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Discontinued Operations and Assets Held for Sale | 6 Months Ended
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Jun. 30, 2019
Discontinued Operations and Disposal Groups [Abstract] |
Discontinued Operations and Assets Held for Sale | Discontinued Operations and Assets Held for Sale As discussed in Note 1, Description of Business, on August 9, 2018, the Company announced that it plans to focus on its principal markets and will divest certain of its other markets. The principal markets that will remain (the Continuing Operations) include Brazil, Chile, Mexico, and Peru, along with the Online & Partnerships segment and the institutions in Australia and New Zealand. At the time of the announcement on August 9, 2018, the markets being divested (the Discontinued Operations) included the institutions in Portugal and Spain, which were part of the Andean segment, all remaining institutions in the Central America & U.S. Campuses segment, and all remaining institutions in the Rest of World segment, except for Australia, New Zealand and the managed institutions in the Kingdom of Saudi Arabia and China. The institutions in the Kingdom of Saudi Arabia are managed under a contract that expires at the end of August 2019 and will not be renewed. As of June 30, 2019, two VIE institutions are included in the Discontinued Operations. The divestitures are expected to create a more focused and simplified business model and generate proceeds that will be used for further repayment of long-term debt. The timing and ability to complete any of these transactions is uncertain and will be subject to market and other conditions, which may include regulatory approvals and consents of third parties. Summarized operating results and cash flows of the Discontinued Operations are presented in the following tables:
For the three months ended June 30, | 2019 |  | 2018
Revenues | $ | 147,947 |  |  | $ | 230,721 |
Depreciation and amortization | — |  |  | 9,517 |
Share-based compensation expense | 106 |  |  | 427 |
Other direct costs | 113,735 |  |  | 173,222 |
Operating income | 34,106 |  |  | 47,555 |
Other non-operating income (expense) | 3,436 |  |  | (13,248 | )
Pretax income of discontinued operations | 37,542 |  |  | 34,307 |
Income tax (expense) benefit | (3,942 | ) |  | 3,765 |
Income from discontinued operations, net of tax | $ | 33,600 |  |  | $ | 38,072 |
For the six months ended June 30, | 2019 |  | 2018
Revenues | $ | 350,563 |  |  | $ | 483,793 |
Depreciation and amortization | — |  |  | 20,310 |
Share-based compensation expense | 269 |  |  | 747 |
Other direct costs | 253,382 |  |  | 350,020 |
Operating income | 96,912 |  |  | 112,716 |
Other non-operating income (loss) | 6,554 |  |  | (13,173 | )
Pretax income of discontinued operations | 103,466 |  |  | 99,543 |
Income tax expense | (13,292 | ) |  | (42,618 | )
Income from discontinued operations, net of tax | $ | 90,174 |  |  | $ | 56,925 |
Operating cash flows of discontinued operations | $ | 13,157 |  |  | $ | 64,505 |
Investing cash flows of discontinued operations | $ | (11,007 | ) |  | $ | (22,031 | )
Financing cash flows of discontinued operations | $ | (25,712 | ) |  | $ | (9,903 | )
The assets and liabilities of the Discontinued Operations, which are subject to finalization, have been classified as held for sale as of June 30, 2019 and December 31, 2018, in accordance with ASC 205. The assets and liabilities are recorded at the lower of their carrying values or their estimated ‘fair values less costs to sell.’ In addition to the Discontinued Operations, Centro Universitário do Norte (UniNorte), a traditional higher education institution located in the city of Manaus, Brazil, has also been classified as held for sale as of June 30, 2019 and December 31, 2018. UniNorte is included in Continuing Operations as it is not part of the strategic shift described above. As described below, on April 16, 2019, the Company entered into an agreement to divest UniNorte, which it expects to close during the second half of 2019. The carrying amounts of the major classes of assets and liabilities that were classified as held for sale are presented in the following tables:
| June 30, 2019 |  | December 31, 2018
Assets of Discontinued Operations |  |  |
Cash and cash equivalents | $ | 123,224 |  |  | $ | 214,934 |
Receivables, net | 35,947 |  |  | 38,588 |
Property and equipment, net | 292,129 |  |  | 667,527 |
Goodwill | 13,362 |  |  | 131,329 |
Tradenames | 17,170 |  |  | 124,932 |
Operating lease right-of-use assets, net | 69,951 |  |  | — |
Other assets | 58,879 |  |  | 99,566 |
Subtotal: assets of Discontinued Operations | $ | 610,662 |  |  | $ | 1,276,876 |
Other assets classified as held for sale: UniNorte Brazil |  |  |
Receivables, net | $ | 6,750 |  |  | $ | 6,983 |
Property and equipment, net | 14,366 |  |  | 16,726 |
Goodwill | 15,379 |  |  | 15,165 |
Tradenames | 8,261 |  |  | 8,146 |
Operating lease right-of-use assets, net | 18,034 |  |  | — |
Other assets | 7,573 |  |  | 13,935 |
Subtotal: other assets classified as held for sale | $ | 70,363 |  |  | $ | 60,955 |
Total assets held for sale | $ | 681,025 |  |  | $ | 1,337,831 |
| June 30, 2019 |  | December 31, 2018
Liabilities of Discontinued Operations |  |  |
Deferred revenue and student deposits | $ | 39,989 |  |  | $ | 115,969 |
Operating leases, including current portion | 75,542 |  |  | — |
Long-term debt and finance leases, including current portion | 63,897 |  |  | 278,074 |
Other liabilities | 96,093 |  |  | 253,397 |
Subtotal: liabilities of Discontinued Operations | $ | 275,521 |  |  | $ | 647,440 |
Other liabilities classified as held for sale: UniNorte Brazil |  |  |
Deferred revenue and student deposits | $ | 546 |  |  | $ | 469 |
Operating leases, including current portion | 11,641 |  |  | — |
Long-term debt and finance leases, including current portion | 2,486 |  |  | 5,370 |
Other liabilities | 12,827 |  |  | 9,405 |
Subtotal: other liabilities classified as held for sale | $ | 27,500 |  |  | $ | 15,244 |
Total liabilities held for sale | $ | 303,021 |  |  | $ | 662,684 |
Sale Agreements Signed in 2019 and Pending Closure Agreement to Sell UniNorte On April 16, 2019, Rede Internacional de Universidades Laureate Ltda., a limited business company organized under the laws of Brazil (the UniNorte Seller), which is an indirect wholly owned subsidiary of the Company, entered into a Quota Assignment and Transfer Agreement (the UniNorte Agreement) with Cenesup - Centro Nacional de Ensino Superior Ltda., a limited liability company organized under the laws of Brazil (the UniNorte Purchaser), which is an indirect wholly owned subsidiary of Ser Educacional S.A., a company organized under the laws of Brazil (Ser). Pursuant to the UniNorte Agreement, the UniNorte Purchaser will purchase from the UniNorte Seller 100% of the quota capital of Sodecam - Sociedade de Desenvolvimento Cultural do Amazonas Ltda., a limited liability company organized under the laws of Brazil, which is the maintaining entity of UniNorte. The Company and Ser are also parties to the Agreement as guarantors of certain obligations of their respective subsidiaries. The transaction enterprise value under the UniNorte Agreement is 194,800 Brazilian Reais (BRL) (or approximately $50,900 as of June 30, 2019), which includes the assumption of net debt in the amount of approximately BRL 9,800 (or approximately $2,600 as of June 30, 2019), and the parties expect that the transaction will close during the second half of 2019, subject to customary closing conditions, including approval by the Brazilian competition authorities. Agreement to Sell NewSchool of Architecture and Design, LLC (NSAD) On June 14, 2019, the Company and Exeter Street Holdings, LLC, an indirect wholly owned subsidiary of the Company, entered into a membership interests purchase agreement with Ambow NSAD, Inc. and Ambow Education Holding, Ltd. (the NSAD Buyers) to sell 100% of the outstanding membership interests of NSAD to the NSAD Buyers for a purchase price of one dollar, subject to certain adjustments. In addition, under the terms of the agreement, the Company estimates that it will pay subsidies to the NSAD Buyers for continued operations and campus facilities of up to approximately $5,800. The closing of the sale is subject to regulatory approvals and other conditions precedent, which could take approximately six months. NSAD is a higher education institution located in California that offers undergraduate and graduate degrees and non-degree certificates in design and construction management. Dispositions Sale of the University of St. Augustine for Health Sciences, LLC (St. Augustine) As previously disclosed in our 2018 Form 10-K, the sale of St. Augustine was completed on February 1, 2019. The total transaction value under the sale agreement was $400,000. Upon completion of the sale, the Company received net proceeds of approximately $346,400, which included $11,700 of customary closing adjustments, and was net of $58,100 of debt assumed by the purchaser and fees of $7,200. The proceeds net of cash sold were approximately $301,800, which the Company used to repay outstanding indebtedness under its U.S. term loan and revolving credit facility. The Company recognized a gain on the sale of approximately $223,000, which is included in gain on sales of discontinued operations on the Consolidated Statements of Operations. Sale of Thailand Operations As previously disclosed in our 2018 Form 10-K, on February 12, 2019, the Company completed the sale of its interests in Thai Education Holdings Company Limited, a Thailand corporation (TEDCO), and Far East Stamford International Co. Ltd. (FES), a Thailand corporation. TEDCO was the owner of a controlling interest in FES, which was the license holder for Stamford International University, which had three campuses in Thailand. The total purchase price was approximately $35,300, and net proceeds were approximately $27,900, net of debt assumed by the buyer and other customary closing adjustments. Of the $27,900 in net proceeds, $23,700, or $20,300 net of cash sold, was received at closing. The balance of $4,200 was payable upon satisfaction of certain post-closing requirements; the first post-closing requirement was satisfied in May 2019 and the Company received $2,800, leaving a remaining receivable of $1,400. The Company recognized a gain on the sale of approximately $10,800, which is included in gain on sales of discontinued operations on the Consolidated Statements of Operations. Additional Gain on Sale of China Operations As previously disclosed in our 2018 Form 10-K, on January 25, 2018, the Company completed the sale of LEI Lie Ying Limited (LEILY). A portion of the purchase price was held back and subject to deduction of any indemnifiable losses payable to the buyer pursuant to the sale purchase agreement. On January 25, 2019, Laureate received HKD 71,463 (approximately US $9,100 at date of receipt) for the second and final holdback payment, net of legal fees. Also, as of December 31, 2018, the Company had recorded a liability of approximately $14,300 related to loss contingencies for which the Company had indemnified the buyer. During the first quarter of 2019, the legal matter that this loss contingency related to was settled, with no cost to the Company. Accordingly, during the six months ended June 30, 2019, the Company reversed the loss contingency and recognized additional gain on the sale of LEILY of approximately $13,700, which is included in gain on sales of discontinued operations on the Consolidated Statements of Operations. The remaining liability recorded relates to certain legal fees. Additionally, at the closing of the sale on January 25, 2018, a portion of the total transaction value was paid into an escrow account and will be distributed to the Company pursuant to the terms and conditions of the escrow agreement. As of both June 30, 2019 and December 31, 2018, the Company has recorded a receivable of approximately $25,900 for the portion of the escrowed amount that the Company expects to receive. Sale of Monash South Africa On April 8, 2019, the Company completed the sale of its institution in South Africa, Monash South Africa, as well as the sale of the real estate associated with that institution. The transactions consisted of: (i) the transfer by Monash South Africa Limited (MSA), an Australia limited company that is an indirect 75%-owned subsidiary of the Company, to The Independent Institute of Education Limited (IIE), a South Africa limited company that is a subsidiary of ADvTECH Limited, of all of MSA’s assets and certain of its operational liabilities for a sale price of 15,000 South African Rand (ZAR) (subject to customary adjustments) (or approximately $1,100 at the closing date) and (ii) the sale by LEI AMEA Investments B.V., a Netherlands limited company that is an indirect wholly owned subsidiary of the Company, of all of the shares of Laureate South Africa Pty. Ltd. (LSA), a South Africa limited company, to IIE for a net sale price of approximately ZAR 99,000 (subject to customary adjustments) (or approximately $7,000 at the closing date). In addition, IIE assumed debt of approximately $20,200. In the aggregate, including working capital adjustments, the Company received approximately $9,000 from the buyer, which approximated the amount of cash sold with the business. The Company recognized a gain for these transactions of approximately $2,300, which is included in gain on sales of discontinued operations on the Consolidated Statements of Operations. Sale of India Operations On May 9, 2019, LEI Singapore Holdings Pte Limited, a Singapore corporation, Laureate I B.V., a Netherlands private limited company (Laureate I), and Laureate International B.V., a Netherlands private limited company (collectively, the India Sellers), all of which are indirect wholly owned subsidiaries of the Company, closed a transaction pursuant to the share purchase agreement (the India Agreement), among the India Sellers, Global University Systems India Bidco B.V., a Netherlands private limited liability company (the India Purchaser) and Global University Systems Holding B.V. (the India Purchaser Guarantor), a Netherlands private limited liability company. Pursuant to the India Agreement, the India Purchaser acquired from the India Sellers all of the issued and outstanding shares in the capital of Pearl Retail Solutions Private Limited, an India corporation (PRS), M-Power Energy India Private Limited (M-Power), an India corporation, and Data Ram Sons Private Limited (Data Ram), an India corporation. As a result of the closing of the transaction, the Company no longer consolidates its network institutions in India, including Creative Arts Education Society (CAES), the operator of Pearl Academy, and University of Petroleum and Energy Studies (UPES). In connection with the India Agreement, certain of the India Sellers also closed a separate transaction with the minority owners of PRS relating to the purchase by them of the minority owners’ 10% interest in PRS. The total purchase price under the India Agreement was $145,600. The net proceeds received by the India Sellers, before the payment to the 10% minority owners and after transaction fees and taxes, were approximately $144,600, or approximately $76,200 net of cash sold, which the Company used to repay indebtedness under its term loan that had a maturity date of April 2024 (the 2024 Term Loan). The Company recognized a gain for these transactions of approximately $19,500, which is included in gain on sales of discontinued operations on the Consolidated Statements of Operations. Sale of Spain and Portugal On May 31, 2019, Iniciativas Culturales de España S.L., a Spanish private limited liability company (ICE), and Laureate I, both of which are indirect wholly owned subsidiaries of the Company, closed a previously announced transaction pursuant to the sale and purchase agreement (the Spain and Portugal Sale Agreement) with Samarinda Investments, S.L., a Spanish limited liability company (Samarinda). Pursuant to the Spain and Portugal Sale Agreement, Samarinda acquired from ICE all of the issued and outstanding shares in the capital of each of Universidad Europea de Madrid, S.L.U., Iniciativas Educativas de Mallorca, S.L.U., Iniciativa Educativa UEA, S.L.U., Universidad Europea de Canarias, S.L.U., and Universidad Europea de Valencia, S.L.U. (together, the Spain Companies), and Samarinda acquired from Laureate I all of the issued and outstanding shares in the capital of Ensilis—Educação e Formação, Unipessoal, Lda. (the Portugal Company). Three of the Spain Companies are the entities that operate Universidad Europea de Madrid, Universidad Europea de Canarias, and Universidad Europea de Valencia. The Portugal Company is the entity that operates Universidade Europeia, a comprehensive university in Portugal, and Instituto Português de Administração de Marketing (IPAM Lisbon and IPAM Porto), post-secondary schools of marketing in Portugal. The total purchase price under the Spain and Portugal Sale Agreement was EUR 770,000 (or approximately $857,000 at the date of closing), subject to customary closing adjustments. After payment of transaction fees, receipt of working capital and other adjustments, as well as settlement of the foreign currency swaps discussed below, the total net proceeds received by ICE and Laureate I were approximately $908,000, or approximately $762,000 net of cash sold, which the Company used to repay indebtedness, including full repayment of the remaining balance outstanding under the 2024 Term Loan. Additionally, the buyer assumed debt of approximately $109,000. The Company recognized a gain for these transactions of approximately $618,000, including a tax benefit of $33,600 that relates to the reversal of net deferred tax liabilities, which is included in gain on sales of discontinued operations on the Consolidated Statements of Operations.

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