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, 2004.

OR

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

for the transition period from            to           .

Commission File Number 0-22844

LAUREATE EDUCATION, INC.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code:  (410) 843-8000

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

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

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 ý. No o.

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K 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.  o

 Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).  Yes  ý. No  o

The aggregate market value of voting Common Stock held by non-affiliates of the registrant was approximately $1,743,410,000 as of June 30, 2004.

The registrant had 49,299,899 shares of Common Stock outstanding as of March 4, 2005.

DOCUMENTS INCORPORATED BY REFERENCE

Certain information in Laureate Education, Inc.’s definitive Proxy Statement for its 2004 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission pursuant to Regulation 14A no later than April 30, 2005, is incorporated by reference in Part III of this Form 10-K.

INDEX

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PART I.

Item 1.                              Business

Laureate Education, Inc. (“the Company” or “Laureate”), currently with 159,000 students, is focused exclusively on providing a superior higher education experience through a leading global network of accredited campus-based and online universities and other higher education institutions (“higher education institutions” or “schools”).   Laureate offers a broad range of career-oriented undergraduate and graduate programs to students through several campus-based higher education institutions located in Latin America and Europe.  Laureate Online Education offers working-adult students the convenience and flexibility of distance learning to pursue undergraduate, master’s and Ph.D. degree programs in major career fields including engineering, education, business, and healthcare.

In many countries, demand for university-level education is rising - fueled by several demographic and economic factors including a growing middle class, a rising percentage of students who participate in higher education, and the need for highly-skilled professionals in an increasingly competitive workforce.  To address this growing demand, Laureate is increasing student capacity at current locations, adding new campus locations, developing new programs and curricula, and leveraging the Company’s education and marketing expertise.  To further strengthen its leadership in the international higher education market, Laureate will also enter into attractive new geographic markets and market segments.

The schools in Laureate’s network, known as Laureate International Universities, are generally characterized by a diverse array of career-oriented degree offerings, a curriculum with an international perspective, and strong academic and brand name recognition. Laureate’s higher education network offers students access to unique and specialized curricula from institutions within the network as well as study abroad programs.

While most of Laureate’s institutions have many years of successful operating history, the Company implements programs and strategies to increase the financial and operational performance of each school.  Laureate’s higher education institutions share content and degree programs with other schools in the network and transfer best practices, including successful marketing, recruiting, and retention programs.

Laureate benefits from a high degree of revenue predictability as a result of high student retention and program lengths of up to 6 years. Laureate believes in the importance of expanding access to higher education, especially in underserved markets, and that its replicable business model and rigorous approach to growth will continue to generate increases in revenue and operating margins.

The Company’s educational services are offered through three separate business segments: Campus Based - Latin America (“Latin America”), Campus Based – Europe (“Europe”) and Laureate Online Education.  The Latin America and Europe segments own or maintain controlling interests in nine and nine separately accredited higher education institutions, respectively, with locations in Mexico, Chile, Peru, Ecuador, Panama, and Costa Rica, and in Spain, Switzerland, and France, respectively.  The Laureate Online Education segment provides career-oriented degree programs to approximately 21,000 students through two accredited universities - Walden E-Learning, Inc. (“Walden”), and National Technological University, Inc. (“NTU”) - and two institutions that partner with accredited universities - Laureate Online Education B.V. (formerly KIT eLearning BV) and Canter and Associates (“Canter”).

On June 30, 2003, the Company sold the principal operations comprising its K-12 educational services segments (“K-12 segments”), including certain Ventures investments deemed not strategic to the Company’s higher education business, in a transaction more fully described in Note 3 to the consolidated financial statements.  As a result, the Company changed its name from Sylvan Learning Systems, Inc. to Laureate Education, Inc. on May 17, 2004.  The Company began trading under a new NASDAQ ticker symbol, LAUR, on May 18, 2004.

As part of the Company’s transformation in 2003 to focus exclusively on post-secondary education, the Company committed to a plan to sell its English Language Instruction business, Wall Street Institute (“WSI”), as described in Note 3 to the consolidated financial statements.   The information in this Item 1 focuses only on continuing operations of the Company.

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Campus-based

The Latin America and Europe segments own and operate the leading network of private, post-secondary educational institutions outside the United States.  Their program offerings address the fast-growing international demand for career-oriented education.  In many international markets, public higher education institutions are unable to adequately increase capacity to address the burgeoning demand for university education. Laureate is uniquely positioned to address higher education demand by expanding campus locations, opening new campus locations, and developing innovative degree programs for traditional students and for students in new market segments, such as the working adult and technical/vocational markets.

Laureate campuses in Latin America and Europe primarily serve 18- to 24-year-old students, but are increasingly attracting working adults and those seeking vocational and technical training.  The Laureate network of schools offers an education that emphasizes career-oriented fields of study with undergraduate and graduate degrees in a wide range of disciplines, including international business, hotel management, health sciences, information technology and engineering.  The Company believes its network benefits from the strong academic reputation, developed brand awareness and established operating history of each of its institutions.  Each institution also has flexible, teaching-focused faculty led by an experienced local management team.  In addition to expanding capacity, Laureate is developing new degree programs and creating study abroad opportunities for both traditional students and working professionals.

Latin America  Higher Education Institution Descriptions

The Latin America segment is composed of nine institutes and operates in Mexico, Chile, Peru, Ecuador, Panama, and Costa Rica.  The Latin America schools enroll approximately 123,000 students and offer more than 100 degree programs through 34 campuses.

The following table presents information about Laureate schools in Latin America:

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(1)                                                     Represents enrollment on the last day of the year rounded to the nearest hundred.

(2)                                                     Based on 2004 calendar year data in U.S. dollars rounded to the nearest hundred.

Laureate higher education institutions in Latin America provide a broad range of degrees and programs, and are well regarded by students, employers and government authorities in their respective markets:

•                                          Universidad del Valle de México (“UVM”) offers 45 undergraduate (9 specifically for working adults) and 12 graduate degree programs in a broad range of fields including accounting, architecture, business administration, education, engineering and law.  The university is the second largest private university in Mexico in number of students and number of campuses.  UVM has 19 campuses located throughout Mexico including 10 in Mexico City, four in the central region (Queretaro, San Luis Potosi, Aguascalientes and Guadalajara), four in the southern region (Tuxtla, Villahermosa, Puebla and Toluca) and one northern region campus (Saltillo).  During the 2004 primary enrollment period, UVM increased its new enrollment by 30% compared to the same period in 2003.

•                                          Universidad de Las Américas (“UDLA”) offers 50 undergraduate degree programs focused on business administration, education, engineering, law and psychology.  In 2003, this university had the highest number of new enrollments of any private university in Chile. Between 2001 and 2004, UDLA increased its new enrollments by more than 34% per year. UDLA operates 7 campuses, four in Santiago (Chile’s capital), one in Viña del Mar (central Chile), one in Concepción (Southern Chile) and a satellite campus in Quito, Ecuador.

•                                          Universidad Andrés Bello (“UNAB”) offers 49 undergraduate and 40 graduate degree programs.  With degree programs in medicine, dentistry, business administration, law, engineering, psychology, and education, UNAB ranks among the top Chilean universities for its academic quality and brand recognition among high school seniors. UNAB operates three campuses (two in Santiago and one in Viña del Mar) and a marine biology research station in Quintay.

•                                          Academia de Idiomas y Estudios Profesionales (“AIEP”) is a professional institute offering 38 technical and vocational programs to traditional and working-adult students at nine locations throughout Chile. AIEP offers one- to four-year certificate and degree programs, which include technology, management, communications, art, social science, and health science. AIEP’s modular curriculum is geared toward certification of technical/vocational job skills and competencies and is designed to help working adults advance in existing careers, enter new career fields, or prepare for higher levels of university education.

•                                          Universidad Interamericana (“UI”) offers undergraduate and graduate degree programs in business, hospitality, engineering, communications, and education through locations in San Jose, Costa Rica and Panama City, Panama.  In 1994, Universidad Interamericana opened its Panama City campus, demonstrating its ability to open new campuses across national borders.  Universidad Interamericana was a founding member of the Interamericana Consortium of Higher Education.

•                                          Universidad Peruana de Ciencias Aplicadas (“UPC”) offers undergraduate and graduate programs in business, engineering, law, communications and architecture, and technical vocational programs in engineering and information technology through Cibertec.  The school operates two campuses in central Lima (Peru’s capital).

•                                          Universidad Latinoamericana de Ciencia y Tecnología (“ULACIT”) offers undergraduate and graduate programs in business, engineering, law and psychology through its campus in Panama City, Panama. ULACIT was the first private university in Panama.

Europe Higher Education Institution Descriptions

The Europe segment is composed of nine institutions, and operates in Spain, Switzerland, and France. Laureate campuses in Europe enroll approximately 15,000 students and offer more than 75 degree programs through 8 campuses.

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The following table presents information about Laureate  schools in Europe:

(1)                                                     Represents enrollment on the last day of the year rounded to the nearest hundred.

(2)                                                     Based on 2004 calendar year data in U.S. dollars rounded to the nearest hundred.

(3)                                                     Hospitality includes two schools – Les Roches and Glion.

(4)                                                     Excludes approximately 12,000 short-course enrollments in the CNOF and IFG Langues subsidiaries of IFG

Laureate higher education institutions in Europe provide a broad range of degrees and programs, and are well regarded by students, employers and government authorities in their respective markets:

•                                          Universidad Europea de Madrid (“UEM”) offers 43 diploma, bachelor’s degrees or double degree programs and 54 master’s and Ph.D. degree programs.  The university includes a well-known school of health sciences and schools of architecture, economics, engineering, journalism, law and sports sciences. In 2002, UEM began hosting student exchange programs with the Company’s other universities and today hosts more than 300 students from other universities in the Laureate network.

•                                          Hospitality (Swiss Hotel Association Hotel Management School Les Roches (“Les Roches”) and Glion Hotel School (“Glion”) offers globally recognized hospitality and hotel management programs.  Hospitality specialized programs require students to complete at least two internships prior to graduation.  Les Roches was the first English-speaking hotel management school established in Switzerland.  In addition to the appropriate licenses in Switzerland and Spain (Swiss Hotel Association and Swiss Hotel Schools Association), Les Roches (Bluche and Marbella) and Glion are both fully accredited by the New England Association of Schools and Colleges (NEASC).

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•                                          École Supérieure du Commerce Extérieur (“ESCE”) offers a four-year undergraduate degree program in international commerce and management that features a combination of coursework and internships.  This university was the first in France to specialize in international trade.  In 2004, ESCE launched its first graduate degree program (Master in International Management) with Poitiers. In November 2004, ESCE was ranked 4^th out of the top 30 French business schools by Le Point.

•                                          IEDE, Institute for Executive Development (“IEDE”) is a business school offering MBA and postgraduate masters programs, in its main location in downtown Madrid and an International MBA partially delivered in its subsidiary sites in Shanghai and Santiago, Chile.

•                                          École Centrale d’Electronique (“ECE”) offers undergraduate and graduate programs in engineering to students through its campus in central Paris.  ECE, a Grande École of Engineering, was ranked fourth out of over 300 engineering schools by the magazine Le Point in 2004, and was the highest ranking private university in the survey.

•                                          Institut Français de Gestion (“IFG”) offers working adult programs in business subjects through IFG SAS and its subsidiaries, CNOF and IFG Langues.  Several of its programs have the highest recognition offered by the Commission Nationale de la Certification Professionelle, the accrediting body for working adult degree programs in France.  IFG offers courses to students in Paris and 9 other cities in France.

Degree Programs and Areas of Study

The higher education institutions in the Latin America and Europe segments offer more than 100 career-oriented undergraduate and graduate degree programs in a wide range of fields. The time typically required to complete a program varies by degree, with undergraduate degrees requiring four to five years on average and graduate degrees requiring an additional two to three years on average. The Company’s International Rector oversees curriculum development and  deployment of programs in the network in cooperation with the deans of the higher education institutions.  The Company also encourages its faculty to develop new educational programs and curricula.  The programs are designed to satisfy three constituencies:

•                                          Students.  The Company believes that students choose from career-oriented schools based on the type and quality of the educational offering and career placement opportunities.  The Company focuses on providing students with a solid academic foundation and the technical and practical skills necessary to pursue and excel in their careers.

•                                          Employers.  The relationship of each of the higher education institutions with the business community plays a significant role in the placement of students and development of curriculum.  Each school works with prominent members of relevant industries to evaluate and improve existing programs in order to maintain their relevance in the workplace. These employers provide critical input on the latest advancements within each field and the implications of these changes on the curriculum.

•                                          Regulating or licensing agencies.  The degree programs of each of the higher education institutions have been approved in accordance with applicable law.  For example, the Secretary of Education in Mexico has reviewed all of UVM’s programs and given the university degree-granting authority for those programs.  The Ministries of Education in Spain, France, Costa Rica, Panama, and Ecuador perform similar roles.  The Company must generally work with the regulators of these higher education institutions to ensure that any new programs will be approved.  In Chile, UDLA, UNAB, and AIEP have been granted full autonomy by the Ministry of Education. As a result, the Company is free to create new degree programs in Chile without additional regulatory approval. In addition, UNAB received a four-year voluntary accreditation from the Ministry of Education. Les Roches and Glion (Hospitality) are licensed in Switzerland and accredited by the NEASC, one of six accrediting associations in the U.S, and must ensure that their curriculum continues to meet the standards of that association.

The campus-based network in Latin America and Europe allows the Company to share high quality curricula among its higher education institutions, thereby broadening students’ educational opportunities.  In recent years, UEM and Les Roches developed a new joint degree program in hospitality business management that is now offered to students at UEM. UVM now offers a sports management degree program developed at UEM, and has launched an enhanced tourism degree, using Les Roches’ curriculum.  In 2004, UVM and UEM launched a dual-degree program, in which graduating students receive a degree from both institutions, recognized in both countries.  The Company has also launched an international resource enabling all students in the campus-based network to identify job and internship opportunities around the world, and allowing the schools’ corporate partners to market their open positions to all network students.

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Tuition and Fees

Tuition varies at each of the higher education institutions depending on the curriculum and type of program.  For the full-service universities in Latin America (Mexico, Chile, Peru and Central America), average annual tuition ranges from $1,400 to $3,800 for the 2004-2005 academic year.  In Europe, annual tuition at Universidad Europea de Madrid averages $10,100. For the specialized higher education institutions in Europe (Hospitality, ESCE, IEDE, ECE and IFG), average tuition ranges from $3,200 to $20,000 for the 2004-2005 academic year. Tuition payment options vary by higher education institution and primarily include monthly installment payment plans and lump sum payments at the beginning of the academic year. Historically, the Company has increased tuition as educational costs and inflation have risen.  In 2004, the Company implemented average tuition increases of approximately 4.5% and 6.0% in Latin America and Europe, respectively.  The Company intends to continue increasing tuition at each of the higher education institutions as market conditions warrant.

Students are generally responsible for room and board fees, transportation expenses and costs related to textbook and supply purchases required for their educational programs.  At some of the higher education institutions, the Company offers these services to the student body, which helps generate incremental revenue.

Students typically self-finance their education or seek non-higher education institution sponsored financing programs.  Although none of the countries in which the higher education institutions currently operate provides student loan programs similar to those in the U.S., the Company is actively working to develop a variety of financing alternatives for students.  The Company has implemented pilot tuition financing programs at its Chilean universities.  The Company anticipates these programs will establish a lending and collections history, which will attract third party lenders.

Student Financing

In 2004, the Company expanded its previous student financing activities at its Chilean universities in order to establish a lending and collections history in this market to attract third party lenders.  The Company believes Chile’s stability, both economic and political, coupled with its sophisticated banking system, reputable and reliable credit bureau, and the strong credit consciousness of its people, support the Company’s decision to explore additional growth opportunities through enhanced financing.

UNAB offered its students financing on a limited basis prior to Laureate’s acquisition in 2003.  The program was designed as a retention tool offered to students completing their second year of studies that might not otherwise be able to continue due to financial reasons.  To be eligible, students must  meet certain academic and financial requirements, and  provide a cosigner of the debt obligation.

UDLA’s financing program also existed prior to Laureate’s acquisition in 2000 and, until 2003, was offered on a limited basis to new students for their first year of studies to provide students time to obtain government or other forms of financing.  In 2004, the program was redesigned and expanded to require income qualifications and credit scores, as well as a cosigner in certain cases.  More importantly, students are required to secure part-time employment to the extent the university is able to provide opportunities through its employment program.  UDLA has made arrangements with a number of Santiago businesses to provide flexible part-time employment to its students.  As of December 31, 2004, there were approximately 1,100 students participating in the employment program.

Both the UNAB and the redesigned UDLA financing programs permit eligible students to pay 50% of their tuition in monthly installments.  Provided the students remain current with their monthly payments, they are allowed to defer the remaining 50% plus interest until after graduation.  As of December 31, 2004, the number of internally financed students represented 12% of total Chilean enrollment.

At December 31, 2004 and 2003, respectively, the Company has long-term tuition receivables of $14,004 and $2,446, net of allowances of $5,846 and $2,158.  Since this program is not mature, there is limited repayment history.  Nevertheless, third party interest in the program is increasing as evidenced by recent inquiries from third parties regarding the acquisition of the portfolio and the transfer of prior receivables to third parties.  Creating a third party tuition finance solution in Latin America could create much broader access to our offerings thereby supplementing future enrollment growth.

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Laureate Online Education

Laureate Online Education offers undergraduate and graduate degree programs to working professionals through distance learning.  Laureate Online Education institutions collectively offer degree programs in education, psychology, health and human services, management, engineering, and information technology.

The following table presents information about Laureate’s online higher education institutions:

(1)                                                     Represents enrollment as of the last day of the year rounded to the nearest hundred.

(2)                                                     Represents Distance Learning master’s enrollment, excludes over 33,600 non-degree students and excludes 8,200 students enrolled through the Canter-Walden partnership.

(3)                                                     Includes 8,200 students enrolled through the Canter-Walden partnership.

Laureate Online Education’s strategy is to expand program offerings in specific career fields and specializations that are experiencing rapid growth, undergoing major industry changes, and/or experiencing professional shortages.  Each unit offers programs that present the most current academic theory and its practical application to the workplace, allowing graduates to apply their education to their occupations and successfully compete against other well-qualified professionals in the workforce.

As part of Laureate’s international network of higher education institutions, Laureate Online Education is also focused on expanding student access to higher education outside the United States.  The Company’s online higher education institutions are assisting Laureate’s campus based higher education institutions in launching distance-learning initiatives, including joint and coordinated degree programs.

•                                          Walden University is one of the pioneers of distance education, and has over 30 years of academic and operating history.   Walden offers two undergraduate and 19 graduate degree programs in management, health and human services, psychology, and education to working professionals.  Bachelor’s and master’s degree programs are delivered online.  Ph.D. programs are delivered online with a short-term residency requirement.

•                                          Canter & Associates, through its partner universities, offers a master’s degree in education and thousands of individual courses for teachers.  For over 25 years, Canter’s mission has been to enhance the quality of teaching and learning by empowering educators with new teaching strategies.  Approximately 45% of students enrolled in Canter degree-seeking programs have elected online learning, with the remainder enrolled in more traditional distance-learning programs that include video and study guides.  Canter’s Distance Learning master’s division works with five private universities that provide K-12 educators the opportunity to earn a master’s degree in education.  Additionally, Canter’s Distance Learning master’s division works with Walden University (“Canter-Walden partnership”) to provide working professionals the opportunity to earn a master’s degree in education, with specializations including reading, technology, and standards.  The majority of Walden’s students in these programs elect online learning as their mode of distance education.

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•                                          National Technological University is the first regionally accredited “virtual” university in the United States, and offers 11 master’s degree programs in engineering, information technology, and management delivered via videotape, CD-ROM, and online learning.  NTU’s courses are developed internally by subject matter experts, or are licensed from some of the country’s premier universities.  In January 2005, NTU was merged with Walden to create the NTU School of Engineering & Applied Sciences at Walden University.

•                                          Laureate Online Education B.V. (formerly KIT eLearning BV), based in Amsterdam, is the exclusive worldwide distance-learning partner of the University of Liverpool, and specializes in delivery of online graduate programs to working-adult students in over 80 countries.  The University of Liverpool and Laureate Online Education B.V. offer master’s degree programs in business and information technology.

Tuition and Fees

Tuition varies at each of the higher education institutions, depending on the curriculum and type of program.

•                                          For Canter, tuition for a typical student enrolled in one of Canter’s partner universities is approximately $8,900 paid over the five semesters, or 20-month program.

•                                          For Walden, tuition ranges from $230 per credit hour for bachelor’s degree programs; to between $300 and $395 per credit hour for the master’s degree programs; to $3,850 per quarter for certain Ph.D. degree programs.  Walden students are currently eligible for the Department of Education’s Title IV federal financial aid under the Higher Education Act of 1965. Degree programs take between two to six years to complete, with a total cost ranging from $9,300 to $68,000, depending on the degree.

•                                          For NTU, tuition ranges from $775 to $1,316 per credit hour.  Degree programs typically take a student two to three years to complete at a total tuition of $28,000 to $35,000 depending on the university and program.  NTU students are currently eligible for the Department of Education’s Title IV federal financial aid under the Higher Education Act of 1965.

•                                          For Laureate Online Education B.V., the average online degree program generally requires two to three years to complete, with a total tuition of  $22,000.

Marketing

Latin America and Europe. The Company markets its higher education institutions through professional broadcasts and targeted marketing campaigns.  These campaigns reach prospective students indirectly through media advertising as well as directly by mail or one-on-one meetings.  During annual enrollment periods, the Company supplements this advertising with local, regional and sometimes national campaigns on television, radio, print and the Internet.  Each higher education institution is responsible for implementing its own marketing campaign, although the Company provides a forum for the network’s marketing departments to share best practices.

Laureate Online Education. The Company markets its distance learning programs to working professionals primarily through direct mail and web advertising, as well as by direct selling to school districts and corporations.

Competition

The Company faces competition in each of its business segments.  The competition focuses on price, educational quality, reputation and location.

Latin America and Europe. The market for post-secondary education outside the U.S. 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 the Company competes, except for its Hospitality schools, which markets to students worldwide.  The Company generally competes with both public and private higher education institutions on the basis of price, educational quality, reputation and location.  Public higher education institutions tend to be less expensive, if not free, but more selective and less focused on career-oriented degree programs. The Company believes that it compares favorably with competitors because of its focus on quality, career-oriented curriculum and the efficiencies of its network.  At present, the Company

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believes that no other company has a similar network of international higher education institutions.  There are a number of other private and public higher education institutions in each of the countries where the Company owns a higher education institution.  Because the concept of private, for-profit 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.  The Company expects competition to increase as the markets mature.

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

Canter competes with both public and private higher education institutions in the U.S. that provide graduate courses and master’s degree programs for teachers.  Canter believes it understands the needs of its students based on its 25 years of experience in the marketplace.  The Company also believes it compares favorably to its competitors for among prospective students due to the convenience of its online and video delivery systems.

Government Regulation

Campus-Based Regulation and Licensing. In response to the growing demand for post-secondary education, governments in many countries have revised their regulations to permit the establishment of private post-secondary, for-profit higher education institutions.  Each country in which the Company operates now allows private investment in post-secondary education. Typically, each applicable regulatory agency oversees higher education institutions, establishes requirements for creation of higher education institutions and sets the official qualifications and standards governing higher education institution departments and degree programs.  Additionally, these regulatory agencies establish prerequisites that students must satisfy in order to apply.  These policies are designed to ensure that the higher education institutions have the resources and capability to provide the student body with a quality education.

Title IV.  Walden and NTU students, mostly working professionals, finance their education through a variety of methods including self-financing, tuition reimbursement from employers, and through federal financial aid programs known as Title IV.  The Higher Education Act of 1965 and related regulations govern all U.S. higher education institutions participating in Title IV programs.  Walden and NTU maintain eligibility to participate in the following Title IV programs: Federal Pell Grant, Federal Family Education Loan, and Federal Parent Loan for Undergraduate Students.

For Title IV program eligibility, universities must comply with the standards and procedures set forth in the Higher Education Act of 1965 and related regulations.  The U.S. Department of Education reviews all participating institutions for compliance with all applicable standards and regulations under the Higher Education Act. The institution must be certified by the Department of Education to participate in Title IV programs, based on meeting certain standards of administrative capability and financial responsibility. In addition, an institution must be authorized by each state within which it is physically located to offer its educational programs and maintain institutional accreditations.

Walden and NTU are two of only 24 participants qualified in the Distance Education Demonstration Program.  This program, authorized by Congress in the 1998 reauthorization of the Higher Education Act of 1965, is designed to test the quality and Title IV eligibility of expanded distance education programs currently restricted under the original Act.   Sixteen participants, including Walden and NTU, received waivers of provisions that prohibit Title IV eligibility at distance learning institutions.  The Distance Education Demonstration Program requires reauthorization by the U.S. Congress in June 2005 to assure continued Title IV eligibility.

Walden and NTU are subject to announced and unannounced compliance reviews as well as annual and periodic audits by various state and federal government agencies and accrediting agencies.  Material provisions of Title IV regulations that may impact eligibility include:

•                  Standards of financial responsibility

•                  Change in ownership or control

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•                  Student loan defaults

•                  Changes in federal and state regulations and laws

•                  Compensation of university representatives

•                  Administrative capacity

•                  Eligibility and certification

•                  Accreditation

Changes in Title IV participation requirements, elimination or reduction in federal funding of Title IV programs, or loss of Title IV program eligibility, could reduce the ability of certain Walden and NTU students to finance their education, thereby leading to lower student enrollment.  In 2004, approximately 35% of total Laureate Online Education students, or 5% of students at all Laureate schools, obtain financing under Title IV programs.  The elimination or reduction of Title IV programs could have an adverse impact on the Company.

Intellectual Property

The Company currently owns the registered trademark for the word “Laureate”.  The Company has pending applications with the US Patent and Trademark Office, as well as with the applicable Trademark agencies within the specific countries where the Company operates, for the marks “Laureate International Universities”, “Laureate Online International” and “Laureate Online Education”.  In addition, Laureate has the rights to tradenames, logos, and other intellectual property specific to its higher education institutions, in the countries in which those institutions operate.

Employees

As of December 31, 2004, the Company had 17,534 employees, including 8,427 classified as full-time and 9,107 classified as part-time. Most of the Company’s part-time employees are academic teaching staff. The Company’s employees at UEM and UVM are covered by labor agreements.  The UEM agreement has been negotiated by a national union with a committee representing all of the private, for-profit universities in the country and is due to be revised in 2005.  Substantially all of the faculty at UVM is represented by a union.  The economic provisions of the labor agreement at UVM were revised in 2004, without any substantial changes, and will be revised again in late 2005.  The agreements govern salaries, benefits and working conditions for all union members at the higher education institutions. The Company considers itself to be in good standing with these unions and with all of its employees.

Effect of Environmental Laws

The Company believes it is in compliance with all applicable environmental laws, in all material respects. The Company does not expect future compliance with environmental laws to have a material effect on the business.

Available Information

The Company’s Internet Address is www.laureate-inc.com.  The Company makes available, free of charge through its website, its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed pursuant to Section 13(a) or 15(d) of the Exchange Act soon after they are electronically filed with the SEC.  In addition, the Company’s earnings conference calls and presentations to the financial community are web cast live via the Company’s website.

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Item 2. Properties

The Company leases 68% of its square footage in its facilities worldwide and owns the other 32%.

The Company’s headquarters consist of three leased facilities in Baltimore, Maryland, including office space and academic facilities. The Laureate Online Education segment leases three additional facilities in the United States, one each in Los Angeles, California; Minneapolis, Minnesota; and Phoenix, Arizona; and one facility in the Netherlands.

The Company’s campus-based segments lease various sites, primarily in Central America, South America and Europe.  The campus-based segments lease 14 UVM sites, 13 IFG sites, 12 UNAB and AIEP sites, 6 UDLA sites, 3 UEM sites, 2 UI sites, and one site each at ESCE, Les Roches, Marbella, Glion, IEDE, and ECE.

The Company’s owned facilities consist of academic buildings and dormitories on the campuses of UVM, UDLA, UPC, Glion, Les Roches, and UEM.  Some of the academic buildings and dormitories at UEM, Les Roches, Glion and UDLA are subject to mortgages.

The Company monitors the capacity of its higher education institutions on a regular basis and makes decisions to expand capacity based on existing facilities and enrollments.

Item 3.   Legal Proceedings

The Company is not currently a party to any litigation that management believes to be material.

Item 4.  Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of security holders during the fourth quarter of 2004.

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PART II.

Item 5.  Market for Registrant’s Common Equity and Related Stockholder Matters

a)                                      The Company’s Common Stock trades on the NASDAQ National Market under the ticker symbol “LAUR”.  The high and low trade prices for 2004 and 2003 for the Company’s common stock are set out in the following table.  These prices are as reported by NASDAQ, and reflect inter-day price quotations, without retail mark-up, mark down or commission, and may not necessarily represent actual transactions.

No dividends were declared on the Company’s common stock during 2004 and 2003, and the Company does not anticipate paying dividends in the foreseeable future.

The number of registered shareholders of record as of February 28, 2005 was 537.

b)                                     On September 16, 2004, the Company issued 2,500,000 shares of its common stock, par value $0.01, to certain former stockholders of Walden pursuant to an Agreement and Plan of Merger dated September 16, 2004 by and among the Company, Laureate Acquisition Corporation, a newly-formed and wholly-owned subsidiary of the Company, and Walden.  The shares were issued in partial consideration for the acquisition of all of the remaining issued and outstanding capital stock of Walden.  The aggregate value of the shares issued was $88.8 million, based on the closing price of the Company’s common stock of $35.53 on September 15, 2004.  There were no underwriting discounts or commissions.  The issuance of the shares was exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, as amended, as a transaction made solely to accredited investors and not involving a public offering.

During the year ended December 31, 2003, the Company issued 581,000 shares of common stock valued at $5.2 million and restricted from sale for three years, as consideration for the acquisition of membership interests in the Ventures business that were not owned by the Company or Apollo Management L.P. (“Apollo”).  These shares were not registered under the Securities Act of 1933, in reliance upon the exemption contained in Section 4(2) of the Act.

c)                                      No shares of common stock were repurchased during the fourth quarter of 2004.

Item 6.  Selected Consolidated Financial Data

The selected consolidated financial data for the years ended December 31, 2004, 2003, 2002, 2001, and 2000 have been derived from the Company’s consolidated financial statements.  The financial data should be read in conjunction with the consolidated financial statements and notes thereto.

The Company consummated several significant purchase business combinations in the five-year period ended December 31, 2004. These business combinations affect the comparability of the amounts presented.   Additionally, the accompanying financial data presents the continuing operations of the Company, and excludes the results of operations of several businesses that were sold during the periods presented.  Note 3 to the consolidated financial statements describes the operations that were discontinued in 2003 and 2004.

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LAUREATE EDUCATION, INC. AND SUBSIDIARIES

Consolidated Statements of Operations Data

(Dollar amounts in thousands, except per share data)

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(1)                                                     During 2004, 2003, and 2002, the Company completed significant acquisitions as discussed further in Note 4 to the consolidated financial statements.

(2)                                                     During 2004 and 2003, the Company recorded non-cash stock compensation expense related to a replenishment plan implementation change and the modification of stock options, respectively.  These events are discussed further in Note 13 to the consolidated financial statements.

(3)                                                     During 2003 and 2002, the Company recorded losses on investments as discussed further in Note 8 to the consolidated financial statements.

(4)                                                     During 2002, the Company wrote off  $3.5 million of previously deferred costs relating to a terminated initial public offering of the campus-based operating segments and one terminated Latin America acquisition.  These charges are included in core operating direct costs.

(5)                                                     Prior to the adoption of Statement of Financial Accounting Standards No. 142, the Company was required to amortize goodwill and all intangible assets.  During 2001 and 2000, the Company recorded $15.6 million and $3.9 million, respectively, of goodwill amortization.  For 2001, equity in net losses of affiliates included amortization of $8.9 million related to the Ventures business.

(6)                                                     The following acquisitions were completed during 2001.  The Company’s 2001 results of continuing operations include the results of the acquired companies from the effective date of the acquisition through December 31, 2001.

•                  During July 2001, the Company acquired an additional 23.75% ownership interest in Prouniversidad S.A., which owns and operates UEM, for cash of $18.5 million, increasing its total ownership in Prouniversidad S.A. to 77.75%.  The Company previously acquired a 54% ownership interest in UEM in 1999.  The purchase of the additional interest was accounted for as a step acquisition.

•                  In October 2001, the Company acquired 98.8% of the common stock of École Supérieur du Commerce Extériuer (“ESCE”), a private, for-profit university in Paris, for $8.2 million in cash.   In December 2002, the Company sold 10% of its ownership in ESCE to an unrelated third party.

 (7)                                                  The Company realized investment gains of $7.9 million in 2001.  The most significant transactions giving rise to these gains are described below.

•                  On September 11, 2001, Ventures recognized an investment gain of $24.7 million upon the sale of its 42% stake in Classwell Learning Group, Inc. for total cash proceeds of $31.8 million.

•                  On June 15, 2001, Caliber Learning Network, Inc. (“Caliber”) filed for Chapter 11 bankruptcy protection.  The Ventures investment in Caliber of $2.9 million was reduced to $0 upon recording its allocable share of losses related to Caliber prior to the bankruptcy proceedings, which was included in equity in net loss of affiliates.  Additionally, the Company recorded a loss on investment of $14.2 million.  This loss consists of bad debt expense for notes receivable from and advances to Caliber of $7.5 million, and $6.7 million for estimated Caliber liabilities incurred by the Company. On December 31, 2002, the loss was increased by $0.7 million due to revised estimates of remaining liabilities resulting from guarantees.

(8)                                                     The following material acquisitions were completed during 2000.  The Company’s 2000 results of continuing operations include the results of the acquired companies from the effective date of the acquisitions through December 31, 2000.

•                  Effective June 30, 2000, the Company acquired for cash the controlling interests in Gesthotel, S.A. which owns and operates Les Roches.   The purchase price totaled $12.3 million and was allocated to acquired assets totaling $32.4 million and assumed liabilities totaling $20.1 million.  In connection with this acquisition, variable amounts of contingent consideration were payable to the sellers based on 2002 earnings.  In 2003 the Company reached an agreement with the sellers of Gesthotel, S.A. to pay them additional consideration of $3.6 million, which was allocated to assets of $4.6 million and liabilities of $1.0 million.

•                  Effective November 24, 2000, the Company acquired for cash the controlling interests in Planeacion de Sistemas, S.A. which controls and operates Universidad del Valle de Mexico (“UVM”).   The purchase price totaled $49.9 million and was allocated to acquired assets totaling $67.7 million and assumed liabilities totaling $17.8 million. Contingent consideration was also payable to the sellers if specified levels of earnings before interest and taxes were achieved in 2002.  Consideration of $0.5 million based on the attainment of these earnings levels was paid to the sellers and recorded as additional goodwill in 2002.

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•                  Effective December 12, 2000, the Company acquired for cash the controlling interests in Desarollo del Conocimiento S.A., a holding company that controls and operates Universidad de Las Americas (“UDLA”) in Chile.   The purchase price totaled $26.0 million, including acquisition costs of $1.7 million, $13.0 million of which was paid in 2001 after finalization of UDLA’s 2000 operating results.  The purchase price was allocated to acquired assets totaling $34.8 million and assumed liabilities totaling $8.8 million.

(9)                                                     The Company recognized realized investment losses of $11.4 million in 2000.  The most significant transactions giving rise to these losses are described below.

•                  In 2000, Ventures incurred a $3.0 million realized loss upon the disposal of its $4.9 million investment in the common stock of ZapMe! Corporation for cash proceeds of $1.9 million.

•                  Ventures also recorded realized investment losses of $8.4 million in 2000 based on an assessment that two investments were permanently impaired due to a significant deterioration in operating results and concerns regarding the ability of these companies to successfully implement their business plan.

Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

The statements contained herein include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  Forward-looking statements include information about possible or assumed results of operations, business strategies, financing plans, competitive position and potential growth opportunities.  Forward-looking statements include all statements that are not historical facts and are generally accompanied by words such as “may,” “will,” “intend,” “anticipate,” “believe,” “estimate,” “expect,” “should” or similar expressions.  These statements also relate to the Company’s contingent payment obligations relating to acquisitions, future capital requirements, potential acquisitions and the Company’s future development plans and are based on current expectations.  Forward-looking statements involve various risks, uncertainties and assumptions.  The Company’s actual results may differ materially from those expressed in these forward-looking statements.

Future events and actual results could differ materially from those set forth in the forward-looking statements as a result of many factors.  These factors may include, without limitation: the Company’s ability to continue to make acquisitions and to successfully integrate and operate acquired businesses; changes in student enrollment; the effect of new technology applications in the educational services industry; failure to maintain or renew required regulatory approvals, accreditations or authorizations; the Company’s ability to effectively manage business growth; possible increased competition from other educational service providers; the effect on the business and results of operations of fluctuations in the value of foreign currencies; and the many risks associated with the operation of an increasingly global business, including complicated legal structures, legal, tax and economic risks and the risk of changes in the business climate in the markets where the Company operates.  These forward-looking statements are based on estimates, projections, beliefs and assumptions of management and speak only as of the date made and are not guarantees of future performance.

Overview

Laureate is focused exclusively on providing a superior higher education experience to over 159,000 students through the leading global network of accredited campus-based and online higher education institutions.  The Company’s educational services are offered through three separate reportable segments: Latin America, Europe and Laureate Online Education.  Latin America and Europe own or maintain controlling interests in six and nine separately accredited higher education institutions, respectively.  The Latin America segment has locations in Mexico, Chile, Peru, Ecuador, Panama, and Costa Rica. The Europe segment has locations in Spain, Switzerland, and France.  The Laureate Online Education segment provides career-oriented degree programs to approximately 21,000 students through Walden E-Learning, Inc. (“Walden”), National Technological University (“NTU”), Laureate Education Online BV (formerly KIT eLearning BV) and Canter and Associates (“Canter”).

On May 17, 2004, the Company changed its name from Sylvan Learning Systems, Inc. to Laureate Education, Inc.  The Company began trading under a new NASDAQ ticker symbol, LAUR, on May 18, 2004.

Sale of Business Units

On December 31, 2004, the Company and WSI Education S.a.r.l. executed an Agreement for Purchase of Shares that provides for the acquisition of substantially all of the Company’s WSI business units and investments.  On June 30, 2003, the Company completed the sale to Educate, Inc. (“Educate”), a company newly-formed by Apollo Management L.P.

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(“Apollo”), of substantially all of the Company’s K-12 segments.  See Note 3 to the consolidated financial statements for more information regarding these transactions.

Critical Accounting Policies and Estimates

The Company’s accounting policies are more fully described in Note 2 of notes to consolidated financial statements.  As disclosed in Note 1 of Notes to Consolidated Financial Statements, the preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying notes.  Future events and their effects cannot be determined with absolute certainty.  Therefore, the determination of estimates requires the exercise of judgment.  Actual results inevitably will differ from those estimates, and these differences may be material to the financial statements.  The Company believes the following key accounting policies affect its more significant judgments and estimates used in the preparation of its consolidated financial statements and are critical to its business operations and the understanding of its results of operations.

Revenue Recognition. Revenues from educational services, tuition and fees, are recorded on a straight-line basis over the length of period in which services are provided.  Textbook sales and the related cost of the textbooks are recognized at the beginning of each academic quarter with respect to students who are attending courses in which textbooks are charged separately from tuition.  Approximately 90% of the Company’s revenues represent tuition charges and approximately 4% of revenues represent bookstore sales and student fees.  For each student, billings issued or payments received in excess of tuition earned are recorded as deferred revenue. Refunds to students have been immaterial and generally limited to amounts paid for which educational services have not been rendered.  Since the Company does not recognize revenues until the services have been rendered, these refunds are typically charged to the deferred revenue account. The amount of tuition earned depends on the fee per semester or per credit hour of the courses, the number of program courses a student takes during each period of enrollment, and the total number of students enrolled in each program.  Each of these factors is known at the time  tuition revenues are calculated and is not subject to estimation.  If the Company adds additional fees related to educational services, the fees are assessed separately for proper revenue recognition treatment.

Revenue from the sale of educational products, approximately 6% of the Company’s revenues, is generally recognized when shipped and collectibility is reasonably assured.

Accounts and Notes Receivable. The Company routinely makes estimates of the collectibility of its accounts and notes receivable. The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its students to make required payments.  The Company estimates the amount of the required allowance by reviewing the status of past-due receivables and analyzing historical bad debt trends.  Actual collection experience has not varied significantly from estimates, due primarily to credit policies, and a lack of concentration of accounts receivable.  If the financial condition of students were to deteriorate, resulting in an impairment of their ability to make required payments for tuition, additional allowances may be required.

Goodwill and Other Intangible Assets.  During each of the years presented, the Company acquired various businesses accounted for using the purchase method of accounting.  A portion of the purchase price for these businesses was allocated to identifiable tangible and intangible assets and assumed liabilities based on estimated fair values at the date of acquisition. Any excess purchase price was allocated to goodwill.  This goodwill and other indefinite-lived intangibles are evaluated at least annually for impairment.

Goodwill is potentially impaired when the carrying amount of a reporting unit’s goodwill exceeds its implied fair value, as determined under a two-step approach.  The first step is to determine the estimated fair value of each reporting unit with goodwill.  The reporting units of the Company for purposes of the impairment test are those operating components for which discrete financial information is available and for which operating results are regularly reviewed by segment management. Components are combined when determining reporting units if they have similar economic characteristics.  In general, each higher education institution is a reporting unit for purposes of the impairment tests.

The Company estimates the fair value of each reporting unit by estimating the present value of the reporting unit’s future cash flows.   If the recorded net assets of the reporting unit are less than the reporting unit’s estimated fair value, then no impairment is indicated.  Alternatively, if the recorded net assets of the reporting unit exceed its estimated fair value, then goodwill is potentially impaired and a second step is performed.  In the second step, the implied fair value of the goodwill is determined by deducting the estimated fair value of all tangible and identifiable intangible net assets of the reporting unit

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from the estimated fair value of the reporting unit.  If the recorded amount of goodwill exceeds this implied fair value, an impairment charge is recorded for the excess.

Other intangible assets include acquired student rosters, accreditation, tradenames, non-competition agreements and curriculum. The assumptions used to calculate the initial fair value of these identified intangible assets included estimates of future operating results and cash flows, as well as discount rates and weighted average costs of capital for each acquisition.  Accreditations and tradenames have indefinite lives.  Useful lives which range from 1 to 7 years are assigned to all other intangible assets based upon estimated matriculation rates and other factors.

If the Company used different assumptions and estimates in the calculation of the initial fair value of identified intangible assets and the estimation of the related useful lives, the amounts allocated to these assets, as well as the related amortization expense, could have been significantly different than the amounts recorded.

In assessing the recoverability of the Company’s goodwill and other intangible assets, the Company must make assumptions regarding estimated future cash flows and other factors to determine the fair value of the respective assets.  If these estimates or their related assumptions change in the future, the Company may be required to record impairment charges for these assets not previously recorded.

Income Taxes.  The Company earns a significant portion of its income from subsidiaries located in countries outside of the United States.  At December 31, 2004, undistributed earnings of foreign subsidiaries totaled approximately $611.8 million.  Deferred tax liabilities have not been recognized for these undistributed earnings because it is management’s intention to reinvest such undistributed earnings outside of the United States.  APB Opinion No. 23, Accounting for Income Taxes – Special Areas, requires that a company evaluate its circumstances to determine whether or not there is sufficient evidence to support the assertion that it has or will reinvest undistributed foreign earnings indefinitely.

The Company’s assertion that earnings from its foreign operations will be permanently reinvested is supported by projected working capital and long-term capital needs in each subsidiary location in which the earnings are generated.  Additionally, the Company believes that it has the ability to permanently reinvest foreign earnings based on a review of projected cash flows from domestic operations, projected working capital and liquidity for both short-term and long-term domestic needs, and the expected availability of debt or equity markets to provide funds for those domestic needs.

If circumstances change and it becomes apparent that some or all of the undistributed earnings of the Company’s foreign subsidiaries will be remitted to the United States in the foreseeable future, the Company will be required to recognize deferred tax liabilities on those amounts.  As of December 31, 2004, if all undistributed earnings had been remitted to the United States, the amount of incremental U.S. federal income tax liabilities, net of foreign tax credits, would have been approximately $171.2 million, of which $83.4 million is related to discontinued operations.

The Company records a valuation allowance to reduce its deferred tax assets to the amount that it believes is more likely than not to be realized.  The Company also has considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the amount of valuation allowance needed.  If the Company were to determine that it would not be able to realize all or part of its net deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to income in the period such determination was made.  Likewise, should the Company determine that it would be able to realize its deferred tax assets in the future in excess of its net recorded amount, an adjustment to the valuation allowance would increase income in the period such determination was made.

Impact of Recently Issued Accounting Standards.  In December 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 123 (revised 2004) (“FASB 123R”), Share-Based Payment. FASB 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values.  As permitted by Statement 123, the Company currently accounts for share-based payments to employees using Opinion 25, which generally recognizes no compensation expense for employee stock options.  The adoption of the fair value method under FASB 123R could have a significant impact on the results of operations, however it will have no impact on the balance sheet.  FASB 123R also requires the benefits of tax deductions in excess of recognized compensation expense to be reported as a cash flow from financing activities rather than a cash flow from operating activities.  This requirement will reduce net cash flow from operations and increase net cash flow from financing activities in the periods after adoption.  The effective date is the first interim reporting period beginning after June 15, 2005. The Company is currently evaluating pricing models and the transition provisions of this standard and will begin expensing stock options in the third quarter of 2005.

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Results of Operations

The Company’s three continuing reportable segments generate revenues as follows:

•                                          Latin America and Europe earn tuition and related fees paid by the students of the Company’s campus-based higher education institutions.

•                                          Laureate Online Education earns revenues from instructional services that are provided through an online format, as well as other forms of distance learning.

The Latin America, Europe and Laureate Online Education segments, when presenting aggregated statements of operations data, are referred to as “Core Operating Segments.”

Enrollments

Management closely follows trends in new and total enrollment because total enrollment growth is highly correlated with revenue growth.  New enrollments are particularly important as they impact future results.

Enrollment Reporting

Each of Laureate’s higher education institutions has a different enrollment cycle depending on geography and academic program.  Each school has a “Primary Enrollment Cycle” at the start of each academic year, during which most of the enrollment occurs.  The first quarter coincides with the Primary Enrollment Cycle for the Company’s higher education institutions in the South American region (Chile, Peru and Ecuador).  The third quarter coincides with the Primary Enrollment Cycle for the Mexico region (Mexico, Costa Rica and Panama), as well as for schools in Spain, Switzerland, U.S. and France.  The timing of the Primary Enrollment Cycles causes the business to be seasonal.

Seasonality

Most of the schools in the Company’s network have a summer break when classes are generally not in session and during which minimal revenues are recognized.  Operating expenses, however, do not fully correlate to the enrollment and revenue cycles, as the schools continue to incur fixed expenses during summer breaks.  As a result, the fourth quarter is the Company’s strongest quarter because all of its higher education institutions are in session.  The second quarter is also strong as most schools have classes in session, although the Company’s largest school, located in Mexico, is in session for only part of that quarter.  The first and third quarters are weaker quarters because the majority of the Company’s schools have summer breaks for some portion of one of these two quarters. Due to this seasonality, revenues and profits in any quarter are not necessarily indicative of results in subsequent quarters.

The following chart shows the enrollment cycles for each higher education institution.  In the chart, shaded areas 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 Enrollment start dates of the Company’s schools, and the small circles represent Secondary Enrollment start dates (smaller intake cycles).

Notes:

(1) Mexico Region includes Mexico, Costa Rica and Panama

(2) South American Region includes Chile, Ecuador and Peru

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Student Attrition

Management defines attrition as those students that leave the higher education institution prior to graduation.  Attrition may be due to academic, financial or other personal reasons.  Management closely monitors attrition levels at its higher education institutions.  To address the key reasons for student attrition, management has implemented programs, such as assistance with financing, remedial educational programs, mentoring and counseling. In general, attrition at the Company’s schools has been stable as a percentage of total revenue over the past five years.  Historically, attrition rates have not changed materially from year to year.

Average Length of Stay

Management actively monitors the average length of stay of students.  The average length of stay is defined as the average time necessary to complete a given course of study, adjusted for attrition.  Management believes that the Company’s 3 to 4 year average length of stay and low attrition levels contribute to the predictability of future revenues.  Due to the Company’s multi-year average length of stay, changes in enrollment from one cycle to the next have not historically materially impacted quarterly or annual results.

Pricing

Each higher education institution has different pricing based upon local demand level, economic conditions, and competitive environment.  Increases in tuition have historically exceeded local market inflation.

Foreign Exchange

All of the higher education institutions in the campus-based segments are located outside the Unites States. Therefore, management actively monitors the impact of foreign currency movements and the correlation between the local currency and the U.S. Dollar.  The Company’s diversified portfolio of currencies has mitigated the impact of translation risk based on currency movements.  Because all revenues and expenses in a particular country are denominated in the local currency, the exposure is limited to the operating margins of schools in that country.  Also, since the Company has historically reinvested each higher education institution’s cash flow locally, the principal exposure is the translation risk into U.S. Dollars for purposes of the consolidated financial statements, as required by U.S. generally accepted accounting principles (“GAAP”).  In addition, the Company occasionally enters into foreign exchange forward contracts to reduce the earnings impact of non-functional currency denominated receivables.  Currently, the Mexican Peso is the Company’s largest currency, followed by the Chilean Peso, Euro, U.S. Dollar, Swiss Franc, Peruvian Nuevo Sol and Costa Rican Colon.

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Reportable Segments

The following table is derived from the Company’s consolidated financial statements and represents financial information of the Company’s reportable segments for 2004, 2003, and 2002:

(1) Other represents results from the Ventures business, which was disbanded in 2003.

The Company’s direct costs include all expenses incurred by operating units including selling and administrative expenses.  The Company’s campus-based segments’ overhead represents centralized costs incurred in support of the Latin America and Europe operations that are not allocated back to the reportable segments.

The following comparisons of results of operations focus on the continuing operations of the Company.

Comparison of results for 2004 to results for 2003.

Revenues.  Total revenues increased by $175.2 million, or 37%, to $648.0 million for the year ended December 31, 2004 (“2004”) from $472.8 million for the year ended December 31, 2003 (“2003”).  This revenue increase was driven primarily by increased total enrollment at the Company’s higher education institutions, plus the impact of acquisitions within the last two years.

Latin America revenue for 2004 increased by $111.0 million, or 44%, to $360.5 million compared to 2003.  Enrollment increases of 20.2% in schools owned in both fiscal years added revenues of $49.9 million over 2003.  For schools owned in both years, the Company increased local currency tuition by a weighted average of 4.5%, which served to increase revenues by $10.2 million.  Each institution in the segment offers tuitions at various prices based upon degree program.  For 2004, the effects of product mix resulted in a $7.1 million reduction in revenue primarily due to lower-priced working adult and high school enrollments exceeding undergraduate enrollment growth. The segment operates in several countries and is subject to

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the effects of foreign currency exchange rates in each of those countries.  For 2004, the effects of currency translations increased revenues by $2.5 million, primarily due to the strengthening of the Chilean Peso against the U.S. Dollar, partially offset by the weaker Mexican Peso relative to the U.S. Dollar. A full year’s operations at UNAB/AIEP, acquired May 2003, and the acquisitions of UPC, ULACIT, and the Hispanoamericana campus of UVM in 2004, increased revenues by $55.5 million. Latin America revenue represented 56% of total revenues for 2004, and 53% of total revenues for 2003.

Europe revenue for 2004 increased by $25.8 million, or 20%, to $152.4 million compared to 2003.  Enrollment increases of 3.1% in schools owned in both years added revenues of $2.5 million over 2003.  For schools owned in both years, the Company increased local currency tuition by a weighted average of 6.0%, which served to increase revenues by $7.2 million.  Each institution in the segment offers tuitions at various prices based upon degree program.  For 2004, the effects of product mix resulted in a $7.4 million reduction in revenue primarily due to lower-priced post-graduate enrollment growth in Spain exceeding undergraduate enrollment growth.  The segment operates in several countries and is subject to the effects of foreign currency exchange rates in each of those countries.  For 2004, the effects of currency translations increased revenues by $12.4 million, due to the strengthening of the Euro and Swiss Franc against the U.S. Dollar.  The acquisitions of IEDE, IFG and ECE increased revenues by $11.1 million.  Europe revenue represented 24% of total revenues for 2004, and 27% of total revenue for 2003.

Laureate Online Education revenue increased by $39.3 million, or 41%, to $135.1 million for 2004 compared to 2003.  Enrollment increases of 23%, excluding Laureate Online Education, B.V., added revenues of $18.3 million, and the Laureate Online Education B.V. acquisition added revenues of $7.5 million. Tuition increases accounted for $3.8 million of additional revenues, and other factors, primarily a favorable change in degree program mix, added $9.7 million.  Laureate Online Education revenue represented 21% of total revenues for 2004, and 20% of total revenues for 2003.

Direct Costs. Total direct costs of revenues increased $134.5 million, or 34%, to $529.7 million for 2004 from $395.2 million for 2003.  Direct costs decreased to 82% of total revenues in 2004 from 84% in 2003 primarily due to increased enrollments providing improved leverage of the fixed cost base.

Latin America direct costs increased by $83.1 million to $275.0 million, or 76% of Latin America revenue for 2004 year, compared to $191.9 million or 77% of Latin America revenue for 2003.  An increase of $35.4 million in expenses reflected higher enrollments and corresponding expanded operating activities compared to 2003.  Acquisitions increased expenses by $47.0 million.  For 2004, the effects of currency translations increased expenses by $0.7 million, primarily due to the strengthening of the Chilean Peso against the U.S. Dollar, partially offset by the weakening of the Mexican Peso relative to the U.S. Dollar.

Europe direct costs increased by $22.0 million to $128.6 million, or 84% of Europe revenue for 2004, compared to $106.6 million, or 84% of Europe revenue for 2003.  Higher enrollments and expanded operations at the higher education institutions compared to 2003 increased expenses by $1.5 million, and the acquisitions of IEDE, IFG and ECE increased expenses by $10.4 million.  For 2004, the effects of currency translations increased expenses by $10.1 million, due to the strengthening of the Euro and Swiss Franc against the U.S. Dollar.

Campus-based segments overhead expense remained constant at $12.0 million in 2004 and 2003.

Laureate Online Education direct costs increased by $31.5 million to $114.0 million, or 84% of Laureate Online Education revenue for 2004, compared to $82.5 million, or 86% of Laureate Online Education revenue for 2003.  The decrease in direct costs as a percentage of revenues was the result of improved Walden margins resulting from higher enrollment volume, partially offset by the inclusion of Laureate Online Education B.V.’s breakeven operating results in 2004.

Other Operating Expenses.  Other expenses decreased by $15.5 million to $27.1 million for 2004 year from $42.6 million for 2003.  The decrease in other operating expenses related primarily to the decrease in non-cash stock compensation expense.

Core operating segments general and administrative expenses increased by $3.6 million in 2004 to $21.4 million from $17.8 million in 2003. The increase in expenses was primarily due to increases in payroll and other employee related costs resulting from increased headcount, training costs and travel expenses incurred to support the rapid growth in the Company’s global operations and implementation of the provisions of the Sarbanes-Oxley legislation.  Approximately $4.0 million of additional consulting expenses related to Sarbanes-Oxley Section 404 internal controls evaluation assistance.

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These increases were offset by a net reduction in labor costs and facilities as a result of the sale of the K-12 segments to Educate. Certain employees principally dedicated to servicing the K-12 segments were employed by Educate effective July 1, 2003.  Contemporaneously, the Company entered into a service agreement for the contracting of certain administrative services from Educate.  Also, the Company entered into a sub-lease agreement with Educate for certain space in the Company’s headquarters facility.  See the contractual obligations and contingent matters discussion for further description of these agreements.

Ventures had no general and administrative expenses or non-operating expenses in 2004 due to the sale of its investment portfolio and the related discontinuation of its administrative costs during the second quarter of 2003.  Ventures incurred $1.8 million of general and administrative expenses in 2003 related to management of its investment portfolio.

Non-cash stock compensation expense decreased $17.3 million to $5.7 million for 2004 compared to $23.0 million for 2003.  During 2003, employee stock options of a subsidiary were exchanged for options to acquire Laureate common stock resulting in compensation expense of $21.9 million in 2003 and $1.9 million in 2004.  In each year, the Company also issued restricted stock to senior executives resulting in additional non-cash compensation expense of  $2.8 million in 2004 and $1.0 million in 2003.

During 2004, certain employees were inadvertently permitted to exercise stock options on a net share basis, whereby shares equal in value to the option exercise price and the employee’s minimum tax withholding obligation were withheld by the Company (also known as a “cashless exercise”).  Under Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, the use of “in the money” options to cover the exercise price resulted in a new measurement date and, as a result, the Company recognized $1.0 million of additional compensation expense in continuing operations for the difference between the exercise price and the market value of the shares on date of exercise.  When the situation was discovered by management in May 2004, the Company discontinued this practice and, therefore, expects no further compensation charges from the exercise of employee stock options.

Non-Operating Income/Expenses.  Non-operating income/expenses changed to income of $19.6 million for 2004 from an expense of $10.0 million in 2003.  This change was primarily attributable to income recognized in connection with the early repayment of a note receivable originally issued on June 30, 2003, as partial consideration for the sale of the Company’s K-12 segments to Educate with an original issue discount of $13.4 million.  The primary component of non-operating expense in 2003 was a loss on investments of $8.4 million.

Investment and other income increased $21.2 million to $28.2 million from $7.0 million in 2003. In connection with the Educate note, the Company recorded income of $12.7 million due to the accelerated recognition of the remaining unamortized original issue discount.  The remaining increase in the investment and other income was primarily due to the interest earned on the Educate note prior to repayment.

Ventures loss on investment of $8.4 million during 2003 was primarily attributable to the write-off of the investment in ClubMom, Inc.

Interest expense decreased $1.2 million primarily due to the retirement and conversion of $95.0 million of convertible debentures in 2003, partially offset by an increase in expense related to debt incurred in connection with the 2003 UNAB acquisition.

Minority Interest in (Income) Loss of Affiliates, Net of Tax.  Minority interest (income) loss of affiliates increased $6.6 million to $21.0 million in 2004 from $14.5 million in 2003. Acquisitions added $1.6 million, and the minority share of improved operating results at UVM, UDLA, UNAB and Walden was $4.5 million. As more fully described in Note 4 to the consolidated financial statements, the ownership interests of the minority shareholders at Walden and UEM were bought in September 2004 and December 2004, respectively.

Income Taxes. The Company has operations in multiple countries, many of which have statutory tax rates lower than the United States.  Since approximately 80% of the Company’s revenues are generated outside the United States, the impact of generally lower effective tax rates in these foreign jurisdictions is an effective tax rate significantly lower than the United States statutory rate as outlined in Note 14 to the consolidated financial statements.

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Comparison of results for 2003 to results for 2002.

Revenues.  Total revenues increased by $136.8 million, or 41%, to $472.8 million for the year ended December 31, 2003 (“2003”) from $336.0 million for the year ended December 31, 2002 (“2002”).  This revenue increase was primarily driven by increases in tuition and enrollment at higher education institutions in the campus-based segments, and the May 2003 acquisition of UNAB.

Latin America revenue for 2003 increased by $80.1 million, or 47%, to $249.5 million compared to 2002.  This increase was primarily due to higher tuition and enrollments at higher education institutions owned in both fiscal years, as well as the impact of the May 2003 acquisition of UNAB.  On an overall basis, enrollment increases of 23.7% in schools owned in both fiscal years added revenues of $36.8 million over 2002.  The Company increased local currency tuition by a weighted average of 8.1% in 2003 compared to 2002, which served to increase revenues by $15.5 million.  Each institution in the segment offers tuitions at various prices based upon degree program.  For 2003, the effects of product mix resulted in a $1.4 million increase in revenue due to higher-priced undergraduate enrollment growth exceeding working adult and high school enrollment growth.   The Company operates in several countries and is subject to the effects of foreign currency exchange rates in each of those countries.  For 2003, the effects of currency translations decreased revenues by $15.7 million, primarily due to the Mexican Peso devaluation against the U.S. Dollar during 2003.  Latin America acquisitions, primarily that of UNAB in the second quarter of 2003, increased revenue by $42.1 million.  Latin America revenue represented 53% of total revenues for 2003, and 50% of total revenues for 2002.

Europe revenue for 2003 increased by $34.7 million, or 38%, to $126.6 million compared to 2002.  This increase was primarily due to higher tuition and enrollments at higher education institutions owned in both fiscal years, as well as the impact of the Glion acquisition.  On an overall basis, enrollment increases of 2.9% in schools owned in both fiscal years added revenues of $2.7 million over 2002.  The Company increased local currency tuition by a weighted average of 5.7% in 2003 compared to 2002, which served to increase revenues by $4.2 million.  Each institution in the segment offers tuitions at various prices based upon degree program.  For 2003, the effects of product mix resulted in a $2.8 million reduction in revenue, primarily due to lower-priced post-graduate enrollment growth in Spain exceeding undergraduate enrollment growth.  The Company operates in several countries and is subject to the effects of foreign currency exchange rates in each of those countries.  For 2003, the effects of currency translations increased revenues by $17.8 million, primarily due to the strengthening of the Euro and Swiss franc against the U.S. Dollar.  Europe revenue increased by $12.8 million due to the acquisition of Glion in the third quarter of 2002.  Europe revenue represented 27% of total revenues for the 2003 and 2002 fiscal years.

Laureate Online Education revenue increased by $21.5 million, or 29%, to $95.8 million for 2003 compared to 2002.  For fiscal 2003, revenues reflect an overall student increase of 6% and an increase in new students of 11%.  Fiscal 2003 revenue includes an average tuition increase of approximately 5% in all of Laureate Online Education programs.  Laureate Online Education revenue represented 20% of total revenues for 2003, and 22% of revenue for 2002.

Direct Costs. Total direct costs of revenues increased $101.0 million, or 34%, to $395.2 million for 2003 from $294.2 million for 2002.  Direct costs decreased to 84% of total revenues in 2003 from 88% in 2002 primarily due to increased enrollments providing improved leverage of the fixed cost base.

Latin America expenses increased by $53.5 million to $191.9 million, or 77% of Latin America revenue for 2003, compared to $138.4 million, or 82% of Latin America revenue for 2002.  Increased enrollments and operating activities at the higher education institutions compared to 2002 added expenses of $36.9 million, and the effect of the acquisition of a controlling interest in UNAB in the second quarter of 2003 and UI in the fourth quarter of 2003 increased expenses by $29.4 million.  For 2003, the effects of currency translations decreased expenses by $12.8 million, primarily due to the Mexican Peso devaluation against the U.S. Dollar during 2003.  The decrease in operating expenses as a percentage of revenue reflects the higher operating margins at UNAB, which was in session from the second quarter 2003 date of acquisition through year-end.

Europe expenses increased by $31.4 million to $106.6 million, or 84% of Europe revenue for 2003, compared to $75.2 million, or 82% of Europe revenue for 2002.  Increased enrollments and operating activities at the higher education institutions compared to 2002 added expenses of $4.9 million, and the acquisition of controlling interest in Glion in the third quarter of 2002 increased expenses by $11.9 million.  For 2003, the effects of currency translations increased expenses by $14.6 million, primarily due to the strengthening of the Euro and Swiss Franc against the U.S. Dollar during 2003.  The increase in operating expenses as a percentage of revenue reflects a decline in the profit margin of the Swiss business.

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Campus-based segments overhead expense decreased by $0.7 million to $12.0 million in 2003 compared to $12.7 million in 2002.

Laureate Online Education expenses increased by $17.2 million to $82.5 million, or 86% of Laureate Online Education revenue for 2003, compared to $65.3 million, or 88% of Laureate Online Education revenue for 2002.  The decrease in direct costs as a percentage of Laureate Online Education revenues is due to the allocation of fixed costs over a greater revenue base as well as the implementation of cost cutting initiatives.

Other Operating Expenses.  Other expenses increased by $15.4 million to $42.6 million for 2003 from $27.2 million for 2002.  The increase in other operating expenses, related primarily to the increase in non-cash stock compensation expense, was partially offset by decreases in general and administrative expenses.

Core operating segments general and administrative expenses decreased by $3.5 million in 2003 compared to 2002.  As a result of the sale of the K-12 segments, certain employees that were principally dedicated to servicing the K-12 segments were employed by Educate effective July 1, 2003.  Contemporaneously, a service agreement was executed with Educate whereby the Company agreed to obtain certain administrative services from Educate.  Also, a sub-lease agreement was executed with Educate for certain space in the Company’s headquarters facility. (See related contractual obligations discussion for further description of these agreements later in this report).  The reduction of the core operating segment general and administrative expenses was the direct result of this reduction in labor costs and facilities costs, partially offset by expenses incurred under the services agreement.

Ventures general and administrative expenses decreased by $3.0 million to $1.8 million for 2003 compared to $4.8 million for 2002. The decrease was due to the sale of Ventures’ portfolio and related discontinuation of Ventures’ administrative costs in the second quarter of 2003.

Non-cash stock compensation expense increased to $23.1 million for 2003 from $1.0 million for 2002. This expense consisted primarily of $21.9 million of compensation expense resulting from the exchange of employee stock options of a subsidiary for stock options to acquire the Company’s common stock during the second quarter of 2003.  The Company also recorded non-cash compensation of $1.0 million related to current grants of restricted stock.

Non-Operating Income/Expenses.  Non-operating income/expenses decreased $1.3 million to $10.0 million for 2002 from $11.3 million in 2003.  An increase of $6.1 million in Ventures investment losses was offset by a decrease of $8.3 million in losses on other investments.

The Ventures loss on investments of $8.4 million in 2003 was primarily attributable to the write-off of the cost of its investment in ClubMom, Inc. during the first quarter of 2003.  The $8.3 million loss on other investments in 2002 relates primarily to a $7.4 million write-off of investments in and advances to the Frontline Group.

Interest expense increased $0.6 million primarily due to debt assumed in the August 2002 Glion acquisition and incurred in connection with the May 2003 UNAB acquisition.

Minority Interest in (Income) Loss of Affiliates, Net of Tax.  Minority interest (income) loss of affiliates increased $9.6 million to $14.5 million in 2003 from $4.8 million in 2002. The acquisition of UNAB in April 2003 added $2.4 million, and improved operating results at UEM, UVM, UNAB and Walden added $5.6 million. Minority participation in Ventures losse decreased by $1.6 million.

Income Taxes.  The Company has operations in multiple countries, many of which have statutory tax rates lower than the United States.  Since approximately 80% of the Company’s revenues are generated outside the United States, the impact of generally lower effective tax rates in these foreign jurisdictions results in a tax rate significantly lower than the United States statutory rate as outlined in Note 14 to the consolidated financial statements.

Cumulative Effect of Change in Accounting Principle.   As a result of adopting Statement No. 142 as of January 1, 2002 and performing the required transitional impairment tests, the Company recorded a non-cash charge of $78.6 million in 2002, net of income tax benefit of $7.7 million, which was included in cumulative effect of change in accounting principle in the consolidated statements of operations.  The impairment charge related solely to WSI.

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Liquidity and Capital Resources

The Company generates revenue from tuition and other fees charged to students in connection with its various education program offerings.  Students typically self-finance the costs of their education or seek third-party sponsored financing programs.  Tuition is generally collected in advance.  As a result, working capital is generally a source rather than use of funds. Given the favorable cash flow characteristics of the Company’s post-secondary education business, Laureate anticipates generating sufficient cash flow from operations within each of the individual countries where we operate to satisfy the working capital and financing needs of the Company’s organic growth plans for each country.  Accordingly, liquidity is managed locally with oversight provided by corporate staff in Baltimore, Maryland.

The Company incurs significant costs at its headquarters location in Baltimore, Maryland relating to 1) meeting U.S. and group corporate governance, reporting and compliance requirements, 2) stewardship and financing of its ownership in investments and subsidiaries, and (3) development of group synergies among its investments and subsidiaries.  Cash flow from operations generated by the Company’s domestic businesses, included within Laureate Online Education, coupled with incremental borrowing capacity, are expected to be sufficient to meet future domestic working capital, financing and investment needs.

Cash provided by operations was $124.4 million for 2004, compared to cash provided by operations of $58.9 million for 2003.  The reported net income in 2004 of $63.0 million included significant non-cash expenses and charges, primarily depreciation and amortization of $41.6 million, loss on disposal of discontinued operations of $13.3 million, non-cash stock compensation expense of $7.2 million, minority interest of $21.0 million, offset by non-cash gains, including the acceleration of the original issue discount on the repayment of the Educate note of $12.7 million and a gain on conveyance of land as purchase consideration of $5.1 million. Cash used by working capital activity totaled $6.4 million in 2004, compared to $24.6 million in 2003. Accounts receivable at December 31, 2004 was $128.5 million, an increase of $37.9 million over the December 31, 2003 balance.  The increase due to acquisitions is $15.7 million, exchange rate added $3.5 million, and revenue growth at entities owned in both periods added $18.7 million.  Notes receivable at December 31, 2004 was $85.5 million, an increase of $41.2 million over the December 31, 2003 balance. Revenue growth, including acquisitions contributed $9.1 million, exchange rate added $4.9 million, and early 2005 registrations in Chile resulting from earlier than usual college entrance exams added $27.2 million.  Deferred revenue at December 31, 2004 was $225.7 million, an increase of $72.8 million over the December 31, 2003 balance.  The increase due to acquisitions is $25.0 million, exchange rate added $6.7 million, revenue growth at entities owned in both periods added $13.9 million, and early 2005 registrations in Chile resulting from earlier than usual college entrance exams added $27.2 million. The reported 2003 fiscal year net income of $46.1 million included significant non-cash expenses and charges such as depreciation and amortization of $30.9 million, loss on ventures investments held for sale of $8.4 million, non-cash stock compensation expense of $27.1 million, minority interest of $14.5 million and equity in net loss of affiliates of $3.7 million.  Net income in 2003 also included a net gain on disposal of discontinued operations of $41.9 million.

Cash used in investing activities was $128.2 million for 2004, compared to cash used in investing activities of $42.9 million for 2003.  The 2004 investment activity included proceeds from the early repayment of notes receivable of $55.0 million, net proceeds from sale of available-for-sale securities of $13.6 million, proceeds from the sale of land of $13.1 million and proceeds from sale of investments in affiliates and other investments of $4.1 million. These cash inflows were offset by purchases of property and equipment of $100.8 million primarily related to construction of new campuses and campus expansion, cash loaned in exchange for notes receivable of $23.2 million less repayments of $2.7 million, net cash paid for acquired businesses of $80.1 million, and expenditures for deferred costs and other assets of $12.7 million.  Investment activity in 2003 was primarily the result of net cash proceeds from the sale of the K-12 segments of $96.4 million and net proceeds from the sale of available-for-sale securities of $12.5 million, offset by the purchases of property and equipment of $81.1 million, net cash paid for acquired businesses of $61.9 million and expenditures for deferred costs and other assets of $8.0 million.

Cash provided by financing activities was $31.8 million in 2004, compared to cash used in financing activities of $2.8 million in 2003.  The 2004 financing activity related primarily to cash received from the exercise of options of $19.7 million, cash received from the issuance of long-term debt of $77.8 million less repayments of $66.9 million, and a change in long-term liabilities of $1.3 million.  Financing activity in 2003 related primarily to cash received from the issuance of long-term debt of $22.1 million less repayments of $39.5 million, and decreases in other long-term liabilities of $2.7 million, offset by proceeds from the exercise of options of $15.0 million and cash received from the minority partners of  $2.3 million.

The Company anticipates that cash flow from operations, available cash and existing credit facilities will be sufficient to meet its operating requirements, including expansion of its existing business, funding campus-based higher education institution acquisitions, and payment of contingent consideration.  The Company continues to examine opportunities in the

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educational services industry for potential synergistic acquisitions and expects that existing capital resources (including credit facilities) will be sufficient to continue to acquire businesses in the educational services industry for at least the next several years.  However, if the Company were to pursue a number of large acquisitions, additional debt or equity capital may be required.  The Company cannot be certain that this capital would be available on attractive terms, if at all.

Contractual Obligations and Contingent Matters

The following tables reflect the Company’s contractual obligations and other commercial commitments as of December 31, 2004: