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Commitments and Contingencies | 9 Months Ended
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Sep. 30, 2019
Commitments and Contingencies Disclosure [Abstract] |
Commitments and Contingencies | Commitments and Contingencies Noncontrolling Interest Holder Put Arrangements The following section provides a summary table and description of our noncontrolling interest holder put arrangements, which relate to Discontinued Operations, that Laureate had outstanding as of September 30, 2019. 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 September 30, 2019, the carrying value of all noncontrolling interest holder put arrangements was $10,230. If the minority put arrangements were all exercised at September 30, 2019, Laureate would be obligated to pay the noncontrolling interest holders an estimated amount of $10,230, as summarized in the following table:
| Nominal Currency | First Exercisable Date | Estimated Value as of September 30, 2019 redeemable within 12-months |  | Reported Value
Noncontrolling interest holder put arrangements |  |  |  |  |
INTI Education Holdings Sdn Bhd (Inti Holdings) - 10.10% | MYR | Current | $ | 10,230 |  |  | $ | 10,230 |
Total noncontrolling interest holder put arrangements |  |  | 10,230 |  |  | 10,230 |
Puttable common stock - not currently redeemable | USD | * | — |  |  | 1,714 |
Total redeemable noncontrolling interests and equity |  |  | $ | 10,230 |  |  | $ | 11,944 |
* Contingently redeemable MYR: Malaysian Ringgit 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. Loss Contingencies Laureate is subject to legal actions arising in the ordinary course of its business. In management's opinion, we have adequate legal defenses, insurance coverage and/or accrued liabilities with respect to the eventuality of such actions. We do not believe that any settlement would have a material impact on our Consolidated Financial Statements. Contingent Liabilities for Taxes As of September 30, 2019 and December 31, 2018, Laureate has recorded cumulative liabilities totaling $50,644 and $52,880, respectively, for taxes other-than-income tax, principally payroll-tax-related uncertainties recorded at the time of an acquisition, of which $3,259 and $4,999, respectively, were classified as held for sale. The changes in this recorded liability are related to acquisitions, interest and penalty accruals, changes in tax laws, expirations of statutes of limitations, settlements and changes in foreign currency exchange rates. The terms of the statutes of limitations on these contingencies vary but can be up to 10 years. These liabilities were included in current and long-term liabilities on the Consolidated Balance Sheets. Changes in the recorded values of non-income tax contingencies impact operating income and interest expense, while changes in the related indemnification assets impact only operating income. The total (decrease) increase to operating income for adjustments to non-income tax contingencies and indemnification assets was $(5,196) and $843, respectively, for the nine months ended September 30, 2019 and 2018. In addition, as of September 30, 2019 and December 31, 2018, Laureate has recorded cumulative liabilities for income tax contingencies of $53,907 and $64,157, respectively, of which $7,569 and $14,582, respectively, were classified as held for sale. As of September 30, 2019 and December 31, 2018, indemnification assets primarily related to acquisition contingencies were $75,383 and $82,061. These indemnification assets primarily cover contingencies for income taxes and taxes other-than-income taxes. We have also recorded receivables of approximately $18,700 and $19,000 as of September 30, 2019 and December 31, 2018, respectively, from the former owner of one of our Brazil institutions which is guaranteed by future rental payments to the former owner. In addition, we have identified certain contingencies, primarily tax-related, that we have assessed as being reasonably possible of loss, but not probable of loss, and could have an adverse effect on the Company’s results of operations if the outcomes are unfavorable. In most cases, Laureate has received indemnifications from the former owners and/or noncontrolling interest holders of the acquired businesses for contingencies, and therefore, we do not believe we will sustain an economic loss even if we are required to pay these additional amounts. In cases where we are not indemnified, the unrecorded contingencies are not individually material and are primarily in Brazil. In the aggregate, we estimate that the reasonably possible loss for these unrecorded contingencies in Brazil could be up to approximately $46,000 if the outcomes were unfavorable in all cases. Other Loss Contingencies Laureate has accrued liabilities for certain civil actions against our institutions, a portion of which existed prior to our acquisition of these entities. Laureate intends to vigorously defend against these matters. As of September 30, 2019 and December 31, 2018, approximately $32,130 and $29,000, respectively, of loss contingencies were included in Other long-term liabilities and Other current liabilities on the Consolidated Balance Sheets. In addition, as of September 30, 2019 and December 31, 2018, $194 and $18,000, respectively, of loss contingencies for Discontinued Operations were classified as liabilities held for sale. The decrease is primarily related to the reversal of loss contingencies recorded in 2018 in connection with the sale of LEILY in China, as discussed in Note 5, Dispositions. During the first quarter of 2019, loss contingencies were reversed following the settlement of a legal matter related to LEILY with no cost to the Company, resulting in additional gain on sale. Material Guarantees – Student Financing 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 $484,000 and $499,000 at September 30, 2019 and December 31, 2018, 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 September 30, 2019 and December 31, 2018, we recorded $34,138 and $28,254, respectively, as estimated long-term guarantee liabilities for these obligations. Material Guarantees – Other In conjunction with the purchase of Universidade Potiguar in Brazil (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. 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 Education Group on September 12, 2014, Laureate pledged its acquired shares to third-party lenders as a guarantee of our payment obligations under the loans that financed a portion of the purchase price. The shares are pledged until full repayment of the loans, which mature in April 2021. In connection with a loan agreement entered into by a Laureate subsidiary in Peru, all of the shares of Universidad Privada del Norte, one of our universities, were pledged to the third-party lender as a guarantee of the payment obligations under the loan. Standby Letters of Credit, Surety Bonds and Other Commitments As of September 30, 2019 and December 31, 2018, Laureate's outstanding letters of credit (LOCs) and surety bonds primarily consisted of the items discussed below. As of September 30, 2019 and December 31, 2018, we had approximately $127,000 and $139,000, respectively, posted as LOCs in favor of the DOE. These LOCs were required to allow Walden, NSAD and, in 2018, St. Augustine to continue participating in the DOE Title IV program. These LOCs are recorded on Walden and Laureate and are fully collateralized with cash equivalents and certificates of deposit, which are classified as Restricted cash on our September 30, 2019 and December 31, 2018 Consolidated Balance Sheets. As of September 30, 2019 and December 31, 2018, we had EUR 5,036 (approximately US $5,500 at September 30, 2019) posted as cash collateral for LOCs related to the Spanish tax audits, which was recorded in Continuing Operations and classified as Restricted cash on our September 30, 2019 and December 31, 2018 Consolidated Balance Sheets. The cash collateral is related to the final assessment issued by the Spanish Taxing Authority (STA) in October 2018 for the 2011 to 2013 tax audit period. 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 September 30, 2019 and December 31, 2018, the total face amount of these surety bonds was $23,036 and $22,204, respectively. These bonds are fully collateralized with cash, which was classified as Restricted cash on our September 30, 2019 and December 31, 2018 Consolidated Balance Sheets. In November 2016, in order to continue participating in Prouni, a federal program that offers tax benefits designed to increase higher education participation rates in Brazil, UAM Brazil posted a guarantee in the amount of $15,300. In connection with the issuance of the guarantee, UAM Brazil obtained a non-collateralized surety bond from a third party in order to secure the guarantee. The cost of the surety bond was $1,400, of which half was reimbursed by the former owner of UAM Brazil, and is being amortized over a five-year term. The Company believes that this matter will not have a material impact on our Consolidated Financial Statements.

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