

(4)

(5)

(6)

(7)

(8)

This
row
discloses
estimated
possible
future
payouts
under
our
2016
AIP.
The
Compensation
Committee
approved
the
2016
AIP
target
award
opportunities
for
the
Named
Executive
Officers
at
its
February
10,
2016
meeting.
The
target
awards
were
equal
to
a
percentage
of
each
Named
Executive
Officer's
base
salary
on
December
31,
2016.
The
percentage
of
base
salary
for
each
Named
Executive
Officer's
2016
AIP
target
award
was:
Mr.
Becker
120%,
Mr.
Serck-Hanssen
85%;
Mr.
Berckemeyer
120%;
Mr.
Guimarães
130%;
and
Ms.
Singer
100%.
The
maximum
2016
AIP
opportunity
for
each
Named
Executive
Officer
was
equal
to
200%
of
his
or
her
2016
AIP
target
award.
See
"—Annual
Cash
Incentive
Opportunity"
above
for
more
information
regarding
the
AIP.

As
of
the
date
of
this
Form
10-K,
the
Compensation
Committee
has
not
yet
assessed
2016
performance
under
any
of
our
performance-based
compensation
programs.
Accordingly,
2016
AIP
awards
have
not
been
determined
at
this
time.
The
Company
intends
to
file
a
Current
Report
on
Form
8-K
or
otherwise
disclose
the
2016
performance-based
compensation
after
the
Compensation
Committee
has
assessed
2016
performance
under
our
performance-based
compensation
programs
and
individual
incentive
awards
are
determined.

On
June
17,
2016,
the
board
of
directors
approved
the
repricing
of
certain
stock
options
granted
under
2013
Plan.
The
exercise
price
of
stock
options
granted
on
October
31,
2013
was
reduced
from
$34.52
to
$23.20.
The
exercise
price
of
stock
options
granted
on
September
17,
2015
was
reduced
from
$26.32
to
$23.20.
The
amounts
in
column
Grant
Date
Fair
Value
of
Stock
and
Option
Awards
represent
the
incremental
fair
value
on
the
modification
date
with
respect
to
the
repricing
of
these
options.
This
incremental
fair
value
is
also
reported
in
the
Options
Awards
column
of
the
Summary
Compensation
Table.

Granted
under
the
2013
Plan.
These
time-based
vesting
options
have
a
10-year
term
and
will
vest
on
June
17,
2018,
subject
to
continued
employment
(with
limited
exceptions
for
termination
of
employment
due
to
death,
permanent
disability
and
qualifying
termination
following
a
change
of
control).

Granted
under
the
2013
Plan.
These
performance
options
have
a
10-year
term
and
50%
will
be
eligible
to
vest
based
upon
achievement
of
the
applicable
Equity
Value
Target
for
each
of
2016
and
2017,
subject
in
each
case
to
continued
employment
through
June
17,
2018
(with
limited
exceptions
for
termination
of
employment
due
to
death,
permanent
disability
and
qualifying
termination
following
a
change
of
control).

Granted
under
the
2013
Plan.
These
RSUs
will
vest
on
June
17,
2018,
subject
to
continued
employment
(with
limited
exceptions
for
termination
of
employment
due
to
death,
permanent
disability
and
qualifying
termination
following
a
change
of
control).

Granted
under
the
2013
Plan.
50%
of
these
PSUs
will
be
eligible
to
vest
based
upon
achievement
of
the
applicable
Equity
Value
Target
for
each
of
2016
and
2017,
subject
in
each
case
to
continued
employment
through
June
17,
2018
(with
limited
exceptions
for
termination
of
employment
due
to
death,
permanent
disability
and
qualifying
termination
following
a
change
of
control).

Mr.
Guimarães
served
as
President
and
Chief
Operating
Officer
until
March
23,
2017.

Outstanding
Equity
Awards
at
2016
Year
End

The
following
table
provides
information
concerning
unexercised
options,
PSUs,
RSUs
and
restricted
shares
that
have
not
vested
as
of
the
end
of
the
most
recently
completed
fiscal
year
for
each
Named
Executive
Officer.
Each
outstanding
award
is
represented
by
a
separate
row,
which
indicates
the
number
of
securities
underlying
the
award,
including
awards
that
have
been
transferred
other
than
for
value
(if
any).

For
option
awards,
the
table
discloses
the
number
of
shares
underlying
both
exercisable
and
unexercisable
options,
as
well
as
the
exercise
price
and
the
expiration
date.
For
stock
unit
awards,
the

377

Table
of
Contents

table
provides
the
total
number
of
units
that
have
not
vested
and
the
aggregate
market
value
of
shares
of
stock
issuable
upon
vesting
of
these
units
that
have
not
vested.

We
computed
the
market
value
of
stock
unit
awards
by
multiplying
the
Compensation
Committee's
estimate
of
the
fair
market
value
of
our
common
stock
at
the
end
of
the
most
recently
completed
fiscal
year
($22.64)
by
the
number
of
shares
of
stock
or
units.

Stock
options
granted
under
the
2013
Plan
have
a
ten-year
term
and
must
have
an
exercise
price
of
no
less
than
fair
market
value
on
the
date
of
grant.
The
Compensation
Committee
has
adopted
an
equity
grant
policy
that
requires
the
Compensation
Committee
to
have
received
an
independent
appraisal
of
our
common
stock
from
a
nationally
recognized
investment
banking
firm
that
is
based
on
our
financial
results
within
one
calendar
quarter
of
the
option
grant
date
("current
appraisal")
before
granting
options
under
the
2013
Plan.
When
granting
options,
the
Compensation
Committee
reviews
the
current
appraisal
and,
if
the
Compensation
Committee
determines
that
no
facts
have
arisen
since
the
delivery
of
the
current
appraisal
that
would
make
the
current
appraisal
unreasonable,
sets
a
fair
market
value
for
our
shares
it
believes
to
be
reasonable
and
supportable
considering
the
data
included
in
the
current
appraisal.
Pursuant
to
its
equity
grant
policy,
the
exercise
price
for
all
options
is
equal
to
the
fair
market
value
set
by
the
Compensation
Committee
in
accordance
with
its
equity
grant
policy.
The
value
of
our
stock
options
to
each
grantee
is
entirely
dependent
on
stock
price
appreciation
beyond
the
date
of
grant
and
the
ability
to
sell
the
shares
acquired
upon
exercise
of
options.
See
"Item
13—Certain
Relationships
and
Related
Transactions,
and
Director
Independence—Management
Stockholder's
Agreements"
for
a
discussion
of
the
voting
and
transfer
restrictions
applicable
to
shares
acquired
upon
exercise
of
vested
options.
On
June
17,
2016,
the
board
of
directors
approved
a
repricing
of
certain
stock
options
issued
under
the
2013
Plan.
See
"—2016
Stock
Option
Repricing/Retention
Equity
Grant."

The
following
table
sets
forth
information
regarding
outstanding
equity
awards
held
by
our
Named
Executive
Officers
as
of
the
end
of
2016,
including
equity
awards
granted
under
our
2007
Plan
and
2013
Plan
to
the
Named
Executive
Officers.

378

Table
of
Contents

OUTSTANDING
EQUITY
AWARDS
AT
FISCAL
YEAR
END

Option
Awards

Stock
Awards

Equity

Incentive

Plan
Awards:

Number
of

Securities

Underlying

Unexercised

Unearned

Options

(#)(3)

Number
of

Securities

Underlying

Unexercised

Options
(#)

Exercisable(1)

595,929

Number
of

Securities

Underlying

Unexercised

Options
(#)

Unexercisable(2)

114,601

Option

Exercise

Price($)

Option

Expiration
Date
10/2/23

91,681
$

23.20(6)

10/25/16

—

114,790

47,477
$

23.36

10/25/26

Name
Douglas
L.
Becker

Original

Grant
Date

10/2/13

Eilif
Serck-Hanssen

8/5/08

Equity

Incentive

Plan
Awards:

Market
or

Payout
Value

of
Unearned
Shares,

Units
or

Other
Rights

That
Have

Not
Vested

($)

Equity

Incentive

Plan
Awards:

Number
of

Unearned

Shares,

Units
or

Other
Rights

That
Have

Not
Vested

(#)(5)

72,506

1,641,536

Market

Value
of

Shares
or

Units
of

Stock
That
Have
Not

Vested

($)

Number
of
Shares
or

Units
of

Stock
That
Have
Not

Vested

(#)(4)

10/2/13

5/14/15

10/25/16

10/2/07

10/2/13

10/25/16

281,250

189,263

402,500

190,357

21.28

8/5/18

36,396

29,117
$

23.20(6)

10/2/23

23,027

521,343

20,380

461,403

21,607

489,182

8,643

195,678

18.36

10/2/17

36,607

29,285
$

23.20(6)

10/2/23

23,160

524,354

21,607

489,188

8,642

195,672

9/17/15

326,578

390,085

266,087
$

23.20(6)

9/17/25

62,500

1,415,000

174,392

3,948,235

12/16/15

10/2/07

10/2/13

10/25/16

445,000

190,357

10,937

247,625

30,518

690,945

18.36

10/2/17

36,607

29,285
$

23.20(6)

10/2/23

23,160

524,354

10,714

242,571

4,285

97,029

Ricardo

Berckemeyer

Enderson

Guimarães(7)

Paula
Singer

(1)

(2)

(3)

(4)

(5)

(6)

(7)

The
numbers
in
this
column
represent
vested
time
and
vested
performance
options.

The
numbers
in
this
column
represent
unvested
time
options.
The
vesting
dates
of
unvested
time
options
are
as
follows:
Mr.
Becker—114,601
on
December
31,
2017
and
114,790
on
June
17,
2018;
Mr.
Serck-Hanssen—36,396
on
December
31,
2017;
Mr.
Berckemeyer—36,607
on
December
31,
2017;
Mr.
Guimarães—130,028
on
December
31,
2017,
130,028
on
December
31,
2018
and
130,029
on
December
31,
2019;
and
Ms.
Singer—36,607
on
December
31,
2017.

The
numbers
in
this
column
represent
unvested
performance
options
as
of
December
31,
2016.
The
terms
of
our
outstanding
performance
options
provide
that
vesting
occurs
only
after
audited
financial
statements
for
the
applicable
target
year
are
available
and
the
Compensation
Committee
can
determine
the
extent
to
which
the
performance
goal
has
or
has
not
been
achieved,
and
in
the
case
of
performance
options
granted
on
October
25,
2016
only,
subject
to
continued
employment
through
June
18,
2018.
The
number
of
performance
options
subject
to
annual
performance
target
is
as
follows:
Mr.
Becker—45,840
for
2016,
45,840
for
2017,
23,738
subject
to
2016
performance
but
not
eligible
to
vest
until
June
17,
2018,
and
23,739
subject
to
2017
performance
but
not
eligible
to
vest
until
June
17,
2018;
Mr.
Serck-Hanssen—14,558
for
2016
and
14,559
for
2017;
Mr.
Berckemeyer—14,642
for
2016
and
14,643
for
2017;
Mr.
Guimarães—66,521
for
2016,
66,522
for
2017,
66,522
for
2018
and
66,522
for
2019;
and
Ms.
Singer—14,642
for
2016
and
14,643
for
2017.
As
of
the
date
of
this
Form
10-K,
the
Compensation
Committee
has
not
yet
assessed
2016
performance
under
any
of
our
performance-based
compensation
programs.
Accordingly,
the
vesting
of
performance
options
subject
to
2016
performance
targets
has
not
been
determined
at
this
time.
The
Company
intends
to
file
a
Current
Report
on
Form
8-K
or
otherwise
disclose
the
2016
performance-based
compensation
after
the
Compensation
Committee
has
assessed
2016
performance
under
our
performance-based
compensation
programs
and
individual
incentive
awards
are
determined.

The
numbers
in
this
column
represent
unvested
RSUs.
The
market
value
of
the
RSUs
is
equivalent
to
$22.64
per
share,
the
estimated
fair
market
value
of
our
common
stock
as
of
December
31,
2016,
as
set
by
the
Compensation
Committee
in
accordance
with
its
equity
grant
policy.
The
vesting
dates
of
unvested
RSUs
are
as
follows:
Mr.
Serck-Hanssen—
20,380
on
May
14,
2018
and
21,607
on
June
17,
2018;
Mr.
Berckemeyer—21,607
on
June
17,
2018;
Mr.
Guimarães—73,437
on
December
31,
2017;
and
Ms.
Singer—10,714
on
June
17,
2018.

The
numbers
in
this
column
represent
unvested
PSUs.
The
market
value
of
the
PSUs
is
equivalent
to
$22.64
per
share,
the
estimated
fair
market
value
of
our
common
stock
as
of
December
31,
2016,
as
set
by
the
Compensation
Committee
in
accordance
with
its
equity
grant
policy.
The
terms
of
our
outstanding
PSUs
provide
that
vesting
occurs
only
after
audited
financial
statements
for
the
applicable
target
year
are
available
and
the
Compensation
Committee
can
determine
the
extent
to
which
the
performance
goal
has
or
has
not
been
achieved,
and
in
the
case
of
PSUs
granted
on
October
25,
2016
only,
subject
to
continued
employment
through
June
17,
2018.
The
number
of
PSUs
subject
to
annual
performance
target
is
as
follows:
Mr.
Becker—36,253
for
2016
and
36,253
for
2017;
Mr.
Serck-Hanssen—11,513
for
2016,
11,514
for
2017,
4,321
subject
to
2016
performance
but
not
eligible
to
vest
until
June
17,
2018,
and
4,322
subject
to
2017
performance
but
not
eligible
to
vest
until
June
17,
2018;
Mr.
Berckemeyer—11,580
for
2016,
11,580
for
2017,
4,321
subject
to
2016
performance
but
not
eligible
to
vest
until
June
17,
2018,
and
4,321
subject
to
2017
performance
but
not
eligible
to
vest
until
June
17,
2018;
Mr.
Guimarães—40,982
for
2016,
40,982
for
2017,
40,982
for
2018
and
40,982
for
2019;
and
Ms.
Singer—11,580
for
2016
and
11,580
for
2017,
2,142
subject
to
2016
performance
but
not
eligible
to
vest
until
June
17,
2018,
and
2,143
subject
to
2017
performance
but
not
eligible
to
vest
until
June
17,
2018.
For
Mr.
Guimarães
only,
the
PSUs
subject
to
the
2015
annual
performance
target
cannot
vest,
if
at
all,
until
after
publication
of
the
Company's
audited
consolidated
financial
statements
for
fiscal
2016.
As
of
the
date
of
this
Form
10-K,
the
Compensation
Committee
has
not
yet
assessed
2016
performance
under
any
of
our
performance-based
compensation
programs.
Accordingly,
the
vesting
of
PSUs
subject
to
2016
performance
targets
has
not
been
determined
at
this
time.
The
Company
intends
to
file
a
Current
Report
on
Form
8-K
or
otherwise
disclose
the
2016
performance-based
compensation
after
the
Compensation
Committee
has
assessed
2016
performance
under
our
performance-based
compensation
programs
and
individual
incentive
awards
are
determined.

The
exercise
price
of
this
stock
option
was
modified
to
$23.20
on
June
17,
2016.

Mr.
Guimarães
served
as
President
and
Chief
Operating
Officer
until
March
23,
2017.

379

Table
of
Contents

Option
Exercises
and
Restricted
Stock
Vested
During
Fiscal
2016

The
following
table
includes
certain
information
with
respect
to
vesting
of
restricted
shares
during
fiscal
2016.
We
have
omitted
the
columns
pertaining
to
Option
Awards
as
they
are
inapplicable,
because
no
Named
Executive
Officer
exercised
any
options
during
fiscal
2016.

OPTION
EXERCISES
AND
STOCK
VESTED

Douglas
L.
Becker
Eilif
Serck-Hanssen
Ricardo
Berckemeyer
Enderson
Guimarães(5)
Paula
Singer

Stock
Awards

Number

of
Shares

Acquired
on

Vesting(#)

36,253(1)
16,513(2)
11,580(3)
—

19,080(4)

Value

Realized
on

Vesting($)

$
$
$

842,520

374,108

269,125

—

433,698

(1)

(2)

(3)

(4)

(5)

36,253
PSUs
vested
on
April
15,
2016,
upon
achievement
of
the
2015
Equity
Value
Target.
The
fair
market
value
of
our
common
stock
as
determined
by
the
Compensation
Committee
in
accordance
with
its
equity
grant
policy
on
April
15,
2016
was
$23.24.

11,513
shares
of
restricted
stock
vested
on
January
28,
2016
and
5,000
PSUs
vested
on
April
15,
2016,
upon
achievement
of
the
2015
Equity
Value
Target.
The
fair
market
value
of
our
common
stock
as
determined
by
the
Compensation
Committee
in
accordance
with
its
equity
grant
policy
on
January
28,
2016,
and
April
15,
2016
was
$22.40
and
$23.24,
respectively.

11,580
PSUs
vested
on
April
15,
2016,
upon
achievement
of
the
2015
Equity
Value
Target.
The
fair
market
value
of
our
common
stock
as
determined
by
the
Compensation
Committee
in
accordance
with
its
equity
grant
policy
on
April
15,
2016
was
$23.24.

11,580
shares
of
restricted
stock
vested
on
January
28,
2016
and
7,500
PSUs
vested
on
April
15,
2016,
upon
achievement
of
the
2015
Equity
Value
Target.
The
fair
market
value
of
our
common
stock
as
determined
by
the
Compensation
Committee
in
accordance
with
its
equity
grant
policy
on
January
28,
2016,
and
April
15,
2016
was
$22.40
and
$23.24,
respectively.

Mr.
Guimarães
served
as
President
and
Chief
Operating
Officer
until
March
23,
2017.

2016
Pension
Benefits

No
Named
Executive
Officer
participates
in
any
defined
benefit
pension
plan
or
arrangement
provided
by
Laureate.

2016
Nonqualified
Deferred
Compensation

Our
Post-2004
DCP
permits
eligible
employees
the
opportunity
to
defer
up
to
85%
of
their
base
salaries
and
100%
of
any
bonus,
or
annual
cash
and/or
long-
term
incentive
awards,
which
may
be
allocated
to
notional
investments
selected
by
the
participants
that
are
similar
to
investment
alternatives
available
in
our
401(k)
Retirement
Savings
Plan
and
pay
out
following
termination
of
employment
or
other
selected
payout
schedule,
which
payouts
will
be
made
in
a
lump
sum
or
in
installments,
at
the
election
of
the
participants.
The
minimum
annual
deferral
amount
under
the
Post-2004
DCP
is
$5,000.
Each
year,
a
participant
may
elect
to
receive
that
year's
deferral
balance
in
a
future
year
while
the

380

Table
of
Contents

participant
is
still
employed
(a
scheduled
in-service
withdrawal)
or
after
employment
terminates
(a
retirement
payment).
Each
year,
we
have
the
ability,
but
not
the
obligation,
to
make
matching
employer
contributions
to
each
participant's
Post-2004
DCP
account
if
the
participant
made
salary
reduction
contributions
to
the
401(k)
Retirement
Savings
Plan,
received
less
than
the
full
match
under
the
401(k)
Retirement
Savings
Plan
on
the
salary
reduction
contribution
because
of
the
limit
in
Section
401(a)(17)
of
the
Code
on
compensation
and
made
at
least
a
$5,000
minimum
contribution
to
his
or
her
401(k)
Retirement
Savings
Plan
account.
To
date,
we
have
not
chosen
to
make
a
matching
contribution
to
any
participant's
Post-2004
DCP
account,
nor
have
we
chosen
to
make
any
other
discretionary
employer
contributions
permitted
under
the
Post-2004
DCP.
In
the
event
of
death
or
disability
prior
to
terminating
employment,
the
participant's
Post-2004
DCP
balance
will
be
distributed
(to
the
participant's
beneficiaries,
in
the
case
of
death),
in
a
lump
sum
the
February
following
the
year
in
which
death
or
disability
occurs.
In
the
event
of
termination
of
employment,
Post-2004
DCP
balances
will
be
distributed
in
a
lump
sum
or
in
up
to
ten
annual
installments
(based
on
the
termination
payment
election
the
participant
had
previously
made
for
each
Post-2004
DCP
annual
year
contribution),
beginning
in
February
following
the
year
in
which
the
participant's
employment
was
terminated.
If
there
is
a
separation
of
service
without
an
effective
termination
payment
election
for
a
Plan
year,
that
Plan
year's
deferral
balance
will
be
paid
in
a
lump
sum
in
the
February
following
the
year
of
separation
of
service.
Mr.
Becker
also
participates
in
a
deferred
compensation
plan
that
was
frozen
and
closed
to
new
participants
in
December
2004
(the
"Pre-2005
DCP").
No
contributions
were
made
to
the
Pre-2005
DCP
in
2016.
The
payout
terms
of
the
Pre-2005
DCP
are
like
those
of
the
Post-2004
DCP.
No
other
Named
Executive
Officer
participates
in
the
Pre-2005
DCP.

Prior
to
the
leveraged
buyout
in
2007,
Mr.
Becker
had
options
to
purchase
shares
of
our
common
stock
and
PSUs,
which,
based
on
a
value
of
$60.50
per
share,
would
have
entitled
Mr.
Becker
to
$78.1
million
if
such
options
and
PSUs
were
cashed
out
in
connection
with
the
leveraged
buyout.
In
connection
with
the
leveraged
buyout,
Mr.
Becker
agreed
to
cancel
his
options
and
PSUs
in
exchange
for
us
establishing
a
deferred
compensation
plan
for
him,
under
which
Mr.
Becker
had
rights
to
receive
cash
payments
in
subsequent
years.
We
established
Mr.
Becker's
Executive
DCP
with
an
account
value
of
$78.1
million.
On
the
closing
date
of
the
leveraged
buyout,
Mr.
Becker's
Executive
DCP
was
credited
with
a
number
of
phantom
shares
of
our
common
stock
equal
to
the
number
of
shares
that
Mr.
Becker
could
have
acquired
in
the
leveraged
buyout
if
all
of
the
options
and
PSUs
had
been
cancelled
in
exchange
for
Phantom
Shares
equal
to
the
quotient
of
(x)
the
aggregate
cash
payment
that
Mr.
Becker
would
have
received
(based
on
a
per
share
value
of
$60.50)
on
a
pre-tax
basis,
in
respect
of
such
cancelled
options
and
PSUs
on
the
closing
date
of
the
leveraged
buyout
divided
by
(y)
the
value
of
one
share
of
Laureate
common
stock
as
it
existed
immediately
after
giving
effect
to
the
leveraged
buyout.

Mr.
Becker
has
been
fully
vested
at
all
times
since
the
leveraged
buyout
in
his
Executive
DCP.
Pursuant
to
the
Executive
DCP,
the
value
of
Mr.
Becker's
Executive
DCP
was
based
on
the
underlying
value
of
our
common
stock,
subject
to
a
maximum
5%
compound
annual
return
until
the
earliest
of
an
initial
public
offering
of
our
shares
of
common
stock,
September
17,
2014
or
a
change
in
control
of
the
Company.
As
of
December
31,
2016
the
Company's
obligations
under
the
Executive
DCP
have
been
satisfied
in
full.
See
"—Compensation
Discussion
and
Analysis—Arrangements
with
Certain
Named
Executive
Officers—Chairman
and
Chief
Executive
Officer
Compensation"
above
for
further
discussion
of
the
Executive
DCP
and
the
payments
made
in
2016.

Information
regarding
Mr.
Becker's
and
Ms.
Singer's
participation
in
the
Post-2004
DCP
and
Mr.
Becker's
participation
in
the
Pre-2005
DCP
and
the
Executive
DCP
is
included
in
the
following
table.

381

Table
of
Contents

Name
Douglas
L.
Becker(1)
Eilif
Serck-Hanssen
Ricardo
M.
Berckemeyer
Enderson
Guimarães(4)
Paula
Singer

NONQUALIFIED
DEFERRED
COMPENSATION

Executive

Contributions

in
Last
FY

($)(1)

Registrant

Contributions

in
Last
FY

($)

Aggregate

Earnings
(Loss)

in
Last

FY($)(2)

Aggregate

Withdrawals/

Distributions

($)

—

121,464

—
$
—

—

—
$

—

54,853

1,231,301
$ 11,059,241
$

Aggregate

Balance
at
Last

FYE($)
8,410,008

—

1,198,469

—

—
$

(1)

(2)

(3)

(4)

The
amount
included
in
this
column
is
included
in
the
"Salary"
column
of
the
Summary
Compensation
Table
for
2016.

Amounts
in
this
column
are
not
reported
as
compensation
for
fiscal
year
2016
in
the
"Summary
Compensation
Table"
because
they
do
not
reflect
above-market
or
preferential
earnings.
Deferrals
may
be
allocated
among
different
investment
crediting
options.

Amounts
shown
comprise
Mr.
Becker's
participation
in
the
Executive
DCP,
our
Post-2004
DCP
and
our
Pre-2005
DCP.
Mr.
Becker's
earnings
and
balance
under
the
Executive
DCP
in
2016
were
$447,258
and
$0,
respectively.
Mr.
Becker's
earnings
and
balance
under
the
Post-2004
DCP
during
2016
were
$521,995
and
$5,599,159,
respectively.
Mr.
Becker's
earnings
and
balance
under
the
Pre-2005
DCP
during
2016
were
$262,048
and
$2,810,849,
respectively.

Mr.
Guimarães
served
as
President
and
Chief
Operating
Officer
until
March
23,
2017.

Potential
Payments
Upon
Termination
or
Change
in
Control

The
table
below
reflects
potential
payments
to
each
of
our
Named
Executive
Officers
in
various
termination
and
change
in
control
scenarios
based
on
compensation,
benefits
and
equity
levels
in
effect
on
December
30,
2016,
which
was
the
last
business
day
of
fiscal
2016.
The
amounts
shown
assume
that
the
termination
or
change
in
control
event
was
effective
as
of
December
30,
2016.
For
stock
valuations,
we
have
assumed
that
the
price
per
share
is
the
fair
market
value
of
our
stock
at
December
30,
2016,
as
determined
by
the
Compensation
Committee
in
accordance
with
its
equity
grant
policy,
which
was
$22.64.
The
table
below
excludes
any
amounts
payable
to
the
Named
Executive
Officer
to
the
extent
that
these
amounts
are
available
generally
to
all
salaried
employees
and
do
not
discriminate
in
favor
of
our
executive
officers.

Potential Payments upon Termination

Payments
Regardless
of
Manner
of
Termination
.

Regardless
of
the
termination
scenario,
the
Named
Executive
Officers
will
receive
earned
but
unpaid
base
salary
through
the
employment
termination
date,
along
with
any
other
accrued
or
vested
payments
or
benefits
owed
under
any
of
our
plans
or
agreements
covering
the
Named
Executive
Officer
as
governed
by
the
terms
of
those
plans
or
agreements.

Payments
Upon
Termination
Due
to
Death
or
Disability
.

In
the
event
of
a
termination
due
to
death
or
disability,
with
respect
to
each
Named
Executive
Officer,
all
unvested
RSUs,
PSUs
or
options
will
be
forfeited,
except
that:
(i)
any
such
unvested
RSUs
or
time
options
that
would
have
vested
subsequent
to,
but
during
the
same
calendar
year
as,
the
death
or
disability
will
become
vested;
and
(ii)
any
unvested
performance
options
or
PSUs
that
would,
but
for
the
termination
of
employment
due
to
death
or
disability,
have
vested
had
the
applicable
performance
goal
for
the
calendar
year
during
which
the
death
or
disability
occurred
been
achieved
will
remain
outstanding
until
the
Compensation
Committee
determines
whether
the
applicable
performance
goal
has
been
achieved
and
will
become

382

Table
of
Contents

vested
if
and
when
the
Compensation
Committee
determines
that
the
applicable
performance
goal
has
been
achieved
or
will
terminate
on
the
date
the
Compensation
Committee
determines
that
the
applicable
performance
goal
has
not
been
achieved,
and
the
balance
of
the
unvested
portion
of
the
performance
option
or
PSU
will
terminate
as
of
the
date
of
termination
of
employment
due
to
death
or
disability.
In
the
event
of
a
termination
due
to
death
or
disability,
vested
options
may
(by
the
employee's
beneficiary
in
the
case
of
death)
be
exercised
only
for
a
period
of
two
years
from
the
termination
due
to
death
or
disability
of
the
Named
Executive
Officer.

In
the
event
of
termination
due
to
death
or
disability,
Mr.
Becker's
or
Ms.
Singer's
Post-2004
DCP
balance
or
Mr.
Becker's
Pre-2005
DCP
balance
will
be
distributed
(to
his
or
her
beneficiaries,
in
the
case
of
death),
in
a
lump
sum
the
February
following
the
year
in
which
his
or
her
death
or
disability
occurs.

Involuntary
Termination
and
Resignation
for
Good
Reason
.

If
a
Named
Executive
Officer's
employment
is
terminated
by
us
without
cause
or
he
or
she
resigns
for
good
reason
all
unvested
RSUs,
PSUs
and
options
will
be
forfeited;
provided,
however,
that
if
the
termination
occurs
subsequent
to
the
end
of
a
fiscal
year
but
prior
to
the
publication
of
our
audited
financial
statements
for
such
year
and
the
Compensation
Committee
determines,
upon
publication
of
such
financial
statements,
that
one
or
more
tranches
of
performance-vested
stock
options
or
PSUs
would
have
vested
and
become
nonforfeitable
based
upon
the
audited
financial
statements
for
such
year,
that
portion
of
the
performance-vested
stock
options
or
PSUs
that
would
otherwise
have
become
vested
and
nonforfeitable
had
the
termination
occurred
after
the
date
of
the
Compensation
Committee's
determination
will
become
vested
and
nonforfeitable
upon
such
determination,
and
he
or
she
will
have
90
days
from
the
termination
date
to
exercise
any
vested
options
held
on
the
termination
date.
Notwithstanding
the
foregoing,
upon
the
termination
of
Mr.
Guimarães's
employment
as
a
result
of:
(x)
termination
by
the
Company
without
cause
prior
to
December
31,
2017,
provided
he
executes
and
allows
to
become
effective
a
customary
release
agreement,
(y)
his
death
during
2017;
or
(z)
his
termination
due
to
permanent
disability
during
2017,
all
of
the
RSUs
granted
to
him
in
September
and
December
of
2015
will
become
vested
and
nonforfeitable
on
the
effective
date
of
such
qualifying
termination.

For
each
Named
Executive
Officer
other
than
Mr.
Becker,
"good
reason"
is
defined
as
(i)
a
reduction
in
base
salary
(other
than
a
general
reduction
in
base
salary
that
affects
all
similarly
situated
employees),
(ii)
a
substantial
diminution
in
the
Named
Executive
Officer's
title,
duties
and
responsibilities,
other
than
any
isolated,
insubstantial
and
inadvertent
failure
by
the
Company
or
its
subsidiaries
that
is
not
in
bad
faith,
or
(iii)
a
transfer
of
the
Named
Executive
Officer's
primary
workplace
by
more
than
50
miles
from
his
or
her
current
workplace;
provided,
however,
that
in
any
event,
such
conduct
is
not
cured
within
ten
business
days
after
the
Named
Executive
Officer
gives
the
Company
notice
of
such
event.

For
Mr.
Becker,
"good
reason"
is
defined
as
(i)
demotion
from
the
position
of
CEO,
or
his
duties
and
responsibilities
are
materially
and
substantially
diminished
as
a
whole;
(ii)
a
reduction
in
his
base
salary;
(iii)
the
removal
of
or
failure
to
reelect
him
as
a
member
of
the
board
of
directors
other
than
as
a
result
of
his
voluntary
resignation
or
choice
not
to
stand
for
reelection
or
reappointment
or
as
required
by
applicable
law;
(iv)
requiring
him
to
be
based
(excluding
travel
responsibilities
in
the
ordinary
course
of
business)
at
any
office
or
location
more
than
25
miles
from
our
Baltimore
office;
(v)
the
failure
by
any
successor
to
expressly
assume
all
of
our
obligations
under
his
employment
agreement,
if
any;
or
(vi)
after
a
change
in
control,
his
duties
are
inconsistent
in
any
material
respect
with
his
position
(including,
without
limitation,
his
status,
office,
title,
or
reporting
relationship),
authority,
control,
duties
or
responsibilities
immediately
prior
to
the
change
in
control.

If
Mr.
Serck-Hanssen's
employment
is
terminated
by
us
without
cause,
he
will
receive
a
lump
sum
cash
payment
equal
to
18
months'
base
salary
and
150%
of
the
target
cash
award
under
the
AIP
for
the
fiscal
year
in
which
the
termination
occurs,
if
Mr.
Serck-Hanssen
executes
and
allows
to
become
effective
a
customary
release
agreement,
which
includes
a
two-year
covenant
not
to
compete
or
disclose
confidential
information,
as
required
in
his
offer
letter.

383

Table
of
Contents

If,
on
or
prior
to
September
1,
2017,
the
Company
terminates
Mr.
Guimarães's
or
Mr.
Berckemeyer's
employment
without
cause,
provided
the
executive
executes
and
allows
to
become
effective
a
customary
release
agreement,
the
Company
will
pay
to
the
executive
a
lump
sum
cash
payment
in
an
amount
equal
to
the
sum
of
(i)
a
full
year
of
the
executive's
annual
base
salary
at
the
rate
in
effect
at
the
time
of
his
termination,
and
(ii)
100%
of
the
target
cash
bonus
award
under
the
AIP
in
effect
at
the
time
of
such
termination,
less
applicable
taxes
and
withholdings,
as
required
in
their
Executive
Retention
Agreements.

For
each
Named
Executive
Officer,
other
than
Mr.
Becker,
"cause"
means
(i)
gross
negligence
or
willful
malfeasance
in
connection
with
the
performance
of
his
or
her
duties;
(ii)
conviction
of,
or
pleading
guilty
or
nolo
contendere
to,
any
felony;
(iii)
theft,
embezzlement,
fraud
or
other
similar
conduct
by
the
executive
in
connection
with
the
performance
of
his
or
her
duties;
or
(iv)
a
willful
and
material
breach
of
any
other
applicable
agreements
including,
without
limitation,
engaging
in
any
action
in
breach
of
any
applicable
restrictive
covenants.

In
Mr.
Becker's
case,
"cause"
means
(i)
gross
negligence
or
willful
malfeasance
in
connection
with
the
performance
of
his
duties
(other
than
in
the
event
he
had
a
reasonable
good
faith
belief
that
the
act,
omission
or
failure
to
act
in
question
was
not
a
violation
of
law),
in
each
case,
that
would
be
reasonably
likely
to
have
a
material
adverse
effect
on
our
business;
(ii)
the
abuse
of
drugs
or
alcohol
or
conduct
involving
moral
turpitude
that
would
be
reasonably
likely
to
have
a
material
adverse
effect
on
our
business;
(iii)
his
misappropriation
of
any
material
business
opportunity;
provided,
however,
that,
solely
for
this
purpose,
he
shall
not
be
deemed
to
have
misappropriated
a
material
business
opportunity
by
virtue
of
any
action
taken
by
Sterling
Capital
(an
affiliate
of
Sterling)
or
any
of
its
affiliates,
unless
he
knows
of
such
action
before
the
date
it
occurs
(or,
if
earlier,
before
the
date
of
a
binding
commitment
to
complete
such
action)
and
he
fails
to
disclose
such
action
to
our
directors;
(iv)
his
being
barred
or
prohibited
by
the
SEC
or
any
other
governmental
authority
from
holding
the
position
of
CEO;
or
(v)
the
willful
and
material
breach
of
any
other
applicable
agreements
with
Laureate
or
Wengen
including,
without
limitation,
engaging
in
any
action
in
breach
of
any
applicable
restrictive
covenants.

Payments
Upon
Voluntary
Resignation
or
Termination
for
Cause.

If
any
Named
Executive
Officer
resigns
without
good
reason
or
is
terminated
by
the
Company
for
cause,
he
or
she
will
forfeit
all
unvested
equity
grants
and,
if
he
or
she
resigns
without
good
reason,
all
vested
but
unexercised
options
held
at
the
time
of
termination
will
be
exercisable
for
a
period
of
90
days
post-termination.
If
employment
is
terminated
by
the
Company
for
cause,
all
vested
awards
also
will
be
forfeited.
Vested
stock
options
will
remain
exercisable
for
a
period
of
two
years
post-termination
of
employment
for
any
participant,
including
any
Named
Executive
Officer,
who
(a)
has
a
minimum
of
five
continuous
years
of
service
with
us
and
(b)
provides
at
least
six
months'
prior
written
notice
of
his
or
her
resignation.

Potential Payments Upon a Change in Control

Immediately
prior
to
a
change
in
control
all
unvested
restricted
shares
will
vest.

If
a
Named
Executive
Officer
ceases
to
be
an
eligible
individual
under
the
2013
Plan
coincident
with
or
within
18
months
after
a
change
in
control
as
a
result
of
an
involuntary
termination
without
cause
or
the
Named
Executive
Officer's
resignation
with
good
reason
(a
"Qualifying
Termination"),
to
the
extent
not
already
vested
or
previously
forfeited,
(1)
that
portion
of
time
vested
options
and
that
portion
of
the
RSUs
that
would
otherwise
have
become
vested
and
exercisable
on
or
before
the
third
anniversary
of
the
effective
date
of
the
Qualifying
Termination
will
become
vested
and
exercisable
immediately
prior
to
the
effective
date
of
the
Qualifying
Termination
and
the
balance
of
the
unvested
portion
of
the
time
vested
options
will
terminate
without
becoming
vested,
and
(2)
that
portion
of
performance
options
and
PSUs
that
would
otherwise
have
become
vested
and
exercisable
had
we
achieved
the
applicable
performance
goal
in
the
three
fiscal
years
(or,
if
shorter,
the
remaining
initial

384

Table
of
Contents

target
years)
ending
coincident
with
or
immediately
subsequent
to
the
effective
date
of
the
Qualifying
Termination
will
become
vested
and
exercisable
immediately
prior
to
the
effective
date
of
the
Qualifying
Termination
and
the
balance
of
the
unvested
portion
of
the
performance
options
or
PSUs
will
terminate
without
becoming
vested.

Name
Douglas
L.
Becker

Eilif
Serck-Hanssen

Ricardo
M.
Berckemeyer

Enderson
Guimarães(7)

Paula
Singer

Without

Cause/Good

Reason

Termination

due
to

Death
or

Disability(1)
$ 8,079,447

Change
in

Control
plus

Qualifying

Termination(1)

Benefit

Pre-2005
DCP
and
Post-2004
DCP

Acceleration
of
PSU
vesting(2)

Total

Cash
Severance(3)

Acceleration
of
RSU
vesting

Acceleration
of
PSU
vesting(2)

Total

Cash
Severance(5)

Acceleration
of
RSU
vesting

Acceleration
of
PSU
vesting(2)

Total

Cash
Severance(5)

Acceleration
of
RSU
vesting

Acceleration
of
PSU
vesting(2)

Total

Post-2004
DCP

Acceleration
of
RSU
vesting

Acceleration
of
PSU
vesting(2)

Total

$ 1,648,282

$ 1,532,442

$ 2,083,837

$ 1,662,625(6)

$ 3,746,463

$
$ 8,079,447
$

$ 1,173,684

$
$ 1,173,684
$

1,641,536

1,648,282

950,586(4)
717,020

3,315,888

1,532,442

489,188(4)
720,026

2,741,655

2,083,837

1,662,625(4)
4,639,179

8,385,642

242,571(4)
621,383

863,954

(1)

(2)

Vesting
of
certain
unvested
time
and
performance
stock
options
will
accelerate
because
of
termination
due
to
death
or
disability
or
upon
a
Qualifying
Termination
within
18
months
following
a
Change
in
Control.
However,
all
unvested
stock
options
held
by
the
Named
Executive
Officers
on
December
30,
2016
had
exercise
prices
greater
than
or
equal
to
the
fair
market
value
of
our
common
stock,
as
determined
by
the
Compensation
Committee
in
accordance
with
its
equity
grant
policy
as
of
such
date,
of
$22.64.
Accordingly,
there
is
no
intrinsic
value
associated
with
the
accelerated
vesting
of
such
stock
options.

In
connection
with
a
Qualifying
Termination
within
18
months
following
a
Change
in
Control,
that
portion
of
unvested
PSUs
that
would
otherwise
have
become
vested
and
exercisable
had
we
achieved
the
Equity
Value
Target
in
the
three
fiscal
years
(or,
if
shorter,
the
remaining
initial
target
years)
ending
coincident
with
or
immediately
subsequent
to
the
effective
date
of
the
Qualifying
Termination
will
become
vested
and
exercisable
immediately
prior
to
the
effective
date
of
the
Qualifying
Termination.
Represents
the
aggregate
fair
market
value,
as
determined
by
the
Compensation
Committee
in
accordance
with
its
equity
grant
policy,
of
unvested
PSUs
outstanding
on
December
30,
2016
and
subject
to
the
2016
and
2017
Equity
Value
Target.
The
terms
of
the
PSUs
provide
that
any
unvested
PSUs
that
would,
but
for
the
termination
due
to
death
or
disability,
have
vested
had
the
Equity
Value
Target
for
the
calendar
year
during
which
the
death
or
disability
occurred
been
achieved
will
remain
outstanding
until
the
Compensation
Committee
determines
whether
the
Equity
Value
Target
for
such
year
has
been
achieved.
Because
the
information
in
this
table
assumes
such
termination
due
to
death
or
disability
occurred
as
of

385

Table
of
Contents

(3)

(4)

(5)

(6)

(7)

December
30,
2016,
there
is
no
acceleration
of
PSU
vesting.
Mr.
Guimarães
served
as
President
and
Chief
Operating
Officer
until
March
23,
2017.

Represents
a
lump
sum
severance
payment
equal
to
18
months'
base
salary
and
150%
of
Mr.
Serck-Hanssen's
target
cash
incentive
award
as
of
December
30,
2016,
if
Mr.
Serck-Hanssen
executes
the
customary
release
agreement,
which
includes
a
two-year
covenant
not
to
compete
or
disclose
confidential
information,
as
required
by
his
offer
letter.

In
connection
with
a
Qualifying
Termination
within
18
months
following
a
Change
in
Control,
that
portion
of
unvested
RSUs
that
would
otherwise
have
become
vested
and
exercisable
in
the
three
fiscal
years
(or,
if
shorter,
the
remaining
initial
years)
ending
coincident
with
or
immediately
subsequent
to
the
effective
date
of
the
Qualifying
Termination
will
become
vested
and
exercisable
immediately
prior
to
the
effective
date
of
the
Qualifying
Termination.
Represents
the
aggregate
fair
market
value,
as
determined
by
the
Compensation
Committee
in
accordance
with
its
equity
grant
policy,
of
unvested
PSUs
outstanding
on
December
30,
2016.
Mr.
Guimarães
served
as
President
and
Chief
Operating
Officer
until
March
23,
2017.

Represents
a
lump
sum
severance
payment
equal
to
one
year
of
base
salary
and
cash
bonus
at
target
as
specified
in
the
executive's
Executive
Retention
Agreement.
Mr.
Guimarães
served
as
President
and
Chief
Operating
Officer
until
March
23,
2017.

The
vesting
of
Mr.
Guimarães's
RSUs
accelerates
pursuant
to
the
terms
of
the
RSUs
upon
termination
of
employment
without
cause,
death
or
termination
due
to
disability
prior
to
December
31,
2017.

The
employment
of
Mr.
Guimarães
as
President
and
Chief
Operating
Officer
terminated
effective
March
23,
2017.
On
March
28,
2017,
we
entered
into
a
Separation
Agreement
and
General
Release
(the
"Separation
Agreement")
with
Mr.
Guimarães.
Mr.
Guimarães
will
remain
employed
and
provide
transition
services
until
June
30,
2017,
or
such
earlier
or
later
date
determined
by
the
Company.
Pursuant
to
the
Separation
Agreement,
and
consistent
with
the
existing
terms
of
Mr.
Guimarães's
employment
letter
with
the
Company
and
equity
compensation
award
agreements,
the
Company
will
provide
Mr.
Guimarães
a
lump
sum
separation
payment
of
$2,083,837
(which
is
the
sum
of
his
current
base
salary
of
$906,016
and
target
bonus
of
$1,177,821)
after
his
termination
of
employment
and
accelerate
vesting
of
73,437
restricted
stock
units.
The
vested
restricted
stock
units
will
be
paid
within
60
days
after
his
date
of
termination.
The
Company
will
also
pay
to
Mr.
Guimarães
the
following
accrued
but
unpaid
bonuses
at
the
same
time
the
Company
pays
bonuses
to
its
executives:
(i)
$1,245,192
earned
for
2016
performance
under
the
2016
Annual
Incentive
Plan;
and
(ii)
$1,000,000
earned
for
2016
performance
under
the
2015
-
2017
Laureate
Executive
Cash
Long
Term
Bonus
Plan.
Mr.
Guimarães
holds
outstanding
performance
share
units
and
a
nonqualified
stock
option.
There
will
be
no
accelerated
vesting
of
either
the
performance
share
units
or
option
in
connection
with
termination
of
Mr.
Guimarães's
employment.
Unvested
units
and
stock
options
will
terminate
upon
termination
of
employment
of
Mr.
Guimarães.

Director
Compensation

The
following
table
summarizes
the
compensation
paid
to
or
earned
by
our
directors
in
2016.
We
have
omitted
from
this
table
the
columns
for
Options
Awards,
Non-Equity
Incentive
Plan
Compensation
and
Change
in
Pension
Value
and
Nonqualified
Deferred
Compensation
Earnings,
as
no
amounts
are
required
to
be
reported
in
any
of
those
columns
for
any
director
during
2016.

Each
non-employee
director
is
entitled
to
receive
an
annual
retainer
of
$50,000.
This
retainer
may
be
paid
in
the
form
of
cash,
common
stock
or
RSUs,
at
the
election
of
the
director.
The
number
of
shares
of
common
stock
or
RSUs
is
determined
based
on
the
fair
market
value
of
our
common
stock

386

Table
of
Contents

on
the
date
of
board
approval,
with
vesting
quarterly
in
arrears.
Newly
elected,
non-employee,
independent
directors
may
elect
to
receive
shares
equal
to
up
to
three
additional
years
of
annual
retainers
at
the
time
of
their
initial
election
to
our
board
of
directors
and
may
elect
to
defer
vesting
of
these
shares.
Each
director
who
is
subject
to
U.S.
federal
income
taxes
and
is
not
contractually
obligated
to
remit
his
director
compensation
to
the
Wengen
Investor
on
whose
behalf
he
serves
is
eligible
to
participate
in
our
Post-2004
DCP
and
defer
receipt
of
his
annual
compensation
in
accordance
with
the
terms
of
the
Post-2004
DCP.
No
Wengen-
affiliated
director
deferred
any
portion
of
his
2016
compensation.

In
addition,
our
compensation
program
for
non-employee
independent
directors
provided
for
the
following
annual
cash
retainers
in
2016,
which
were
paid
quarterly
in
arrears.

Audit
Committee
Compensation
Committee
Committee
on
Education

Chair

Member

$ 15,000
$ 25,000

$ 10,000
$ 20,000

$ 10,000
$ 50,000

Newly
elected,
non-employee,
independent
directors
are
also
eligible
to
receive
an
annual
stock
retainer
worth
$120,000,
in
the
form
of
restricted
shares
or
RSUs,
with
the
number
of
shares
determined
based
on
the
fair
market
value
of
our
common
stock
as
determined
by
the
Compensation
Committee
in
accordance
with
its
equity
grant
policy
on
the
initial
issuance
date.
Newly
elected,
non-employee,
independent
directors
may
elect
to
receive
restricted
shares
or
RSUs
equal
to
up
to
three
additional
years
of
annual
stock
retainers
at
the
time
of
their
initial
election
to
our
board
of
directors
and
may
elect
to
defer
vesting
of
these
shares.

In
April
2016,
the
Compensation
Committee
approved
additional
cash
compensation
for
the
Company's
non-employee,
independent
directors.
For
non-
employee,
independent
directors
first
receiving
a
stock
retainer
in
2013,
the
Compensation
Committee
approved
a
one-time
additional
cash
payment
of
$165,000,
payable
in
2016.
For
non-employee,
independent
directors
first
receiving
a
stock
retainer
in
2014,
the
Compensation
Committee
approved
a
one-time
additional
cash
payment
of
$165,000,
payable
in
January
2017,
in
each
case
provided
the
director
continues
to
serve
on
the
payment
date.
Beginning
in
2017,
non-employee,
independent
directors
will
be
eligible
to
receive
an
annual
retainer
in
an
aggregate
amount
equal
to
$225,000
per
year.
The
annual
retainer
will
be
payable
50%
in
cash
and
50%
in
shares
of
restricted
stock,
with
the
number
of
shares
of
restricted
stock
determined
based
on
the
fair
market
value
of
our
common
stock
on
the
grant
date.
The
shares
of
restricted
stock
will
vest
quarterly
in
arrears.

None
of
our
directors
received
separate
compensation
for
attending
meetings
of
our
board
of
directors
or
any
committees
thereof.
Our
CEO,
Mr.
Becker,
is
the
only
director
who
is
also
an
employee
of
Laureate.
Mr.
Becker
is
not
entitled
to
separate
compensation
for
his
service
on
our
board
of
directors.
Non-employee
directors
are
reimbursed
for
travel
and
other
expenses
directly
related
to
director
activities
and
responsibilities.

387

Table
of
Contents

Name
Douglas
L.
Becker(1)
Brian
F.
Carroll(2)
Andrew
B.
Cohen(4)
Darren
M.
Friedman(5)
John
A.
Miller(6)
George
Muñoz(7)
Judith
Rodin(8)
Jonathan
D.
Smidt(9)
Ian
K.
Snow(10)
Steven
M.
Taslitz(11)
Quentin
Van
Doosselaere(12)
Robert
B.
Zoellick(13)

2016
DIRECTOR
COMPENSATION

Fees
Earned

or
Paid
in

Cash
($)

Stock
Awards
($)

All
Other

Compensation
($)

Total
($)

—

27,500

—

60,000

—

190,000

215,000

15,000

65,000

60,000

10,000

—

49,915(3)
49,915(3)
—

49,915(3)
—

—

49,915(3)
—

—

49,915(3)
—

—

77,415

49,915

60,000

49,915

190,000

215,000

64,915

65,000

60,000

59,915

—

(1)

(2)

(3)

(4)

(5)

(6)

(7)

(8)

Mr.
Becker
is
not
entitled
to
receive
compensation
for
his
service
on
our
Board
of
Directors.

Mr.
Carroll
received
$7,500
in
cash
as
committee
fees.
Mr.
Carroll
elected
to
receive
his
annual
retainer
in
stock.

Each
director
who
elected
to
receive
his
annual
retainer
in
stock
received
2,151
shares
of
our
common
stock.
All
of
these
shares
were
fully-
vested
on
December
31,
2016.

Mr.
Cohen
elected
to
receive
his
annual
retainer
in
stock.
Mr.
Cohen
was
required
by
prior
agreement
with
Cohen
Private
Ventures
to
have
all
shares
issued
in
payment
of
his
director's
fees
issued
to
Cohen
Private
Ventures.
Therefore,
we
issued
to
Cohen
Private
Ventures
2,151
shares
of
our
common
stock
as
compensation
for
Mr.
Cohen's
services
as
a
director
during
2016.

Mr.
Friedman
received
$10,000
in
cash
as
committee
fees
and
elected
to
receive
his
$50,000
annual
retainer
in
cash.
Mr.
Friedman
was
required
by
prior
agreement
with
StepStone
to
have
his
2016
director's
fees
paid
to
StepStone.

Mr.
Miller
elected
to
receive
his
annual
retainer
in
stock.

Mr.
Muñoz
received
$25,000
in
cash
as
committee
fees.
Mr.
Muñoz
also
elected
to
receive
director
compensation
for
2013-2016
in
an
initial
grant
of
19,698
restricted
shares
on
June
28,
2013.
These
restricted
shares
are
issued
and
outstanding
at
December
31,
2016
but
4,924
shares
are
subject
to
transfer
restrictions
and
substantial
risk
of
forfeiture
until
the
vesting
criteria
associated
with
the
restricted
shares
will
have
been
met
on
March
6,
2017.
Notwithstanding
the
foregoing
sentence,
if
Mr.
Muñoz's
service
as
a
director
terminates
because
of
death
or
disability,
any
portion
of
these
restricted
shares
that
were
granted
in
consideration
of
his
service
prior
to
or
during
the
calendar
year
in
which
such
death
or
disability
occurs
will
become
vested
and
nonforfeitable
on
the
termination
date,
and
the
balance
of
the
unvested
restricted
shares
will
terminate
without
becoming
vested.
Mr.
Muñoz
received
a
one-time
$165,000
cash
payment
during
2016.

Dr.
Rodin
received
$50,000
in
cash
as
committee
fees.
Dr.
Rodin
elected
to
receive
director
compensation
for
2013-2016
in
an
initial
grant
of
19,698
shares
of
restricted
stock
on
August
6,
2013.
These
restricted
shares
are
issued
and
outstanding
at
December
31,
2016
but
4,924
shares
are
subject
to
transfer
restrictions
and
substantial
risk
of
forfeiture
until
the
vesting
criteria
associated
with
the
restricted
shares
will
have
been
met
on
March
6,
2017.
Notwithstanding
the
foregoing
sentence,
if
Dr.
Rodin's
service
as
a
director
terminates
because
of
death
or
disability,
any
portion
of
these
restricted
shares
that
were
granted
in
consideration
of
her
service
prior
to
or

388

Table
of
Contents

during
the
calendar
year
in
which
such
death
or
disability
occurs
will
become
vested
and
nonforfeitable
on
the
termination
date,
and
the
balance
of
the
unvested
restricted
shares
will
terminate
without
becoming
vested.
Dr.
Rodin
received
a
one-time
$165,000
cash
payment
during
2016.

(9)

Mr.
Smidt
received
$15,000
in
cash
as
committee
fees.
Mr.
Smidt
elected
to
receive
his
annual
retainer
in
stock.

(10) Mr.
Snow
received
$15,000
in
cash
as
committee
fees
and
elected
to
receive
his
$50,000
annual
retainer
in
cash.
Mr.
Snow
was
required
by

prior
agreement
with
Snow
Phipps
to
have
his
2016
director's
fees
paid
to
Snow
Phipps.

(11) Mr.
Taslitz
received
$10,000
in
cash
as
committee
fees
and
elected
to
receive
his
$50,000
annual
retainer
in
cash.
Mr.
Taslitz
was
required

by
prior
agreement
with
Sterling
Partners
to
have
his
director's
fees
paid
to
Sterling
Partners
or
an
affiliate
of
its
choosing.
As
a
result
of
the
Founders'
Agreement,
each
Sterling
Founder,
including
Mr.
Taslitz,
is
entitled
to
receive
an
equal
share
of,
on
an
after
tax
basis,
any
dividends
on,
or
the
proceeds
from
the
sale
of,
the
EPI
Shares
and
the
shares
of
our
Class
B
common
stock
underlying
the
EPI
Options.
These
prospective
proceeds
are
not
included
in
the
compensation
set
forth
in
the
table
above.

(12) Mr.
Van
Doosselaere
received
$10,000
in
cash
as
committee
fees.
Mr.
Van
Doosselaere
elected
to
receive
his
annual
retainer
in
stock.
Mr.
Van
Doosselaere
was
required
by
prior
agreement
with
Bregal
to
have
all
shares
issued
in
payment
of
his
director's
fees
issued
to
Bregal.
Therefore,
we
issued
to
Bregal
2,151
shares
of
our
common
stock
as
compensation
for
Mr.
Van
Doosselaere's
services
as
a
director
during
2016.

(13) Mr.
Zoellick
elected
to
receive
director
compensation
for
2014,
2015
and
2016
in
an
initial
grant
of
18,558
shares
of
restricted
stock
on

July
15,
2014.
The
fair
market
value
of
our
common
stock
on
the
grant
date
as
determined
by
the
Compensation
Committee
in
accordance
with
its
equity
grant
policy
was
$29.92
per
share.
These
restricted
shares
are
issued
and
outstanding
at
December
31,
2016
but
were
subject
to
transfer
restrictions
and
substantial
risk
of
forfeiture
until
the
vesting
criteria
associated
with
the
restricted
shares
was
met.
All
of
these
restricted
shares
vested
and
became
nonforfeitable
on
January
1,
2017.
Mr.
Zoellick
also
will
receive
a
$165,000
one-time
cash
payment
in
January
2017.

Compensation
Committee
Interlocks
and
Insider
Participation
in
Compensation
Decisions

Steven
Taslitz,
a
member
of
the
Compensation
Committee,
is
the
Senior
Managing
Director
of
Sterling
Partners,
and
Douglas
Becker,
our
Chairman
and
CEO,
is
a
director
of
Sterling
Fund
Management,
LLC,
the
management
affiliate
of
Sterling
Partners.
During
2016,
no
other
members
of
the
Compensation
Committee
(i)
had
a
relationship
with
us
other
than
as
a
director
and,
in
certain
cases,
a
stockholder
nor
(ii)
was
(A)
an
officer
or
employee
or
a
former
officer,
(B)
a
participant
in
a
"related
person"
transaction
or
(C)
an
executive
officer
of
another
entity
where
one
of
our
executive
officers
served
on
the
board
of
directors.
See
"Item
13—Certain
Relationships
and
Related
Transactions,
and
Director
Independence"
for
a
discussion
of
certain
transactions
to
which
affiliates
of
the
members
of
the
Compensation
Committee
were
party.

389

Table
of
Contents

Compensation
Committee
Report

The
Compensation
Committee
has
reviewed
and
discussed
the
Compensation
Discussion
and
Analysis
with
management.
Based
on
such
review
and
discussions,
the
Committee
recommended
to
the
Board
of
Directors,
and
the
Board
approved,
that
the
Compensation
Discussion
and
Analysis
be
included
in
this
Form
10-K.

COMPENSATION
COMMITTEE

Brian
F.
Carroll

Steven
M.
Taslitz
(no
longer
serving
on
the
Compensation
Committee
as
of
March
8,
2017)

Darren
M.
Friedman
(no
longer
a
member
of
the
Board
of
Directors
as
of
February
6,
2017)

Andrew
B.
Cohen*

William
L.
Cornog*

Pedro
del
Corro*

George
Muñoz*

This
report
shall
not
constitute
"soliciting
material,"
shall
not
be
deemed
"filed"
with
the
SEC
and
is
not
to
be
incorporated
by
reference
into
any
of
our
other
filings
under
the
Securities
Act
of
1933,
as
amended,
or
the
Securities
Act,
or
the
Exchange
Act,
except
to
the
extent
that
we
specifically
incorporate
this
report
by
reference
therein.

ITEM
12.

SECURITY
OWNERSHIP
OF
CERTAIN
BENEFICIAL
OWNERS
AND
MANAGEMENT
AND
RELATED
STOCKHOLDER
MATTERS

The
following
table
sets
forth
certain
information
with
respect
to
the
beneficial
ownership
of
our
common
stock
at
March
15,
2017,
for:

•

each
person
who
we
know
beneficially
owns
more
than
five
percent
of
either
Class
A
or
Class
B
common
stock;

each
of
our
current
directors;

each
of
our
Named
Executive
Officers;
and

all
of
our
current
directors
and
executive
officers
as
a
group.

The
address
of
each
beneficial
owner
listed
in
the
table
unless
otherwise
noted
is
c/o
Laureate
Education,
Inc.,
650
South
Exeter
Street,
Baltimore,
Maryland
21202.

We
have
determined
beneficial
ownership
in
accordance
with
the
rules
of
the
SEC.
Except
as
indicated
by
the
footnotes
below,
we
believe,
based
on
the
information
furnished
to
us,
that
the
persons
and
entities
named
in
the
table
below
have
sole
voting
and
investment
power
with
respect
to
all
shares
of
common
stock
that
they
beneficially
own,
subject
to
applicable
community
property
laws.

Applicable
percentage
ownership
is
based
on
35,199,466
shares
of
Class
A
common
stock
and
133,205,013
shares
of
Class
B
common
stock
outstanding
at
March
15,
2017.
The
table
below
does
not
include
any
shares
of
Class
A
common
stock
issuable
upon
conversion
of
our
Series
A
Preferred
Stock.
In
computing
the
number
of
shares
of
common
stock
beneficially
owned
by
a
person
and
the
percentage
ownership
of
that
person,
we
deemed
outstanding
shares
of
common
stock
subject
to
options
held
by
that
person
that
are
currently
exercisable
or
exercisable
within
60
days
of
March
15,

Joined
the
Compensation
Committee
as
of
March
8,
2017.

390

Table
of
Contents

2017.
We
did
not
deem
these
shares
outstanding,
however,
for
the
purpose
of
computing
the
percentage
ownership
of
any
other
person.

Name
of
Beneficial
Owner
5%
Stockholders:

Shares
Beneficially
Owned

Class
A
(includes
shares
of

Class
B
that
are
immediately

convertible
to
Class
A)(1)

Class
B

Percentage
of

Total
Voting

Power(2)

Number
of

Percentage

Number
of

Percentage

Wengen
Alberta,
Limited
Partnership(3)

126,189,616

78.2%
126,189,616

94.7%

KKR
Funds(3)(4)

3,571,428(3)(4)

10.1%(3)

(3)

Funds
and
individuals
affiliated
with
Sterling(3)(5)
FMR
LLC(6)
Melvin
Capital
Management(7)
OZ
Management
LP(8)

3,451,343(3)(5)
3,500,000

2,500,000

1,900,000

8.9%(3)

9.9%

7.1%

5.4%

3,451,343(3)(5)
—

—

92.3%
(3)
(4)
(3)
2.5%
(5)
*

—

2.5%(3)(5)

—

Named
Executive
Officers
and
Directors:
(9)

Douglas
L.
Becker(10)(11)
Brian
F.
Carroll(10)(12)
Andrew
B.
Cohen
(10)
William
L.
Cornog
(10)
Pedro
del
Corro(10)(13)
George
Muñoz(14)
Dr.
Judith
Rodin
Ian
K.
Snow(10)(15)
Steven
M.
Taslitz(10)(16)
Quentin
Van
Doosselaere(10)
Robert
B.
Zoellick
Eilif
Serck-Hanssen(17)
Ricardo
Berckemeyer(18)
Enderson
Guimarães(19)
Paula
Singer(20)
All
Current
Directors
and
Executive
Officers
as
a

Group
(23
persons)(10)

873,254

16,844

—

31,698

19,698

6,656

873,254

—

18,558

517,136

634,929

326,578

704,941

2.4%

—

2.4%

—

1.4%

1.8%

2.0%

873,254

16,844

—

59,578

19,698

6,656

873,254

—

18,558

517,136

634,929

326,578

704,941

5,418,967

13.3%

5,466,545

4.1%%

3.4%

(1)

(2)

(3)

Less
than
one
percent.

The
Class
B
common
stock
is
convertible
into
shares
of
Class
A
common
stock
on
a
share-for-share
basis
upon
the
election
of
the
holder
or
upon
transfer,
subject
to
the
terms
of
our
certificate
of
incorporation.
The
Class
A
common
stock
and
Class
B
common
stock
will
automatically
convert
into
a
single
class
of
common
stock
on
the
date
on
which
the
number
of
outstanding
shares
of
Class
B
common
stock
represents
less
than
15%
of
the
aggregate
combined
number
of
outstanding
shares
of
Class
A
common
stock
and
Class
B
common
stock.

Percentage
total
voting
power
represents
voting
power
with
respect
to
all
shares
of
our
Class
A
common
stock
and
Class
B
common
stock,
as
a
single
class.
Each
holder
of
Class
B
common
stock
is
entitled
to
ten
votes
per
share
of
Class
B
common
stock
and
each
holder
of
Class
A
common
stock
is
entitled
to
one
vote
per
share
of
Class
A
common
stock
on
all
matters
submitted
to
our
stockholders
for
a
vote.
The
Class
A
common
stock
and
Class
B
common
stock
vote
together
as
a
single
class
on
all
matters
submitted
to
a
vote
of
our
stockholders,
except
as
may
otherwise
be
required
by
law
or
our
amended
and
restated
certificate
of
incorporation.

Represents
shares
of
Class
B
common
stock
which
are
directly
held
by
Wengen.
The
limited
partnership
interests
in
Wengen
are
held
by
certain
investors
including
the
Wengen
Investors.
The
general
partner
of
Wengen
is
Wengen
Investments
Limited,
which
is
governed
by
a
board
of
directors
composed
of
Mr.
Becker
and
other
representatives
of
Sterling,
and
representatives
of
KKR,
CPV,
Bregal,
StepStone
and
Snow
Phipps.
As
a
result
of
such
representation,
the
Wengen
Investors
control
the
voting
of
the
shares
of
Class
B
common
stock
held
by
Wengen
in
the
election
of
certain
directors
and
may
be
deemed
to
share
beneficial
ownership
over
the
securities
beneficially
owned
by
Wengen.
Does
not
include
1,401,004
shares
of
Class
B
common
stock
subject
to
proxies
given
by
current
and
former
directors
and
employees
of
the
Company
to
Wengen
to
vote
their
shares
of
Class
B
common
stock
(collectively,
the
"Wengen
Proxy").

The
following
persons
hold,
through
their
interests
in
Wengen,
over
5%
of
our
Class
B
common
stock:
KKR
2006
Fund
(Overseas),
Limited
Partnership
and
KKR
Partners
II
(International),
L.P.;
the
Sterling
Parties;
CPV;
Bregal;
Caisse
de
dépôt
et
placement
du
Québec;
affiliates
of
Moore
Capital
Management,
LP;
and
affiliates
of
Makena
Capital

391

Table
of
Contents

Management,
LLC.
Shares
of
Class
B
common
stock
held
by
Wengen
are
convertible
by
Wengen
into
shares
of
Class
A
common
stock,
in
accordance
with
the
terms
of
our
certificate
of
incorporation,
at
the
discretion
of
the
general
partner
of
Wengen.

KKR
2006
Fund
(Overseas),
Limited
Partnership
and
KKR
Partners
II
(International),
L.P.
hold
limited
partnership
interests
in
Wengen
which
relate
to
approximately
22,889,952
and
952,623
underlying
shares
of
Class
B
common
stock
held
by
Wengen,
respectively,
and
may
also
be
deemed
to
have
voting
and
investment
power
over
such
portion
of
the
Class
B
common
stock
owned
by
Wengen
as
a
result
of
their
ability
to
direct
Wengen
with
respect
to
certain
voting
and
disposition
of
such
securities.
KKR
PI-II
GP
Limited
is
the
general
partner
of
KKR
Partners
II
(International),
L.P.
KKR
Associates
2006
(Overseas),
Limited
Partnership
is
the
general
partner
of
KKR
2006
Fund
(Overseas),
Limited
Partnership.
KKR
2006
Limited
is
the
general
partner
of
KKR
Associates
2006
(Overseas),
Limited
Partnership.
KKR
Fund
Holdings
L.P.
is
the
sole
shareholder
of
KKR
2006
Limited.
KKR
Fund
Holdings
GP
Limited
is
a
general
partner
of
KKR
Fund
Holdings
L.P.
KKR
Group
Holdings
L.P.
is
the
sole
shareholder
of
KKR
Fund
Holdings
GP
Limited
and
a
general
partner
of
KKR
Fund
Holdings
L.P.
KKR
Group
Limited
is
the
general
partner
of
KKR
Group
Holdings
L.P.
KKR
&
Co.
L.P.
is
the
sole
shareholder
of
KKR
Group
Limited.
KKR
Management
LLC
is
the
general
partner
of
KKR
&
Co.
L.P.
Messrs.
Henry
R.
Kravis
and
George
R.
Roberts
are
the
designated
members
of
KKR
Management
LLC.
In
such
capacities,
each
of
the
entities
and
individuals
referenced
in
this
paragraph
may
also
be
deemed
to
be
the
beneficial
owners
having
shared
voting
power
and
shared
investment
power
with
respect
to
the
securities
as
described
above.
The
address
of
each
of
the
persons
and
entities
listed
in
this
paragraph,
except
Mr.
Roberts,
is
c/o
Kohlberg
Kravis
Roberts
&
Co.
L.P.,
9
West
57th
Street,
New
York,
New
York
10019.
The
principal
business
address
for
Mr.
Roberts
is
c/o
Kohlberg
Kravis
Roberts
&
Co.
L.P.,
2800
Sand
Hill
Road,
Suite
200,
Menlo
Park,
California
94025.

Sterling
Capital
Partners
II,
L.P.,
Sterling
Capital
Partners
III,
L.P.,
SP-L
Affiliate,
LLC,
Sterling
Laureate
Executives
Fund,
L.P.,
Sterling
Laureate,
L.P.,
Sterling
Laureate
Rollover,
L.P.,
Douglas
L.
Becker,
Steven
M.
Taslitz
and
certain
of
their
respective
affiliates
hold
limited
partnership
interests
in
Wengen
which
collectively
relate
to
approximately
9,584,825
underlying
shares
of
Class
B
common
stock
held
by
Wengen,
and
may
also
be
deemed
to
have
voting
and
investment
power
over
their
respective
pro
rata
shares
of
such
portion
of
the
Class
B
common
stock
owned
by
Wengen
as
a
result
of
their
respective
abilities
to
direct
Wengen
with
respect
to
certain
voting
and
disposition
of
such
securities.
These
underlying
shares
of
Class
B
common
stock
do
not
include
shares
of
Class
B
common
stock
allocable
to
limited
partnership
interests
held
by
certain
investment
vehicles
that
are
managed
on
behalf
of
persons
not
affiliated
with
Sterling,
which
investment
vehicles,
although
managed
by
Sterling-related
entities,
pass
through
rights
with
respect
to
the
voting
and
disposition
of
the
underlying
shares
of
the
Company
to
the
investors
in
such
vehicles.
SC
Partners
II,
L.P.
is
the
sole
general
partner
of
Sterling
Capital
Partners
II,
L.P.,
and
Sterling
Capital
Partners
II,
LLC
is
the
sole
general
partner
of
SC
Partners
II,
L.P.
SC
Partners
III,
L.P.
is
the
sole
general
partner
of
Sterling
Capital
Partners
III,
L.P.,
and
Sterling
Capital
Partners
III,
LLC
is
the
sole
general
partner
of
SC
Partners
III,
L.P.
SP-L
Management
III,
LLC
is
the
sole
general
partner
of
Sterling
Laureate,
L.P.
SP-L
Management
IV,
LLC
is
the
sole
general
partner
of
Sterling
Laureate
Executives
Fund,
L.P.
SP-L
Management
V,
LLC
is
the
sole
general
partner
of
Sterling
Laureate
Rollover,
L.P.
SP-L
Parent,
LLC
is
the
sole
general
partner
of
each
of
Sterling
Management
III,
LLC,
Sterling
Management
IV,
LLC
and
Sterling
Management
V,
LLC.
Sterling
Capital
Partners
II,
LLC,
Sterling
Capital
Partners
III,
LLC,
SP-L
Affiliate,
LLC
and
SP-L
Parent,
LLC
are
managed
by
Messrs.
Taslitz
and
Becker
and
R.
Christopher
Hoehn-Saric
(each
of
whom
serves
on
the
board
of
directors
of
the
general
partner
of
Wengen).
Each
of
the
aforementioned
entities
and
individuals
may
also
be
deemed
to
be
the
beneficial
owners
having
voting
power
and/or
investment
power
with
respect
to
securities
of
the
Company
owned
directly
by
Wengen
as
described
above,
except
that
Mr.
Becker
does
not
exercise
any
voting
or
investment
power
with
respect
to
such
securities
(other
than
any
securities
of
the
Company
attributable
to
the
limited
partnership
interests
in
Wengen
held
by
SP-L
Affiliate,
LLC).
The
business
address
of
each
of
the
persons
and
entities
listed
in
this
footnote,
except
Mr.
Becker,
is
c/o
Sterling
Partners,
401
N.
Michigan
Avenue,
Suite
3300,
Chicago,
Illinois
60611.
The
business
address
of
Mr.
Becker
is
c/o
Laureate
Education,
Inc.,
650
S.
Exeter
Street,
Baltimore,
Maryland
21202.

CPV
Holdings,
LLC,
Point72
Capital
International,
Ltd.,
Point72
Capital,
L.P.
and
Point72
GDF,
Ltd.
hold,
directly
and
indirectly,
limited
partnership
interests
in
Wengen
which
collectively
relate
to
approximately
16,087,099
underlying
shares
of
Class
B
common
stock
held
by
Wengen,
and
may
also
be
deemed
to
have
voting
and
investment
power
over
such
portion
of
the
Class
B
common
stock
owned
by
Wengen
as
a
result
of
their
ability
to
direct
Wengen
with
respect
to
certain
voting
and
disposition
of
such
securities.
Pursuant
to
certain
investment
management
agreements,
Point72
Asset
Management,
L.P.
maintains
voting
and
investment
power
with
respect
to
the
securities
held
by
Point72
Capital
International,
Ltd.,
Point72
Capital,
L.P.
and
Point72
GDF,
Ltd.
Point72
Capital
Advisors,
Inc.
is
the
general
partner
of
Point72
Asset
Management,
L.P.
Steven
A.
Cohen
is
the
sole
shareholder
of
Point72
Capital
Advisors,
Inc.
and
the
managing
member
of
CPV
Holdings,
LLC.
In
such
capacities,
each
of
Point
72
Asset
Management,
L.P.,
Point
72
Capital
Advisors,
Inc.
and
Steven
A.
Cohen
may
also
be
deemed
to
be
the
beneficial
owners
having
shared
voting
power
and
shared
investment
power
with
respect
to
the
securities
as
described
above.
The
address
of
each
of
the
persons
and
entities
listed
in
this
paragraph,
except
CPV
Holdings,
LLC,
is
c/o
Point72,
L.P.,
72
Cummings
Point
Road,
Stamford,
Connecticut
06902.
The
address
of
CPV
Holdings,
LLC
is
c/o
Cohen
Private
Ventures,
LLC,
510
Madison
Avenue,
New
York,
New
York
10022.

Bregal
Europe
Co-Investment
Limited
Partnership
holds,
directly
and
indirectly,
limited
partnership
interests
in
Wengen
which
relate
to
approximately
11,915,410
underlying
shares
of
Class
B
common
stock
held
by
Wengen,
and
may
also
be
deemed
to
have
voting
and
investment
power
over
such
portion
of
the
Class
B
common
stock
owned
by
Wengen
as
a
result
of
its
ability
to
direct
Wengen
with
respect
to
certain
voting
and
disposition
of
such
securities.
The
General
Partner
of
Bregal
Europe
Co-Investment
Limited
Partnership
is
Bregal
General
Partner
Jersey
Limited.
The
directors
of
Bregal
General
Partner
Jersey
Limited
are:
Paul
Andrew
Bradshaw,
John
Hammill,
John
David
Drury,
Andrew
Crawford,
Wolter
Rudolf
Brenninkmeijer
and
Edwin
Theo
Niers.
In
such
capacities,
each
of
the
entities
and
individuals
referenced
in
this

392

Table
of
Contents

paragraph
may
also
be
deemed
to
be
the
beneficial
owners
having
shared
voting
power
and
shared
investment
power
with
respect
to
the
securities
as
described
above.
The
address
of
Bregal
Europe
Co-Investment
Limited
Partnership
is
Quartermile
One,
15
Lauriston
Place,
Edinburgh,
EH3
9EP,
United
Kingdom.
The
address
of
Bregal
General
Partner
Jersey
Limited
and
the
principal
business
address
of
each
of
Messrs.
Paul
Andrew
Bradshaw,
John
Hammill,
and
Andrew
Crawford
is
2nd
Floor,
Windward
House,
La
Route
de
la
Liberation,
St.
Helier,
JE2
3BQ,
Jersey,
Channel
Islands.
The
principal
business
address
of
each
of
Messrs.
John
David
Drury
and
Wolter
Rudolf
Brenninkmeijer
is
81
Fulham
Road,
3rd
Floor,
London
SW3
6RD,
United
Kingdom.
The
principal
business
address
of
Mr.
Ewin
Niers
is
Grafenauweg
10,
CH-6300,
Zug,
Switzerland.

2007
Co-Investment
Portfolio
L.P.,
StepStone
Capital
Partners
II
Onshore,
L.P.
and
StepStone
Capital
Partners
II
Cayman
Holding,
L.P.
(collectively,
the
"StepStone
Funds")
hold
limited
partnership
interests
in
Wengen
which
collectively
relate
to
approximately
3,999,535
underlying
shares
of
Class
B
common
stock
held
by
Wengen,
and
may
be
deemed
to
have
voting
and
investment
power
over
their
respective
pro
rata
shares
of
such
portion
of
the
Class
B
common
stock
owned
by
Wengen
as
a
result
of
their
respective
abilities
to
direct
Wengen
with
respect
to
certain
voting
and
disposition
of
such
securities.
StepStone
Group
Holdings
LLC
is
the
general
partner
of
StepStone
Group
LP,
which
is
the
sole
member
of
StepStone
Co-Investment
Funds
GP,
LLC,
which
is
the
sole
general
partner
of
each
of
the
StepStone
Funds.
Mr.
Darren
M.
Friedman
is
principally
employed
as
a
Partner
of
StepStone
Group
LP
and
StepStone
Group
Holdings
LLC
and
is
a
director
of
Wengen.
The
principal
business
address
of
each
of
the
StepStone
persons
is
4275
Executive
Square,
Suite
500,
La
Jolla,
CA
9203.

Snow
Phipps
Group,
L.P.,
SPG
Co-Investment,
L.P.,
Snow
Phipps
Group
(B),
L.P.,
Snow
Phipps
Group
(Offshore),
L.P.,
and
Snow
Phipps
Group
(RPV),
L.P.
hold
limited
partnership
interests
in
Wengen
which
relate
to
approximately
3,231,081,
17,483,
31,040,
104,434,
and
168,255
underlying
shares
of
Class
B
common
stock
held
by
Wengen,
respectively,
for
an
aggregate
of
3,552,293
shares,
and
may
also
be
deemed
to
have
voting
and
investment
power
over
such
portion
of
the
securities
Class
B
common
stock
owned
by
Wengen
as
a
result
of
their
ability
to
direct
Wengen
with
respect
to
certain
voting
and
disposition
of
such
securities.
SPG
GP,
LLC
is
the
general
partner
of
Snow
Phipps
Group
(Offshore),
L.P.,
Snow
Phipps
Group
(B),
L.P.,
Snow
Phipps
Group,
L.P.,
Snow
Phipps
Group
(RPV),
L.P.,
and
SPG
Co-Investment,
L.P.
Ian
Snow
is
the
sole
managing
member
of
SGP
GP,
LLC.
In
such
capacities,
each
of
the
entities
and
the
individual
referenced
in
this
paragraph
may
also
be
deemed
to
be
the
beneficial
owners
having
shared
voting
power
and
shared
investment
power
with
respect
to
the
securities
as
described
above.
The
address
of
each
of
the
persons
and
entities
listed
in
this
paragraph
is
667
Madison
Avenue,
18th
Floor,
New
York,
New
York,
10065.

Caisse
de
dépôt
et
placement
du
Québec
holds,
directly
and
indirectly,
limited
partnership
interests
in
Wengen
which
relate
to
approximately
11,491,277
underlying
shares
of
Class
B
common
stock
held
by
Wengen,
and
may
be
deemed
to
have
voting
and
investment
power
over
such
portion
of
the
Class
B
common
stock
owned
by
Wengen
as
a
result
of
its
ability
to
direct
Wengen
with
respect
to
certain
voting
and
disposition
of
such
securities.
The
principal
business
address
for
Caisse
de
dépôt
et
placement
du
Québec
is
1000,
place
Jean-Paul-Riopelle,
Montreal
(Québec)
H2Z
2B3,
Canada.

Kendall
Family
Investments,
LLC,
MMF
Moore
ET
Investments,
LP
and
MEM
Moore
ET
Investments,
LP
hold,
directly
and
indirectly,
limited
partnership
interests
in
Wengen
which
collectively
relate
to
approximately
11,054,982
underlying
shares
of
the
Class
B
common
stock
held
by
Wengen,
and
may
be
deemed
to
have
voting
and
investment
power
over
their
respective
pro
rata
shares
of
such
portion
of
the
Class
B
common
stock
owned
by
Wengen
as
a
result
of
their
respective
abilities
to
direct
Wengen
with
respect
to
certain
voting
and
disposition
of
such
securities.
Louis
M.
Bacon
is
the
chief
executive
officer
and
director
of
Moore
Capital
Management,
LP,
which
serves
as
discretionary
investment
manager
to
MMF
Moore
ET
Investments,
LP
and
MEM
Moore
ET
Investments,
LP,
and
the
majority
equity
holder
of
Kendall
Family
Investments,
LLC.
The
principal
business
address
of
Moore
Capital
Management,
LP
is
11
Times
Square,
New
York,
New
York
10036.

Makena
Capital
Holdings
M,
L.P.
and
Makena
Contingent
Capital
Account,
L.P.
hold,
directly
and
indirectly,
limited
partnership
interests
in
Wengen
which
collectively
relate
to
approximately
6,765,025
underlying
shares
of
Class
B
common
stock
held
by
Wengen,
and
may
be
deemed
to
have
voting
and
investment
power
over
their
respective
pro
rata
shares
of
such
portion
of
the
Class
B
common
stock
owned
by
Wengen
as
a
result
of
their
respective
abilities
to
direct
Wengen
with
respect
to
certain
voting
and
disposition
of
such
securities.
Makena
Capital
Management,
LLC
is
the
general
partner
of
Makena
Capital
Holdings
M,
L.P.
and
Makena
Contingent
Capital
Account,
L.P.
The
principal
business
address
of
Makena
Capital
Management,
LLC
is
2755
Sand
Hill
Road,
Suite
200,
Menlo
Park,
California
94025.

(4)

(5)

Represents
3,532,737
and
38,691
shares
of
Class
A
common
stock
owned
by
KKR
2006
Fund
(Overseas),
Limited
Partnership
and
KKR
Partners
II
(International),
L.P.,
respectively.
Does
not
include
the
Class
B
common
stock
held
by
Wengen
described
further
in
footnote
(3)
above
or
an
additional
4,987,395
and
54,622
shares
of
Class
A
common
stock
that
will
be
received
by
KKR
2006
Fund
(Overseas),
Limited
Partnership
and
KKR
Partners
II
(International),
L.P.,
respectively,
upon
the
conversion
of
59,350
and
650
shares
of
Series
A
Preferred
Stock,
respectively.
In
the
aggregate
the
investment
funds
affiliated
with
KKR
may
be
deemed
to
beneficially
own
134,803,061
shares
of
Class
A
Common
Stock,
which
represents,
in
the
aggregate,
approximately
81.0%
of
the
outstanding
shares
of
the
Class
A
common
stock,
calculated
pursuant
to
the
rules
of
the
SEC,
or
92.6%
of
the
total
voting
power.

Represents
shares
of
Class
B
common
stock
beneficially
owned
by
funds
and
individuals
affiliated
with
Sterling.
Does
not
include
the
Class
B
common
stock
held
by
Wengen
described
further
in
footnote
(3)
above.
In
the
aggregate,
such
funds
and
individuals
may
be
deemed
to
beneficially
own
129,640,959
shares
of
Class
A
Common
Stock
(including
3,369,027
shares
of
Class
A
Common
Stock
issuable
upon
conversion
of
shares
of
Class
B
Common
Stock
issuable
upon
the
exercise

393

Table
of
Contents

of
vested
options
issued
to
Mr.
Becker),
which
represents,
in
the
aggregate,
approximately
78.6%
of
the
outstanding
shares
of
the
Class
A
common
stock,
calculated
pursuant
to
the
rules
of
the
SEC.

Based
solely
on
information
reported
by
FMR
LLC,
Abigail
P.
Johnson
and
Fidelity
Contrafund
on
a
Schedule
13G
filed
with
the
SEC
on
March
10,
2017.
Consists
of
3,500,000
shares
beneficially
held
by
FMR
LLC,
of
which
349,700
FMR
LLC
possesses
sole
voting
power
and
of
3,500,000
shares
FMR
possesses
sole
dispositive
power,
3,500,000
shares
beneficially
held
by
Ms.
Johnson
for
which
Ms.
Johnson
possesses
sole
dispositive
power,
and
2,465,300
shares
beneficially
held
by
Fidelity
Contrafund
for
which
Fidelity
Contrafund
possesses
sole
voting
power.
Various
persons
have
the
right
to
receive
or
the
power
to
direct
the
receipt
of
dividends
from,
or
the
proceeds
from
the
sale
of,
these
shares.
All
of
these
shares
are
shares
of
Class
A
common
stock.
The
reporting
person
listed
its
address
as
245
Summer
Street,
Boston,
Massachusetts
02210.

Based
solely
on
information
reported
by
Melvin
Capital
Management
LP
on
a
Schedule
13G
filed
with
the
SEC
on
March
15,
2017.
All
of
these
shares
are
shares
of
Class
A
common
stock.
According
to
this
Schedule
13G,
Melvin
Capital
Management
LP
has
sole
voting
power
and
sole
dispositive
power
with
respect
to
2,500,000
shares
of
common
stock
and
shared
voting
power
and
shared
dispositive
power
with
respect
to
no
shares
of
common
stock.
The
reporting
person
listed
its
address
as
527
Madison
Avenue,
25
th

Floor,
New
York,
New
York
10022.

Based
solely
on
information
reported
by
OZ
Management
LP,
Och-Ziff
Holding
Corporation,
Och-Ziff
Capital
Management
Group
LLC
and
Daniel
S.
Och
on
a
Schedule
13G
filed
with
the
SEC
on
February
10,
2017.
OZ
Management
LP
indicated
that
it
had
voting
and
investment
power
over
all
of
these
shares.
All
of
these
shares
are
shares
of
Class
A
common
stock.
Each
of
the
reporting
persons
listed
its
address
as
9
West
57th
Street,
39th
Floor,
New
York,
New
York
10019.

No
shares
are
pledged
as
security.

The
director
is
affiliated
with
Wengen
or
an
investor
in
Wengen.
Does
not
include
the
Class
B
common
stock
held
of
record
by
Wengen
and
the
1,401,004
shares
of
Class
B
common
stock
subject
to
the
Wengen
Proxy.
See
footnote
3
for
further
information
on
any
beneficial
ownership
of
securities
indirectly
held
through
Wengen.

Includes
Mr.
Becker's
allocable
share
of
certain
equity
securities
of
the
Company
that
are
subject
to
the
Founders'
Agreement
(as
defined
and
described
in
"Executive
Compensation-
Summary
Compensation
Table-Arrangements
with
Certain
Named
Executive
Officers"),
including
(i)
one
quarter
of
the
shares
issuable
upon
the
exercise
of
options
to
purchase
an
aggregate
of
3,369,027
shares
of
Class
B
common
stock
issued
to
Mr.
Becker
and
(ii)
one
quarter
of
the
68,427
shares
of
Class
B
common
stock
issued
to
Mr.
Becker.
Does
not
include
12,490
shares
of
Class
B
common
stock
held
by
the
2002
GST
Exempt
Harvest
Trust,
a
trust
of
which
Mr.
Becker
is
the
sole
beneficiary,
but
as
to
which
Mr.
Becker
is
not
a
trustee
and
does
not
have
voting
or
investment
power
over
the
securities
it
holds.
Mr.
Becker
disclaims
beneficial
ownership
of
these
shares.
Includes
13,888
shares
of
Class
B
common
stock
held
by
Sterling
Fund
Management,
LLC,
an
affiliate
of
Sterling
Partners.
Mr.
Becker
shares
voting
and
dispositive
power
with
respect
to
the
shares
of
Class
B
common
stock
held
by
this
affiliate
of
the
Sterling
Founders,
with
Messrs.
Taslitz
and
Hoehn-Saric.

Includes
4,611
shares
of
Class
B
common
stock
reserved
for
issuance
upon
distribution
of
Mr.
Carroll's
Post-2004
DCP
account
when
he
retires
from
the
Company's
board
of
directors.

Includes
limited
partnership
interests
in
Wengen
held,
directly
and
indirectly,
by
Mr.
del
Corro
which
relate
to
approximately
59,578
underlying
shares
of
Class
B
common
stock
held
by
Wengen,
over
which
he
may
be
deemed
to
have
voting
and
investment
power
as
a
result
of
his
ability
to
direct
Wengen
with
respect
to
certain
voting
and
disposition
of
such
securities.
Shares
of
Class
B
common
stock
held
by
Wengen
are
convertible
by
Wengen
into
shares
of
Class
A
common
stock
of
Laureate,
in
accordance
with
the
terms
of
our
certificate
of
incorporation,
at
the
discretion
of
the
general
partner
of
Wengen.

Includes
12,000
shares
of
Class
A
common
stock.

Includes
3,837
shares
of
Class
B
common
stock
held
by
Snow
Phipps.
Includes
2,819
shares
of
Class
B
common
stock
reserved
for
issuance
upon
distribution
of
Mr.
Snow's
Post-
2004
DCP
account
when
he
retires
from
the
Company's
board
of
directors.
See
"—Executive
Compensation—Director
Compensation."
Does
not
include
an
additional
1,148,739,
3,782,
11,036,
37,129,
and
59,819
shares
of
Class
A
common
stock
that
will
be
received
by
Snow
Phipps
Group,
L.P.,
SPG
Co-Investment,
L.P.,
Snow
Phipps
Group
(B),
L.P.,
Snow
Phipps
Group
(Offshore),
L.P.,
and
Snow
Phipps
Group
(RPV),
L.P.,
respectively,
upon
the
conversion
of
the
13,700,
45,
131,
442,
and
712
shares
of
Series
A
Preferred
Stock,
respectively.
Mr.
Snow
disclaims
beneficial
ownership
of
the
shares
held,
directly
or
indirectly,
by
Snow
Phipps.

Includes
Mr.
Taslitz's
allocable
share
of
certain
equity
securities
of
the
Company
that
are
subject
to
the
Founders'
Agreement
(as
defined
and
described
in
"Executive
Compensation
—Summary
Compensation
Table—Arrangements
with
Certain
Named
Executive
Officers"),
including
(i)
one
quarter
of
the
shares
issuable
upon
the
exercise
of
options
to
purchase
an
aggregate
of
3,369,027
shares
of
Class
B
common
stock
issued
to
Mr.
Becker
and
(ii)
one
quarter
of
the
68,427
shares
of
Class
B
common
stock
issued
to
Mr.
Becker.
Includes
13,889
shares
of
Class
B
common
stock
held
by
Sterling
Fund
Management,
LLC,
an
affiliate
of
Sterling
Partners.
Mr.
Taslitz
shares
voting
and
dispositive
power
with
respect
to
the
shares
of
Class
B
common
stock
held
by
this
affiliate
of
the
Sterling
Founders,
with
Messrs.
Becker
and
Hoehn-Saric.

Includes
shares
issuable
upon
exercise
of
options
to
purchase
470,513
shares
of
Class
B
common
stock
that
are
exercisable
within
60
days
of
the
date
of
the
above
table.

(6)

(7)

(8)

(9)

(10)

(11)

(12)

(13)

(14)

(15)

(16)

(17)

394

Table
of
Contents

(18)

(19)

(20)

Includes
shares
issuable
upon
exercise
of
options
to
purchase
592,857
shares
of
Class
B
common
stock
that
are
exercisable
within
60
days
of
the
date
of
the
above
table.

Includes
shares
issuable
upon
exercise
of
options
to
purchase
326,578
shares
of
Class
B
common
stock
that
are
exercisable
within
60
days
of
the
date
of
the
above
table.
Mr.
Guimarães
served
as
President
and
Chief
Operating
Officer
until
March
23,
2017.

Includes
shares
issuable
upon
exercise
of
options
to
purchase
635,357
shares
of
Class
B
common
stock
that
are
exercisable
within
60
days
of
the
date
of
the
above
table.

Securities
Authorized
for
Issuance
Under
Equity
Compensation
Plans

The
following
table
provides
information
as
of
December
31,
2016,
with
respect
to
shares
of
our
common
stock
that
may
be
issued
under
our
existing
equity
compensation
plans:

(a)

(b)

Number
of

securities
to
be

issued
upon
exercise
of

outstanding
options,

warrants
and
rights

Weighted-average

exercise
price
of

outstanding
options,

warrants
and
rights

remaining
available

for
future

issuance
under

equity
compensation

plans
(excluding

securities
reflected
in

column
(a))

6,707,677
$
5,504,654
$

23.21

20.43

4,888,529

—

Plan
Category
Equity
compensation
plans
approved
by
stockholders(1):
2013
Plan
2007
Plan
Equity
compensation
plans
not
approved
by
stockholders:
None

(1)

For
a
description
of
our
equity
compensation
plans,
see
Item
11—Executive
Compensation.

395

Table
of
Contents

ITEM
13.

CERTAIN
RELATIONSHIPS
AND
RELATED
TRANSACTIONS,
AND
DIRECTOR
INDEPENDENCE

Management
Stockholder's
Agreements

Each
of
the
stockholders
of
the
Company
who
are
employees
or
directors
or
former
employees
or
directors
of
the
Company
has
entered
into
a
stockholder's
agreement
(each,
a
"Management
Stockholder's
Agreement")
with
the
Company
and
Wengen
that
gives
Wengen
a
proxy
to
vote
such
holder's
shares
of
the
Company's
Class
B
common
stock.
In
addition
to
the
voting
proxy
on
shares
held
by
current
and
former
employees
and
directors
of
the
Company,
the
Management
Stockholder's
Agreement
executed
by
each
current
and
former
employee
who
owns
stock
or
has
been
granted
options
to
purchase
stock
of
the
Company
contains
provisions
that
prohibit
the
employee
or
former
employee
(i)
at
any
time
during
or
after
employment
with
the
Company
or
its
subsidiaries,
from
disclosing
or
using
any
confidential
information
pertaining
to
the
business
of
the
Company
or
any
of
its
subsidiaries
or
the
Wengen
Investors
or
any
of
their
respective
affiliates,
except
when
required
to
perform
his
or
her
duties
to
the
Company
or
one
of
its
subsidiaries,
by
law
or
judicial
process;
(ii)
at
any
time
during
employment
with
the
Company
or
its
subsidiaries
and
for
a
period
of
two
years
thereafter,
from
directly
or
indirectly
acting
as
a
proprietor,
investor,
director,
officer,
employee,
substantial
stockholder,
consultant,
or
partner
in
any
business
that
directly
competes,
at
the
relevant
determination
date,
with
the
post-secondary
business
of
the
Company
or
any
of
their
respective
affiliates
in
any
geographic
area
where
the
Company
or
its
affiliates
manufactures,
produces,
sells,
leases,
rents,
licenses
or
otherwise
provides
products
or
services;
and
(iii)
at
any
time
during
employment
with
the
Company
or
its
subsidiaries
and
for
a
period
of
two
years
thereafter,
from
directly
or
indirectly
(a)
soliciting
customers
or
clients
of
the
Company,
any
of
its
subsidiaries,
the
Wengen
Investors
or
any
of
their
respective
affiliates
to
terminate
their
relationship
with
the
Company,
any
of
its
subsidiaries,
the
Wengen
Investors
or
any
of
their
respective
affiliates
or
otherwise
soliciting
such
customers
or
clients
to
compete
with
any
business
of
the
Company,
any
of
its
subsidiaries,
the
Wengen
Investors
or
any
of
their
respective
affiliates
or
(b)
soliciting
or
offering
employment
to
any
person
who
is,
or
has
been
at
any
time
during
the
12
months
immediately
preceding
the
termination
of
the
employee's
employment,
employed
by
the
Company
or
any
of
its
affiliates.

Subsequent
to
our
initial
public
offering,
the
Management
Stockholder's
Agreements
permit
each
of
the
stockholders
of
the
Company
who
are
employees
or
directors
or
former
employees
or
directors
of
the
Company
to
participate
in
any
sale
of
the
Company's
common
stock
by
Wengen
or
any
of
the
Wengen
Investors
that
is
registered
under
the
Securities
Act
(the
"piggyback
registration
rights"),
subject
to
customary
underwriters'
restrictions
including
pro
rata
reduction
and
execution
of
customary
custody
and
lockup
agreements.
The
piggyback
registration
rights
provided
in
the
Management
Stockholder's
Agreements
expire
upon
a
change
in
control
of
the
Company.
The
registration
rights
also
provide
for
our
indemnification
of
the
stockholders
and
their
affiliates
in
connection
with
the
"piggyback"
registration
of
their
securities.

Agreements
with
Wengen

Wengen Securityholders' Agreement.

Prior
to
our
initial
public
offering,
the
Wengen
Investors
were
subject
to
the
Wengen
Securityholders'
Agreement,
pursuant
to
which
the
general
partner
of
Wengen
was
permitted
to
develop
and
implement
an
initial
public
offering
of
our
securities
and
certain
of
the
Wengen
Investors
had
the
right
to
appoint
members
to
the
board
of
directors
of
Wengen's
general
partner
and
Laureate.
Effective
upon
the
closing
of
our
initial
public
offering,
the
Wengen
Securityholders'
Agreement
was
amended
and
restated
to
make
the
Company
a
party
thereto
and
to
provide
that
certain
of
the
Wengen
Investors
will
continue
to
have
the
right
to
elect
a
majority
of
our
board
of
directors
and
coordinate
the
sale
of
all
shares
of
our
Class
B
common
currently
held
by
Wengen
which
may
be
distributed
to
the
Wengen
Investors
from
time
to
time.
The
right
of
Wengen
to
designate
directors
shall
survive
the
dissolution
of
Wengen
and
shall
become
rights
of
the
Wengen

396

Table
of
Contents

Investors
until
they
hold
less
than
40%
of
the
outstanding
common
stock
of
Laureate.
In
addition,
the
right
of
KKR,
Sterling
Capital
Partners
II,
L.P.,
Bregal
and
CPV
to
designate
directors
shall
survive
the
dissolution
of
Wengen.

Registration Rights Agreement.

Wengen
and
the
Wengen
Investors
are
parties
to
a
registration
rights
agreement
(the
"Registration
Rights
Agreement"),
pursuant
to
which
the
Wengen
Investors
were
granted
certain
registration
rights
in
connection
with
our
initial
public
offering.
Pursuant
to
the
existing
Registration
Rights
Agreement,
the
Wengen
Investors
were
granted
the
right,
beginning
180
days
following
the
completion
of
our
initial
public
offering
to
cause
us,
at
our
expense,
to
use
our
reasonable
best
efforts
to
register
certain
shares
of
common
stock
held
by
the
Wengen
Investors
and
any
securities
issued
in
replacement
of
or
in
exchange
for
such
shares
of
common
stock
for
public
resale,
subject
to
certain
limitations
as
set
forth
in
the
Registration
Rights
Agreement.
The
exercise
of
this
"demand"
right
is
limited
to
ten
requests
in
the
aggregate.
In
the
event
that
we
register
any
of
our
common
stock
following
completion
of
our
initial
public
offering,
the
Wengen
Investors
and
management
(pursuant
to
a
provision
in
the
Management
Stockholder's
Agreements)
have
a
"piggyback
right"
which
allows
them
to
require
us
to
use
our
reasonable
best
efforts
to
include
shares
of
our
common
stock
held
by
them
in
such
registration,
subject
to
certain
limitations.
The
existing
Registration
Rights
Agreement
also
provides
for
our
indemnification
of
the
Wengen
Investors
and
management
in
connection
with
the
registration
of
their
securities.
The
Company
become
a
party
to
the
Registration
Rights
Agreement
effective
upon
the
consummation
of
the
initial
public
offering.

SFUAD Shared Services Agreement.

In
June
2008,
Laureate
entered
into
an
agreement
with
the
College
of
the
Christian
Brothers
of
New
Mexico
to
provide
a
line
of
credit
of
$2.8
million
that
was
to
mature
on
the
earlier
of
six
months
from
the
date
of
the
loan
or
upon
Laureate's
acquisition
of
assets
from
the
Christian
Brothers
relative
to
College
of
Santa
Fe
(now
known
as
the
Santa
Fe
University
of
Arts
and
Design,
or
SFUAD).
The
agreement
was
subsequently
amended
to
increase
the
line
of
credit
to
$3.8
million.
The
interest
on
the
line
of
credit
was
10%
per
annum
payable
in
arrears
on
the
line
of
credit
termination
date.
The
amounts
outstanding
under
the
agreement
were
secured
by
land
adjacent
to
the
SFUAD
campus.
During
2009,
Laureate
transferred
the
SFUAD
line
of
credit
to
a
newly
formed
subsidiary.
This
subsidiary
was
sold
to
Wengen
for
cash
of
$2.7
million,
equal
to
the
outstanding
principal
and
interest
on
the
line
of
credit.
No
gain
or
loss
was
recognized
on
the
transfer.
In
connection
with
the
sale
of
the
newly
formed
subsidiary
to
Wengen
in
2009,
Laureate
entered
into
a
shared
services
agreement
with
SFUAD.
During
2014,
Laureate
entered
into
a
new
shared
services
agreement
with
SFUAD
that
replaced
the
shared
services
agreement
previously
entered
into
in
2009.
Laureate
provides
SFUAD
with
certain
management
consulting,
legal,
tax,
finance,
accounting,
treasury,
human
resources,
and
network
entry
services.
The
new
shared
services
agreement
has
a
term
of
five
years
and
automatically
renews
for
two
year
periods
thereafter,
unless
terminated
by
either
party.
As
of
December
31,
2015,
Laureate
had
recorded
a
receivable
from
SFUAD
of
$0.7
million
related
to
the
shared
services
agreement,
substantially
all
of
which
was
collected
subsequent
to
year-end.
As
of
December
31,
2016,
Laureate
recorded
a
net
related
party
payable
to
SFUAD
of
$0.5
million,
related
to
an
advance
payment
received
during
the
fourth
quarter
of
2016.

During
the
third
quarter
of
2013,
14
Laureate
institutions
entered
into
partnership
agreements
with
SFUAD
(the
"Global
Partnership
agreements").
These
Global
Partnership
agreements
have
an
initial
term
of
five
years
and
provide
Laureate
students
with
educational
opportunities
to
study
certain
academic
programs
at
SFUAD.
Under
the
terms
of
these
agreements,
the
partnering
Laureate
institutions
commit
to
pay
SFUAD
an
annual
amount
each
calendar
year,
which
SFUAD
then
bills
to
the
Laureate
institutions
on
a
quarterly
basis.
The
Global
Partnership
agreements
can
be
unilaterally
canceled
by
either
SFUAD
or
the
Laureate
institutions
with
at
least
six
months'
prior
written
notice;
however,
any
remaining
unpaid
commitment
amount
for
that
calendar
year
is
contractually
owed
to
SFUAD.
These
partnership
agreements
were
phased
out
during
2016.
For
the
years
ended
December
31,
2016,
2015
and
2014,
the
total
amounts
paid
under
the
Global
Partnership
agreements

397

Table
of
Contents

were
$0.7
million,
$3.6
million
and
$4.6
million,
respectively.
As
of
December
31,
2016
and
2015,
Laureate
recorded
a
related
party
payable
to
SFUAD
of
$0.1
million
and
$0.2
million,
respectively.
On
May
18,
2016,
SFUAD
announced
that
it
had
signed
an
agreement
to
be
acquired
by
a
private
education
provider
with
a
global
network
of
colleges
and
universities
that
focus
on
art
and
design
education.
This
agreement
was
terminated
by
the
parties
thereto
on
March
29,
2017.

Agreements
with
Holders
of
Series
A
Preferred
Stock

Subscription Agreement

On
December
4,
2016,
we
signed
the
Subscription
Agreement
with
six
investors,
including
KKR
and
Snow
Phipps,
which
purchased
$60
million
and
$15
million
worth
of
shares
of
Series
A
Preferred
Stock,
respectively,
pursuant
to
which
we
agreed
to
issue
an
aggregate
of
400,000
shares
of
Series
A
Preferred
Stock
in
a
private
offering
for
total
gross
proceeds
of
$400
million
and
total
net
proceeds
of
approximately
$383
million.
Closing
of
the
first
tranche
of
funding
for
this
transaction
occurred
on
December
20,
2016
and
we
received
net
proceeds,
after
issuance
costs,
of
approximately
$328
million.
One
investor
funded
a
portion
of
its
purchase
price
equal
to
$57
million
(approximately
$55
million
net
of
issuance
costs)
on
January
18,
2017
and
the
remainder
on
January
23,
2017.
The
proceeds
from
the
Series
A
Preferred
Stock
offering
have
and
will
be
used
to
pay
transaction
expenses,
including
structuring
fees
to
certain
of
the
purchasers
of
the
Series
A
Preferred
Stock
(including
a
fee
of
$1.8
million
to
KKR
and
$450,000
to
Snow
Phipps),
to
repay
a
portion
of
our
outstanding
debt
(other
than
any
debt
held
by
our
stockholders,
employees,
officers
or
directors,
including
their
affiliates),
and
for
working
capital
and
general
corporate
purposes.

Upon
the
closing
and
funding
of
the
purchase
price
of
the
Series
A
Preferred
Stock
offering
in
full,
which
was
a
qualified
equity
issuance
under
our
Senior
Secured
Credit
Facilities,
the
applicable
LIBOR
margin
for
the
2021
Extended
Term
Loan
under
our
Senior
Secured
Credit
Facilities
was
reduced
to
7.5%
and
the
applicable
ABR
margin
was
reduced
to
6.5%.
The
applicable
LIBOR
margin
for
the
revolving
credit
line
under
our
Senior
Secured
Credit
Facilities
was
reduced
to
3.75%
and
the
applicable
ABR
margin
was
reduced
to
2.75%.
In
addition,
the
additional
scheduled
payment
on
such
2021
Extended
Term
Loan
in
the
amount
of
$62.5
million
will
not
be
required
under
our
Senior
Secured
Credit
Facilities.

The
Subscription
Agreement
requires
us
to
repay
any
portion
of
our
outstanding
debt
(other
than
any
debt
held
by
our
stockholders,
employees,
officers,
or
directors,
including
their
affiliates)
in
an
amount
equal
to
at
least
the
total
proceeds
received
by
the
Company
under
the
Subscription
Agreement,
less
the
amount
used
to
pay
our
transaction
expenses
and
other
fees,
by
not
later
than
June
20,
2018,
the
18
month
anniversary
of
the
closing
date.
However,
to
the
extent
the
outstanding
debt
repaid
pursuant
to
the
Subscription
Agreement
repaid
consists
of
revolving
loans,
we
may
subsequently
redraw
such
revolving
loans.
We
are
not
permitted
to
use
any
funds
paid
received
pursuant
to
the
Subscription
Agreement
to
acquire
the
assets
or
securities
of
another
entity
or
to
purchase,
redeem,
retire
or
otherwise
acquire,
or
make
any
payment
in
respect
of,
directly
or
indirectly,
any
of
our
equity
securities.

The
Company
agreed
to
indemnify
each
purchaser
of
Series
A
Preferred
Stock
from
and
against
any
and
all
losses
incurred
by
or
asserted
against
any
of
them
by
virtue
of,
among
other
things,
any
breach
of
representations
or
warranties
made
by
the
Company
in
the
Subscription
Agreement,
any
breach,
non-compliance
or
non-fulfillment
in
any
material
respect
of
any
covenant
or
agreement
of
the
Company,
or
any
fraud
by
the
Company.
In
addition,
each
purchaser
of
Series
A
Preferred
Stock,
severally
(and
not
jointly
and
severally),
agreed
to
indemnify
and
hold
harmless
the
Company
from
and
against
all
losses
incurred
by
or
asserted
against
the
Company
by
virtue
of
any
breach
of
any
representation
or
warranty
made
by
such
purchaser
of
Series
A
Preferred
Stock
or
any
fraud
of
such

398

Table
of
Contents

purchaser
of
Series
A
Preferred
Stock.
We
will
not
be
liable
to
any
purchaser
of
Series
A
Preferred
Stock
for
any
amounts
in
excess
of
the
purchase
price
paid
by
such
purchaser.

In
connection
with
the
transactions
contemplated
by
the
Subscription
Agreement,
the
Company
executed
both
a
stockholders
agreement
(the
"Stockholders
Agreement")
and
a
registration
rights
agreement
(the
"Series
A
Registration
Rights
Agreement").
The
following
summary
of
the
Subscription
Agreement,
Stockholders
Agreement
and
Series
A
Registration
Rights
Agreement
does
not
purport
to
be
complete
and
is
qualified
in
its
entirety
by
reference
to
the
provisions
of
the
Subscription
Agreement,
Stockholders
Agreement
and
Series
A
Registration
Rights
Agreement,
each
of
which
are
filed
with
the
Securities
and
Exchange
Commission
as
exhibits
to
the
IPO
Registration
Statement.

Stockholders Agreement

The
Stockholders
Agreement
provides
that
the
shares
of
Series
A
Preferred
Stock
have
tag
along
rights
with
respect
to
any
proposed
transfer
of
shares
of
our
capital
stock
by
Wengen.
The
tag
along
rights
terminate
upon
the
earlier
to
occur
of
(x)
the
redemption
of
all
of
the
shares
of
Series
A
Preferred
Stock
in
accordance
with
the
terms
of
the
Certificate
of
Designations
and
(y)
the
earlier
of
(A)
the
date
on
which
the
closing
of
our
first
follow-on
public
offering
following
our
initial
public
offering
in
which
the
holders
of
the
Series
A
Preferred
Stock
receive
net
proceeds
not
less
than
the
Priority
Amount
is
consummated
pursuant
to
the
Certificate
of
Designations
and
the
Series
A
Registration
Rights
Agreement
and
(B)
if
then
converted,
the
date
which
is
120
days
(or
if
a
registration
is
suspended,
postponed
or
otherwise
not
available
pursuant
to
the
terms
of
the
Series
A
Registration
Rights
Agreement,
then
an
additional
number
of
days
equal
to
the
length
of
such
suspension,
postponement
or
lack
of
availability)
after
the
date
on
which
an
amount
of
Conversion
Stock
(as
defined
in
the
Stockholders
Agreement)
equal
to
or
more
than
the
Priority
Amount
has
been
registered
pursuant
to
an
effective
registration
statement
in
accordance
with
the
terms
of
the
Series
A
Registration
Rights
Agreement,
or
if
earlier,
the
date
on
which
at
least
the
Priority
Amount
under
such
registration
statement
has
been
sold.

Series A Registration Rights Agreement

Pursuant
to
the
Series
A
Registration
Rights
Agreement,
the
holders
of
the
shares
of
Series
A
Preferred
Stock
are
entitled
to
certain
demand
registration
rights
following
conversion
of
the
shares
or
within
45
days
of
the
shares
becoming
required
or
entitled
to
be
converted.
The
holders
of
two-thirds
of
the
shares
of
Series
A
Preferred
Stock
are
entitled
to
make
up
to
two
demands,
excluding
short
form
demands,
that
we
register
the
resale
of
such
shares,
subject
to
the
right
of
the
Company
to
convert
a
demand
registration
made
by
the
holders
of
the
Series
A
Preferred
Stock
into
a
follow-on
public
offering
in
which
the
holders
of
the
Series
A
Preferred
Stock
receive
net
proceeds
not
less
than
the
Priority
Amount.
The
holders
of
Series
A
Preferred
Stock
also
have
certain
piggyback
registration
rights
with
respect
to
registration
statements
and
rights
to
require
us
to
register
for
resale
such
securities
pursuant
to
Rule
415
under
the
Securities
Act.

For
underwritten
offerings,
the
holders
of
the
Series
A
Preferred
Stock
have
priority
to
participate
in
any
demand
or
piggyback
registration
up
to
the
Priority
Amount
or
until
the
Priority
Amount
is
satisfied.
Once
the
Priority
Amount
is
registered
or
satisfied,
the
shares
of
the
holders
of
the
Series
A
Preferred
Stock,
Wengen
and
certain
other
stockholders
with
registration
rights
will
then
be
included
in
the
registration
on
a
pro
rata
basis
based
upon
the
number
of
shares
requested
to
be
included
in
the
offering,
followed
by
the
shares
of
the
Company
requested
to
be
included
in
the
offering;
provided,
however,
that
the
shares
of
the
Company
will
have
priority
over
the
shares
of
the
holders
of
the
Series
A
Preferred
Stock,
Wengen
and
certain
other
stockholders
with
registration
rights
for
underwritten
piggyback
registrations
initiated
by
the
Company.

399

Table
of
Contents

The
Company
will
bear
the
expenses
incurred
in
connection
with
the
filing
of
any
such
registration
statements
in
connection
with
the
exercise
of
demand
and
piggyback
registration
rights
by
the
holders
of
the
Series
A
Preferred
Stock.

Payments
for
Airplane
Usage
Costs

In
2016,
2015
and
2014,
we
incurred
costs
of
$0.1
million,
$0.3
million
and
$0.2
million,
respectively,
for
the
business
use
of
a
private
airplane
that
is
owned
in
part
by
our
Chief
Executive
Officer.

Relationship
with
KKR

As
part
of
our
initial
public
offering,
an
affiliate
of
Kohlberg
Kravis
Roberts
&
Co.
L.P.
purchased
from
the
underwriters
3,571,428
shares
of
Class
A
common
stock
at
the
initial
public
offering
price.

Relationship
with
KKR
Capital
Markets

Since
2014,
KKR
Corporate
Lending
LLC,
an
affiliate
of
KKR
Capital
Markets
LLC,
has
been
a
participating
lender
under
the
Company's
existing
revolving
credit
facilities
and
as
of
December
31,
2016
had
received
interest
payments
and
amendment
consent
fees
of
approximately
$2.7
million.

In
addition,
an
affiliate
of
one
of
the
Wengen
investors
acted
as
a
financial
adviser
in
connection
with
our
initial
public
offering
and
we
paid
this
affiliate
a
one-time
fee
of
$1.5
million
for
its
services.

Relationship
with
KKR
Credit

Since
2014,
investment
funds
or
accounts
managed
or
advised
by
KKR
Credit
Advisors
(US)
LLC
("KKR
Credit")
were
participating
lenders
under
the
Company's
existing
credit
agreements
and
from
2014
through
2016
received
aggregate
principal
payments
of
$12.9
million
and
interest
and
amendment
fee
payments
of
$20.8
million.
Since
2014,
investment
funds
or
accounts
managed
or
advised
by
KKR
Credit
were
also
holders
of
notes
issued
by
the
Company
and
from
2014
through
2016
received
interest
payments
of
approximately
$4.7
million.

As
of
December
31,
2016,
investment
funds
or
accounts
managed
or
advised
by
KKR
Credit
held
a
portion
of
the
Company's
first
lien
term
loan.

Relationship
to
KKR
Capstone
Americas
LLC

We
have
historically
utilized
KKR
Capstone,
a
consulting
company
that
works
exclusively
with
KKR's
portfolio
companies,
for
consulting
services,
and
paid
to
KKR
Capstone
related
fees
and
expenses.
References
to
"KKR
Capstone"
are
to
KKR
Capstone
Americas
LLC
and
their
affiliates,
which
are
owned
and
controlled
by
their
senior
management
team.
KKR
Capstone
is
not
a
subsidiary
or
affiliate
of
KKR.
KKR
Capstone
operates
under
several
consulting
agreements
with
KKR
and
uses
the
"KKR"
name
under
license
from
KKR.

Agreement
with
Sterling
Affiliate

We
have
agreements
with
I/O
Data
Centers,
LLC
("I/O")
pursuant
to
which
I/O
will
provide
modular
data
center
solutions
to
the
Company.
In
2016,
2015
and
2014,
we
incurred
costs
for
these
agreements
of
$0.9
million,
$0.5
million
and
$0.5
million,
respectively.
Mr.
Taslitz,
one
of
our
directors
and
a
Senior
Managing
Director
of
Sterling
Partners,
is
a
director
of
I/O.
Messrs.
Becker
and
Taslitz,
Sterling
Partners
and
certain
of
its
affiliates
own,
directly
or
through
investment
vehicles,
an
aggregate
of
approximately
65%
of
the
outstanding
equity
in
I/O.

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Table
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Conflicts
of
Interest
Policy

The
Audit
Committee
reviews
all
relationships
and
transactions
in
which
the
Company
and
our
directors
and
executive
officers
or
their
immediate
family
members
are
participants
to
determine
whether
such
persons
have
a
direct
or
indirect
material
interest
in
any
particular
transaction.
The
Company's
legal
staff
is
primarily
responsible
for
the
development
and
implementation
of
processes
and
controls
to
obtain
information
from
the
directors
and
executive
officers
with
respect
to
related
person
transactions
and
for
then
determining,
based
on
the
facts
and
circumstances,
whether
the
Company
or
a
related
person
has
a
direct
or
indirect
material
interest
in
the
transaction.
The
Audit
Committee
of
the
board
of
directors
reviews
and
approves
or
ratifies
any
related
person
transaction
that
meets
this
standard.
In
the
course
of
the
Audit
Committee's
review
and
approval
or
ratification
of
a
disclosable
related
person
transaction,
the
committee
considers:

•

the
nature
of
the
related
person's
interest
in
the
transaction;

the
material
terms
of
the
transaction,
including
the
amount
and
type
of
transaction;

the
importance
of
the
transaction
to
the
related
person;

the
importance
of
the
transaction
to
the
Company;

whether
the
transaction
would
impair
the
judgment
of
a
director
or
executive
officer
to
act
in
the
best
interest
of
the
Company;
and

any
other
matters
the
committee
deems
appropriate.

Any
member
of
the
Audit
Committee
who
is
a
related
person
with
respect
to
a
transaction
under
review
may
not
participate
in
the
deliberations
or
vote
respecting
approval
or
ratification
of
the
transaction,
provided
that
such
director
may
be
counted
in
determining
the
presence
of
a
quorum
at
a
meeting
of
the
committee
that
considers
the
transaction.
The
current
Wengen
Securityholders'
Agreement
requires
approval
of
six
directors
for
related
party
transactions
having
a
value
of
at
least
$25
million.

Information
Regarding
the
Laureate
Board

Our
board
of
directors
consists
of
11
persons,
seven
of
whom
are
designated
by
Wengen.
Until
Wengen
ceases
to
own
at
least
40%
of
the
common
equity
of
Laureate,
it
is
entitled
to
designate
a
proportion
of
the
Laureate
directors
commensurate
with
its
relative
economic
ownership
but
Wengen
has
chosen
to
limit
its
designees
on
the
initial
board.
We
intend
over
the
course
of
the
next
12
months
to
add
at
least
two
additional
independent
directors
in
order
to
comply
with
the
corporate
governance
standards
of
Nasdaq.
Pursuant
to
the
Wengen
Securityholders'
Agreement,
four
of
Wengen's
seven
directors
shall
be
selected
by
KKR,
Sterling
Capital
Partners
II,
L.P.,
Bregal
and
CPV.
KKR
will
be
entitled
to
elect
one
of
Laureate's
directors
so
long
as
KKR
owns
at
least
a
number
of
shares
held
through
or
acquired
from
Wengen
in
an
amount
equal
to
$75
million
divided
by
the
per
share
initial
public
offering
price
of
the
Class
A
common
stock.
Mr.
Cornog
currently
serves
as
the
KKR-designated
director.
Sterling
Capital
Partners
II,
L.P.
will
be
entitled
to
elect
one
of
Laureate's
directors
so
long
as
Sterling
Capital
Partners
II,
L.P.,
Sterling
Capital
Partners
III,
L.P.,
SP-L
Affiliate,
LLC,
Messrs.
Becker
and
Taslitz
and
each
of
their
respective
affiliates
(together
the
"Sterling
Parties")
collectively
own
at
least
a
number
of
shares
held
through
or
acquired
from
Wengen
in
an
amount
equal
to
$75
million
divided
by
the
per
share
initial
public
offering
price
of
the
Class
A
common
stock.
Mr.
Taslitz
currently
serves
as
the
Sterling-designated
director.
Bregal
will
be
entitled
to
elect
one
of
Laureate's
directors
so
long
as
Bregal
owns
at
least
a
number
of
shares
held
through
or
acquired
from
Wengen
in
an
amount
equal
to
$75
million
divided
by
the
per
share
initial
public
offering
price
of
the
Class
A
common
stock.
Mr.
Van
Doosselaere
currently
serves
as
the
Bregal-designated
director.
CPV
will
be
entitled
to
elect
one
of
Laureate's
directors
so
long
as
CPV
owns
at
least
a
number
of
shares
held
through
or
acquired

401

Table
of
Contents

from
Wengen
in
an
amount
equal
to
$75
million
divided
by
the
per
share
initial
public
offering
price
of
the
Class
A
common
stock.
Mr.
Cohen
currently
serves
as
the
CPV-designated
director.
The
remaining
three
Wengen
designees
to
the
Laureate
board
of
directors
will
be
selected
by
the
vote
of
holders
of
a
majority
of
interests
in
Wengen
and
are
currently
Mr.
Carroll,
Mr.
del
Corro
and
Mr.
Snow.
Wengen
has
agreed
that
so
long
as
Mr.
Becker
is
our
Chief
Executive
Officer
it
will
vote
for
Mr.
Becker
as
a
director.
Wengen
may
decide
to
change
the
individuals
it
is
entitled
to
have
elected
to
our
board
of
directors.
The
Wengen
Securityholders'
Agreement
does
not
terminate
upon
the
dissolution
of
Wengen.
See
"Certain
Relationships
and
Related
Party
Transactions,
and
Director
Independence—Agreements
with
Wengen."

Controlled
Company
Exception

Wengen
controls
a
majority
of
the
voting
power
of
our
outstanding
common
stock.
As
a
result,
we
are
a
"controlled
company"
within
the
meaning
of
the
Nasdaq
corporate
governance
standards.
Under
the
Nasdaq
rules,
a
company
of
which
more
than
50%
of
the
voting
power
is
held
by
an
individual,
group
or
another
company
is
a
"controlled
company"
and
may
elect
not
to
comply
with
certain
Nasdaq
corporate
governance
standards,
including:

•

the
requirement
that
a
majority
of
the
board
of
directors
consist
of
independent
directors;

the
requirement
that
we
have
a
compensation
committee
that
is
composed
entirely
of
independent
directors
with
a
written
charter
addressing
the
committee's
purpose
and
responsibilities;
and

the
requirement
for
an
annual
performance
evaluation
of
the
nominating/corporate
governance
and
compensation
committees.

We
utilize,
and
intend
to
continue
to
utilize,
these
exemptions.
As
a
result,
we
do
not
and
will
not
have
a
majority
of
independent
directors,
our
nominating/corporate
governance
committee
and
compensation
committee
do
not
and
will
not
consist
entirely
of
independent
directors
and
such
committees
do
not
and
will
not
be
subject
to
annual
performance
evaluations.
Accordingly,
for
so
long
as
we
are
a
"controlled
company"
our
stockholders
will
not
have
the
same
protections
afforded
to
stockholders
of
companies
that
are
subject
to
all
of
the
Nasdaq
corporate
governance
requirements.

ITEM
14.

PRINCIPAL
ACCOUNTANT
FEES
AND
SERVICES

Audit
Fees
and
All
Other
Fees

The
following
table
shows
the
fees
for
audit
and
other
services
provided
by
PricewaterhouseCoopers
LLP
for
2016
and
2015
(in
millions):

(in
millions)
Audit
Fees
Audit-Related
Fees
Tax
Fees
All
Other
Fees
Total

2016

2015

$ 14.5
$ 13.0

2.0

0.9

1.0

$ 16.4
$ 16.9

1.2

0.5

0.2

402

Table
of
Contents

Audit Fees

This
category
includes
fees
related
to
the
audit
of
our
annual
consolidated
financial
statements;
the
review
of
our
quarterly
consolidated
financial
statements;
comfort
letters,
consents,
and
assistance
with
and
review
of
documents
filed
with
the
SEC;
offering
memoranda,
purchase
accounting
and
other
accounting,
and
financial
reporting
consultation
and
research
work
billed
as
audit
fees
or
necessary
to
comply
with
the
standards
of
the
Public
Company
Accounting
Oversight
Board
(United
States).

Audit-Related Fees

The
category
consists
of
fees
for
audit-related
services
that
are
reasonable
related
to
the
performance
of
the
audit
or
review
of
our
consolidated
financial
statements.
Audit-related
fees
primarily
include
fees
related
to
service
auditor
examinations,
statutory
audits
required
domestically
and
internationally,
due
diligence
related
to
mergers
and
acquisitions,
attest
services
that
are
not
required
by
statute
or
regulation,
and
consultation
concerning
financial
accounting
and
reporting
standards
not
classified
as
audit
fees.

Tax Fees

This
category
consists
of
fees
for
tax
compliance,
tax
advice
and
tax
planning
services.

All Other Fees

This
category
consists
of
fees
for
services
that
are
not
included
in
the
above
categories.

Audit
Committee
Pre-approval
of
Service
of
Independent
Registered
Public
Accounting
Firm

Our
Audit
Committee
has
established
a
policy
to
pre-approve
all
audit
and
non-audit
services
provided
by
the
independent
registered
public
accounting
firm.
These
services
may
include
audit
services,
audit-related
services,
tax
services,
and
other
services.
Under
the
policy,
our
Audit
Committee
annually
reviews
and
pre-approves
services
that
may
be
provided
by
the
independent
registered
public
accounting
firm
for
each
audit
year.
The
pre-approval
is
detailed
as
to
the
particular
service
or
category
of
services
and
is
subject
to
a
specific
budget.
Once
pre-approved,
the
services
and
pre-approved
amounts
are
monitored
against
actual
charges
incurred
and
modified
if
appropriate.
The
Chairperson
of
the
Committee
has
the
authority
to
pre-approve
such
services
between
meetings
of
our
Audit
Committee
and
reports
such
pre-approvals
to
our
Audit
Committee
at
the
next
regularly
scheduled
meeting.

During
2016,
all
audit
and
non-audit
services
provided
by
PricewaterhouseCoopers
LLP
were
pre-approved
by
our
Audit
Committee
or,
consistent
with
the
pre-approval
policy
of
our
Audit
Committee,
by
the
Chairperson
of
our
Audit
Committee
for
inter-meeting
pre-approvals.

In
the
event
the
shareholders
fail
to
ratify
the
appointment,
the
Audit
Committee
will
consider
it
a
direction
to
select
other
auditors
for
the
subsequent
year.
Even
if
the
selection
is
ratified,
the
Audit
Committee,
in
its
discretion,
may
select
a
new
independent
registered
public
accounting
firm
at
any
time
during
the
year
if
it
feels
that
such
a
change
would
be
in
the
best
interest
of
Laureate
and
its
shareholders.

403

Table
of
Contents

PART
IV

ITEM
15.

EXHIBITS,
FINANCIAL
STATEMENT
SCHEDULES

(a)

The
following
documents
are
filed
as
part
of
this
report:

(1)

Financial
Statements

See
Index
to
Financial
Statements

Financial
Statement
Schedules

See
Index
to
Financial
Statements

Those
exhibits
required
by
Item
601
of
Regulation
S-K
and
by
paragraph
(b)
below.

(2)

(3)

(b)

The
following
exhibits
are
filed
as
part
of
this
Annual
Report
or,
where
indicated,
were
filed
and
are
incorporated
by
reference:

Exhibit
No.

Exhibit
Description

2.1# Equity
Purchase
Agreement,
dated
as
of
May
10,
2013,
by
and

between
Rede
Internacional
de
Universidades
Laureate
Ltda.,
and
Dra.
Labibi
Elias
Alves
da
Silva,
Prof.
Dr.
Edevaldo
Alves
da
Silva,
Dra.
Aidéa
Alves
da
Silva,
and
Dr.
Arnold
Fioravante,
and
Faculdades
Metropolitanas
Unidas—Associação
Educacional
in
the
capacity
of
intervening
and
consenting
party

Form

S-1/A

File
Number
333-207243

Exhibit
Number

Filing
Date
2.1
11/20/2015

2.2# Equity
Purchase
Agreement,
dated
as
of
May
10,
2013,
by
and

S-1/A

333-207243

2.2
11/20/2015

between
Rede
Internacional
de
Universidades
Laureate
Ltda.,
and
Dra.
Labibi
Elias
Alves
da
Silva,
Prof.
Dr.
Edevaldo
Alves
da
Silva
and
Dr.
Arnold
Fioravante,
and
Associação
de
Cultura
e
Ensino,
in
the
capacity
of
intervening
and
consenting
party

2.3# Equity
Purchase
Agreement,
dated
as
of
May
10,
2013,
by
and

S-1/A

333-207243

2.3
11/20/2015

between
Rede
Internacional
de
Universidades
Laureate
Ltda.,
and
Dra.
Labibi
Elias
Alves
da
Silva,
and
Dr.
Eduardo
Alves
da
Silva,
Dr.
Edson
Alves
da
Silva,
and
União
Educacional
de
São
Paulo,
in
the
capacity
of
intervening
and
consenting
party

404

Table
of
Contents

Exhibit
No.

Exhibit
Description

2.4# Quota
Purchase
Agreement,
dated
as
of
July
11,
2014,
by
and

between
Sociedade
de
Educacao
Ritter
dos
Reis
Ltda.
and
Solon
Flores
Sant'anna,
Darci
Sanfelici,
Ana
Maria
Lisboa
de
Mello,
Iron
Augusto
Muller
and,
as
intervening
consenting
parties,
Sociedade
Educacional
Sul-Rio-Grandense
S/S
Ltda.,
Sociedade
Porto-Alegrense
de
Pesquisa
Educacional
S/S
Ltda.,
and
SFS
Assessoria
e
Consultoria
S/S
Ltda.

Form

S-1/A

File
Number
333-207243

Exhibit
Number

Filing
Date
2.4
11/20/2015

2.5# Sale
and
Purchase
Agreement,
dated
as
of
March
15,
2016,
by
and

S-1/A

333-207243

2.5
05/20/2016

between
Laureate
International
B.V.
and
Graduate
S.A.

2.6# Share
Purchase
Agreement,
dated
as
of
April
15,
2016,
by
and

S-1/A

333-207243

2.6
05/20/2016

between
Laureate
I
B.V.
and
Insignis.

3.1
Amended
and
Restated
Certificate
of
Incorporation

S-1/A

333-207243

3.1
01/31/2017

3.2
Amended
and
Restated
Bylaws

S-1/A

333-207243

3.2
01/31/2017

3.3
Certificate
of
Designations
of
Convertible
Redeemable
Preferred

S-1/A

333-207243

3.3
12/15/2016

Stock,
Series
A
of
Laureate
Education,
Inc.

4.1

4.2

4.3

Senior
Indenture,
dated
July
25,
2012,
among
Laureate
Education,
Inc.,
the
guarantors
named
therein
and
Wells
Fargo
Bank,
National
Association,
as
trustee

First
Supplemental
Indenture,
dated
November
13,
2012,
among
Laureate
Education,
Inc.,
the
guarantors
named
therein
and
Wells
Fargo
Bank,
National
Association,
as
trustee

Second
Supplemental
Indenture,
dated
December
29,
2015,
among
Laureate
Education,
Inc.,
the
guarantors
named
therein
and
Wells
Fargo
Bank,
National
Association,
as
trustee

4.4
Third
Supplemental
Indenture,
dated
December
30,
2016,
among
Laureate
Education,
Inc.,
the
guarantors
named
therein
and
Wells
Fargo
Bank,
National
Association,
as
trustee

S-1/A

333-207243

4.1
11/20/2015

S-1/A

333-207243

4.2
11/20/2015

S-4/A
333-208758-13

4.3
01/20/2016

S-1/A

333-207243

4.4
01/10/2017

4.5

Form
of
9.250%
Senior
Notes
due
2019
(included
in
Exhibit
4.1)

S-1/A

333-207243

4.1
11/20/2015

405

Table
of
Contents

Exhibit
No.
10.1

Exhibit
Description

Second
Amendment
to
Credit
Agreement,
dated
as
of
June
16,
2011,
among
Laureate
Education,
Inc.
and
Iniciativas
Culturales
de
España
S.L.,
as
borrowers,
certain
financial
institutions
listed
on
the
signature
pages
thereto
and
Goldman
Sachs
Credit
Partners
L.P.,
as
Administrative
Agent
and
Collateral
Agent

Form

S-1/A

File
Number
333-207243

Exhibit
Number

Filing
Date
10.1
11/20/2015

10.2
Amended
and
Restated
Credit
Agreement
dated
as
of
August
17,
2007
and
amended
and
restated
as
of
June
16,
2011,
among
Laureate
Education,
Inc.
and
Iniciativas
Culturales
de
España
S.L.,
as
borrowers,
the
lending
institutions
from
time
to
time
parties
thereto,
and
Citibank,
N.A.
(as
successor
to
Goldman
Sachs
Credit
Partners
L.P.),
as
Administrative
Agent
and
Collateral
Agent

10.3

10.4

First
Amendment
to
Amended
and
Restated
Credit
Agreement,
dated
as
of
January
18,
2013,
entered
into
by
Laureate
Education,
Inc.
and
Iniciativas
Culturales
de
España
S.L.,
as
borrowers,
Citibank,
N.A.,
as
successor
Administrative
Agent
and
Collateral
Agent,
and
certain
financial
institutions
listed
on
the
signature
pages
thereto

Second
Amendment
to
Amended
and
Restated
Credit
Agreement,
dated
as
of
April
23,
2013,
entered
into
by
Laureate
Education,
Inc.
and
Iniciativas
Culturales
de
España
S.L.,
as
borrowers,
Citibank,
N.A.,
as
successor
Administrative
Agent
and
Collateral
Agent,
and
certain
financial
institutions
listed
on
the
signature
pages
thereto

S-1/A

333-207243

10.2
11/20/2015

S-1/A

333-207243

10.3
11/20/2015

S-1/A

333-207243

10.4
11/20/2015

10.5
Third
Amendment
to
Amended
and
Restated
Credit
Agreement,

S-1/A

333-207243

10.5
11/20/2015

dated
as
of
October
3,
2013,
entered
into
by
Laureate
Education,
Inc.
and
Iniciativas
Culturales
de
España
S.L.,
as
borrowers,
Citibank,
N.A.,
as
successor
Administrative
Agent
and
Collateral
Agent,
and
certain
financial
institutions
listed
on
the
signature
pages
thereto

406

Table
of
Contents

Exhibit
No.
10.6

10.7

10.8

10.9

10.10

10.11

Exhibit
Description
Fourth
Amendment
to
Amended
and
Restated
Credit
Agreement
and
Amendment
to
the
U.S.
Obligations
Security
Agreement
and
the
U.S.
Pledge
Agreement,
dated
as
of
July
7,
2015,
entered
into
by
Laureate
Education,

Inc.
and
Iniciativas
Culturales
de
España
S.L.,
as
borrowers,
Citibank,
N.A.,
as
successor
Administrative
Agent
and
Collateral
Agent,
the
other
parties
thereto
and
certain
financial
institutions
listed
on
the
signature
pages
thereto

Joinder
Agreement,
dated
as
of
December
22,
2011,
by
and
among
Bank
of
Montreal,
Chicago
Branch,
Laureate
Education,
Inc.
and
Citibank,
N.A.,
as
Administrative
Agent
and
Collateral
Agent

Joinder
Agreement,
dated
as
of
December
22,
2011,
by
and
among
Morgan
Stanley
Senior
Funding,
Inc.,
Laureate
Education,
Inc.
and
Citibank,
N.A.,
as
Administrative
Agent
and
Collateral
Agent

Joinder
Agreement,
dated
as
of
January
18,
2013,
by
and
among
the
lenders
party
thereto,
Laureate
Education,
Inc.,
as
borrower,
and
Citibank,
N.A.,
as
Administrative
Agent

Joinder
Agreement,
dated
as
of
April
23,
2013,
by
and
among
the
lenders
party
thereto,
Laureate
Education,
Inc.,
as
borrower,
and
Citibank,
N.A.,
as
Administrative
Agent

Joinder
Agreement,
dated
as
of
December
16,
2013,
by
and
among
lenders
party
thereto,
Laureate
Education,
Inc.,
as
borrower,
and
Citibank,
N.A.,
as
Administrative
Agent

407

Form

S-1/A

File
Number
333-207243

Exhibit
Number

Filing
Date
10.6
11/20/2015

S-1/A

333-207243

10.7
11/20/2015

S-1/A

333-207243

10.8
11/20/2015

S-1/A

333-207243

10.9
11/20/2015

S-1/A

333-207243

10.10
11/20/2015

S-1/A

333-207243

10.11
11/20/2015

Table
of
Contents

Exhibit
No.

Exhibit
Description

10.12
Guarantee
dated
as
of
August
17,
2007,
by
certain
domestic

Form

S-1/A

File
Number
333-207243

Exhibit
Number

Filing
Date
10.12
11/20/2015

10.13

subsidiaries
of
Laureate
Education,
Inc.,
as
Guarantors
in
favor
of
Goldman
Sachs
Credit
Partners
L.P.,
as
Collateral
Agent,
as
supplemented
by
Supplement
No.
1
dated
as
of
April
1,
2009
between
LEI
Administration,
LLC,
as
the
New
Guarantor,
and
Goldman
Sachs
Credit
Partners
L.P.,
as
Collateral
Agent,
as
supplemented
by
Supplement
No.
2
dated
as
of
July
15,
2011,
between
Exeter
Street
Holdings
LLC,
as
the
New
Guarantor,
and
Goldman
Sachs
Credit
Partners
L.P.,
as
Collateral
Agent

Security
Agreement,
dated
as
of
August
17,
2007,
among
Laureate
Education,
Inc.,
and
certain
domestic
subsidiaries
of
Laureate
Education,
Inc.,
as
Grantors,
and
Goldman
Sachs
Credit
Partners
L.P.,
as
Collateral
Agent,
as
supplemented
by
Supplement
No.
1
dated
as
of
April
1,
2009
between
LEI
Administration,
LLC,
as
the
New
Grantor,
and
Goldman
Sachs
Credit
Partners
L.P.,
as
Collateral
Agent,
as
supplemented
by
Supplement
No.
2
dated
as
of
July
15,
2011
between
Exeter
Street
Holdings
LLC,
as
the
New
Grantor,
and
Goldman
Sachs
Credit
Partners
L.P.,
as
Collateral
Agent,
as
amended
by
the
Fourth
Amendment
to
Amended
and
Restated
Credit
Agreement
and
Amendment
to
the
U.S.
Obligations
Security
Agreement
and
the
U.S.
Pledge
Agreement,
dated
as
of
July
7,
2015

408

S-1/A

333-207243

10.13
11/20/2015

Table
of
Contents

Exhibit
No.

10.14

Exhibit
Description
Pledge
Agreement,
dated
as
of
August
17,
2007,
among
Laureate
Education,
Inc.,
and
certain
domestic
subsidiaries
of
Laureate
Education,
Inc.,
as
Pledgors,
and
Goldman
Sachs
Credit
Partners
L.P.,
as
Collateral
Agent,
as
supplemented
by
Supplement
No.
1
dated
as
of
April
1,
2009
between
LEI
Administration,
LLC,
as
Additional
Pledgor,
and
Goldman
Sachs
Credit
Partners
L.P.,
as
Collateral
Agent,
as
supplemented
by
Supplement
No.
2
dated
as
of
July
15,
2011
between
Exeter
Street
Holdings
LLC,
as
Additional
Pledgor,
and
Goldman
Sachs
Credit
Partners
L.P.,
as
Collateral
Agent,
as
amended
by
the
Fourth
Amendment
to
Amended
and
Restated
Credit
Agreement
and
Amendment
to
the
U.S.
Obligations
Security
Agreement
and
the
U.S.
Pledge
Agreement,
dated
as
of
July
7,
2015

Form

S-1/A

File
Number
333-207243

Exhibit
Number

Filing
Date
10.14
11/20/2015

10.15
Amended
and
Restated
Collateral
Agreement,
dated
as
of
June
16,

S-1/A

333-207243

10.15
11/20/2015

2011,
among
Walden
University,
LLC,
each
other
subsidiary
of
Laureate
Education,
Inc.
that
becomes
a
party
thereto
from
time
to
time,
and
Goldman
Sachs
Credit
Partners
L.P.,
as
Collateral
Agent

10.16
Exchange
and
Registration
Rights
Agreement,
dated
as
of
July
25,
2012,
among
Laureate
Education,
Inc.,
the
guarantors
listed
on
the
signature
pages
thereto
and
Citigroup
Global
Markets
Inc.,
J.P.
Morgan
Securities
LLC,
Barclays
Capital
Inc.,
Credit
Suisse
Securities
(USA)
LLC,
Goldman,
Sachs
&
Co.,
KKR
Capital
Markets
LLC
and
Morgan
Stanley
&
Co.
LLC

10.17
Exchange
and
Registration
Rights
Agreement,
dated
as
of
November
13,
2012,
among
Laureate
Education,
Inc.,
the
guarantors
listed
on
the
signature
pages
thereto
and
J.P.
Morgan
Securities
LLC,
Barclays
Capital
Inc.,
Citigroup
Global
Markets
Corp.,
BMO
Capital
Markets
Corp.,
Credit
Suisse
Securities
(USA)
LLC,
Goldman,
Sachs
&
Co.,
KKR
Capital
Markets
LLC
and
Morgan
Stanley
&
Co.
LLC

409

S-1/A

333-207243

10.16
11/20/2015

S-1/A

333-207243

10.17
11/20/2015

Table
of
Contents

Exhibit
No.

Exhibit
Description

10.18
Exchange
and
Registration
Rights
Agreement,
dated
as
of
December
29,
2015,
among
Laureate
Education,
Inc.,
the
guarantors
listed
on
the
signature
pages
thereto
and
the
initial
holders
listed
on
the
signature
pages
thereto

10.19

10.20

Foreign
Obligations
Guarantee,
dated
as
of
January
23,
2008,
by
Rede
Internacional
de
Universidades
Laureate,
Ltda.,
as
Foreign
Obligations
Guarantor,
in
favor
of
Goldman
Sachs
Credit
Partners
L.P.,
as
Collateral
Agent
under
the
Credit
Agreement
for
the
benefit
of
the
Foreign
Obligations
Secured
Parties

Foreign
Obligations
Guarantee,
dated
as
of
January
23,
2008,
by
Laureate
Education,
Inc.,
ICE
Inversiones
Brazil,
SL,
Inversiones
en
Educacion
Limitada,
Laureate
Education
Mexico,
S.
de
R.L.
de
C.V.,
Laureate
Education
Peru,
S.R.L.,
Laureate
Honduras
S.
de
R.L.
de
C.V.,
Laureate
I
B.V.,
Laureate
International
B.V.,
Laureate
International
Costa
Rica
S.R.L.,
LIUF,
SAS,
Online
Higher
Education,
B.V.,
Laureate
Panama,
S.A.,
Laureate
Chile
Limitada,
and
Iniciativas
Culturales
de
España
S.L.,
as
Foreign
Obligations
Guarantors,
in
favor
of
Goldman
Sachs
Credit
Partners
L.P.,
as
Collateral
Agent
under
the
Credit
Agreement
for
the
benefit
of
the
Foreign
Obligations
Secured
Parties

10.21
Deed
of
Pledge
of
Receivables,
dated
August
17,
2007,
between
Goldman
Sachs
Credit
Partners
L.P.
and
Laureate
Education,
Inc.
with
respect
to
interests
in
Fleet
Street
International
Universities
C.V.

10.22
Deed
of
Pledge
of
Receivables,
dated
September
2011,
between
Laureate
Education,
Inc.,
as
Pledgor,
and
Citibank,
N.A.,
in
its
capacity
as
Collateral
Agent,
as
Pledgee,
with
respect
to
interests
in
Fleet
Street
International
Universities
C.V.

Form

S-4/A

File
Number
333-208758

Exhibit
Number

Filing
Date
4.6
01/20/2016

S-1/A

333-207243

10.18
11/20/2015

S-1/A

333-207243

10.19
11/20/2015

S-1/A

333-207243

10.20
11/20/2015

S-1/A

333-207243

10.21
11/20/2015

10.23
Deed
of
Pledge
of
Receivables
dated
August
17,
2007,
between

S-1/A

333-207243

10.22
11/20/2015

Goldman
Sachs
Credit
Partners
L.P.
and
Laureate
Education
International
Limited,
with
respect
to
interests
in
Fleet
Street
International
Universities
C.V.

410

Table
of
Contents

Exhibit
No.

Exhibit
Description

10.24
Deed
of
Pledge
of
Receivables,
dated
September
30,
2011,

between
Laureate
Education
International
Limited,
as
Pledgor,
and
Citibank,
N.A.,
in
its
capacity
as
Collateral
Agent,
as
Pledgee,
with
respect
to
interests
in
Fleet
Street
International
Universities
C.V.

Form

S-1/A

File
Number
333-207243

Exhibit
Number

Filing
Date
10.23
11/20/2015

10.25
Deed
of
Pledge
(Laureate
I
B.V.),
dated
January
29,
2008,
by

S-1/A

333-207243

10.24
11/20/2015

Iniciativas
Culturales
de
España
S.L.
in
favor
of
Goldman
Sachs
Credit
Partners
L.P.,
in
its
capacity
as
Collateral
Agent
under
the
Credit
Agreement
for
the
benefit
of
the
Secured
Parties

10.26
Deed
of
Pledge
(Laureate
I
B.V.),
dated
September
30,
2011,

S-1/A

333-207243

10.25
11/20/2015

between
Iniciativas
Culturales
de
España
S.L.,
as
Pledgor,
Citibank,
N.A.,
as
Administrative
Agent
and
Collateral
Agent
under
the
Credit
Agreement
for
the
benefit
of
the
Lenders
under
the
Credit
Agreement,
as
Pledgee,
and
Laureate
I
B.V.,
as
the
Company

10.27
Deed
of
Pledge
(Laureate
International
B.V.),
dated
January
29,

S-1/A

333-207243

10.26
11/20/2015

2008,
by
Laureate
I
B.V.
in
favor
of
Goldman
Sachs
Credit
Partners
L.P.,
as
Administrative
Agent
and
Collateral
Agent
under
the
Credit
Agreement
for
the
benefit
of
the
Secured
Parties

10.28
Deed
of
Pledge
(Laureate
International
B.V.),
dated

S-1/A

333-207243

10.27
11/20/2015

September
30,
2011,
between
Laureate
I
B.V.,
as
Pledgor,
Citibank,
N.A.,
as
Administrative
Agent
and
Collateral
Agent
under
the
Credit
Agreement
for
the
benefit
of
the
Lenders
under
the
Credit
Agreement,
as
Pledgee,
and
Laureate
International
B.V.,
as
the
Company

411

Table
of
Contents

Exhibit
No.

Exhibit
Description

10.29
Deed
of
Pledge
Over
Credit
Rights
Derived
from
Bank
Account,
dated
March
14,
2008,
by
Iniciativas
Culturales
de
España
S.L.
in
favor
of
Goldman
Sachs
Credit
Partners
L.P.,
as
Administrative
Agent
and
Collateral
Agent
under
the
Credit
Agreement
for
the
benefit
of
the
Secured
Parties,
as
amended
by
that
Amendment
Agreement
in
Respect
of
Pledge
Over
Credit
Rights
Derived
from
Bank
Account,
dated
October
5,
2011,
by
and
between
Iniciativas
Culturales
de
España
S.L.,
as
Pledgor,
Goldman
Sachs
Credit
Partners
L.P.,
as
Prior
Pledgee,
and
Citibank,
N.A.,
acting
as
Administrative
Agent
and
Collateral
Agent,
as
Pledgee

Form

S-1/A

File
Number
333-207243

Exhibit
Number

Filing
Date
10.28
11/20/2015

10.30
Deed
of
First
Priority
Pledge
Over
Credit
Rights,
dated
March
14,

S-1/A

333-207243

10.29
11/20/2015

2008,
by
Iniciativas
Culturales
de
España
S.L.
in
favor
of
Goldman
Sachs
Credit
Partners
L.P.,
as
Administrative
Agent
and
Collateral
Agent
under
the
Credit
Agreement
for
the
benefit
of
the
Secured
Parties,
as
amended
by
that
Amendment
Agreement
in
Respect
of
Pledge
Over
Credit
Rights,
dated
October
5,
2011,
by
and
between
Iniciativas
Culturales
de
España
S.L.,
as
Pledgor,
Goldman
Sachs
Credit
Partners
L.P.,
as
Prior
Pledgee,
and
Citibank,
N.A.,
acting
as
Administrative
Agent
and
Collateral
Agent,
as
Pledgee

10.31
Deed
of
Pledge
of
Participations,
dated
March
14,
2008,
by

S-1/A

333-207243

10.30
11/20/2015

Iniciativas
Culturales
de
España
S.L.
in
favor
of
Goldman
Sachs
Credit
Partners
L.P.,
as
Administrative
Agent
and
Collateral
Agent
under
the
Credit
Agreement
for
the
benefit
of
the
Secured
Parties,
as
amended
by
that
Amendment
Agreement
in
Respect
of
Pledge
of
Shares,
dated
October
5,
2011,
by
and
between
Iniciativas
Culturales
de
España
S.L.,
as
Pledgor,
Goldman
Sachs
Credit
Partners
L.P.,
as
Prior
Pledgee,
and
Citibank,
N.A.,
acting
as
Administrative
Agent
and
Collateral
Agent,
as
Pledgee

10.32† 2007
Stock
Incentive
Plan
for
Key
Employees
of
Laureate

S-1/A

333-207243

10.31
11/20/2015

Education,
Inc.
and
its
Subsidiaries

412

Table
of
Contents

Exhibit
No.

Exhibit
Description

10.33† 2007
Stock
Incentive
Plan
Form
of
Stock
Option
Agreement,
as

amended
on
August
31,
2010

Form

S-1/A

File
Number
333-207243

Exhibit
Number

Filing
Date
10.32
11/20/2015

10.34† Laureate
Education,
Inc.
2013
Long-Term
Incentive
Plan,
as

S-1/A

333-207243

10.33
11/20/2015

amended
by
the
First
Amendment
to
the
2013
Long-Term
Incentive
Plan
effective
as
of
September
17,
2015

10.35† 2013
Stock
Incentive
Plan
Form
of
Stock
Option
Agreement

S-1/A

333-207243

10.34
11/20/2015

effective
as
of
September
11,
2013

10.36† Laureate
Education,
Inc.
Deferred
Compensation
Plan,
as
amended
and
restated
effective
January
1,
2009

S-1/A

333-207243

10.35
11/20/2015

10.37† Form
of
Management
Stockholder's
Agreement
for
equityholders
S-1/A

333-207243

10.36
11/20/2015

10.38† Employment
Offer
Letter,
dated
July
6,
2015,
between
Laureate

S-1/A

333-207243

10.37
12/23/2015

Education,
Inc.
and
Enderson
Guimarães

10.39† Deferred
Compensation
Letter
Agreement,
dated
August
16,
2007,

S-1/A

333-207243

10.38
12/23/2015

by
and
among
L
Curve
Sub
Inc.,
Laureate
Education,
Inc.
and
Douglas
L.
Becker

10.40† Deferred
Compensation
Letter
Agreement,
dated
December
24,
2015,
between
Laureate
Education,
Inc.
and
Douglas
L.
Becker

S-4/A

333-208758

10.37
01/20/2016

10.41† 2nd
Amended
and
Restated
Executive
Interest
Subscription

S-1/A

333-207243

10.39
11/20/2015

Agreement,
dated
August
31,
2010,
between
Wengen
Alberta,
Limited
Partnership
and
Douglas
L.
Becker

10.42† Employment
Offer
Letter,
dated
July
21,
2008,
between
Laureate

S-1/A

333-207243

10.40
11/20/2015

Education,
Inc.
and
Eilif
Serck-Hanssen

10.43† Amendment
to
Employment
Offer
Letter,
dated
December
9,

S-1/A

333-207243

10.41
11/20/2015

2010,
between
Laureate
Education,
Inc.
and
Eilif
Serck-Hanssen

10.44† Time-Based
Restricted
Stock
Agreement,
effective
August
5,

S-1/A

333-207243

10.42
11/20/2015

2008,
between
Laureate
Education,
Inc.
and
Eilif
Serck-Hanssen

10.45† Form
of
Time-Based
Restricted
Stock
Units
Agreement,
for
grants

S-1/A

333-207243

10.43
11/20/2015

from
and
after
September
11,
2013

413

Table
of
Contents

Exhibit
No.

10.46

Exhibit
Description
Support
Services
Agreement
between
Santa
Fe
University
of
Art
and
Design,
LLC
and
Laureate
Education,
Inc.
dated
October
1,
2014

Form

S-1/A

File
Number
333-207243

Exhibit
Number

Filing
Date
10.44
11/20/2015

10.47
Master
Service
and
Confidentiality
Agreement,
dated
April
28,
2014,
by
and
between
Laureate
Education,
Inc.
and
Accenture
LLP

S-1/A

333-207243

10.45
11/20/2015

10.48‡ System
Wide
Master
Agreement,
dated
April
10,
2015,
between

S-1/A

333-207243

10.46
11/20/2015

Blackboard
Inc.
and
Laureate
Education,
Inc.

10.49† Form
of
Stockholders'
Agreement
for
Entity-Appointed
Directors
S-1/A

333-207243

10.47
11/20/2015

10.50† Form
of
Stockholders'
Agreement
for
Individual
Directors

S-1/A

333-207243

10.48
11/20/2015

10.51† 2013
Stock
Incentive
Plan
Form
of
Restricted
Stock
Units

S-1/A

333-207243

10.49
11/20/2015

Agreement

10.52† 2013
Stock
Incentive
Plan
Form
of
Performance
Share
Units

S-1/A

333-207243

10.50
11/20/2015

Agreement

10.53

Form
of
Laureate
Education,
Inc.
Note
Exchange
Agreement
dated
as
of
April
15,
2016

S-1/A

333-207243

10.53
05/20/2016

10.54† Executive
Retention
Agreement,
dated
February
25,
2016,
by
and

S-1/A

333-207243

10.54
05/20/2016

between
Ricardo
Berckemeyer
and
Laureate
Education,
Inc.,
effective
as
of
September
1,
2015

10.55† 2013
Long-Term
Incentive
Plan
Form
of
Performance
Share

S-1/A

333-207243

10.55
05/20/2016

Award
Agreement
for
2016
for
Named
Executive
Officers

10.56† 2013
Long-Term
Incentive
Plan
Form
of
Performance
Share

S-1/A

333-207243

10.56
05/20/2016

Award
Agreement
for
2016

10.57† 2013
Long-Term
Incentive
Plan
Form
of
Stock
Option
Agreement

S-1/A

333-207243

10.57
05/20/2016

for
2016
for
Named
Executive
Officers

10.58† 2013
Long-Term
Incentive
Plan
Form
of
Stock
Option
Agreement

S-1/A

333-207243

10.58
05/20/2016

for
2016

10.59† 2013
Long-Term
Incentive
Plan
Form
of
Restricted
Stock
Unit
Agreement
for
2016
for
Named
Executive
Officers

S-1/A

333-207243

10.59
05/20/2016

10.60† 2013
Long-Term
Incentive
Plan
Form
of
Restricted
Stock
Unit

S-1/A

333-207243

10.60
05/20/2016

Agreement
for
2016

414

Table
of
Contents

Exhibit
No.

10.61

10.62

10.63

10.64

Exhibit
Description

Fifth
Amendment
to
Amended
and
Restated
Credit
Agreement,
dated
as
of
June
3,
2016,
entered
into
by
Laureate
Education,
Inc.,
Iniciativas
Culturales
de
España
S.L.,
Citibank,
N.A.,
as
successor
Administrative
Agent
and
Collateral
Agent,
the
other
parties
thereto
and
certain
financial
institutions
listed
on
the
signature
pages
thereto

Sixth
Amendment
to
Amended
and
Restated
Credit
Agreement,
dated
as
of
July
7,
2016,
entered
into
by
Laureate
Education,
Inc.
and
Iniciativas
Culturales
de
España
S.L.,
as
borrowers,
Citibank,
N.A.,
as
successor
Administrative
Agent
and
Collateral
Agent,
the
other
parties
thereto
and
certain
financial
institutions
listed
on
the
signature
pages
thereto

Subscription
Agreement,
dated
as
of
December
4,
2016,
by
and
among
Laureate
Education,
Inc.,
Macquarie
Sierra
Investment
Holdings
Inc.,
and
each
of
the
other
Persons
listed
on
Schedule
A
and
Schedule
B
thereto.

Form
of
Registration
Rights
Agreement
by
and
among
Laureate
Education,
Inc.,
each
of
the
Investors
set
forth
on
Schedule
A
thereto,
Douglas
L.
Becker
and
Wengen
Alberta,
Limited
Partnership.

Form

S-1/A

File
Number
333-207243

Exhibit
Number

Filing
Date
10.61
12/15/2016

S-1/A

333-207243

10.62
12/15/2016

S-1/A

333-207243

10.63
12/15/2016

S-1/A

333-207243

10.64
12/15/2016

10.65

Form
of
Investors'
Stockholders
Agreement
by
and
among
Laureate
Education,
Inc.,
Wengen
Alberta,
Limited
Partnership
and
the
Investors
set
forth
on
Schedule
A
thereto.

S-1/A

333-207243

10.65
12/15/2016

10.66† First
Amendment
to
the
2013
Long-Term
Incentive
Plan,
effective

S-1/A

333-207243

10.66
12/15/2016

as
of
September
15,
2015.

10.67† Second
Amendment
to
the
2013
Long-Term
Incentive
Plan,

S-1/A

333-207243

10.67
12/15/2016

effective
as
of
December
14,
2016.

10.68† Deferred
Compensation
Letter
Agreement,
dated
December
30,
2016,
between
Laureate
Education,
Inc.
and
Douglas
L.
Becker

S-1/A

333-207243

10.68
01/10/2017

10.69
Exchange
and
Registration
Rights
Agreement,
dated
as
of
December
30,
2016,
among
Laureate
Education,
Inc.,
the
guarantors
listed
on
the
signature
pages
thereto
and
the
initial
holders
listed
on
the
signature
pages
thereto

415

S-1/A

333-207243

10.69
01/10/2017

Table
of
Contents

Exhibit
No.

Exhibit
Description

10.70† 2013
Long-Term
Incentive
Plan
Form
of
Restricted
Stock
Unit

Agreement
for
October
2016

Form

S-1/A

File
Number
333-207243

Exhibit
Number

Filing
Date
10.70
01/10/2017

10.71† 2013
Long-Term
Incentive
Plan
Form
of
Performance
Share
Unit

S-1/A

333-207243

10.71
01/10/2017

Agreement
for
Named
Executive
Officers
for
October
2016

10.72† 2013
Long-Term
Incentive
Plan
Form
of
Performance
Share
Unit

S-1/A

333-207243

10.72
01/10/2017

Agreement
for
October
2016

10.73† Form
of
Cash
Long-Term
Incentive
Plan
Agreement

S-1/A

333-207243

10.73
01/10/2017

10.74
Amended
and
Restated
Securityholders
Agreement
by
and
among

8-K

001-38002

10.1
02/06/2017

Wengen
Alberta,
Limited
Partnership,
Laureate
Education,
Inc.
and
the
other
parties
thereto

10.75
Amended
and
Restated
Registration
Rights
Agreement
by
and

8-K

001-38002

10.2
02/06/2017

among
Wengen
Alberta,
Limited
Partnership,
Wengen
Investments
Limited,
Laureate
Education,
Inc.
and
the
other
parties
thereto

10.76*† Amendment
to
the
2007
Stock
Incentive
Plan
for
Key
Employees

of
Laureate
Education,
Inc.
and
its
Subsidiaries

21.1* List
of
Subsidiaries
of
the
Registrant

31.1* Certification
pursuant
to
Section
302
of
the
Sarbanes-Oxley
Act
of

2002

31.2* Certification
pursuant
to
Section
302
of
the
Sarbanes-Oxley
Act
of

2002

32* Certifications
pursuant
to
Section
906
of
the
Sarbanes-Oxley
Act

of
2002

Filed
herewith.

Laureate
Education,
Inc.
hereby
undertakes
to
furnish
supplementally
a
copy
of
any
omitted
schedule
or
exhibit
to
such
agreement
to
the
U.S.
Securities
and
Exchange
Commission
upon
request.

Indicates
a
management
contract
or
compensatory
plan
or
arrangement.

Confidential
treatment
has
been
requested
with
respect
to
certain
portions
of
this
exhibit.
Omitted
portions
have
been
filed
separately
with
the
Securities
and
Exchange
Commission.

†

‡

ITEM
16.

FORM
10-K
SUMMARY.

None.

416

Table
of
Contents

Pursuant
to
the
requirements
of
Section
13
or
15(d)
of
the
Securities
Exchange
Act
of
1934,
the
registrant
has
duly
caused
this
report
to
be
signed
on
its
behalf
by
the
undersigned,
thereunto
duly
authorized.

LAUREATE
EDUCATION,
INC.

By:
/s/
EILIF
SERCK-HANSSEN

Name:
Eilif
Serck-Hanssen

Title:

President, Chief Administrative Officer and Chief

Financial Officer

Date:
March
29,
2017

Pursuant
to
the
requirements
of
the
Securities
Exchange
Act
of
1934,
this
report
has
been
signed
below
by
the
following
persons
on
behalf
of
the
registrant
and
in
the
capacities
and
on
the
dates
indicated.

SIGNATURE

TITLE

DATE

/s/
DOUGLAS
L.
BECKER

Douglas
L.
Becker

/s/
EILIF
SERCK-HANSSEN

Eilif
Serck-Hanssen

/s/
TAL
DARMON

Tal
Darmon

/s/
BRIAN
F.
CARROLL

Brian
F.
Carroll

/s/
ANDREW
B.
COHEN

Andrew
B.
Cohen

/s/
WILLIAM
L.
CORNOG

William
L.
Cornog

/s/
PEDRO
DEL
CORRO

Pedro
del
Corro

Chairman
and
Chief
Executive
Officer
and
Director
(Principal
Executive
Officer)

March
29,
2017

President,
Chief
Administrative
Officer
and
Chief
Financial
Officer
(Principal
Financial
Officer)

March
29,
2017

Senior
Vice
President,
Chief
Accounting
Officer
and
Global
Controller
(Principal
Accounting
Officer)

Director

417

March
29,
2017

Table
of
Contents

SIGNATURE

TITLE

DATE

/s/
GEORGE
MUÑOZ

George
Muñoz

/s/
JUDITH
RODIN

Judith
Rodin

/s/
IAN
K.
SNOW

Ian
K.
Snow

/s/
STEVEN
M.
TASLITZ

Steven
M.
Taslitz

/s/
QUENTIN
VAN
DOOSSELAERE

Quentin
Van
Doosselaere

/s/
ROBERT
B.
ZOELLICK

Robert
B.
Zoellick

Director

418

March
29,
2017

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AMENDMENT
TO
THE
2007
STOCK
INCENTIVE
PLAN
FOR
KEY
EMPLOYEES
OF

LAUREATE
EDUCATION,
INC.
AND
ITS
SUBSIDIARIES

This
Amendment
to
the
2007
Stock
Incentive
Plan
for
Key
Employees
of
Laureate
Education,
Inc.
and
its
Subsidiaries
(this
"
Amendment "),
effective
as
of
January
30,
2017,
is
made
and
entered
into
by
Laureate
Education,
Inc.,
a
Delaware
public
corporation
(the
"
Company ").
Terms
used
in
this
Amendment
with
initial
capital
letters
that
are
not
otherwise
defined
herein
shall
have
the
meanings
ascribed
to
such
terms
in
the
2007
Stock
Incentive
Plan
for
Key
Employees
of
Laureate
Education,
Inc.
and
its
Subsidiaries
(the
"
Plan ").

Exhibit
10.76

RECITALS

WHEREAS,
on
October
2,
2007
the
Board
of
Directors
of
the
Company
(the
"Board")
approved
the
Plan,
which
Plan
also
has
been
approved
by
the
Company's
stockholders;

WHEREAS,
pursuant
to
Section
10(b)
of
the
Plan,
the
Board
may
amend,
suspend
or
terminate
the
Plan,
except
as
otherwise
provided
in
the
Plan;

WHEREAS,
the
fourth
sentence
of
Section
5(a)
of
the
Plan
states:
"In
addition
to
other
restrictions
contained
in
the
Plan,
a
Stock
Option
granted
under
this
Section
5(a)
may
not
be
exercised
more
than
10
years
after
the
date
it
is
granted.";
and

WHEREAS,
the
Board
desires
to
amend
the
Plan,
to
permit
the
Board
to
authorize
the
exercise
of
one
or
more
stock
options
more
than
10
years
after
the
date
such
stock
option
was
granted;
and

NOW,
THEREFORE,
in
accordance
with
Section
10(b)
of
the
Plan,
the
Board
hereby
amends
the
Plan
as
follows:

Section
5(a)
of
the
Plan
is
hereby
amended
by
deleting
the
fourth
sentence
of
Section
5(a)
and
substituting
in
lieu
thereof
the
following
new
sentence:

"In
addition
to
other
restrictions
contained
in
the
Plan,
a
Stock
Option
granted
under
this
Section
5(a)
may
not
be
exercised
more
than
10
years
after
the
date
it
is
granted,
except
as
otherwise
provided
by
the
Board."

This
Amendment
shall
be
effective
on
the
date
first
set
forth
above.

Except
as
expressly
amended
by
this
Amendment,
the
Plan
shall
continue
in
full
force
and
effect
in
accordance
with
the
provisions
thereof.

[Remainder of Page Intentionally Left Blank Signature Page Follows]

IN
WITNESS
WHEREOF,
the
Company
has
caused
this
Amendment
to
be
duly
executed
as
of
the
date
first
written
above.

LAUREATE
EDUCATION,
INC.

By:

Name:

Title:

/s/
ROBERT
W.
ZENTZ

Robert
W.
Zentz
SVP, General Counsel & Secretary

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Exhibit
10.76

AMENDMENT
TO
THE
2007
STOCK
INCENTIVE
PLAN
FOR
KEY
EMPLOYEES
OF
LAUREATE
EDUCATION,
INC.
AND
ITS
SUBSIDIARIES

RECITALS

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Company
ACNT
Health
Holdings
Pty
Ltd

Laureate
Education,
Inc.

List
of
Subsidiaries
as
of
March
28,
2017

Jurisdiction
of

Organization

Australia

D/B/A

Exhibit
21.1

Blue
Mountains
International
Hotel
Management
School
Pty

Limited

BM
Hospitality
Holdings
Pty
Ltd

GNUCO
Pty
Ltd

Laureate
Education
Services
Australia
Pty.
Ltd.

LEI
Australia
Education,
Pty.
Ltd.

LEI
Australia
Holdings
Pty
Ltd

LEI
Higher
Education
Holdings
Pty
Ltd

LESA
Education
Services
Holding
Pty
Ltd

Monash
South
Africa
Ltd

Think:
Colleges
Pty
Ltd

Think:
Education
Group
Pty
Ltd

Think:
Education
Services
Pty
Ltd

Torrens
University
Australia
Limited

Educacao
Interativa
do
Brasil,
Ltda.

FACS
Serviços
Educacionais
Ltda.

Faculdades
Metropolitanas
Unidas
Educacionais
Ltda.

FADERGS—Faculdade
de
Desenvolvimento
do
Rio
Grande

do
Sul
Ltda.

Fundaçao
Encontro
das
Aguas

Instituto
Brasileiro
de
Medicina
de
Reabilitação,
Ltda.

ISCP—Sociedade
Educacional
Ltda.

Australia

Brazil

APM
College
of
Business
and
Communication,
Australasian
College
of
Natural
Therapies,
Billy
Blue
College
of
Design,
Jansen
Newman
Institute,
Southern
School
of
Natural
Therapies,
William
Blue
College
of
Hospitality
Management,
Australian
National
College
of
Beauty,
CATC
Design
School

Universidade
Salvador

Centro
Universitario
das
Faculdades
Metropolitanas
Unidas
("FMU")

Centro
Universitario
do
Norte

Centro
Universitario
IBMR

Universidade
Anhembi
Morumbi

Company
Rede
Internacional
de
Universidades
Laureate
Ltda.

Brazil

Jurisdiction
of

Organization

D/B/A

Sociedade
Capibaribe
de
Educação
e
Cultura
Ltda.

Brazil

Faculdade
dos
Guararapes

Sociedade
de
Cultura
e
Ensino
Ltda.

Brazil

Faculdades
Integradas:
Alcântara
Machado—Faculdade
de
artes
Alcântara
Machado—Centro
Universitário

Sociedade
de
Desenvolvimento
Cultural
do
Amazonas
Ltda.

Brazil

Centro
Universitario
do
Norte—UniNorte

Sociedade
de
Educação
Ritter
dos
Reis
Ltda

Sociedade
de
Ensino
Superior
da
Bahia

Sociedade
Educacional
Luiz
Tarquinio

Sociedade
Educacional
Sul-Rio-Grandense
Ltda.

Sociedade
Paraibana
de
Educação
e
Cultura
Ltda.

Sociedade
Potiguar
de
Educação
e
Cultura
Ltda.

Uniao
Educacional
de
Sao
Paulo
Ltda.

Brazil

LEI
Combination
Holdings
Limited

Cayman
Islands

CAMPVS
Mater,
SpA

Center
for
Executive
Education
IEDE
SpA

Chile

Centro
de
Formación
Técnica
Instituto
AIEP
Regional
SpA

Chile

Centro
de
Formación
Técnica
Instituto
AIEP
SpA

Centro
de
Innovación
y
Emprendimiento
UVV
Limitada

Corporación
Universidad
Nacional
Andrés
Bello

Fleet
Street
Development
Company
SpA

IEDE
Chile
Institute
for
Executive
Development
SpA

Inmobiliaria
e
Inversiones
San
Genaro
Dos
SpA

Chile

Centro
Universitario
Ritter
dos
Reis—Uniritter

Faculdade
Porto-Alegrense—FAPA

Faculdade
Internacional
da
Paraiba

Universidade
Potiguar

Faculdades
Integradas
de
São
Paulo

Universidad
Andrés
Bello

Company
Inmobiliaria
e
Inversiones
San
Genaro
SpA

Inmobiliaria
Educacional
SpA

Instituto
Nacional
de
Computación
y
Administración
de

Empresas
INDAE
Limitada

Instituto
Profesional
AIEP
SpA

Instituto
Profesional
Escuela
Moderna
de
Musica
SpA

Laureate
Chile
II
SpA

Laureate
Desarrollos
Educacionales
SpA

Servicios
Andinos
SpA

Servicios
Profesionales
Andrés
Bello
SpA

Sociedad
Educacional
Campvs
SpA

Universidad
de
Las
Américas

Universidad
de
Viña
del
Mar

Beijing
INTI
Management
College

Blue
Mountains
Hotel
Management
Consulting

(Shanghai)
Co.
Ltd.

Chengdu
Garwing
Business
Consulting
Co.,
Ltd.

Hunan
International
Economics
University

Hunan
International
Economics
University
Vocational
Skills

Training
Center

Hunan
Lie
Ying
Industry
Co.,
Ltd.

Hunan
Lie
Ying
Mechanic
School

Hunan
Lie
Ying
Property
Management
Co.,
Ltd.

Laureate
Investment
Consulting
(Shanghai)
Co.,
Ltd.

Laureate
Holding
Costa
Rica
S.R.L.

Lusitania
S.R.L.

Universidad
Americana
UAM
S.R.L.

Universidad
U
Latina
S.R.L.

A.S.
Cyprus
College
(Larnaca)
Limited

Jurisdiction
of

Organization

Chile

D/B/A

Chile

China

Costa
Rica

Cyprus

Universidad
Viña
del
Mar

Blue
Mountains
International
Hotel
Management
School

Universidad
Latina
de
Costa
Rica

Company
Ermis
Research
and
Incubator
Center
(ERIC),
Ltd.

Cyprus

Jurisdiction
of

Organization

D/B/A

EUC
Health
Services
Ltd

European
University—Cyprus
Ltd

S
P
S
Institute
of
Education
Ltd.

Servicios
Profesionales
Ad
Portas
Cia.
Ltda.

Cyprus

Ecuador

BiTS-Business
and
Information
Technology
School
GmbH

Germany

HSM
Deutschland
GmbH

Laureate
Academies
GmbH

Laureate
Germany
Holding
GmbH

Fleet
Street
Development
Company
Honduras,
S.
de
R.L.
de

C.V.

Fundación
Para
el
Desarollo
de
la
Educación
y
Fomento
de
la

Iniciativa
Empresarial

Laureate
Honduras,
S.
de
R.L.
de
C.V.

Universidad
Tecnológica
Centroamericana

INTI
College
Hong
Kong
Ltd

INTI
Education
(International)
Ltd

Jia
Yue
Investment
Limited

Laureate
Education
Asia
Limited

LEI
China
Limited

LEI
Holdings,
Limited

LEI
Lie
Ying
Limited

Merit
International
(HK)
Limited

Academe
Education
Private
Limited

Collegiate
Educational
Services
Private
Limited

Creative
Arts
Education
Society

Data
Ram
Sons
Private
Limited

Energy
Education

Germany

Honduras

Hong
Kong

India

HTK
Academy
of
Design;
BTK
Academy
of
Design

Universidad
Tecnológica
Centroamericana;
Centro
Universitario
Tecnológico

Pearl
Academy
of
Fashion;
Pearl
Academy
of
Fashion
Management

Company
Hydrocarbons
Education
&
Research
Society

Laureate
Education
India
Private
Limited

M-Power
Energy
India
Private
Limited

NuovoEtude
Intellect
Advisory
Services
Private
Limited

Pearl
Retail
Solutions
Private
Limited

Sagacity
Education
Solutions
Private
Limited

Scholastic
Knowledge
Private
Limited

South
Asia
International
Institute
Charitable
Society

Sylvan
Learning
India
Private
Limited

University
of
Petroleum
and
Energy
Studies

University
of
Technology
and
Management

Laureate
Italy,
S.r.l.

Nuova
Accademia
S.r.l.

LEI
Japan
Holdings
K.K.

India

Italy

Japan

Fleet
Street
Investments
Sarl

Luxembourg

Erti
Utama
Sdn
Bhd

Exeter
Street
Holdings
Sdn.
Bhd.

Genting
INTI
Education
Sdn.
Bhd.

Human
Capital
Development
Academy
Sdn
Bhd

INTI
Asset
Management
Sdn
Bhd

INTI
Assets
Holdings
Sdn
Bhd

INTI
Education
Holdings
Sdn
Bhd

INTI
Education
Sdn
Bhd

INTI
Higher
Learning
Centre
Sdn
Bhd

INTI
IABS
Sdn.
Bhd

INTI
Instruments
(M)
Sdn
Bhd

INTI
International
College
Kuala
Lumpur
Sdn
Bhd

Malaysia

Jurisdiction
of

Organization

D/B/A

Indian
Retail
School

Nuova
Accademia
di
Belle
Arti
Milano;
Domus
Academy

Genting
INTI
International
College

INTI
College
Sarawak

INTI
International
College
Subang

INTI
International
College
Kuala
Lumpur

Company
INTI
International
College
Penang
Sdn
Bhd

Jurisdiction
of

Organization

Malaysia

D/B/A
INTI
International
College
Penang

INTI
International
Education
Sdn
Bhd

INTI
Kinabalu
Sdn
Bhd

INTI
Management
Services
Sdn
Bhd

INTI
Universal
Holdings
Sdn.
Bhd.

LEI
Management
Asia,
Sdn
Bhd

MIM-IMS
Education
Sdn
Bhd

PJ
College
of
Art
&
Design
Sdn
Bhd

Colegio
Americano
de
Veracruz,
S.C.

Colegio
Villa
Rica
Coatzacoalcos,
S.C.

Colegio
Villa
Rica,
S.C.

Corparación
Educativa
de
Celaya,
S.C.

Fundación
Laureate
S.C.

Estrater,
S.A.
de
C.V.
SOFOM
ENR

Grupo
Educativo
UVM,
S.C.

Malaysia

Mexico

INTI
International
University

INTI
College
Sabah

MIM-INTI
Management
Institute

Universidad
del
Valle
de
Mexico

Institute
for
Executive
Development
Mexico
S.A.
de
C.V.

Mexico

Laureate
Education
Mexico,
S.
de
R.L.
de
C.V.

Planeacion
de
Sistemas,
S.A.P.I.
de
C.V.

Servicios
Regionales
Universitarios
LE,
S.C.

Universidad
Autónoma
de
Veracruz,
S.C.

Universidad
del
Valle
de
Mexico
del
Noreste,
S.C.

Universidad
del
Valle
de
México,
S.C.

Universidad
Tecnológica
de
Mexico,
S.C.

UVM
Educación,
S.C.

UVM
Formación,
S.C.

Laureate
Somed
Education
Holding

CH
Holding
Netherlands
B.V.

Education
Trademark
B.V.

Fleet
Street
International
Universities
C.V.

Mexico

Morocco

Netherlands

Universidad
del
Valle
de
Mexico

Universidad
Tecnológica
de
México;
Universidad
del
Valle
de
Mexico

Universidad
del
Valle
de
Mexico

Université
Internationale
de
Casablanca

Company
Hispano
Trademark
Holding,
B.V.

Laureate
I
B.V.

Laureate
Coöperatie
U.A.

Laureate
Education—Turkey
B.V.

Laureate
International
B.V.

Laureate
Middle
East
Holdings
B.V.

Laureate
Online
Education
B.V.

Laureate
Real
Estate
Holdings
B.V.

Laureate
Trademark
Holding
B.V.

Jurisdiction
of

Organization

Netherlands

D/B/A

Netherlands

University
of
Liverpool;
University
of
Roehampton

Laureate-University
of
Liverpool
Ventures
B.V.

Netherlands

LEI
AMEA
Investments
B.V.

LEI
Bahrain
Investments
B.V.

LEI
European
Investments,
B.V.

LEI
New
Zealand
Holdings
B.V.

Online
Higher
Education
B.V.

LEI
New
Zealand

Media
Design
School

Visam
Properties
Limited

Castro
Harrigan
Asociados
Panamá,
S.
de
R.L.

Desarrollos
Urbanos
Educativas,
S.
de
R.L.

Laureate
Panamá
S.
de
R.L.

Ulatec,
S.
de
R.L.

Universidad
Interamericana
de
Panamá,
S.
de.
R.L.

Cibertec
Perú
S.A.C.

Inversiones
Educacionales
Perú
S.R.L.

Laureate
Education
Perú
S.R.L.

Metramark
S.A.C.

Universidad
Peruana
de
Ciencias
Aplicadas
S.A.C.

Universidad
Privada
del
Norte
S.A.C.

OIE
Support
spółka
z
ograniczoną
odpowiedzialnością
w

organizacji

Netherlands

New
Zealand

Panama

Peru

Poland

CIBERTEC;
Instituto
Technologico
del
Norte

Company
Associação
de
Estudos
e
de
Investigação

Ensilis—Educação
e
Formacão,
Ltda.

Europeia
ID—Associação
para
a
Investigação
em
Design,

Marketing
e
Comunicação

Laureate
Vocational
Saudi
Limited

Laureate
Middle
East
Saudi
Arabia
Limited

LEI
Singapore
Holdings
Pte.
Ltd.

Laureate
South
Africa
Pty.
Ltd.

Fundacion
General
de
la
Universidad
Europea
de
Madrid

ICE
Inversiones
Brazil,
S.L.

Iniciativa
Educativa
UEA,
SLU.

Iniciativas
Culturales
de
España
SL

Iniciativas
Educativas
de
Mallorca,
SLU.

Universidad
Europea
de
Canarias
S.L.U.

Universidad
Europea
de
Madrid,
S.L.U.

Universidad
Europea
de
Valencia
S.L.U.

Stamford
International
University

Thai
Education
Holdings
Company
Limited

Bilgi
Egitim
Ve
Kultur
Vakfi

Bilgili
Halkla
İlişkiler
ve
İletişim
Limited
Şirketi

Bilgi
Iletişim
Grubu
Yayincilik
Müzik
Yapim
Ve
Haber

Ajansi
Ltd.
Şti

Jurisdiction
of

Organization

Portugal

Saudi
Arabia

Singapore

South
Africa

Spain

Thailand

Turkey

Cientifica
do
Isla
Lisboa

D/B/A

Universidade
Europeia

Universidad
Europea
de
Madrid;
IEDE
Business
School;
Collaboration
with
Real
Madrid
International
School

Universidad
Europea
de
Valencia;
Escuela
de
Negocios
Estema;
Centro
Superior
de
Edificacion,
Arquitectura
e
Ingenieria
(PROY3CTA)

Jurisdiction
of

Organization

D/B/A

Company
Bilgili
Temizlik
ve
Tadilat
Hizmetleri
Limited
Şirketi

Bilgili
Yapımcılık
Ticaret
Limited
Şirketi

Istanbul
Bilgi
University

Turkey

Media
Com
Halkla
Ilişkiler
Ve
Iletişim
Limited
Şirketi

Turkey

Öztan
Temizlik
Ve
Tadilat
Hizmetleri
Ticaret
Ltd.
Şti

Turkey

Ulet
Uluslararasi
Danişmanlik
Eğitim
Teknolojileri
Sanayi
ve

Ticaret
Limited
Şirketi

Turkey

Laureate-Obeikan,
Ltd.

United
Arabs
Emirates

Canter
and
Associates,
LLC

Educational
Satellite
Services,
Inc.

Exeter
Street
Holdings
LLC

Delaware,
USA

Maryland,
USA

Fleet
Street
Aviation,
LLC

Washington,
USA

Fleet
Street
International
University
Holdings,
LLC

Maryland,
USA

FSIUH
Holding
Company

International
University
Ventures,
Ltd.

Kendall
College
LLC

Laureate
Bagby
Investors,
LLC

Laureate
Education
International
Ltd.

Laureate
International
Universities,
Inc.

Laureate
Properties,
LLC
(Delaware)

Laureate
Ventures,
Inc.

LEI
Administration,
LLC

LTBC
LLC

Maryland,
USA

Illinois,
USA

Maryland,
USA

Delaware,
USA

Maryland,
USA

Delaware,
USA

Maryland,
USA

Delaware,
USA

National
Hispanic
University,
LLC

California,
USA

NewSchool
of
Architecture
and
Design,
LLC

California,
USA

Post-Secondary
Education
Acquisition
Corporation

Delaware,
USA

The
Canter
Group
of
Companies,
LLC

Tuition
Finance,
Inc.

California,
USA

Maryland,
USA

Company
University
of
St.
Augustine
for
Health
Sciences,
LLC

Jurisdiction
of

Organization

California,
USA

D/B/A

Walden
e-Learning,
LLC

Walden
University,
LLC

Delaware,
USA

Florida,
USA

Wall
Street
International
Holdings-US
I,
Inc.

Maryland,
USA

QuickLinks

Exhibit
21.1

Laureate
Education,
Inc.
List
of
Subsidiaries
as
of
March
28,
2017

QuickLinks
--
Click
here
to
rapidly
navigate
through
this
document

Exhibit
31.1

I,
Douglas
L.
Becker,
certify
that:

Certification
Pursuant
to
Section
302
of
the
Sarbanes-Oxley
Act
of
2002

I
have
reviewed
this
Annual
Report
on
Form
10-K
of
Laureate
Education,
Inc.;

Based
on
my
knowledge,
this
report
does
not
contain
any
untrue
statement
of
a
material
fact
or
omit
to
state
a
material
fact
necessary
to
make
the
statements
made,
in
light
of
the
circumstances
under
which
such
statements
were
made,
not
misleading
with
respect
to
the
period
covered
by
this
report;

Based
on
my
knowledge,
the
financial
statements,
and
other
financial
information
included
in
this
report,
fairly
present
in
all
material
respects
the
financial
condition,
results
of
operations
and
cash
flows
of
the
registrant
as
of,
and
for,
the
periods
presented
in
this
report;

The
registrant's
other
certifying
officer
and
I
are
responsible
for
establishing
and
maintaining
disclosure
controls
and
procedures
(as
defined
in
Exchange
Act
Rules
13a-15(e)
and
15d-15(e))
for
the
registrant
and
have:

(a)

(b)

(c)

(d)

Designed
such
disclosure
controls
and
procedures,
or
caused
such
disclosure
controls
and
procedures
to
be
designed
under
our
supervision,
to
ensure
that
material
information
related
to
the
registrant,
including
its
consolidated
subsidiaries,
is
made
known
to
us
by
others
within
those
entities,
particularly
during
the
period
in
which
this
report
is
being
prepared;

[Paragraph
omitted
in
accordance
with
SEC
transition
instructions.];

Evaluated
the
effectiveness
of
the
registrant's
disclosure
controls
and
procedures
and
presented
in
this
report
our
conclusions
about
the
effectiveness
of
the
disclosure
controls
and
procedures,
as
of
the
end
of
the
period
covered
by
this
report
based
on
such
evaluation;
and

Disclosed
in
this
report
any
change
in
the
registrant's
internal
control
over
financial
reporting
that
occurred
during
the
registrant's
most
recent
fiscal
quarter
(the
registrant's
fourth
fiscal
quarter
in
the
case
of
an
annual
report)
that
has
materially
affected,
or
is
reasonably
likely
to
materially
affect,
the
registrant's
internal
control
over
financial
reporting;
and

The
registrant's
other
certifying
officer
and
I
have
disclosed,
based
on
our
most
recent
evaluation
of
internal
control
over
financial
reporting,
to
the
registrant's
auditors
and
the
audit
committee
of
the
registrant's
board
of
directors
(or
persons
performing
the
equivalent
functions):

(a)

(b)

All
significant
deficiencies
and
material
weaknesses
in
the
design
or
operation
of
internal
control
over
financial
reporting
which
are
reasonably
likely
to
adversely
affect
the
registrant's
ability
to
record,
process,
summarize
and
report
financial
information;
and

Any
fraud,
whether
or
not
material,
that
involves
management
or
other
employees
who
have
a
significant
role
in
the
registrant's
internal
control
over
financial
reporting.

Date:
March
29,
2017

/s/
DOUGLAS
S.
BECKER

Douglas
L.
Becker

Chairman and Chief Executive Officer

QuickLinks

Exhibit
31.1

Certification
Pursuant
to
Section
302
of
the
Sarbanes-Oxley
Act
of
2002

QuickLinks
--
Click
here
to
rapidly
navigate
through
this
document

Exhibit
31.2

I,
Eilif
Serck-Hanssen,
certify
that:

Certification
Pursuant
to
Section
302
of
the
Sarbanes-Oxley
Act
of
2002

I
have
reviewed
this
Annual
Report
on
Form
10-K
of
Laureate
Education,
Inc.;

(a)

(b)

(c)

(d)

[Paragraph
omitted
in
accordance
with
SEC
transition
instructions.];

(a)

(b)

Any
fraud,
whether
or
not
material,
that
involves
management
or
other
employees
who
have
a
significant
role
in
the
registrant's
internal
control
over
financial
reporting.

Date:
March
29,
2017

/s/
EILIF
SERCK-HANSSEN

Eilif
Serck-Hanssen

President, Chief Administrative Officer and Chief Financial
Officer

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Exhibit
31.2

Certification
Pursuant
to
Section
302
of
the
Sarbanes-Oxley
Act
of
2002

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Certificate
Pursuant
to
Section
906
of
the
Sarbanes-Oxley
Act
Of
2002

In
connection
with
the
Annual
Report
of
Laureate
Education,
Inc.
on
Form
10-K
for
the
annual
period
ended
December
31,
2016
as
filed
with
the
Securities
and
Exchange
Commission
on
the
date
hereof
(the
"Report"),
each
of
the
undersigned
officers
of
Laureate
Education,
Inc.
does
hereby
certify,
to
the
best
of
such
officer's
knowledge
and
belief,
pursuant
to
18
U.S.C.
Section
1350,
as
adopted
pursuant
to
Section
906
of
the
Sarbanes-Oxley
Act
of
2002,
that:

(1)

(2)

The
Report
fully
complies
with
the
requirements
of
section
13(a)
or
15(d)
of
the
Securities
Exchange
Act
of
1934;
and

The
information
contained
in
the
Report
fairly
presents,
in
all
material
respects,
the
financial
condition
and
results
of
operations
of
the
Company.

Date:
March
29,
2017

Exhibit
32

/s/
DOUGLAS
L.
BECKER

Douglas
L.
Becker

Chairman and Chief Executive Officer

/s/
EILIF
SERCK-HANSSEN

Eilif
Serck-Hanssen

President, Chief Administrative Officer and Chief Financial
Officer

The
certification
set
forth
above
is
being
furnished
as
an
exhibit
solely
pursuant
to
Section
906
of
the
Sarbanes-Oxley
Act
of
2002
and
is
not
being
filed
as
part
of
the
Report
as
a
separate
disclosure
document
of
Laureate
Education,
Inc.
or
the
certifying
officers.

A
signed
original
of
this
written
statement
required
by
Section
906,
or
other
document
authenticating,
acknowledging,
or
otherwise
adopting
the
signature
that
appears
in
typed
form
within
the
electronic
version
of
this
written
statement
required
by
Section
906,
has
been
provided
to
Laureate
Education,
Inc.
and
will
be
retained
by
Laureate
Education,
Inc.
and
furnished
to
the
Securities
and
Exchange
Commission
or
its
staff
upon
request.

QuickLinks

Exhibit
32

Certificate
Pursuant
to
Section
906
of
the
Sarbanes-Oxley
Act
Of
2002