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Commitments and Contingencies | 12 Months Ended
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Dec. 31, 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 the various noncontrolling interest holder put arrangements, which relate to Discontinued Operations, that Laureate had outstanding as of December 31, 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. If the minority put arrangements were all exercised at December 31, 2019, Laureate would be obligated to pay the noncontrolling interest holders an estimated amount of $10,581, as summarized in the following table:
| Nominal Currency | First Exercisable Date | Estimated Value as of December 31, 2019 redeemable within 12-months: |  | Reported Value
Noncontrolling interest holder put arrangements |  |  |  |  |
INTI Education Holdings Sdn Bhd (Inti Holdings) - 10.10% | MYR | Current | $ | 10,581 |  |  | $ | 10,581 |
Total noncontrolling interest holder put arrangements |  |  | 10,581 |  |  | 10,581 |
Puttable common stock - not currently redeemable | USD | * | — |  |  | 1,714 |
Total redeemable noncontrolling interests and equity |  |  | $ | 10,581 |  |  | $ | 12,295 |
* 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. Commitments and contingencies are generally denominated in foreign currencies. Inti Holdings As part of the acquisition of INTI, formerly known as Future Perspective, Sdn Bhd, a higher education institution with five campuses in Malaysia, 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, 2019, there is one put option remaining for the holder of the 10.10% minority interest. The put option for the 10.10% 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 $9,670 at December 31, 2019) of EBITDA plus six times EBITDA above this amount. This put option expires after the 30-day period related to delivery of the 2025 audited financial statements. As of December 31, 2019, the Company recorded $10,581 for this arrangement in Redeemable noncontrolling interests and equity on its Consolidated Balance Sheet. 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, 2019 and 2018, $1,714 and $1,713, respectively, of contingently redeemable common stock attributable to director stockholder puts was included in Redeemable noncontrolling interests and equity on the Consolidated Balance Sheets. 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, Indemnification Assets and Other As of December 31, 2019 and 2018, Laureate has recorded cumulative liabilities totaling $44,595 and $52,880, respectively, for taxes other-than-income tax, principally payroll-tax-related uncertainties recorded at the time of an acquisition. Included in these amounts, as of December 31, 2019 and 2018, $2,893 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 (decreases)/increases to operating income for adjustments to non-income tax contingencies and indemnification assets were $(9,393), $(6,884), and $2,586 for the years ended December 31, 2019, 2018 and 2017, respectively. In addition, as of December 31, 2019 and 2018, Laureate has recorded cumulative liabilities for income tax contingencies of $51,442 and $64,157, respectively, of which $6,996 and $14,582, respectively, were classified as held for sale. Income tax contingencies are disclosed further in Note 16, Income Taxes. As of December 31, 2019 and 2018, indemnification assets primarily related to acquisition contingencies were $69,040 and $82,061, respectively, of which $0 and $476, respectively, were classified as held for sale. These indemnification assets primarily cover contingencies for income taxes and taxes other-than-income taxes. We have also recorded a receivable of approximately $19,000 as of December 31, 2019 and 2018 from the former owner of one of our Brazil institutions which is guaranteed by future rental payments to the former owner. 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 $49,000 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 December 31, 2019 and 2018, approximately $31,400 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 December 31, 2019 and 2018, approximately $1,000 and $18,000, respectively, of loss contingencies 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 6, Dispositions and Asset Sales. 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 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 $474,000 and $499,000 at December 31, 2019 and 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 December 31, 2019 and 2018, we recorded $30,887 and $28,254, respectively, as estimated long-term guarantee liabilities for these obligations. Material Guarantees – Other In conjunction with the purchase of Universidade Potiguar (UNP) in Brazil, 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 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 payment 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 UPN Peru, 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 December 31, 2019 and 2018, Laureate's outstanding letters of credit (LOCs) and surety bonds primarily consisted of the items discussed below. As of December 31, 2019 and 2018, we had approximately $127,300 and $139,000, respectively, posted as LOCs in favor of the DOE. As of December 31, 2019, the amount required by the DOE to be posted was approximately $125,800. These LOCs were required to allow Walden and NewSchool, and, in 2018, St. Augustine to participate in the DOE Title IV program. These LOCs are recorded on Walden and a corporate entity and are fully collateralized with cash equivalents and certificates of deposit, which are classified as Restricted cash on our December 31, 2019 and 2018 Consolidated Balance Sheets. As of December 31, 2019 and 2018, we had EUR 5,036 (approximately $5,600 at December 31, 2019) posted as cash collateral for LOCs related to the Spain Tax Audits, which was recorded in Continuing Operations and classified as Restricted cash on our 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 December 31, 2019 and 2018, the total face amount of these surety bonds was $25,582 and $22,204, respectively. These bonds are fully collateralized with cash, which is classified as Restricted cash on our December 31, 2019 and 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 the five-year term. The Company believes that this matter will not have a material impact on our Consolidated Financial Statements.

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