INDEX

Page No. PART I. - —FINANCIAL INFORMATION     Item 1.   Financial Statements (Unaudited)         Item 1. Financial Statements (Unaudited)               Consolidated Balance Sheets — September 30, 2005March 31, 2006 and December 31, 20042005   1                    Consolidated Statements of Operations -— Three months ended September 30,March 31, 2006 and March 31, 2005 and September 30, 2004   3                    Consolidated Statements of Operations - NineCash Flows — Three months ended September 30,March 31, 2006 and March 31, 2005 and September 30, 2004 4        Consolidated Statements of Cash Flows - Nine months ended September 30, 2005 and September 30, 2004               Notes to Consolidated Financial Statements — September 30, 2005March 31, 2006 5                  Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations   Item 3. Quantitative and Qualitative Disclosures About Market Risk 18                Item 3.   Item 4.Quantitative and Qualitative Disclosures About Market Risk Controls and Procedures 25                PART II. - OTHER INFORMATIONItem 4. Controls and Procedures 26            Item 1.PART II.—OTHER INFORMATION Legal Proceedings Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Item 3. Defaults Upon Senior Securities Item 4. Submission of Matters to a Vote of Security Holders Item 5. Other Information Item 6. Exhibits                 Item 1. Legal Proceedings N/A    Item 1A. Risk Factors N/A    Item 2. Unregistered Sales of Equity Securities and Use of Proceeds N/A    Item 3. Defaults Upon Senior Securities N/A    Item 4. Submission of Matters to a Vote of Security Holders N/A    Item 5. Other Information N/A    Item 6. Exhibits 27      SIGNATURESIGNATURES 28        i LAUREATE EDUCATION, INC. AND SUBSIDIARIES Consolidated Balance Sheets (Dollar and share amounts in thousands, except per share data)     March 31,   December 31,       2006   2005       (unaudited)   (as restated - Note 2)   Assets           Current assets:           Cash and cash equivalents   $ 141,634   $ 105,106   Available-for-sale securities   2,974   4,768               Receivables:           Accounts receivable   167,326   181,211   Notes receivable   113,600   101,764   Other receivables   13,400   14,208       294,326   297,183   Allowance for doubtful accounts   (38,225 ) (39,006 )     256,101   258,177               Inventory   6,002   5,282   Deferred income taxes   18,627   16,978   Income tax receivable   2,886   2,373   Prepaid expenses and other current assets   22,612   17,836   Total current assets   450,836   410,520               Notes receivable, less current portion, net of allowance of $9,360 and $9,328 at March 31, 2006 and December 31, 2005, respectively   93,548   86,931               Property and equipment:           Land   111,318   101,993   Buildings   263,786   256,941   Construction in-progress   43,143   40,856   Furniture, computer equipment and software   230,523   223,143   Leasehold improvements   84,459   81,336       733,229   704,269   Accumulated depreciation and amortization   (142,113 ) (130,332 )     591,116   573,937               Goodwill   413,450   412,419   Other intangible assets:           Tradenames and accreditations   216,583   215,112   Other intangible assets, net of accumulated amortization of $15,447 and $14,397 at March 31, 2006 and December 31, 2005, respectively    6,011   7,163       636,044   634,694               Deferred income taxes   26,014   25,760   Deferred costs, net of accumulated amortization of $15,273 and $14,041 at March 31, 2006 and December 31, 2005, respectively   21,473   21,935   Other assets   21,678   19,651   Net assets of discontinued operations   1,687   2,906   Total assets   $ 1,842,396   $ 1,776,334         September 30,   December 31,       2005   2004       (Unaudited)   (as restated - Note 3)   Assets           Current assets:           Cash and cash equivalents   $ 99,453   $ 106,854   Available-for-sale securities   4,699   3,258               Receivables:           Accounts receivable   90,209   126,486   Notes receivable   72,318   85,450   Other receivables   7,385   3,507       169,912   215,443   Allowance for doubtful accounts   (28,021 ) (25,209 )     141,891   190,234               Inventory   4,721   4,618   Deferred income taxes   5,103   5,079   Income tax receivable   18,693   33,523   Prepaid expenses and other current assets   21,369   15,230   Net assets of discontinued operations, current   1,840   20,000   Total current assets   297,769   378,796               Notes receivable, less current portion, net of allowance of $8,323 and $5,846 at September 30, 2005 and December 31, 2004, respectively   78,679   50,384               Property and equipment:           Land   101,107   95,153   Buildings   257,594   266,524   Construction in-progress   28,415   3,154   Furniture, computer equipment and software   198,668   161,132   Leasehold improvements   72,909   56,362       658,693   582,325   Accumulated depreciation and amortization   (121,241 ) (97,163 )     537,452   485,162               Goodwill   360,667   364,973   Other intangible assets:           Tradenames and accreditations   183,950   174,245   Other intangible assets, net of accumulated amortization of $13,080 and $9,358 at September 30, 2005 and December 31, 2004, respectively   7,643   11,447       552,260   550,665               Deferred income taxes   1,426   3,335   Deferred costs, net of accumulated amortization of $12,785 and $10,025 at September 30, 2005 and December 31, 2004, respectively   22,250   15,976   Other assets   17,745   16,193   Net assets of discontinued operations   —   30,199   Total assets   $ 1,507,581   $ 1,530,710   1     September 30,   December 31,       2005   2004       (Unaudited)   (as restated - Note 3)   Liabilities and stockholders’ equity           Current liabilities:           Accounts payable   $ 24,334   $ 20,824   Accrued expenses   96,875   108,542   Deferred revenue   193,172   225,747   Current portion of long-term debt   43,453   47,010   Current portion of due to shareholders of acquired companies   10,462   26,861   Income tax payable   1,774   15,423   Deferred income taxes   631   1,205   Other current liabilities   4,823   10,482   Total current liabilities   375,524   456,094               Long-term debt, less current portion   76,196   86,605   Due to shareholders of acquired companies, less current portion   35,343   29,402   Deferred income taxes   20,719   22,446   Other long-term liabilities   19,992   19,990   Total liabilities   527,774   614,537               Commitments and contingent liabilities   —   —               Minority interest   52,668   37,538               Stockholders’ equity:           Preferred stock, par value $.01 per share — authorized 10,000 shares, no shares issued and outstanding as of September 30, 2005 and December 31, 2004   —   —   Common stock, par value $.01 per share — authorized 90,000 shares, issued and outstanding shares of 49,759 and 48,813 as of September 30, 2005 and December 31, 2004, respectively   498   488   Additional paid-in capital   497,027   474,928   Retained earnings   392,209   355,989   Accumulated other comprehensive income   37,405   47,230   Total stockholders’ equity   927,139   878,635               Total liabilities and stockholders’ equity   $ 1,507,581   $ 1,530,710               See accompanying notes to financial statements.           2 LAUREATE EDUCATION, INC. AND SUBSIDIARIES Consolidated Balance Sheets (continued) Consolidated Statements of Operations (Dollar amounts in thousands, except per share data)     Three months ended September 30,       2005   2004       (Unaudited)               Revenues   $ 199,204   $ 146,110               Costs and expenses           Direct costs   169,852   122,063   General and administrative expenses   7,173   5,450   Non-cash stock compensation expense (1)   1,335   891   Total costs and expenses   178,360   128,404               Operating income   20,844   17,706               Other income (expense)           Interest and other income   2,876   1,160   Interest expense   (2,611 ) (2,067 ) Foreign currency exchange loss   (90 ) (509 )     175   (1,416 ) Income from continuing operations before income taxes, minority interest, and equity in net loss of affiliates   21,019   16,290   Income tax expense   (2,977 ) (2,795 ) Minority interest in income of consolidated subsidiaries, net of tax   (5,829 ) (4,192 ) Equity in net loss of affiliates, net of tax   (166 ) —               Income from continuing operations   12,047   9,303   (Loss) income from discontinued operations, net of income tax benefit of $0 in 2005 and $974 in 2004   (229 ) 31               Net income   $ 11,818   $ 9,334               Earnings per common share, basic:           Income from continuing operations   $ 0.24   $ 0.20   Net income   $ 0.24   $ 0.20               Earnings per common share, diluted:           Income from continuing operations   $ 0.23   $ 0.19   Net income   $ 0.23   $ 0.19             (1) Composition of non-cash stock compensation expense:           Direct costs   $ 366   $ 714   General and administrative expenses   969   177   Total   $ 1,335   $ 891               See accompanying notes to financial statements.           3     Nine months ended September 30,       2005   2004       (as restated - Note 3)           (Unaudited)               Revenues   $ 597,606   $ 436,517               Costs and expenses           Direct costs   516,062   373,002   General and administrative expenses   19,074   16,170   Non-cash stock compensation expense (1)   2,529   3,886   Total costs and expenses   537,665   393,058               Operating income   59,941   43,459               Other income (expense)           Interest and other income   8,565   20,505   Interest expense   (7,687 ) (5,220 ) Foreign currency exchange loss   (777 ) (446 )     101   14,839   Income from continuing operations before income taxes, minority interest, and equity in net loss of affiliates   60,042   58,298   Income tax expense   (8,406 ) (9,911 ) Minority interest in income of consolidated subsidiaries, net of tax   (13,081 ) (12,732 ) Equity in net loss of affiliates, net of tax   (370 ) (8 )             Income from continuing operations   38,185   35,647   Income (loss) from discontinued operations, net of income tax benefit of $285 in 2005 and $155 in 2004   386   (5,887 ) Loss on disposal of discontinued operations, net of income tax expense of $3,131 in 2005 and $0 in 2004   (2,351 ) —               Net income   $ 36,220   $ 29,760               Earnings per common share, basic:           Income from continuing operations   $ 0.77   $ 0.78   Net income   $ 0.73   $ 0.65               Earnings per common share, diluted:           Income from continuing operations   $ 0.74   $ 0.74   Net income   $ 0.70   $ 0.62             (1) Composition of non-cash stock compensation expense:           Direct costs   $ 960   $ 2,105   General and administrative expenses   1,569   1,781   Total   $ 2,529   $ 3,886               See accompanying notes to financial statements.           4 LAUREATE EDUCATION, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (Dollar amounts in thousands)     Nine months ended September 30,       2005   2004       (Unaudited)   Operating activities           Net income   $ 36,220   $ 29,760   Adjustments to reconcile net income to net cash provided by operating activities:           Depreciation and amortization of fixed assets   26,861   22,176   Amortization   10,439   8,116   Loss on disposal of discontinued operations   2,351   —   Non-cash stock compensation expense - continuing operations   2,529   3,886   Non-cash stock compensation expense - discontinued operations   —   1,436   Acceleration of original issue discount on note receivable repayment   —   (12,722 ) Minority interest in consolidated subsidiaries   12,961   12,732   Equity in net loss of affiliates   370   8   Deferred income taxes   (666 ) 9,466   Other non-cash items   (2,065 ) (1,711 ) Changes in operating assets and liabilities:           Receivables   52,481   7,408   Income tax receivable   15,676   —   Inventory, prepaid expenses and other current assets   (6,406 ) (2,165 ) Accounts payable and accrued expenses   (14,835 ) 6,419   Income tax payable   (7,614 ) (15,305 ) Deferred revenue and other current liabilities   (32,373 ) (5,044 ) Net cash provided by operating activities   95,929   64,460               Investing activities           Purchase of available-for-sale securities   (4,393 ) (48,812 ) Proceeds from sales or maturity of available-for-sale securities   2,950   39,605   Change in investment in and advances to affiliates and other investments   —   2,128   Purchase of property and equipment, net   (82,861 ) (74,038 ) Cash loaned in exchange for notes receivable   (5,414 ) (12,000 ) Proceeds from repayment of related party note receivable   —   55,247   Proceeds from sales of discontinued operations, net of cash sold   12,654   —   Cash paid for acquisitions, net of cash acquired   (9,485 ) (19,956 ) Payment of deferred consideration for prior period acquisitions   (25,232 ) (1,349 ) Expenditures for deferred costs   (9,089 ) (7,941 ) Change in other long-term assets   1,578   (321 ) Net cash used in investing activities   (119,292 ) (67,437 )             Financing activities           Proceeds from exercise of options   11,207   11,454   Proceeds from issuance of common stock   —   151   Proceeds from issuance of long-term debt   72,045   31,581   Payments on long-term debt   (80,067 ) (36,975 ) Cash received from minority interest members   —   1,595   Change in long-term liabilities   (1,238 ) 2,824   Net cash provided by financing activities   1,947   10,630   Effects of exchange rate changes on cash   3,351   (3,222 )             Net change in cash and cash equivalents   (18,065 ) 4,431   Cash and cash equivalents at beginning of period   117,518   98,388   Cash and cash equivalents at end of period   $ 99,453   $ 102,819               Cash and cash equivalents classified as:           Continuing operations   $ 99,453   $ 94,164   Discontinued operations   —   8,655   Cash and cash equivalents at end of period   $ 99,453   $ 102,819               See accompanying notes to financial statements.           5 Laureate Education, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) (Dollar and share amounts in thousands, except per share data)     March 31,   December 31,       2006   2005       (unaudited)   (as restated - Note 2)   Liabilities and stockholders’ equity           Current liabilities:           Accounts payable   $ 32,444   $ 30,078   Accrued expenses   112,099   106,463   Deferred revenue   319,908   273,193   Current portion of long-term debt   50,741   63,044   Current portion of due to shareholders of acquired companies   18,996   18,737   Income tax payable   31,106   31,615   Deferred income taxes   28,897   28,644   Other current liabilities   6,182   3,543   Total current liabilities   600,373   555,317               Long-term debt, less current portion   98,323   99,997   Due to shareholders of acquired companies, less current portion   44,035   46,686   Deferred income taxes   1,764   583   Other long-term liabilities   24,208   22,876   Total liabilities   768,703   725,459               Commitments and contingent liabilities   —   —               Minority interest   74,045   72,354               Stockholders’ equity:           Preferred stock, par value $.01 per share — authorized 10,000 shares, no shares issued and outstanding as of March 31, 2006 and December 31, 2005   —   —   Common stock, par value $.01 per share — authorized 90,000 shares, issued and outstanding shares of 51,258 and 49,861 as of March 31, 2006 and December 31, 2005, respectively   513   499   Additional paid-in capital   524,740   503,791   Retained earnings   434,737   435,412   Accumulated other comprehensive income   39,658   38,819   Total stockholders’ equity   999,648   978,521               Total liabilities and stockholders’ equity   $ 1,842,396   $ 1,776,334   See accompanying notes to financial statements. LAUREATE EDUCATION, INC. AND SUBSIDIARIES Consolidated Statements of Operations (Dollar amounts in thousands, except per share data)     Three months ended March 31,       2006   2005           (as restated - Note 2)       (Unaudited)               Revenues   $ 235,110   $ 178,677               Costs and expenses           Direct costs   225,232   170,247   General and administrative expenses   9,851   6,696   Total costs and expenses   235,083   176,943               Operating income   27   1,734               Other income (expense)           Interest and other income   3,722   2,416   Interest expense   (3,606 ) (2,373 ) Foreign currency exchange (loss) gain   (111 ) 249       5   292   Income from continuing operations before income taxes, minority interest, and equity in net loss of affiliates   32   2,026   Income tax expense   (233 ) (227 ) Minority interest in income of consolidated subsidiaries, net of tax   (457 ) (381 ) Equity in net loss of affiliates, net of tax   (109 ) (90 )             (Loss) Income from continuing operations   (767 ) 1,328   (Loss) Income from discontinued operations, net of income tax benefit of $0 in 2006 and $285 in 2005   (169 ) 612   Gain from disposal of discontinued operations, net of income tax benefit of $576 in 2006 and $0 in 2005   261   —               Net (loss) income   $ (675 ) $ 1,940               Earnings (Loss) per common share, basic:           (Loss) Income from continuing operations   $ (0.02 ) $ 0.03   Net (loss) income   $ (0.01 ) $ 0.04               Earnings (Loss) per common share, diluted:           (Loss) Income from continuing operations   $ (0.02 ) $ 0.03   Net (loss) income   $ (0.01 ) $ 0.04               See accompanying notes to financial statements. LAUREATE EDUCATION, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (Dollar amounts in thousands)     Three Months Ended March 31,       2006   2005           (as restated - Note 2)   Operating activities           Net (loss) income   $ (675 ) $ 1,940   Adjustments to reconcile net (loss) income to net cash provided by operating activities:           Depreciation and amortization of fixed assets   11,856   8,974   Amortization   2,951   2,644   Gain on disposal of discontinued operations   (261 ) —   Non-cash stock compensation expense   3,429   780   Minority interest in consolidated subsidiaries   457   381   Equity in net loss of affiliates   109   90   Deferred income taxes   (1,524 ) (1,570 ) Other non-cash items   (1,159 ) (1,126 ) Changes in operating assets and liabilities:           Receivables   (4,001 ) (21,854 ) Income tax receivable   —   15,676   Inventory, prepaid expenses and other current assets   (5,637 ) (938 ) Accounts payable and accrued expenses   6,354   (5,806 ) Income tax payable   57   (977 ) Deferred revenue and other current liabilities   52,142   46,905   Net cash provided by operating activities   64,098   45,119               Investing activities           Purchase of available-for-sale securities   (1,799 ) (8,451 ) Proceeds from sales or maturity of available-for-sale securities   3,642   897   Purchase of property and equipment, net   (31,984 ) (14,358 ) Proceeds from sales of discontinued operations, net of cash sold   —   12,654   Cash loaned in exchange for notes receivable   (1,642 ) (2,752 ) Proceeds from repayment of notes receivable   9   —   Cash paid for acquisitions, net of cash acquired   —   (5,957 ) Payment of deferred consideration for prior period acquisitions   —   (20,312 ) Expenditures for deferred costs   (1,061 ) (1,714 ) Change in other long-term assets   2,036   (808 ) Net cash used in investing activities   (30,799 ) (40,801 )             Financing activities           Proceeds from exercise of options   17,534   5,542   Proceeds from issuance of long-term debt   27,107   28,580   Payments on long-term debt   (41,756 ) (47,995 ) Change in other long-term liabilities   1,564   (944 ) Net cash provided by (used in) financing activities   4,449   (14,817 ) Effects of exchange rate changes on cash   (1,220 ) (950 )             Net change in cash and cash equivalents   36,528   (11,449 ) Cash and cash equivalents at beginning of period   105,106   116,261   Cash and cash equivalents at end of period   $ 141,634   $ 104,812   See accompanying notes to financial statements. 4 Laureate Education, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) (Dollar and share amounts in thousands, except per share data) Note 1 -– Description of Business and Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These financial statements should be read in conjunction with the audited consolidated financial statements of the Company for the fiscal year ended December 31, 2004,2005, included in the Company’s Annual Report on Form 10-K.10-K/A. Operating results for the three- and nine-month periodsthree-month period ended September 30, 2005March 31, 2006 are not necessarily indicative of the results that may be expected for the year ending December 31, 2005.2006. The traditional semester programs in the education industry, with a summer break, result in significant seasonality in the operating results of Laureate Education, Inc. and subsidiaries (the “Company”). The consolidated balance sheet at December 31, 20042005 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. Certain amounts previously reported for 20042005, including certain long-term notes receivable and deferred revenue balances, have been reclassified to conform to the 20052006 presentation. The Company is focused exclusively on providing a superior higher education experience to over 193,000approximately 226,000 students through a leading global network of accredited campus-based and online universities and higher education institutions (“higher education institutions”). The Company’s educational offerings are delivered through three separate reportable segments: Campus Based - Latin America (“Latin America”), Campus Based - Europe (“Europe”) and Laureate Online Education. The campus-based segments of Latin America and Europe own or maintain controlling interests in eleven and seventen separately accredited higher education institutions, respectively. The Latin America segment has locations in Mexico, Chile, Brazil, Peru, Ecuador, Honduras, Panama, and Costa Rica. The Europe segment has locations in Spain, Switzerland, France, and France.Cyprus. The Laureate Online Education segment provides career-oriented degree programs to working adult students through Walden E-Learning, Inc. (“Walden”), Laureate Online Education BV, and Canter and Associates (“Canter”). Note 2 —– Significant Accounting Policies Revenue Recognition and Accounting Change Effective January 1, 2006, the Company made a preferential change in its revenue recognition policies regarding semester-based tuition for its campus-based universities. (See Exhibit 18.01 for the Letter Regarding Change in Accounting Principle — Preferability Letter — on this change in method.) The universities now recognize tuition revenue ratably on a weekly straight-line basis over each academic session instead of the previously used monthly straight-line basis. Tuition revenue is reported net of scholarships and other discounts. Tuition paid in advance or unpaid and unearned tuition included in accounts receivable is recorded as deferred revenue. This change was made to improve transparency and the correlation between the Company’s enrollments, revenues, and actual academic calendars. All other revenue is recognized as earned over the appropriate service period, including the Company’s online business. Dormitory revenues are recognized over the occupancy period. Revenue from the sale of educational products is generally recognized when shipped and collectibility is reasonably assured. The Company has applied this change retrospectively with all prior period financial statements presented in accordance with Statement of Financial Accounting Standard (“SFAS”) No. 154, Accounting Changes and Error Corrections, including retroactive application to all reporting periods presented. There is no material impact on the previously issued annual results of the Company as a result of this change. The following amounts represent the changes to each financial statement line affected by the Company’s preferential change in revenue recognition for the consolidated balance sheet as of December 31, 2005 and the statement of operations for the three months ended March 31, 2005:        December 31, 2005   Balance Sheet       Goodwill   $ 305   Total assets   $ 305           Deferred revenue   $ 817   Total liabilities   817           Minority interest   (325 )         Retained earnings   (143 ) Accumulated other comprehensive income   (44 ) Total stockholders’ equity   (187 )         Total liabilities and stockholders’ equity   $ 305       Three months ended March 31, 2005   Statement of Operations       Revenues   $ (3,752 )         Operating income   (3,752 )         Income from continuing operations before income taxes, minority interest and equity in net loss in affiliates      (3,752 )         Minority interest in income of consolidated subsidiaries, net of tax   635           (Loss) Income from continuing operations   (3,117 ) Net (loss) income   $ (3,117 )         Earnings (Loss) per share, basic:       (Loss) Income from Continuing Operations   $ (0.06 ) Net (loss) income   $ (0.06 )         Earnings (Loss) per share, diluted:       (Loss) Income from continuing operations   $ (0.06 ) Net (loss) income   $ (0.06 )   Stock BasedIncome Taxes The Company accounts for income taxes using the liability method. Under the liability method, deferred tax assets and liabilities are determined based on the differences between the financial statement carrying amounts and the tax basis of existing assets and liabilities (i.e. temporary differences) and are measured at prevailing enacted tax rates that will be in effect when these differences are settled or realized. The Company also measures its interim income tax provision using Financial Accounting Standards Board Interpretation (“FIN”) No. 18, Accounting for Income Taxes in Interim Periods. FIN No. 18 measures the seasonality of any subsidiary, or controlled entity, that operates at an annual loss for which no income tax benefit is recognized. This seasonality can cause volatility in the interim effective rates. FIN No. 18, however, has no effect on the Company’s annual effective tax rate. Equity-Based Compensation Effective January 1, 2006, the Company adopted the fair value recognition provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123 (revised 2004), “Share-Based Payment” (“SFAS No. 123R”), using the modified prospective transition method and therefore has not restated results for prior periods. Under this transition method, equity-based compensation expense for the first quarter of fiscal 2006 includes compensation expense for all equity-based compensation awards granted prior to, but not yet vested as of January 1, 2006, based on the grant date fair value estimated in accordance with the original provision of SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS No. 123”). Equity-based compensation expense for all equity-based compensation awards granted after January 1, 2006 is based on the grant-date fair value estimated in accordance with the provisions of SFAS 123R. The Company recognizes these compensation costs on a straight-line basis over the requisite service period of the award. SFAS No. 123R clarifies and expands the guidance in SFAS 123 in several areas, including measuring fair value and attributing compensation cost to reporting periods. Changes to SFAS 123 fair value measurement and service period provisions prescribed by SFAS 123R include a requirement to estimate forfeitures of share-based awards at the date of grant, rather than recognizing forfeitures as incurred as permitted by SFAS 123. The Company estimates the forfeiture rate based on the historical experience subsequent to the sale of the K-12 business units on June 30, 2003. The Company uses the Black-Scholes-Merton method to calculate the for fair value of stock options. The use of option valuation models requires the input of highly subjective assumptions, including the expected stock price volatility and the expected term of the option. In March 2005, the Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin No. 107 (“SAB No. 107”) regarding the SEC’s interpretation of SFAS No. 123R and the valuation of share-based payments for public companies. For options issued subsequent to January 1, 2006, the Company has applied the provisions of SAB No. 107 in its adoption of SFAS No. 123R. Under SAB No. 107, the Company has estimated the expected term of granted options to be the weighted average mid-point between the vesting date and the end of the contractual term. The Company estimates the volatility rate based on the weekly historical closing stock price since the sale of the K-12 business units on June 30, 2003. Prior to the adoption of SFAS 123R, the Company recognized equity-based compensation expense in accordance with Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees”. In addition, the Company presented the cash flows related to income tax deductions in excess of the compensation cost recognized on stock options exercised during the period (“excess tax benefits”) as operating cash flows in the Consolidated Statement of Cash Flows. SFAS No. 123R requires excess tax benefits to be classified as financing cash flows. The Company records compensation expense for all employee and director stock-based compensation plans using the intrinsic value method and provides pro forma disclosures of net income and net earnings per common share as if the fair value method had been applied in measuring stock compensation expense.  Under the intrinsic value method, stock compensation expense is defined as the difference between the amount payable upon exercise of an option and the quoted market value of the underlying common stock on the date of grant or measurement date, or in the case of issuances of restricted stock, the quoted market value of unrestricted shares of common stock on the date of grant.   Any resulting compensation expense is recognized ratably over the vesting period, or over the period that the restrictions lapse. The Company records compensation expense for all stock options granted to non-employees who are not directors of wholly-owned subsidiary boards in an amount equal to their estimated fair value at the earlier of the performance commitment date or the date at which performance is complete, determined using the Black-Scholes option pricing model. The compensation expense is recognized ratably over the vesting period. Note 3 – Equity-Based Compensation Equity-Based Compensation Plans The Board of Directors may grant options under six equity-based compensation plans to selected employees, officers and directors of the Company to purchase shares of the Company’s common stock at a price not less than the fair market value of the stock at the date of the grant. The 2005 Stock Incentive Plan (“2005 Plan”) is the only plan with significant stock option awards available for grant. Options outstanding under all six of the Company’s stock option plans have been granted at prices which are equal to or exceed the market value of the stock on the date of grant and vest ratably over periods not exceeding five years. Stock option awards under plans prior to the 2005 Plan are subject to time-based vesting over five years with a life of ten years.  Stock options awards under the 2005 Plan are subject to time-based vesting generally over four years with a life of seven years. Stock options under the 2005 Plan vest ratably over a four year period; the first year vests on the first anniversary date and the remaining three years vest quarterly. Stock options granted to non-employee Directors vested immediately prior to January 1, 2006. Subsequent to January 1, 2006, options to non-employee Directors vest monthly over a one year period. Restricted stock and restricted stock unit (“RSU”) awards granted prior to December 2005 are subject to time-based vesting generally over five years. Restricted stock and restricted stock unit awards granted subsequent to December 2005 are performance-based and are generally eligible for vesting over four years. Stock Options The following table summarizes the stock option activity of the Company for the three months ended March 31:     Options   Weighted- Average Exercise Price   Aggregate Intrinsic Value   Outstanding at December 31, 2005   6,188   $ 19.45       Granted   57   51.15       Exercised   (1,378 ) 14.31       Forfeited   —   —       Outstanding at March 31, 2006   4,867   $ 21.61   $ 154,244   Exercisable at March 31, 2006   3,555   $ 14.31   $ 136,429   Vested and expected to vest at March 31, 2006   4,647   $ 21.61   $ 147,279   The weighted average remaining contractual term of options outstanding is 4.4 years. The weighted average contractual term of exercisable options outstanding is 3.5 years. The total intrinsic value, measured as the pre-tax difference between the exercise price and the market price on the date of exercise, of all options exercised during the period was $54,291. The Company uses the Black-Scholes option pricing model to fair value stock options. The use of option valuation models require the input of highly subjective assumptions, including the expected term and the expected stock price volatility. The weighted average estimated fair values of stock options granted for the three months ended March 31, 2006 was $14.45. The total compensation expense related to stock options was $1,289, net of the impact of estimated forfeitures, for the three months ended March 31, 2006. As of March 31, 2006, $15,736 of total unrecognized compensation cost related to stock options is expected to be recognized over a weighted average period of 2.7 years. Nonvested Restricted Stock and Restricted Stock Units Nonvested restricted stock and RSU awards as of March 31, 2006 and changes during the three months ended March 31, 2006 are as follows:     Number of Shares   Weighted- Average Grant Date Fair Value   Nonvested at December 31, 2005   594   $ 38.18   Granted   4   $ 53.27   Lapsed   (7 ) $ 46.20   Forfeited   —   —   Nonvested at March 31, 2006   591   $ 38.19   Of the nonvested restricted stock and RSU awards above, 199 with a weighted-average grant date fair value of $53.04 per share, are subject solely to performance-based conditions. The awards are eligible for lapse annually on the anniversary date of the award over a four year period. A fixed percentage of shares are eligible for vesting each year, with the possibility to fully vest in subsequent years if performance warrants. No shares will vest if required performance levels are not achieved during the four-year period and the applicable catch up period. The compensation expense associated with these awards is evaluated on a quarterly basis for progress toward achievement of pre-determined performance targets. The compensation expense is recognized when it is probable that the performance levels will be met. As of March 31, 2006, there was $16,272 unrecognized equity-based compensation expense related to nonvested restricted stock and RSU awards. The cost is expected to be recognized over a weighted-average period of 2.8 years, assuming that all performance conditions are met. The fair value of the nonvested restricted stock is measured using the close price of the Company’s stock on the date of grant. The total compensation expense related to nonvested restricted stock was $1,879 for the three months ended March 31, 2006. For the three months ended March 31, 2006, total equity-based compensation expense was allocated as follows: Direct Costs   $ 1,779   General and administrative expenses   1,650   Equity-based compensation expense before income taxes   3,429   Income tax benefit   (1,501 ) Total equity-based compensation expense after income taxes   $ 1,928   Prior to January 1, 2006, the Company provided pro forma disclosure amounts in accordance with SFAS No. 123, as if the fair value method defined by SFAS No. 123 had been applied to its equity-based compensation. The following assumptions were used in calculating pro forma stock compensation expense for the ninethree months ended September 30:     2005   2004   Risk-free interest rate (weighted average)   3.9 % 3.3 % Expected dividend yield   0.0 % 0.0 % Expected lives   5-7.5 years   5-7.5 years   Expected volatility (average)   30.2 % 35.1 % 6 For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options’ vesting periods. The Company’s pro forma information is as followsMarch 31, 2005 and recorded stock compensation for the three months ended:ended March 31, 2006:     September 30,       2005   2004   Net income, as reported   $ 11,818   $ 9,334   Stock-based employee compensation expense included in net income as reported, net of tax   801   533   Stock-based employee compensation expense as if the fair value method had been applied, net of tax   (1,092 ) (1,152 ) Pro forma net income   $ 11,527   $ 8,715               Earnings per share:           Basic - as reported   $ 0.24   $ 0.20   Basic - pro forma   $ 0.23   $ 0.19   Diluted — as reported   $ 0.23   $ 0.19   Diluted — pro forma   $ 0.22   $ 0.18       2006   2005   Average risk-free interest rate   4.4%   3.3%   Expected dividend yield   0.0%   0.0%   Expected lives   3.5-4.75 years   4-6 years   Average expected volatility   28.3%   46.0%     The Company’s pro forma information is as followstable below reflects net earnings and basic and diluted net earnings per share for the ninethree months ended:ended March 31, 2005 had the Company applied the fair value recognition provisions of SFAS No. 123:     September 30,       2005   2004   Net income, as reported   $ 36,220   $ 29,760   Stock-based employee compensation expense included in net income as reported, net of tax   1,518   3,193   Stock-based employee compensation expense as if the fair value method had been applied, net of tax   (3,449 ) (4,014 ) Pro forma net income   $ 34,289   $ 28,939               Earnings per share:           Basic - as reported   $ 0.73   $ 0.65   Basic - pro forma   $ 0.69   $ 0.63   Diluted — as reported   $ 0.70   $ 0.62   Diluted — pro forma   $ 0.66   $ 0.60   Net income, as reported (as restated — Note 2)   $ 1,940   Equity-based employee compensation expense included in net income, as reported, net of tax   468   Equity-based employee compensation expense as if the fair value method had been applied, net of tax   (1,443 ) Pro forma net income   $ 965           Earnings per share:       Basic — as reported   $ 0.04   Basic — pro forma   $ 0.02   Diluted — as reported   $ 0.04   Diluted — pro forma   $ 0.02     Impact of Recently Issued Accounting Standards In June 2005, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 154, Accounting Changes and Error Corrections (“SFAS 154”). SFAS 154 replaces Accounting Principal Board (“APB”) Opinion No. 20, Accounting Changes andPro forma compensation expense recognized under SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements. SFAS 154 requires that a voluntary change in accounting principle be applied retrospectively with all prior period financial statements presented on the new accounting principle. SFAS 154 also requires that a change in method of depreciating or amortizing a long-lived nonfinancial asset be accounted for prospectively as a change in estimate, and correction of errors in previously issued financial statements should be termed a restatement. SFAS 154 is effective for accounting changes and correction of errors made in fiscal years beginning after December 15, 2005. The Company123 does not expectconsider estimated forfeitures. The computational differences in the terms and nature of the 2006 equity-based compensation awards create incomparability between the pro forma compensation presented above and the equity compensation recognized in 2006. As a result of adopting SFAS 123R, for the three months ended March 31, 2006, income before income taxes and net income was $1,289 and $799 lower, respectively, than if the Company had continued to account for equity-based compensation under APB No. 25. The impact on both basic and diluted earnings per share for the three months ended March 31, 2006 was $0.02 per share. In addition, prior to the adoption of SFAS 154 to have a material impact onNo. 123R, the Company’s consolidated financial statements. In December 2004,Company presented the FASB issuedtax benefit of stock option exercises as operating cash flows. Upon the adoption of SFAS No. 123 (revised 2004) (“SFAS 123R”), Share-Based Payment.  SFAS 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 SFAS 123, the Company currently accounts for share-based payments to employees using APB Opinion 25, which generally recognizes no compensation expense for employee stock options with exercise prices at the date of grant equal to or greater than the quoted market value of the underlying stock.  The adoption of the fair value method under SFAS 123R is expected to have a material impact on the results of operations.  SFAS 123R also requires thetax benefits ofresulting from tax deductions in excess of the compensation cost recognized compensation expense to be reportedfor those options are classified as financing cash flows. Under SFAS No. 123R, a cash flow from 7 financing activities rather thantax benefit is not recognized until the tax deductions result in a cash flow fromreduction of tax liability instead of creating or increasing net operating activities.  This requirement will reduce net cash flow from operations and increase net cash flow from financing activities inlosses. There was no excess tax benefit recorded for the periods after adoption.  The effective date is the first annual reporting period beginning after June 15, 2005. The Company is currently evaluating the Black-Scholes and binomial lattice valuation models and the modified-prospective-transition and modified-retrospective-transition provisions of this standard and will begin applying the valuation and transition provisions of SFAS 123R in the first quarter ofended March 31, 2006. Note 3 -4 – Discontinued Operations The Company intendsreached a decision in 2005 to sell the operations of a non-strategic business in the European segment,Europe, accordingly the business has beenwas classified as discontinued operationsoperations. Also, during the third quarter of 2005.  During the first quarter of 2005, the Company closed the sale of its WSIWall Street Institute (“WSI”) business.  During 2004, the Company terminated its program in India and sold its remaining K-12 educational services businesses. The operations and cash flows of the business components comprising the non-strategic European segment business, WSI,Wall Street Institute (“WSI”), India, and K-12 educational services businesses were or will be eliminated from ongoing operations as a result of the sale or abandonment and the Company will not have any significant continuing involvement in the operations after the disposal transactions. Therefore, these operations are classified as discontinued operations for all periods. WSI Business On December 31, 2004,During the Company and WSI Education S.a.r.l. executed an Agreement for Purchase of Shares that provided for the sale of substantially all of the Company’s WSI business units and investments.  At that time, the purchase price was estimated to be $40,000 based on eight times the projected 2004 earnings before interest, taxes, depreciation, and amortization (“EBITDA”) of $5,000.  At closing, the consideration for the sale of the shares comprising the WSI business unit consisted of the following: •                  Cash of $15,000; •                  A $15,000 USD equivalent subordinated note, denominated in Euros, bearing interest at 12.5%; and •                  An estimated $10,000 other receivables payable in cash. Subsequent to the closing date of February 28, 2005, the final base purchase price was determined to be $40,000 as estimated in December 2004. The Company received a payment in cash for the $10,000 of other receivables in the thirdfirst quarter of 2005.  The Company is entitled to additional consideration if the operating results of WSI exceed specified levels of earnings in 2005 and 2006, up to a maximum of $11,500. In addition, the Company agreed to continue to finance the $15,000 subordinated note received at closing with a senior promissory note bearing market interest (initially at 8%) with a step-up provision of 0.5% per annum. The note matures in July 2010.  Additionally, the Company received a payment during the third quarter of 2005 of $2,000 in recognition of net working capital conveyed at closing. During the fourth quarter of 2004, the Company recorded an estimated loss on disposal of WSI of $10,187, net of income tax expense of $3,202.  The loss reflected the change in the net realizable value of the net assets of the WSI business (including changes in the carrying value of the net assets resulting from foreign currency fluctuations) adjusted for estimated costs to close the WSI sale and accrued expenses related to indemnifications specified in the agreement. During the second quarter of 2005, the Company recorded an additional estimated loss on disposalnet gain of $3,114, consisting primarily$261, including a tax benefit of income tax expense$576, related to the settlement of $2,491.  This additional expense resulted from a change infranchisee law suits related to the Company’s estimate of the tax liabilities incurred in connection with this transaction.  The loss reflected the write off of additional net assets of WSI from the time of the definitive agreement, December 31, 2004, through the close of the transaction. business. During the third quarter of 2005, WSI Education S.a.r.l. received a preliminary field audit report assessing Italian VAT taxes owed related to services provided by the WSI business unit in 2003 prior to its disposition. Under the terms of the sale agreement with WSI, the Company agreed to indemnify WSI from obligations that may arise as a result of an Italian VAT assessment related to periods prior to the closing of the sale of the WSI business unit on February 28, 2005, however the Company is entitled to the value of the tax benefit of any indemnification. The Company has filed, on behalf of WSI Education S.a.r.l., an appeal with the Italian authorities and a complaint against the Italian Republic at the European Union Commission for restraint of trade based on the VAT exemption only being available to Italian owned companies. The Company intends to vigorously pursue these cases. As of March 31, 2006, the Company does not believe it is possible to estimate the ultimate outcome of this issue. As a result, no accrual for any potential adverse outcome of this matter has been made in the process of reviewing the audit report as a potential claim under the sales agreement and is evaluating its options to resolve this matter, up to and including legal action. 8 consolidated financial statements. Summarized Financial Information of Discontinued Operations Summarized operating results from the discontinued operations included in the Company’s consolidated statement of operations were as follows for the three months ended September 30:March 31:     WSI   Other     WSI   Other     2005   2004   2005   2004     2006   2005   2006   2005   Revenues   $ 0   $ 15,943   $ 1,329   $ —     $ —   $ 12,310   $ 1,799   $ 1,681   Pretax loss from discontinued operations   $ (69 ) $ (902 ) $ (160 ) $ (41 ) Pretax (loss) income from discontinued operations   $ (14 ) $ 480   $ (155 ) $ (153 )   Summarized operating results fromNet assets of the discontinued operations included in the Company’s consolidated statement of operations were as follows for the nine months ended September 30:     WSI   Other       2005   2004   2005   2004   Revenues   $ 12,310   $ 50,388   $ 4,830   $ —   Pretax income (loss) from discontinued operations   $ 411   $ (1,730 ) $ (310 ) $ (4,312 ) Assets and liabilities of theother discontinued operations were as follows:     WSI   Other       December 31, 2004   September 30, 2005   December 31, 2004   Current assets   $ 37,446   $ 947   $ 2,100   Property and equipment, net   16,311   333   430   Goodwill   27,620   —   —   Other assets   8,773   560   626   Current liabilities   (39,702 ) —   —   Long-term liabilities   (566 ) —   —   Other comprehensive income   (2,841 ) —   —   Net assets of discontinued operations   $ 47,041   $ 1,840   $ 3,156       Other       March 31, 2006   December 31, 2005   Current assets   $ 1,131   $ 2,192   Property and equipment, net   257   386   Tradename/accreditation   167   165   Other assets   132   163   Current liabilities   —   —   Long-term liabilities   —   —   Other comprehensive income   —   —   Total net assets of discontinued operations   $ 1,687   $ 2,906     The accompanying balance sheet at September 30, 2005 and December 31, 2004 classifies the assets and liabilities of the disposal groups based on the probable timing of receipt of sales proceeds.  The liabilities of the non-strategic business in the European segment are not included in the other disposal group above because it is not certain that the future buyer of the business will assume those liabilities.10 Note 4 —5 – Notes Receivable (Long-term) Notes receivable (long-term) consistconsists of the following:   September 30, 2005   December 31, 2004     March 31, 2006   December 31, 2005   Trade notes receivable (long-term), net of allowance of $8,323 and $5,846 at September 30, 2005 and December 31, 2004, respectively   $ 29,299   $ 15,339   Trade notes receivable (long-term), net of allowance of $9,360 and $9,328 at March 31, 2006 and December 31, 2005, respectively   $ 41,793   $ 37,878   Notes receivable (long-term):                     Kendall College   24,140   18,026     27,191   25,395   WSI Education S.a.r.l.   13,654   —     13,768   13,448   Other   11,586   17,019     10,796   10,210     $ 78,679   $ 50,384     $ 93,548   $ 86,931     The gross increase inOf the balance of long-term other trade notes receivable, of $16,437 is due to the primary enrollment at the Chilean universities.  Of this increase, $8,801$11,691 was unearned as of September 30, 2005March 31, 2006 and the related revenue is included in deferred 9 revenue on the Company’s balance sheet. Tuition revenues are generally billable, and the full amount of notes receivable and related deferred revenue are recorded, when a note agreement is signed by the student. student Note 5—6 – Other Intangible Assets The following table summarizes other intangible assets as of September 30, 2005:March 31, 2006:   Gross Carrying Amount   Accumulated Amortization   Net Carrying Amount     Gross Carrying Amount   Accumulated Amortization   Net Carrying Amount   Subject to amortization:                             Student rosters   $ 18,650   $ (11,476 ) $ 7,174     $ 19,385   $ (13,772 ) $ 5,613   Non-compete agreements   1,291   (960 ) 331     1,293   (981 ) 312   Other   782   (644 ) 138     780   (694 ) 86   Total   $ 20,723   $ (13,080 ) $ 7,643     $ 21,458   $ (15,447 ) $ 6,011     Amortization expense for intangible assets was $1,751 and $5,223subject to amortization for the three months ended March 31, 2006 and nine month periods ended September 30, 2005 respectively,was $745 and $1,161 and $3,004 for the three and nine month periods ended September 30, 2004,$1,362, respectively. The estimated future amortization expense for intangible assets for the remaining three-monthnine-month period of 20052006 is $1,001.$3,065. The estimated future amortization expense for intangible assets for each of the five years subsequent to December 31, 20052006 is as follows: 2006 - $4,163; 2007 - $2,179;$2,367; 2008 - $285;$462; 2009 - $15;$117; 2010 and beyond - - $0. Note 6 -7 – Long-Term Debt Long-term debt consists of the following:     March 31,   December 31,       2006   2005   Mortgage notes payable bearing interest at variable rates ranging from 3.35% to 8.50%   $52,525   $52,429   Various unsecured lines of credit bearing interest at variable rates ranging from 3.46% to 9.36%    38,797   51,332   Notes payable secured by fixed assets, bearing interest at rates ranging from 3.80% to 10.00%   25,443   24,239   Various notes payable bearing interest at fixed rates ranging from 0.00% to 13.72%   17,472   19,742   Capital lease obligations bearing interest at rates ranging from 3.00% to 9.00%   11,914   12,374   Various notes payable bearing interest at variable rates ranging from 3.12% to 9.27%   2,913   2,925       149,064   163,041   Less: current portion of long-term debt   50,741   63,044   Total long-term debt, net of current portion   $98,323   $99,997         September 30,   December 31,       2005   2004   Mortgage notes payable bearing interest at variable rates ranging from 3.17% to 8.5%   $ 35,842   $ 42,045   Various unsecured lines of credit bearing interest at variable rates ranging from 2.70% to 10.98%   33,278   22,618   Notes payable secured by fixed assets, bearing interest at rates ranging from 3.80% to 10.00%   17,695   18,303   Various notes payable bearing interest at fixed rates ranging from 0.00% to 8.09%   15,769   19,556   Capital lease obligations bearing interest at rates ranging from 2.93% to 8.40%   12,399   16,424   Various notes payable bearing interest at variable rates ranging from 3.32% to 11.02%   4,666   14,669       119,649   133,615   Less: current portion of long-term debt   43,453   47,010   Total long-term debt, net of current portion   $ 76,196   $ 86,605   10 Note 7 -8 – Due to Shareholders of Acquired Companies Due to shareholders of acquired companies consists of the following amounts payable in cash:     September 30,   December 31,       2005   2004   Amounts payable to former shareholders of Universidad Andres Bello (“UNAB”)   $ 23,864   $ 27,773   Amounts payable to former shareholders of Universidad Tecnologica Centroamericana (“UNITEC”)   14,117   —   Amounts payable to former shareholders of Universidad Interamericana   4,800   4,800   Amounts payable to former shareholders of Universidad Peruana de Ciencias Aplicadas   2,924   2,984   Amounts payable to former shareholders of Universidad Latinoamericana de Ciencia y Tecnologia   100   100   Amounts payable to former shareholders of Walden   —   19,249   Amounts payable to former shareholders of Institute of Executive Development   —   1,357       45,805   56,263   Less: current portion of due to shareholders   10,462   26,861   Total due to shareholders, net of current portion   $ 35,343   $ 29,402       March 31,   December 31,       2006   2005   Amounts payable to former shareholders of Universidad Andres Bello (“UNAB”)   $24,246   $24,929   Amounts payable to former shareholders of Universidade Anhembi Morumbi (“UAM”)   15,066   13,658   Amounts payable to former shareholders of Universidad Tecnologica Centroamericana (“UNITEC”)   14,706   14,814   Amounts payable to former shareholders of Universidad Interamericana (“UI”)   4,200   4,200   Amounts payable to former shareholders of Universidad Peruana de Ciencias Aplicadas (“UPC”)   2,901   2,859   Amounts payable to former shareholders of UNO   1,812   1,890   Amounts payable to former shareholders of Universidad Latinoamericana de Ciencia y Tecnologia (“ULACIT”)   100   100   Amounts payable to former shareholders of Cyprus College   —   2,973       63,031   65,423   Less: current portion of due to shareholders   18,996   18,737   Total due to shareholders, net of current portion   $44,035   $46,686     In conjunction withDuring the acquisition of UNITEC in July 2005,three months ended March 31, 2006, the Company entered into an agreement with the sellers to finance a portion of the purchase price.  This agreement calls for the Company to make a one-time payment to the sellers of approximately $1,497 on the fourth anniversary of the closing and an annuity payable monthly over a 15-year period beginning immediately, with initial monthly payments of approximately $84, adjusted for inflation.  The Company recorded these obligations at their present value of $14,117.  The amounts payable to the sellers are denominatedformer shareholders of Cyprus College were reevaluated under the terms of the purchase agreement. As a result, the liability and corresponding goodwill recorded in Honduran Lempiras, and are subject to foreign currency exchange risk at the dates of payment. transaction were decreased. Note 8 -9 – Income Taxes The Company’s income tax provisions for all periods consist of federal, state, and foreign income taxes. The tax provisions for the three- and nine-monththree-month periods ended September 30,March 31, 2006 and 2005 and 2004 were based on the estimated effective tax rates applicable for the 20052006 and 20042005 full years, after giving effect to significant items related specifically to the interim periods, including the mix of income for the period between higher and lower taxed jurisdictions. The Company’s effective tax rate from continuing operations was 14.2%728.1% and 14.0%11.2% for the three-three months ended March 31, 2006 and nine-months2005, respectively. For the three months ended September 30, 2005, respectivelyMarch 31, 2006, the effective rate includes the impact of FIN No. 18. FIN No. 18 only applies to interim periods and 17.2% and 17.0%has no effect on the Company’s annual effective rate. The effective rate for the three-three months ended March 31, 2006, excluding the impact of FIN No. 18 was 9.0%. For the period ended March 31, 2005, the Company’s effective tax rate was 11.2%, and nine-months ended September 30, 2004, respectively.the impact of FIN No. 18 was immaterial. The forecasted effective tax rate for 2006 decreased from the 2005 effective tax rate due to the impact of recent acquisitions in lower taxed jurisdictions and foreign holding company tax planning implemented during the first quarter of 2006. The Company has operations in multiple countries, many of which have statutory tax rates lower than the United States. Generally lower tax rates in these foreign jurisdictions resultalong with the Company’s intent and ability to permanently reinvest foreign earnings outside of the United States results in an effective tax rate significantly lower than the United States statutory rate. In SeptemberAs previously reported, on February 8, 2006 the Company received notice of 2003,certain adjustments proposed by the IRSInternal Revenue Service (the “Service”) completed their field examination ofwith respect to the Company’s 19972000 federal income tax return. In connection with this examination,The proposed adjustments primarily relate to the gain on the sale of the Company’s Prometric testing subsidiary in 2000 for $775 million. The Service claims that the Company disagreedowes additional taxes of approximately $54.6 million plus penalties and interest. The Company intends to appeal and contest vigorously the Service’s determination and believes that it has properly reported the transaction. Consequently, the Company does not believe at this point that a loss from this matter is probable, nor is it possible to estimate the ultimate outcome if the Company does not prevail. As a result, no accrual for any potential adverse outcome of this matter has been made in the consolidated financial statements; however, the Company can provide no assurance that the eventual outcome will not result in a material adverse amount. As previously reported, on February 23, 2006, the Company received a Notice of Deficiency from the Internal Revenue Service (“IRS”) for the Company’s 1997 tax year disagreeing with Laureate’s exclusion from income of a break-up fee it received in its attempted acquisition of NEC. The Company is appealing the Notice of Deficiency and intends to pay the current amount of the assessment, $8,100, and the interest due of $6,700, on the tax treatmentassessment when the Appeal is filed in May of a specific item.  The Company has appealed the Service’s treatment of this item throughout the administrative review process.  As a final step in the administrative appeal process, both parties2006. These amounts have made proposals to settle the issue.  The Company’s latest settlement proposal was made in July of 2005 and the Service has not responded to the proposal and has no deadline by which it must respond.been previously accrued. The Company believes that it properly excluded the final resolutionincome from the break up fee and intends to vigorously litigate the Services’s determination. Although the ultimate disposition of this issue is uncertain, based on current information, it is the opinion of management  that the ultimate disposition of this issue will not have a material effect on the Company’s consolidation financial position, liquidity, or results of operations. In June of 2004, the Internal Revenue Service (“IRS”) completed their field examination of the Company’s 1998 and 1999 federal income tax returns.  In connection with this examination, the Company received notice of certain adjustments proposed by the IRS, primarily related to transfer pricing and the timing of certain deductions.  The Company is working to reach a resolution with the IRS by the end of fiscal 2005.  Although the final resolution of the proposed adjustments is uncertain, based on current information, in the opinion of the management, the ultimate disposition of these matters will not have a material adverse effect on the Company’s consolidated financial position, liquidity, or results of operations. 11 In April 2006, the IRS began a field examination of the Company’s 2003 tax year. In addition, there are several other income tax audits in progress. No assurance can be given as to the eventual outcome of these audits. Note 9 —10 – Stockholders’ Equity The components of stockholders’ equity are as follows:                 Accumulated               Additional       Other   Total       Common   Paid-In   Retained   Comprehensive   Stockholders’       Stock   Capital   Earnings   Income   Equity   Balance at December 31, 2004   $ 488   $ 474,928   $ 355,989   $ 47,230   $ 878,635   Options exercised for purchase of 886 shares of common stock, including income tax  benefit of $8,839   9   20,037           20,046   Non-cash stock compensation       2,529           2,529   Other   1   (467 )         (466 ) Comprehensive income:                       Net income for the nine months ended September 30, 2005           36,220       36,220   Foreign currency translation adjustment               (9,851 ) (9,851 ) Unrealized gain on available-for-sale securities               48   48   Minimum pension liability adjustment               (22 ) (22 ) Total comprehensive income                   26,395   Balance at September 30, 2005   $ 498   $ 497,027   $ 392,209   $ 37,405   $ 927,139                   Accumulated               Additional       Other   Total       Common   Paid-In   Retained   Comprehensive   Stockholders’       Stock   Capital   Earnings   Income (Loss)   Equity   Balance at December 31, 2005 (as restated - Note 2)   $ 499   $ 503,791   $ 435,412   $ 38,819   $ 978,521                           Options exercised for purchase of 1,364 shares of common stock, net of 14 replenishment shares   14   17,520   —   —   17,534   Non cash stock compensation modification for former employee   —   261   —   —   261   Non-cash stock compensation   —   3,168   —   —   3,168   Comprehensive income:                       Net loss for the three months ended March 31, 2006   —   —   (675 ) —   (675 ) Foreign currency translation adjustment   —   —   —   824   824   Unrealized gain on available-for-sale securities   —   —   —   15   15   Total comprehensive income   —   —   —   —   164   Balance at March 31, 2006   $ 513   $ 524,740   $ 434,737   $ 39,658   $ 999,648     See accompanying notes to financial statements Note 10 —11 – Comprehensive Income (Loss) The components of comprehensive income (loss), net of related income taxes, are as follows:   Three months ended March 31,       2006   2005           (as restated - Note 2)   Net (loss) income   $ (675 ) $ 1,940   Foreign currency translation adjustment   824   (16,232 ) Unrealized gain on available-for-sale securities, net of tax   15   14   Minimum pension liability adjustment   —   (22 ) Comprehensive income (loss)   $ 164   $ (14,300 )       Three months ended September 30,   Nine months ended September 30,       2005   2004   2005   2004   Net income   $ 11,818   $ 9,334   $ 36,220   $ 29,760   Foreign currency translation adjustment   12,699   7,903   (9,851 ) (5,976 ) Unrealized gain (loss) on available-for-sale securities, net of tax   (5 ) —   48   —   Minimum pension liability adjustment   —   189   (22 ) (18 ) Comprehensive income   $ 24,512   $ 17,426   $ 26,395   $ 23,766   The foreign currency translation adjustment of $12,699 for the three months ended September 30, 2005 relates to the effects of translating the financial statements of the Company’s foreign subsidiaries to U.S. Dollars, and primarily reflects the strengthening of the Chilean peso during that period. The foreign currency translation adjustment of $(9,851) for the nine months ended September 30, 2005 relates to the effects of translating the financial statements of the Company’s foreign subsidiaries to U.S. Dollars, and primarily reflects the devaluation of the Euro and Swiss Franc against the U.S. Dollar, partially offset by the effects of the strengthening Mexican peso and the Chilean peso, during that period. 12 Note 11 -12 – Earnings (Loss) Per Share The following table summarizes the computations of basic and diluted earnings (loss) per share:     Three months ended March 31,       2006   2005           (as restated - Note 2)               Numerator used in basic and diluted earnings (loss) per common share:           (Loss) Income from continuing operations   $ (767 ) $ 1,328   (Loss) Income from discontinued operations, net of tax   (169 ) 612   Gain on disposal of discontinued operations, net of tax   261   —   Net (loss) income   $ (675 ) $ 1,940               Denominator for basic earnings (loss) per share — weighted-averagecommon shares outstanding   50,436   49,237   Net effect of dilutive stock options based on treasury stock method   —   2,577   Denominator for diluted earnings (loss) per share — weighted averagecommon shares outstanding   50,436   51,814               Earnings (loss) per common share, basic:           (Loss) Income from continuing operations   $ (0.02 ) $ 0.03   Income (Loss) from discontinued operations, net of tax   0.00   0.01   Gain (Loss) on disposal of discontinued operations, net of tax   0.01   0.00   (Loss) Earnings per common share   $ (0.01 ) $ 0.04               Earnings (loss) per common share, diluted:           (Loss) Income from continuing operations   $ (0.02 ) $ 0.03   Income (Loss) from discontinued operations, net of tax   0.00   0.01   Gain (Loss) on disposal of discontinued operations, net of tax   0.01   0.00   (Loss) Earnings per common share   $ (0.01 ) $ 0.04         Three months ended September 30,   Nine months ended September 30,       2005   2004   2005   2004   Numerator used in basic and diluted earnings (loss) per common share:                   Income from continuing operations   $ 12,047   $ 9,303   $ 38,185   $ 35,647   Income (loss) from discontinued operations, net of tax   (229 ) 31   386   (5,887 ) Loss on disposal of discontinued operations, net of tax   —   —   (2,351 ) —   Net income   $ 11,818   $ 9,334   $ 36,220   $ 29,760                       Denominator for basic earnings (loss) per share — weighted-average common shares outstanding   49,801   46,524   49,539   45,598   Net effect of dilutive stock options and restricted stock based on treasury stock method   2,272   2,600   2,409   2,649   Denominator for diluted earnings (loss) per share — weighted average common shares outstanding   52,073   49,124   51,948   48,247                       Earnings (loss) per common share, basic:                   Income from continuing operations   $ 0.24   $ 0.20   $ 0.77   $ 0.78   Income (loss) from discontinued operations, net of tax   0.00   0.00   0.01   (0.13 ) Loss on disposal of discontinued operations, net of tax   0.00   0.00   (0.05 ) 0.00   Earnings per common share   $ 0.24   $ 0.20   $ 0.73   $ 0.65                       Earnings (loss) per common share, diluted:                   Income from continuing operations   $ 0.23   $ 0.19   $ 0.74   $ 0.74   Income (loss) from discontinued operations, net of tax   0.00   0.00   0.01   (0.12 ) Loss on disposal of discontinued operations, net of tax   0.00   0.00   (0.05 ) 0.00   Earnings per common share   $ 0.23   $ 0.19   $ 0.70   $ 0.62   Outstanding stock options and unvested restricted shares and RSUs were not included in the computation of earnings (loss) per diluted common share for the three months ended March 31, 2006 because they were anti-dilutive. The number of shares of common stock issuable upon the exercise of stock options and the lapse of restricted shares was 4,872 and 591, respectively, as of March 31, 2006. Per share amounts may not sum due to rounding differences. Note 12 —13 – Commitments and Contingencies Purchase Obligations As part of the 2004 acquisition of Ecole Centrale d’Electronique (“ECE”), the Company committed to purchase the remaining 30% ownership from the sellers on December 31, 2008 for approximately $8,415.$8,484. The purchase obligation is denominated in Euros, and is subject to foreign currency exchange rate risk on the date of payment. As part of the 2004 acquisition of Institut Francais de Gestion SAS (“IFG”), the Company committed to additional capital contributions, which will increase the Company’s share of ownership. The agreement provides that, no later than July 31, 2006 and July 31, 2007, the Company mustshall contribute approximately $1,507$1,520 and $2,245, respectively,$2,264 resulting in an increase in ownership share of 16% and 23%, respectively. In addition, during the period October through November 2008, the sellers may exercise a put option requiring the Company to purchase the remaining 10% ownership for approximately $962.$970. The purchase obligation is denominated in Euros, and is subject to foreign currency exchange rate risk on the dates of payment. As a part of the acquisition of Cyprus College, the Company committed to making a contribution of approximately $3,017 between the closing date and three years thereafter. The contributions will fund certain capital projects, if approved and will not alter the relative equity interests. The contribution commitment is denominated in Cypriot Pounds and is subject to foreign currency exchange rate risk on the dates of payment. Loss Contingencies The Company is subject to legal actions arising in the ordinary course of its business. In management’s opinion, the Company has adequate legal defenses and/or insurance coverage with respect to the eventuality of such actions and does not believe any settlement would materially affect the Company’s financial position. 13 Contingent Payments In connection with certain acquisitions, variable amounts of contingent consideration are payable to the sellersellers based upon specified terms. All existing contingent consideration agreements are predicated upon improved operating profitability of the acquired entities and utilize multiples consistent with those used to calculate the initial purchase price. The Company will record the contingent consideration when the contingencies are resolved and the additional consideration is payable. Additional amounts of contingent consideration are due the sellers of Universidad de Las Americas (“UDLA”) based on operating results for the three years ending December 31, 2006. On the later of March 31, 2006 or 45 days after the Company receives the audited financial statements of Decon, the holding company that controls and operates UDLA, the Company is obligated to the sellers for an amount equal to 60% of six times (i) average recurring EBIT for 2004 and 2005, less (ii) 2000 EBIT; this result is reduced by (iii) 42% of certain specified debt. AssumingThe Company has received the Decon audited financials and has begun its review of the amount due to the sellers. Excluding adjustments of non-recurring EBIT remains at 2004 levels for 2005,items and any other negotiated amounts, the Company believes it would be obligated to the sellers for approximately $60,866.  No$81,700, although the actual amount will be mutually agreed upon with the sellers. This amount is net of approximately $8,800 of amounts owed to the Company from the sellers related to consideration from a prior acquisition of another university. On the later thanof March 31, 2007 or 45 days after the Company receives the audited financial statements of Decon, the Company is obligated to the sellers for an amount equal to 20% of four times (i) average recurring EBIT for 2005 and 2006; this result is reduced by (ii) 20% of certain specified debt and (iii), $6,500.  AssumingExcluding adjustments of non-recurring EBIT remains at 2004 levels for 2005items and any other negotiated amounts as well as including 2006 estimates and projections, the Company would be obligated to the sellers for approximately $12,559.$18,500. The Company has pledged its shares of Decon to satisfyas security for its payment obligations to the sellers. The Company cannot dispose of, place any lien on or encumber the shares without the prior approval of the sellers. Effective April 1, 2008 the minority owners of UDLA have thea put right to require the Company to purchase their remaining 20% interest in Decon for a variable purchase price based on 4.5 times average recurring EBIT for certain specified periods. Effective April 1, 2009 the Company has a call right to acquire the remaining 20% interest for a variable purchase price based on 5.0 times average EBIT for certain specified periods. Effective April 1, 2009 the minority owners of UNABUniversidad Andres Bello (“UNAB”) and Academia de Idiomas y Estudios Profesionales (“AIEP”) have thea put right to require the Company to purchase their 20% interest for a variable purchase price based on average recurring EBIT for certain specified periods. Effective April 1, 2009 the Company has a call right to acquire this 20% interest under a similar methodology for certain specified periods. Effective March 1, 2009 the minority owners of Universidade Anhembi Morumbi (“UAM”) have a put right to require the Company to purchase an equity interest of 29% from the minority owners at a variable purchase price based on 4.0 times recurring EBITDA for certain specified periods. Also effective March 1, 2009, the Company has a call right to acquire the same 29% interest from the minority owners for a variable purchase price equal to the greater of 4.0 times recurring EBITDA for certain specified periods or the equivalent per share valuation of the Company’s initial 51% acquisition of UAM, grown at local inflation. Beginning March 1, 2013 and continuing for ten years the minority owners and the Company have similar put and call rights, respectively, on the remaining 20% interest of the minority owners, with the purchase price determined based on a similar formula. Additional amounts of contingent consideration, not to exceed $10,000, are due the sellers of KIT eLearningLaureate Online Education BV equal to four times the average of the audited earnings before interest, income taxes, depreciation and amortizationEBITDA for the calendar years ending December 31, 2006 and 2007.  KIT eLearning BV was acquired on March 31, 2004 and is operated as Laureate Online Education BV. Guarantees Subsequent to the June 2003 divestiture of the Company’s K-12 business segments, all leases related to Sylvan Learning Centers were renegotiated or assigned in the name of Educate, Inc. (“Educate”) during the third quarter of 2003. Leases with remaining payments of $4,676$5,850 through December 20082010 are guaranteed by the Company. Under the terms of the Asset Purchase Agreement with Educate, the Company is indemnified against any losses suffered as a result of these lease guarantees. During 2004, the Company entered into an agreement to guarantee equipment lease payments owed by Kendall College to Key Equipment Finance. Equipment leases with remaining payments of $4,529$4,167 through December 2011 are guaranteed by the Company. The fair value of the guarantees havehas been recorded as other long-term liabilities in the consolidated balance sheets. Standby Letters of Credit The Company has $15,070$14,500 outstanding in standby letters of credit. The Company is self-insured for workers compensation and other insurable risks up to predetermined amounts above which third party insurance applies. The Company is contingently liable to insurance carriers under certain of these policies and has provided a letter of credit in favor of the insurance carriers for $1,100. The Company has also issued a standby letter of credit in the amount of $1,400 assuring the collectibility of a line of credit at AIEP, which is being used for working capital purposes. The outstanding balance on the line of credit was $2,197$1,987 at September 30, 2005.March 31, 2006 and is also covered by other guarantees by other affiliated entities. In the first quarter of 2005, the companyCompany issued a $12,000 standby letter of credit in favor of WSI Education S.a.r.l. for a tax indemnification related to the sale of WSI. 14 Commitments Under terms of note agreements with Kendall College, the Company has committed to provide additional funding to Kendall College of up to $2,600. In the event the Company does not exercise its agreement to acquire Kendall, Kendall is obligated to enter into a lease agreement with the Company beginning July 21, 2006 to lease office space. The lease commitment specifies a term of 36 months and annual rent of $1,000. Note 13 -14 – Business and Geographic Segment Information The Company is focused exclusively on providing a superior higher education experience to its over 193,000approximately 226,000 students through a leading global network of accredited campus-based and online higher education institutions. The Company’s educational services are offered through three reportable segments:  Campus Based - Latin America, Campus Based - Europe and Laureate Online Education. The accounting policies of the segments are the same as those described in the significant accounting policies. The Company evaluates performance based on profit or loss from operations before income taxes, corporate general and administrative expenses, non-cash stock compensation expense and campus-based overhead expenses. The Latin America segment consists of nineten separately accredited universities and two accreditedone professional institutes,institute, and has operations in Mexico, Chile, Brazil, Peru, Ecuador, Panama, Honduras Panama, and Costa Rica. Latin America higher education institutions currently enroll approximately 152,000 full-time178,400 students and offer more than 100 degree programs through 3842 campuses. The schools primarily serve 18- to 24-year-old students as well as working adults and offer an education that emphasizes career-oriented fields of study with undergraduate and graduate degrees in a wide range of disciplines, including international business, law, health sciences, information technology and engineering. The Europe segment consists of onetwo accredited universityuniversities and severaleight other accredited post-secondary institutions, and has operations in Spain, Switzerland, France and France.Cyprus. Europe higher education institutions currently enroll approximately 15,000 full-time19,300 students and offer more than 75 degree programs through 89 campuses. The schools primarily serve 18- to 24-year-old students and offer 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, architecture and engineering. The Company believes that all of its campus-based higher education institutions benefit from strong academic reputations and brand awareness, and established operating histories. Each school also has flexible, non-tenured, teaching-focused faculty and is led by an experienced local management team. The Laureate Online Education segment offers undergraduate and graduate degree programs to working professionals through distance learning. Laureate Online Education consists of Walden, Canter, and Laureate Online Education BV, and Canter, which collectively offer degree programs including education, psychology, health and human services, management, engineering, and information technology. Laureate Online Education institutions currently enroll approximately 26,00028,300 students. These reportable segments are business units that offer distinct services and are managed separately. The campus-based reportable segments of Latin America and Europe are not aggregated with Laureate Online Education as Laureate Online Education offers services to a different class of customer, profile with different economic characteristics through a different delivery system.system, and with different economic characteristics. The Latin America and Europe segments are managed separately and have certain differences in classes of customer profile and economic characteristics, and thus are not aggregated together. Prior to 2004, the Company’s reportable segments consisted of Campus Based and Laureate Online Education. The segment information for the three- and nine- month periods ended September 30, 2004 has been reclassified to conform to current year presentation. 15 The following table sets forth information on the Company’s reportable segments: Three months ended March 31, 2006       Latin America   Europe   Laureate Online Education   Total   Revenues   $ 122,501   $ 59,903   $ 52,706   $ 235,110   Segment profit   (2,310 ) 12,535   4,320   14,545     Three months ended September 30, 2005   Latin America   Europe   Laureate Online Education   Total   Three months ended March 31, 2005 (as restated - Note 2)       Latin America   Europe   Laureate Online Education   Total   Revenues   $ 131,574   $ 21,821   $ 45,809   $ 199,204   Revenues   $ 82,972   $ 56,243   $ 39,462   $ 178,677   Segment profit   35,586   (7,653 ) 7,054   34,987   Segment profit   (298 ) 10,404   1,168   11,274                     Three months ended September 30, 2004   Latin America   Europe   Laureate Online Education   Total   Revenues   $ 93,668   $ 17,284   $ 35,158   $ 146,110   Segment profit   26,053   (4,465 ) 5,105   26,693                     Nine months ended September 30, 2005   Latin America   Europe   Laureate Online Education   Total   Revenues   $ 338,812   $ 127,944   $ 130,850   $ 597,606   Segment profit   69,975   9,039   13,653   92,667                     Nine months ended September 30, 2004   Latin America   Europe   Laureate Online Education   Total   Revenues   $ 243,082   $ 98,958   $ 94,477   $ 436,517   Segment profit   50,412   10,736   10,313   71,461     The following tables reconcile the reported information on segment profit to income from continuing operations before income taxes, minority interest, and equity in net loss of affiliates reported in the statements of operations:operations for the three months ended March 31:     Three months ended September 30,   Nine months ended September 30,       2005   2004   2005   2004   Total profit for reportable segments   $ 34,987   $ 26,693   $ 92,667   $ 71,461   Campus-based segment’s overhead   (5,635 ) (2,646 ) (11,123 ) (7,946 ) General and administrative expense   (7,173 ) (5,450 ) (19,074 ) (16,170 ) Non-cash compensation expense   (1,335 ) (891 ) (2,529 ) (3,886 ) Net non-operating income (loss)   175   (1,416 ) 101   14,839   Income from continuing operations before income taxes, minority interest and equity in net income (loss) of affiliates   $ 21,019   $ 16,290   $ 60,042   $ 58,298       2006   2005           (as restated - Note 2)   Total profit for reportable segments   $ 14,545   $ 11,274   Campus-based segments’ overhead   (4,667 ) (2,844 ) General and administrative expense   (9,851 ) (6,696 ) Net non-operating income   5   292   Income from continuing operations before income taxes, minority interest and equity in net loss of affiliates   $ 32   $ 2,026     Revenue information of continuing operations by geographic area for the three months ended March 31 is as follows:   Three months ended September 30,   Nine months ended September 30,     2006   2005     2005   2004   2005   2004         (as restated - Note 2)   Revenues                             Chile   $ 57,423   $ 43,772   $ 129,767   $ 103,208   Mexico   57,280   43,618   162,658   123,402     $ 70,605   $ 58,670   United States   42,715   32,699   121,773   89,659     48,784   36,582   Spain   3,846   4,845   65,109   60,448     30,635   31,573   Brazil   17,951   -   Chile   17,369   13,448   Switzerland   12,302   12,168   France   11,806   12,502   Other foreign countries   37,940   21,176   118,299   59,800     25,658   13,734   Consolidated total   $ 199,204   $ 146,110   $ 597,606   $ 436,517     $ 235,110   $ 178,677     Revenues are attributed to countries based on the location of the customer. 16 Note 14 — Subsequent Event On October 26, 2005, the Company, entered into a 364-day, $120,000 Credit Agreement (the “Agreement”) with Bank of America, N.A. (“Bank of America”).  The Agreement expires on October 25, 2006 and is comprised of two tranches: Tranche A for $90,000 and Tranche B for $30,000.  Tranche B has a $20,000 sublimit for standby letters of credit.  The Agreement effectively supercedes the existing $30,000 Credit Agreement dated June 30, 2003 by incorporating it as Tranche B in the Agreement. The Agreement states that borrowings made under Tranche A may be denominated in U.S. Dollars or foreign currency; however, borrowings denominated in foreign currency may not exceed $50,000. All borrowings made under Tranche B must be denominated in U.S. Dollars.  At the Borrower’s option, borrowings under Tranche A of the facility will bear interest at (a) 1.75% per annum plus the applicable LIBOR rate, or (b) 0.25% per annum plus the higher of (1) 0.50% per annum plus the Federal Funds Rate, or (2) the prime rate publicly announced by Bank of America.  Tranche A borrowings made in currencies other than the U.S. Dollar must be made under the LIBOR rate option.  Also at the Borrower’s option, borrowings under Tranche B will bear interest at (a) 1.50% per annum plus the applicable LIBOR rate, or (b) the higher of (1) 0.50% per annum plus the Federal Funds Rate, or (2) the prime rate publicly announced by Bank of America.  U.S. Dollar borrowings bear an interest rate equal to the greater of (a) Federal Fund rate plus 0.50% and (b) prime rate publicly announced by Bank of America.  Foreign currency borrowings bear an interest rate equal to LIBOR plus 1.75%.  All borrowings made under Tranche B must be denominated in U.S. Dollars. The Agreement has a material covenant, which states that the Company is limited in total net debt, defined as debt minus unrestricted cash, to 2.5 times consolidated EBITDA.  The Agreement is fully guaranteed by the equity interests of the following subsidiaries: Walden E-Learning, Inc., Walden University, Inc., The Canter Group of Companies, and Canter and Associates, Inc. Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations The statements contained herein include forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. 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 aredo not relate solely to historical or current facts and are generally accompaniedcan be identified by the use of words such as “anticipate,” “goal,” “may,” “will,” “intend,“expect,” “anticipate,“hope,” “believe,” “intend,” “plan,” “estimate,” “expect,“project,” “should” orand other 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. 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.  Theseterms. Such forward-looking statements are based on estimates, projections, beliefsthe current facts and assumptionscircumstances and management’s current strategic plan and are subject to a number of managementrisks and speakuncertainties that could significantly affect the Company’s current goals and future financial condition. For a comprehensive description of the types of risks and uncertainties the Company faces, see Item 1.A. “Risk Factors.” of this Report and of the Company’s Annual Report on Form 10-K/A. Please note the forward-looking statements included in this Report are made only as of the date madeof this report. The Company assumes no obligation to publicly update any forward-looking statements Investors should not unduly reply on our forward-looking statements when evaluating the information presented in our filing and are not guarantees of future performancereports.. Overview Laureate is focused exclusively on providing a superior higher education experience to its over 193,000approximately 226,000 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: Campus Based - Latin America (“Latin America”), Campus Based - Europe (“Europe”) and Laureate Online Education. Latin America and Europe own or maintain controlling interests in eleven and seventen separately accredited higher education institutions, respectively. The Latin America segment has locations in Mexico, Brazil, Chile, Peru, Ecuador, Panama, Honduras, Panama, and Costa Rica. The Europe segment has locations in Spain, Switzerland, France, and France.Cyprus. The Laureate Online Education segment provides career-oriented degree 17 programs to approximately 26,000 students through Walden E-Learning, Inc. (“Walden”), Laureate Education Online BV, and Canter and Associates (“Canter”). Discontinued OperationsSale of Business Units The Company intendsreached a decision in 2005 to sell the operations of a non-strategic business in the European segment,Europe, accordingly the business has beenwas classified as discontinued operationsoperations. Also, during the thirdfirst quarter of 2005.  On February 28, 2005, the Company closed the sale of its Wall Street Institute (“WSI”) business. The operations and cash flows of the business tocomponents comprising the non-strategic European segment business and WSI Education S.a.r.l.  The WSI business waswere or will be eliminated from ongoing operations as a result of the sale or abandonment and the Company will not have any significant continuing involvement in the operations after the disposal transactions. Therefore, these operations are classified as a discontinued operation in both 2004 and 2005.operations for all periods. See Note 34 to the unaudited consolidated financial statements for more information regarding these transactions. Critical Accounting Policies Equity Compensation Plans The Company has equity-based compensation plans which authorize the granting of various equity-based incentives including stock options, restricted stock and restricted stock units to employees and nonemployee directors. The expense for these equity-based incentives is based on their fair value at date of grant and amortized over their vesting period. The fair value of each stock option granted is estimated on the date of grant using a closed-form pricing model. The pricing model requires assumptions such as the expected term of the stock option and expected volatility of the Company’s stock over the expected term, which significantly impact the assumed fair value. The Company uses historical data to determine the expected volatility assumption and uses Staff Accounting Bulletin (“SAB”) No. 107 to estimate the expected term of the stock option. In addition, judgment is required in estimating the amount of equity-based awards that are expected to be forfeited. If these pricing model assumptions change significantly for future grants or if forfeiture experience differs from estimates, share-based compensation expense will fluctuate in future years. The fair value of the restricted stock grants is equal to the market price of the Company’s stock at date of grant. Income Taxes The Company accounts for income taxes using the liability method. Under the liability method, deferred tax assets and liabilities are determined based on the differences between the financial statement carrying amounts and the tax basis of existing assets and liabilities (i.e. temporary differences) and are measured at prevailing enacted tax rates that will be in effect when these differences are settled or realized. The Company also measures its interim income tax provision using Financial Accounting Standards Board Interpretation (“FIN”) No. 18, Accounting for Income Taxes in Interim Periods. FIN No. 18 measures the seasonality of any subsidiary or controlled entity that operates at an annual loss for which no income tax benefit is recognized. This seasonality can cause volatility in the interim effective rates. FIN No. 18, however, has no effect on the Company’s annual effective tax rate. 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 costsexpenses 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 EnrollmentIntake start dates of the Company’s schools, and the small circles represent Secondary EnrollmentIntake start dates (smaller intake cycles).  Enrollment and revenue recognition are year round for the Online segment. 19 18 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 the three months ended September 30,March 31, 2006 and 2005, and 2004:excluding discontinued operations:             Laureate               Latin       Online               America   Europe   Education   Unallocated   Consolidated       (in thousands)   September 30, 2005                       Segment revenues   $ 131,574   $ 21,821   $ 45,809   $ —   $ 199,204   Segment direct costs   (95,988 ) (29,474 ) (38,755 ) —   (164,217 ) Campus-based segment’s overhead   —   —   —   (5,635 ) (5,635 ) Segment profit (loss)   35,586   (7,653 ) 7,054   (5,635 ) 29,352   General and administrative expenses   —   —   —   (7,173 ) (7,173 ) Non-cash stock compensation expense   —   —   —   (1,335 ) (1,335 ) Operating income (loss)   $ 35,586   $ (7,653 ) $ 7,054   $ (14,143 ) $ 20,844                           September 30, 2004                       Segment revenues   $ 93,668   $ 17,284   $ 35,158   $ —   $ 146,110   Segment direct costs   (67,615 ) (21,749 ) (30,053 ) —   (119,417 ) Campus-based segment’s overhead   —   —   —   (2,646 ) (2,646 ) Segment profit (loss)   26,053   (4,465 ) 5,105   (2,646 ) 24,047   General and administrative expenses   —   —   —   (5,450 ) (5,450 ) Non-cash stock compensation expense   —   —   —   (891 ) (891 ) Operating income (loss)   $ 26,053   $ (4,465 ) $ 5,105   $ (8,987 ) $ 17,706   The following table is derived from the Company’s consolidated financial statements and represents financial information of the Company’s reportable segments for the nine months ended September 30, 2005 and 2004, respectively:           Laureate                     Laureate             Latin       Online             Latin       Online             America   Europe   Education   Unallocated   Consolidated     America   Europe   Education   Unallocated   Consolidated     (in thousands)     (in thousands)   September 30, 2005                       2006                       Segment revenues   $ 338,812   $ 127,944   $ 130,850   $ —   $ 597,606     $ 122,501   $ 59,903   $ 52,706   $ —   $ 235,110   Segment direct costs   (268,837 ) (118,905 ) (117,197 ) —   (504,939 )   (124,811 ) (47,368 ) (48,386 ) —   (220,565 ) Campus-based segment’s overhead   —   —   —   (11,123 ) (11,123 )   —   —   —   (4,667 ) (4,667 ) Segment profit   69,975   9,039   13,653   (11,123 ) 81,544   Segment (loss) profit   (2,310 ) 12,535   4,320   (4,667 ) 9,878   General and administrative expenses   —   —   —   (19,074 ) (19,074 )   —   —   —   (9,851 ) (9,851 ) Non-cash stock compensation expense   —   —   —   (2,529 ) (2,529 ) Operating income (loss)   $ 69,975   $ 9,039   $ 13,653   $ (32,726 ) $ 59,941   Operating (loss) income   $ (2,310 ) $ 12,535   $ 4,320   $ (14,518 ) $ 27                                               September 30, 2004                       2005                       Segment revenues   $ 243,082   $ 98,958   $ 94,477   $ —   $ 436,517     $ 82,972   $ 56,243   $ 39,462   $ —   $ 178,677   Segment direct costs   (192,670 ) (88,222 ) (84,164 ) —   (365,056 )   (83,270 ) (45,839 ) (38,294 ) —   (167,403 ) Campus-based segment’s overhead   —   —   —   (7,946 ) (7,946 )   —   —   —   (2,844 ) (2,844 ) Segment profit (loss)   50,412   10,736   10,313   (7,946 ) 63,515   Segment (loss) profit   (298 ) 10,404   1,168   (2,844 ) 8,430   General and administrative expenses   —   —   —   (16,170 ) (16,170 )   —   —   —   (6,696 ) (6,696 ) Non-cash stock compensation expense   —   —   —   (3,886 ) (3,886 ) Operating income (loss)   $ 50,412   $ 10,736   $ 10,313   $ (28,002 ) $ 43,459   Operating (loss) income   $ (298 ) $ 10,404   $ 1,168   $ (9,540 ) $ 1,734     The Company’s segment 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 international network of universities, relating primarily to strategic planning, resource allocation, identification of acquisition targets, and oversight of acquisition transactions. These centralizedAs such, these costs are not properly allocable to the operating results of Latin America and Europe. 19 The following comparison of results of operations focuses on the continuing operations of the Company. Comparison of results for the three months ended September 30, 2005March 31, 2006 to results for the three months ended September 30, 2004.March 31, 2005. Revenues.Total revenues increased by $53.1$56.4 million, or 36%32%, to $199.2$235.1 million for the three months ended September 30, 2005March 31, 2006 (the “2005“2006 fiscal quarter”) from $146.1$178.7 million for the three months ended September 30, 2004March 31, 2005 (the “2004“2005 fiscal quarter”). 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 the 20052006 fiscal quarter increased by $37.9$39.5 million, or 40%48%, to $131.6$122.5 million compared to $93.7 million for the 20042005 fiscal quarter. Enrollment increases of 25.8%16.6% in schools owned in both fiscal quarters added revenues of $15.7$13.7 million over the 20042005 fiscal quarter.  The acquisition of Universidad Peruana de Ciencias Aplicadas (“UPC”), Universidad Latinoamericana de Ciencia y Tecnologia (“ULACIT”),quarter, and Universidad Tecnologica Centroamericana (“UNITEC”) as well as the acquisition of two campuses at Universidad del Valle de Mexico (“UVM”)acquisitions within the last 12 months contributed additional revenue of $11.4$21.3 million. For schools owned in both fiscal quarters, the Company increased local currency tuition by a weighted average of 3.8%5.6%, which served to increase revenues by $3.4$5.1 million. Each institution in the segment offers programstuitions at various prices based upon the degree program. For the 20052006 fiscal quarter, the effects of enrollments at varying price points (“product mixmix”) resulted in a $3.0$5.7 million reduction in revenue compared to the 20042005 fiscal quarter, primarily due to lower-priced working adult and high school enrollments.quarter. The effects of currency translation increased revenues by $10.4$5.1 million, primarily due to the strengthening of the Chilean Peso andstronger Mexican Peso relative to the U.S. Dollar. Latin America revenue represented 66%52% of total revenues for the 2006 fiscal quarter, and 46% of total revenues for the 2005 fiscal quarter, and 64% of total revenues for the 2004 fiscal quarter. Europe revenue for the 20052006 fiscal quarter increased by $4.5$3.7 million, or 26%7%, to $21.8$59.9 million compared to $17.3 million for the 20042005 fiscal quarter. Enrollment increases of 2.5%4.1% in schools owned in both fiscal quarters addedsaw an increase in revenues of $0.9$2.5 million over the 20042005 fiscal quarter.  The acquisition of Ecole Centrale d’Electronique (“ECE”)quarter, and Insititut Francais de Gestion (“IFG”)acquisitions within the last 12 months contributed additional revenue of $4.2$5.1 million. For schools owned in both fiscal quarters, the Company increased local currency tuition by a weighted average of 3.8%2.9%, which served to increase revenues by $0.7$2.0 million. Each institution in the segment offers programstuitions at various prices based upon degree or certificate program. For the 20052006 fiscal quarter, the effects of product mix resulted in a $1.1$0.8 million reduction in revenue compared to the 20042005 fiscal quarter.quarter, primarily due to lower-priced post-graduate enrollment growth in Spain exceeding undergraduate enrollment growth. The effects of currency translation reduceddecreased revenues by $0.2$5.1 million, due to the weakening of the Euro and Swiss Franc against the U.S. Dollar. Europe revenue represented 11%26% of total revenues for the 2006 fiscal quarter, and 32% of total revenues for the 2005 fiscal quarter and 12% of total revenues for the 2004 fiscal quarter. Laureate Online Education revenue increased by $10.7$13.2 million, or 30%34%, to $45.8$52.7 million for the 20052006 fiscal quarter compared to $35.1 million the 20042005 fiscal quarter. Enrollment increases of 23%, added revenues of $6.7$7.4 million. Tuition increases accounted for $1.7$1.4 million of additional revenues, and other factors, primarily a favorable change in degree program mix, added $2.3$4.4 million. Laureate Online Education revenue represented 23%22% of total revenues for both the 2006 fiscal quarter, and the 2005 fiscal quarter, and 24% of total revenues for the 2004 fiscal quarter. Direct Costs. Total direct costs of revenues increased by $47.9$55.0 million, or 39%32%, to $169.9$225.2 million for the 2006 fiscal quarter from $170.2 million for the 2005 fiscal quarter from $122.0 million for the 2004 fiscal quarter. Direct costs represented 85%were 96% of total revenues in the 2006 fiscal quarter and 95% of total revenues in the 2005 fiscal quarter and 84% of total revenues for the 2004 fiscal quarter. Latin America direct costs increased by $28.4$41.5 million to $96.0$124.8 million, or 73%102% of Latin America revenue for the 2006 fiscal quarter, compared to $83.3 million or 100% of Latin America revenue for the 2005 fiscal quarter, compared to $67.6 million or 72% of Latin America revenue for the 2004 fiscal quarter. An increase of $10.8$14.8 million in direct costsexpenses reflected higher expenses due to increased enrollments and expanded operating activities compared to the 20042005 fiscal quarter. Acquired businesses increased direct costsexpenses by $10.5$20.8 million. For the 20052006 fiscal quarter, the effects of currency translations increased direct costsexpenses by $7.1$5.9 million, primarily due to the strengthening of the Chilean Peso and Mexican Peso against the U.S. Dollar. Europe direct costs increased by $7.8$1.5 million to $29.5$47.3 million, or 135%79% of Europe revenue for the 2006 fiscal quarter, compared to $45.8 million, or 82% of Europe revenue for the 2005 fiscal quarter, compared to $21.7 million, or 126% of Europe revenue for the 2004 fiscal quarter.  The margin decline was due to the strategic acquisition of a relatively lower margin business.  The negative margins in both fiscal quarters results from general 20 seasonality due to the shut down of the majority of these higher education institutions. Higher enrollments and expanded operations at the higher education institutions compared to the 20042005 fiscal quarter increased direct costsexpenses by $1.9 million, and acquired businesses increased direct costsexpenses by $6.1$3.6 million. For the 20052006 fiscal quarter, the effects of currency translations decreased direct costsexpenses by $0.2$4.0 million, due to the weakening of the Euro and Swiss Franc against the U.S. Dollar. Campus-based segment’ssegments overhead expense increased by $3.0$1.9 million to $5.6$4.7 million for the 2006 fiscal quarter, compared to $2.8 million for the 2005 fiscal quarter, compared to $2.6 million for the 2004 fiscal quarter, representing 3.7% and 2.4% of total campus-based revenues, respectively.  Thisquarter. The increase is dueprimarily attributable to the accrualequity-based compensation including the impact of performance-based compensationexpensing of stock options of $0.4 million under Statement of Financial Accounting Standard (“SFAS”) No. 123R, Share-Based Payment. In addition, professional fees, payroll and management travel expenses increased in support of the third quartergrowth of 2005, as well as the development of a regional management office. Company’s international operations. Laureate Online Education direct costs increased by $8.7$10.1 million to $38.8$48.4 million, or 85%92% of Laureate Online Education revenue for the 2006 fiscal quarter, compared to $38.3 million, or 97% of Laureate Online Education revenue for the 2005 fiscal quarter, comparedquarter. The 5% reduction in costs as a percentage of revenue is primarily due to $30.1 million, or 85% of Laureate Online Education revenue for the 2004 fiscal quarter. achieving increased operating efficiencies that resulted from scale. Other OperatingGeneral and Administrative Expenses.  OtherGeneral and administrative expenses increased by $2.2$3.2 million to $8.5$9.9 million for the 2006 fiscal quarter from $6.7 million for the 2005 fiscal quarter from $6.3 million for the 2004 fiscal quarter. General and administrative expenses increased by $1.8 million in the 2005 fiscal quarter to $7.2 million from $5.4 million in the 2004 fiscal quarter, reflecting the growth in the Company’s global operations. Non-cash stock compensation expense increased $0.4 million to $1.3 million for the 2005 fiscal quarter compared to $0.9 million for the 2004 fiscal quarter.  Restricted stock issued by the Company to senior executives resulted in non-cash compensation of $1.3 million in the 2005 fiscal quarter compared to $0.4 million in the 2004 fiscal quarter. Non-Operating Income/Expense.  Non-operating income/expense changed to income of $0.2 million in the 2005 fiscal quarter from expense of $1.4 million in the 2004 fiscal quarter. Interest and other income increased $1.7 million to $2.9 million from $1.2 million in the 2004 fiscal quarter, primarily due to the increase in interest-bearing corporate and Chilean long-term notes receivable. Interest expense increased $0.5 million to $2.6 million from $2.1 million in the 2004 fiscal quarter primarily due to indebtedness assumed in the Company’s 2004 acquisitions. Income Taxes. The Company has operations in multiple countries, many of which have statutory tax rates lower than those of the United States.  Approximately 79% of the Company’s revenues are generated outside the United States. Generally lower effective tax rates in these foreign jurisdictions result in an effective tax rate significantly lower than the United States statutory rate. The tax provisions for the 2005 and 2004 fiscal quarters were based on the estimated effective tax rates applicable for the 2005 and 2004 full years, after giving effect to significant items related specifically to the interim periods, including the mix of income for the period between higher and lower taxed jurisdictions.  The Company’s effective tax rates from continuing operations were 14.2% and 17.2% for the 2005 and 2004 fiscal quarters, respectively. Minority Interest in Income of Consolidated Subsidiaries, Net of Tax.  Minority interest in income of consolidated subsidiaries, net of tax, increased $1.6 million to $5.8 million in the 2005 fiscal quarter from $4.2 million in the 2004 fiscal quarter.  This increase was primarily due to an increase in net income at Universidad de Las Americas (“UDLA”), Universidad Andres Bello (“UNAB”), and UVM, as well as the acquisition of UPC in September 2004 and the buyout of the ownership interest of the minority shareholders at Universidad Europea de Madrid (“UEM”) in December 2004.  This increase is partially offset by the impact of the Company’s buy-out of the ownership interests of the minority shareholders at Walden in September 2004 and the acquisition of companies generating losses in the 2005 fiscal quarter with minority ownership interests, ECE and IFG, in October and November 2004, respectively. Comparison of results for the nine months ended September 30, 2005 to results for the nine months ended September 30, 2004. Revenues.  Total revenues increased by $161.1 million, or 37%, to $597.6 million for the nine months ended September 30, 2005 (the “2005 fiscal nine-month period”) from $436.5 million for the nine months ended September 30, 21 2004 (the “2004 fiscal nine-month period”).  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 the 2005 fiscal nine-month period increased by $95.7 million, or 39%, to $338.8 million compared to $243.1 million for the 2004 fiscal nine-month period.  Enrollment increases of 25.8% in schools owned in both fiscal nine-month periods added revenues of $41.4 million over the 2004 fiscal nine-month period.  The acquisition of UPC, ULACIT, and UNITEC as well as the acquisition of two campuses at UVM within the last 12 months contributed additional revenue of $40.0 million.  For schools owned in both fiscal nine-month periods, the Company increased local currency tuition by a weighted average of 3.8%, which served to increase revenues by $8.9 million.  Each institution in the segment offers programs at various prices based upon degree program.  For the 2005 fiscal nine-month period, the effects of product mix resulted in a $10.1 million reduction in revenue compared to the 2004 fiscal nine-month period, primarily due to lower-priced working adult and high school enrollments.  The effects of currency translation increased revenues by $15.5 million, primarily due to the strengthening of the Chilean Peso and Mexican Peso relative to the U.S. Dollar. Latin America revenue represented 57% of total revenues for the 2005 fiscal nine-month period and 56% for the 2004 fiscal nine-month period. Europe revenue for the 2005 fiscal nine-month period increased by $29.0 million, or 29%, to $127.9 million compared to $98.9 million for the 2004 fiscal nine-month period. Enrollment increases of 0.7% in schools owned in both fiscal nine-month periods had a negligible impact on revenues, and the acquisition of Institute of Executive Development (“IEDE”), ECE and IFG within the last 12 months contributed additional revenue of $22.8 million.  For schools owned in both fiscal nine-month periods, the Company increased local currency tuition by a weighted average of 3.7%, which served to increase revenues by $3.8 million.  Each institution in the segment offers programs at various prices based upon degree or certificate program.  For the 2005 fiscal nine-month period, the effects of product mix resulted in a $1.5 million reduction in revenue compared to the 2004 fiscal nine-month period.  The effects of currency translation increased revenues by $3.9 million, due to the strengthening of the Euro and Swiss Franc against the U.S. Dollar. Europe revenue represented 21% of total revenues for the 2005 fiscal nine-month period and 23% for the 2004 fiscal nine-month period. Laureate Online Education revenue increased by $36.4 million, or 38%, to $130.9 million for the nine months ended September 30, 2005 compared to $94.5 million the nine months ended September 30, 2004.  Enrollment increases of 23%, added revenues of $16.7 million, and the Laureate Online Education B.V. acquisition added revenues of $2.9 million.  Tuition increases accounted for $4.3 million of additional revenues, and other factors, primarily a favorable change in degree program mix, added $12.5 million.  Laureate Online Education revenue represented 22% of total revenues for the nine months ended September 30, 2005 and for the nine months ended September 30, 2004. Direct Costs.Total direct costs of revenues increased $143.1 million, or 38%, to $516.1 million for the 2005 fiscal nine-month period from $373.0 million for the 2004 fiscal nine-month period.  Direct costs represented 86% of total revenues in the 2005 fiscal nine-month period and 85% of total revenues for the 2004 fiscal nine-month period. Latin America direct costs increased by $76.2 million to $268.8 million, or 79% of Latin America revenue for the 2005 fiscal nine-month period, compared to $192.7 million or 79% of Latin America revenue for the 2004 fiscal nine-month period. An increase of $29.6 million in direct costs reflected higher expenses due to increased enrollments and expanded operating activities compared to the 2004 fiscal nine-month period.  Acquired businesses increased direct costs by $35.9 million.  For the 2005 fiscal nine-month period, the effects of currency translations increased direct costs by $10.7 million, primarily the strengthening of the Chilean Peso and Mexican Peso against the U.S. Dollar. Europe direct costs increased by $30.7 million to $118.9 million, or 93% of Europe revenue for the 2005 fiscal nine-month period, compared to $88.2 million, or 89% of Europe revenue for the 2004 fiscal nine-month period.  The margin decline was due to the strategic acquisition of a relatively lower margin business.  Higher enrollments and expanded operations at the higher education institutions compared to the 2004 fiscal nine-month period increased direct costs by $4.0 million, and acquired businesses increased direct costs by $23.5 million.  For the 2005 fiscal nine-month period, the effects of currency translations increased direct costs by $3.2 million, due to the strengthening of the Euro and Swiss Franc against the U.S. Dollar. Campus-based segment’s overhead expense increased by $3.2 million to $11.1 million for the 2005 fiscal nine-month period, compared to $7.9 million for the 2004 fiscal nine-month period.  These amounts represent 2.4% and 2.3% of campus 22 based revenues, respectively.  This increase is due to the accrual of performance-based compensation in the third quarter of 2005, as well as the development of a regional management office. Laureate Online Education direct costs increased by $33.0 million to $117.2 million, or 90% of Laureate Online Education revenue for the 2005 fiscal nine-month period, compared to $84.2 million, or 89% of Laureate Online Education revenue for the 2004 fiscal nine-month period.  Program efficiencies due to higher enrollment volumes were offset by investments in brand development and student advisory services. Other Operating Expenses.  Other expenses increased by $1.5 million to $21.6 million for the 2005 fiscal nine-month period from $20.1 million for the 2004 fiscal nine-month period. General and administrative expenses increased by $2.9 million in the 2005 fiscal nine-month period to $19.1 million from $16.2 million in the 2004 fiscal nine-month period. The increase in expenses was primarily due to higher payroll and other employee related costs resulting from increased headcount, training costsprofessional fees and travel expenses to support the rapid growth in the Company’s global operations. In addition, there was an increase in equity-based compensation including the impact of expensing stock options of $0.4 million under SFAS No. 123R. Non-cash stock compensation expenseNon-Operating Income/Expenses. Non-operating income/expenses decreased $1.4to break even for the 2006 fiscal quarter from income of $0.3 million to $2.5 million forin the 2005 fiscal nine-month period compared to $3.9 million for the 2004 fiscal nine-month period.  The decrease was primarily due to a non-recurring variable stock option charge of $1.1 million in the 2004 fiscal nine-month period related to the inadvertent exercise of stock options by employees on a net share basis. Non-Operating Income/Expense.  Non-operating income/expense decreased to income of $0.1 million for the 2005 fiscal nine-month period from income of $14.8 million in the 2004 fiscal nine-month period. quarter. Interest and other income decreased $11.9increased $1.3 million to $8.6$3.7 million from $20.5$2.4 million in the 20042005 fiscal nine-month period,quarter, primarily due to a reduction inadditional interest income related toearned of $0.8 million by subsidiaries acquired after March 31, 2005 as well as interest earned of $0.3 million on notes receivable from the early repayment of a note receivable originally issued on June 30, 2003, as partial consideration for the saledisposition of the Company’s K-12 segments to Educate with an original issue discountWall Street Institute (“WSI”) business in the first quarter of $13.4 million. 2005. Interest expense increased $2.5$1.2 million primarily due to indebtednessdebt balances entered into and assumed in connection with the Company’s 20042005 acquisitions. Income Taxes.The Company has operations in multiple countries, many of which have statutory tax rates lower than the United States. Approximately 80%79% of the Company’s revenues are generated outside the United States. Generally lower effective tax rates in these foreign jurisdictions results in an effective tax rate significantly lower than the United States statutory rate. The tax provisions for the 2005 and 2004 fiscal nine-month periods were based on the estimated effective tax rates applicable for the 2005 and 2004 full years, after giving effect to significant items related specifically to the interim periods, including the mix of income for the period between higher and lower taxed jurisdictions.  The Company’s effective tax ratesrate from continuing operations were 14.0%was 728.1% and 17.0%11.2% for the three months ended March 31, 2006 and 2005, respectively. For the three months ended March 31, 2006, the effective rate includes the impact of Financial Accounting Standards Board Interpretation (“FIN”) No. 18. FIN No. 18 only applies to interim periods, and 2004 fiscal nine-month periods, respectively. has no effect on the Company’s annual effective rate. The Company’s effective rate for the three months ended March 31, 2006, excluding the impact of FIN No. 18 was 9.0%, which is the Company’s forecasted annual effective tax rate for 2006. For the period ended March 31, 2005, the Company’s effective tax rate was 11.2%, and the impact of FIN No. 18 was immaterial. The forecasted effective tax rate for 2006 decreased from the 2005 effective tax rate due to the impact of recent acquisitions in lower taxed jurisdictions and foreign tax planning implemented during the first quarter of 2006. Liquidity and Capital Resources Cash provided by operations was $95.9$64.1 million for the 2005 fiscal nine-month period,first quarter of 2006, an increase of $31.4$19 million from $64.5$45.1 million for the 2004 fiscal nine-month period.first quarter of 2005. This increase was drivencaused by several factors includingwhich offset a $6.5$2.6 million increasedecrease in net income for the 2005 fiscal nine-month period.first quarter of 2006 as compared to the first quarter of 2005. Adjustments for significant non-cash income and expense included a $7.0$3.2 million increase in depreciation and amortization and a $2.8$2.7 million reductionincrease in non-cashequity-based compensation, which includes the impact of expensing stock compensationoptions, in the 2005 fiscal nine-month period, and a $2.4 million loss on dispositionfirst quarter of discontinued operations in the 2005 fiscal nine-month period only.  In addition, the 2004 fiscal nine-month period net income included $12.7 million of a non-cash acceleration of original issue discount that did not recur in the 2005 fiscal nine-month period.  Non-cash activity in deferred income taxes decreased by $10.1 million between the 2004 and 2005 fiscal nine-month periods.2006. The operating assets and liabilities for both fiscal nine-month periods changed $15.6$15.9 million to a source of cash of $6.9$48.9 million in the 2005 fiscal nine-month periodfirst quarter of 2006 compared to a usesource of cash of $8.7$33.0 million in the 2004 fiscal nine-month period.  This increase is due primarily to receiptfirst quarter of a $15.7 million income tax refund in the 2005 fiscal nine-month period. 23 2005. Cash used in investing activities increased $51.9decreased $10.0 million from $67.4$40.8 million for the 2004 fiscal nine-month period to $119.3 million for 2005 fiscal nine-month period.  Late in the secondfirst quarter of 2004, the Company collected a $55.0 million related party note receivable taken in connection with the 2003 sale of its K-12 business segments.  Investing activities in the 2005 fiscal nine-month period included $12.7 million collected in connection with the disposition of discontinued operations, which is $42.3 million less than in the 2004 fiscal nine-month period.  The 2005 fiscal nine-month period also included a $13.4 million increase in payments of consideration for acquisitions than did the 2004 fiscal nine-month period, primarily due to payments to prior owners of Walden and UNAB. Our change in notes receivables was $6.6 million less in the 2005 fiscal nine month period of $5.4 million from $12.0$30.8 million for the 2004 fiscal nine-month period. Net transactions in available-for-sale securities provided $7.8 million more in cash and purchasesfirst quarter of 2006. Purchases of property and equipment were $8.8$17.6 million higher in the 2005 fiscal nine-month periodfirst quarter of 2006 than in the 2004 fiscal nine-month period. first quarter of 2005. Non-recurring activities taking place in the first quarter of 2005 included $12.7 million in net proceeds from sales of discontinued operations relating to WSI, and $26.3 million in payments made for acquisitions and deferred considerations. In addition, purchases of available-for-sale securities decreased $6.7 million and proceeds from sales of securities increased $2.7 million in the first quarter of 2006 compared to the first quarter of 2005. Cash provided by financing activities forincreased $19.2 million to $4.4 million in the 2005 fiscal nine-month period was $1.9 million compared tofirst quarter of 2006 from cash provided byused in financing activities forof $14.8 million in the 2004 fiscal nine-month periodfirst quarter of $10.6 million, a change of $8.7 million.2005. The most significant componentcomponents of this change wasare a net increase in payments of debt of $2.6 millionthe proceeds from the 2004 fiscal nine-month period to the 2005 fiscal nine-month period. exercise of stock options of $12.0 million and a decrease of $4.8 million in net payments on long term debt. The foreign currency effect on our operationsthe cash balances resulted in an increase in cash of $3.4 million for the 2005 fiscal nine-month period compared to a decrease of $3.2($0.2) million to ($1.2) million in the first quarter of 2006 from ($1.0) in the first quarter of 2005. In the fourth quarter of 2005, the Company entered into a 364-day, $120.0 million Credit Agreement (the “Agreement”) with Bank of America, N.A. (“Bank of America”). The Agreement has a material covenant, which states that the Company is limited in total net debt, defined as debt minus unrestricted cash, to 2.5 times consolidated EBITDA, as defined. The following subsidiaries of the Company are guarantors under the Agreement: Walden E-Learning, Inc., Walden University, Inc., The Canter Group of Companies, and Canter and Associates, Inc. The outstanding balance on the line of credit was $25.0 million at March 31, 2006. The Company is in compliance with its covenant requirements as of March 31, 2006. The Company anticipates that cash flow from operations, available cash and existing credit facilities will be sufficient to meet its recurring operating requirements. The Company will require additional liquidity in order to meet certain obligations, including contingent consideration paid to minority owners of its institutions and tax settlement obligations.  Additionally, the Company continues to examine opportunities in the educational services industry for potential synergistic acquisitions, which will require additional liquidity. In order to meet certain obligations and strategic goals, the same periodCompany is considering the issuance of secured and unsecured debt as well as equity instruments in 2004.order to meet additional commitments. Contractual Obligations and Contingent Matters The following tables reflect the Company’s contractual obligations and other commercial commitments as of March 31, 2006:     Payments Due by Period (in thousands)   Contractual Obligations       Total   Due in less than 1 year   Due in 1-3 years   Due in 4-5 years   Due after 5 years   Long-term debt (1)   $ 149,064   $ 50,741   $ 40,622   $ 16,735   $ 40,966   Interest payments (7)   26,622   8,195   11,645   3,567   3,215   Operating leases (8)   428,298   41,628   120,876   69,989   195,805   Due to shareholders of acquired companies   63,031   18,996   32,477   1,400   10,158   Other long term liabilities (2,6)   3,548   3,548   -   -   -   Total contractual cash obligations   $ 670,563   $ 123,108   $ 205,620   $ 91,691   $ 250,144       Amount of Commitment Expiration Per Period (in thousands)   Commercial Commitments       Total Amounts Committed   Due in less than 1year   Due in 1-3 years   Due in 4-5 years   Due after 5 years   Guarantees (3)   $ 10,016   $ 3,816   $ 4,848   $ 1,352   $ —   Purchase Obligations(4)   16,254   1,520   14,734   —   —   Standby letters of credit (5)   14,500   14,500   —   —   —   Total commercial commitments   $ 40,770   $ 19,836   $ 19,582   $ 1,352   $ —     (1) On October 26, 2005, the Company entered into a 364-day, $120.0 million Credit Agreement (the “Agreement”) with Bank of America, N.A. (“Bank of America”) and certain other parties thereto.parties. The Agreement expires on October 25, 2006 and is comprised of two tranches: Tranche A for $90.0 million and Tranche B for $30.0 million. Tranche B has a $20.0 million sublimit for standby letters of credit. The Agreement effectively supercedes the existing $30.0 million Credit Agreement dated June 30, 2003 by incorporating it as Tranche B in the Agreement. See Note 14 to the unaudited consolidated financial statement for additional information on the Agreement. The Company anticipates that cash flow from operations, available cash and existing credit facilities will be sufficient to meet its operating requirements, including some expansions of its existing business.  The Company continues to examine opportunities in the 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.  However, if the Company were to pursue a number of acquisitions or major expansions, 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  September 30, 2005:     Payments Due by Period (in thousands)   Contractual Obligations   Total   Due in less than 1 year   Due in 1-3 years   Due in 4-5 years   Due after 5 years   Long-term debt (1)   $ 119,649   $ 43,453   $ 32,474   $ 10,277   $ 33,445   Operating leases   238,717   32,992   91,545   49,755   64,425   Due to shareholders of acquired companies   45,805   10,462   26,856   2,425   6,062   Other obligations (2)   2,790   2,790   —   —   —   Total contractual cash obligations   $ 406,961   $ 89,697   $ 150,875   $ 62,457   $ 103,932   24     Amount of Commitment Expiration Per Period (in thousands)   Commercial Commitments   Total Amounts Committed   Due in less than 1year   Due in 1-3 years   Due in 4-5 years   Due after 5 years   Lines of credit   $ —   $ —   $ —   $ —   $ —   Guarantees (3)   9,206   3,570   3,995   1,459   182   Purchase Obligations (4)   13,129   1,507   11,622   —   —   Standby letters of credit (5)   15,070   15,070   —   —   —   Kendall College (6)   2,600   2,600   —   —   —   Total commercial commitments   $ 40,005   $ 22,747   $ 15,617   $ 1,459   $ 182   (1) Effective June 30, 2003, the Company entered into an unsecured line of credit agreement of $30.0 million, with a $5.0 million sub-limit for standby letters of credit, which is intended for working capital purposes.  The line of credit was effectively superceded on October 26, 2005 by the Agreement entered into by the Company with Bank of America for $120.0 million. There was no outstanding balance on the line of credit was $25.0 million at September 30, 2005.March 31, 2006. Individual units within campus-based operations have unsecured lines of credit, which total $41.9$43.1 million, primarily for working capital purposes. The aggregate outstanding balance on the campus-based segments’ lines of credit was $37.4$13.8 million at September 30, 2005,March 31, 2006, which is included in the current portion of long-term debt. The weighted average short-termshort term borrowing rates were 8.5%5.8% and 7.1%5.1% at September 30,March 31, 2006 and March 31, 2005 and 2004, respectively. (2) In connection with the sale of substantially all of the Company’s K-12 segments to Educate, the Company entered into a three-year management service agreement with Educate, which terminates June 30, 2006.Educate. Under the terms of the agreement, Educate provideswill provide certain support services, including, specified accounting, benefits, IT, human resources, purchasing and payroll services to Laureate. Conversely, the CompanyLaureate will provide certain support services, primarily in the areas of facilities, tax and treasury, to Educate. The agreement is based on a fixed-fee, adjusted as appropriate based on increases to predetermined service volumes. The net fee due to Educate on a monthly basisprior to June 30, 2006 is approximately $0.3 million, for a total amount due of approximately $2.8$0.9 million. (3) Subsequent to the divestiture of the K-12 segments, all leases related to Sylvan Learning Centers acquired by Educate were renegotiated or assigned in the name of Educate during the third quarter of 2003. Leases with remaining payments of $4.7$5.8 million through December 20082010 are guaranteed by the Company. Under the terms of the Asset Purchase Agreement with Educate, the Company is indemnified against any losses suffered as a result of these lease guarantees. During 2004, the Company entered into an agreement to guarantee lease payments owed by Kendall College to Key Equipment Finance. Equipment leasesLeases with remaining payments of $4.5$4.2 million through December 2011 are guaranteed by the Company under this agreement. (4) As part of the 2004 acquisition of ECE,Ecole Centrale d’Electronique (“ECE”), the Company committed to purchase the remaining 30% ownership from the sellers on December 31, 2008 for approximately $8.4$8.5 million. The agreement is denominated in Euros, and is subject to foreign currency exchange rate risk on the date of payment. As part of the 2004 acquisition of IFG,Institut Francais de Gestion (“IFG”), the Company committed to additional capital contributions, which will increase the Company’s share of ownership. The agreement provides that, no later than July 31, 2006 and July 31, 2007, the Company mustshall contribute approximately $1.5 million and $2.2$2.3 million respectively, resulting in an increase in ownership share of 16% and 23%, respectively. In addition, during the period October through November 2008, the sellers may exercise a put option requiring the Company to purchase the remaining 10% ownership for approximately $1.0 million. The agreement is denominated in Euros, and is subject to foreign currency exchange rate risk on the dates of payment. As part of the acquisition of Cyprus College, the Company committed to making a contribution of approximately $3.0 million between the closing date and three years thereafter. The contributions will fund certain capital projects, if approved, and will not alter the relative equity interests. The contribution commitment is denominated in Cypriot Pounds and is subject to foreign currency exchange rate risk on the dates of payment. (5) The Company has approximately $15.1$14.5 million outstanding in standby letters of credit. The Company is self-insured for workers compensation and other insurable risks up to predetermined amounts above which third party insurance applies. The Company is contingently liable to insurance carriers under certain of these policies and has provided a letter of credit in favor of the insurance carriers for approximately $1.1 million. The Company has also providedissued a standby letter of credit in the amount of $1.4 million assuring the collectibility of a line of credit at Academia de Idiomas y Estudios Profesionales (“AIEP”),AIEP, which is being used for working capital purposes. The outstanding balance on the AIEPAcademia de Idiomas y Estudios Profesionales (“AIEP”) line of credit was $2.2$2.0 million at September 30, 2005.March 31, 2006. In the first quarter of 2005, the Company obtainedissued a $12.0 million standby letter of credit in favor of WSI Education S.A.R.L.S.a.r.l. for a tax indemnification related to the WSI sale. 25 sale of WSI. (6) Under terms of the note agreements with Kendall College (“Kendall”), the Company has committed to provideproviding total additional funding to Kendall College of up to $2.6 million. In the event the Company does not exercise its agreement to acquire Kendall, Kendall is obligated to enter into a lease agreement with the Company beginning July 21, 2006 to lease office space. The lease commitment specifies a term of 36 months and annual rent of $1.0 million. (7) Interest payments for variable rate long-term debt were calculated using the variable interest rate at March 31, 2006. (8) In February 2006, the company entered into a 15-year, approximately 140,000 square foot lease with Harbor East Parcel B—Commercial, LLC (the “Landlord”). The lease has a 10-year non-cancellable lease term commencing in the first quarter of 2007. Upon completion, the leased facility will become the company’s corporate headquarters. Contingent Matters In connection with certain acquisitions, variable amounts of contingent consideration are payable to the sellers based upon specified terms. All existing contingent consideration agreements are predicated upon improved operating profitability of the acquired entities, based on multiples consistent with those used to calculate the initial purchase price. The Company will record the contingent consideration when the contingencies are resolved and the additional consideration becomes payable. Additional amounts of contingent consideration are due the sellers of UDLAUniversidad de Las Americas (“UDLA”) based on operating results for the three years ending December 31, 2006. On the later of March 31, 2006 or 45 days after the Company receives the audited financial statements of Decon, the holding company that controls and operates UDLA, the Company is obligated to the sellers for an amount equal to 60% of six times (i) average recurring earnings before interest and income taxes (“EBIT”) for 2004 and 2005, less (ii) 2000 EBIT; this result is reduced by (iii) 42% of certain specified debt. AssumingThe Company has received the Decon audited financials and has begun its review of the amount due to the sellers. Excluding adjustments of non-recurring EBIT remains at 2004 levels for 2005,items and any other negotiated amounts, the Company believes it would be obligated to the sellers for approximately $60.9 million.  No$81.7 million, although the actual amount will be mutually agreed upon with the  sellers. This amount is net of approximately $8.8 million of amounts owed to the Company from the sellers related to consideration from a prior acquisition of another university. On the later thanof March 31, 2007 or 45 days after the Company receives the audited financial statements of Decon, the Company is obligated to the sellers for an amount equal to 20% of four times (i) average recurring EBIT for 2005 and 2006; this result is reduced by (ii) 20% of certain specified debt and (iii), $6.5 million. AssumingExcluding adjustments of non-recurring EBIT remains at 2004 levels for 2005items and any other negotiated amounts as well as including 2006 estimates and projections, the Company would be obligated to the sellers for approximately $12.6$18.5 million. The Company has pledged its shares of Decon, the holding company that controls and operates UDLA, to satisfy its payment obligations to the sellers. The Company cannot dispose of, place any lien on or encumber the shares without the prior approval of the sellers. Effective April 1, 2008, the minority owners of UDLA have thea put right to require the Company to purchase their remaining 20% interest in Decon for a variable purchase price based on 4.5 times average recurring EBIT for certain specified periods. Effective April 1, 2009, the Company has a call right to acquire the remaining 20% interest for a variable purchase price based on 5.0 times average EBIT for certain specified periods. Effective April 1, 2009, the minority owners of UNABUniversidad Andres Bello (“UNAB”) and AIEP have thea put right to require the Company to purchase their 20% interest for a variable purchase price based on average recurring EBIT for certain specified periods. Effective April 1, 2009, the Company has a call right to acquire this 20% interest under a similar methodology for certain specified periods. Effective March 1, 2009, the minority owners of Universidade Anhembi Morumbi (“UAM”) have a put right to require the Company to purchase an equity interest of 29% from the minority owners at a variable purchase price based on 4.0 times recurring EBITDA for certain specified periods. Also effective March 1, 2009, the Company has a call right to acquire the same 29% interest from the minority owners for a variable purchase price equal to the greater of 4.0 times recurring EBITDA for certain specified periods or the equivalent per share valuation of the Company’s initial 51% acquisition of UAM, grown at local inflation. Beginning March 1, 2013 and continuing for ten years the minority owners and the Company have similar put and call rights, respectively, on the remaining 20% interest of the minority owners, with the purchase price determined based on a similar formula. Additional amounts of contingent consideration, not to exceed $10.0 million, are due the sellers of KIT eLearningLaureate Online Education BV equal to four times the average of the audited earnings before interest, income taxes, depreciation and amortizationEBITDA for the calendar years ending December 31, 2006 and 2007.  KIT eLearning BV was acquired on March 31, 2004 and is operated as Laureate Online Education BV. Impact of Recently Issued Accounting Standards. In June 2005, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 154, Accounting Changes and Error Corrections (“SFAS 154”). SFAS 154 replaces Accounting Principal Board (“APB”) Opinion No. 20, Accounting Changes and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements. SFAS 154 requires that a voluntary change in accounting principle be applied retrospectively with all prior period financial statements presented on the new accounting principle. SFAS 154 also requires that a change in method of depreciating or amortizing a long-lived nonfinancial asset be accounted for prospectively as a change in estimate, and correction of errors in previously issued financial statements should be termed a restatement. SFAS 154 is effective for accounting changes and correction of errors made in fiscal years beginning after December 15, 2005. The Company does not expect the adoption of SFAS 154 to have a material impact on the Company’s consolidated financial statements. In December 2004, the FASB issued SFAS No. 123 (revised 2004) (“SFAS 123R”), Share-Based Payment.  SFAS 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 SFAS 123, the Company currently accounts for share-based payments to employees using APB Opinion 25, which generally recognizes no compensation expense for employee stock options with exercise prices at the date of grant equal to or greater than the quoted market value of the underlying stock.  The adoption of the fair value method under SFAS 123R is expected to have a material impact on the results of operations.  SFAS 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 annual reporting period beginning after June 15, 2005. The Company is currently evaluating the Black-Scholes and binomial 26 lattice valuation models and the modified-prospective-transition and modified-retrospective-transition provisions of this standard and will begin applying the valuation and transition provisions of SFAS 123R in the first quarter of 2006. Item 3. Quantitative and Qualitative Disclosures About Market Risk Market risk is the risk of loss to future earnings, to fair values or to future cash flows that may result from changes in the price of financial instruments. The Company is exposed to financial market risks, including changes in foreign currency exchange rates, interest rates, equity prices and investment values. The Company occasionally uses derivative financial instruments to protect against adverse currency movements related to significant foreign transactions. Exposure to market risks related to operating activities is managed through the Company’s regular operating and financing activities. Foreign Currency Risk The Company derives approximately 80%79% of its revenues from students outside the United States. This business is transacted through a network of international subsidiaries, generally in the local currency that is considered the functional currency of that foreign subsidiary. Expenses are also incurred in the foreign currencies to match revenues earned, which minimizes the Company’s exchange rate exposure to operating margins. A hypothetical 10% adverse change in average  foreign currency exchange rates would have decreased operating income and cash flows for the 20052006 fiscal nine-month periodquarter by $9.0$0.2 million. The Company generally views its investment in most of its foreign subsidiaries as long-term. The effects of a change in foreign currency exchange rates on the Company’s net investment in foreign subsidiaries are reflected in accumulated other comprehensive income (loss) on the Company’s balance sheets. A 10% depreciation in functional currencies relative to the U.S. dollar would have resulted in a decrease in the Company’s net investment in foreign subsidiaries of approximately $67.2$69.2 million at September 30, 2005.March 31, 2006. The Company occasionally enters into foreign exchange forward contracts to reduce the earnings impact of non-functional currency denominated receivables. The primary business objective of thesuch activity is to protect the U.S. dollar value of the Company’s assets and future cash flows with respect to exchange rate fluctuations. At September 30, 2005,March 31, 2006, the Company had twoone forward contractscontract with an expiration datesdate in 2005 and 2009, respectively.2009. The gains and losses on these contracts are deferred in accumulated other comprehensive income until the changes in the underlying financial instruments are recorded in the income statement. At thisthat time, the deferred gains and losses will be reclassified from accumulated other comprehensive income on the balance sheet to the income statement. Interest Rate Risk The Company holds its cash and cash equivalents in high quality, short-term, fixed income securities. Consequently, the fair value of the Company’s cash and cash equivalents would not be significantly impacted by either a 100 basis point increase or decrease in interest rates due to the short-term nature of the Company’s portfolio. The Company’s revolving credit facility bears interest at variable rates, and the fair value of this instrument is not significantly affected by changes in market interest rates. A 100 basis point decrease in interest rates would have decreased net interest income for the 2005 fiscal nine-month periodquarter by $0.4$0.5 million. The table below provides information about the Company’s financial instruments that are sensitive to changes in interest rates. The table presents cash flows of weighted-average interest rates and principal payments for the following years ending September 30.March 31. The fair value of the debt below approximates book value. 27 Total debt and due to shareholders of acquired companies (in millions of US dollars):   2006   2007   2008   2009   2010   Thereafter   Total     2007   2008   2009   2010   2011   Thereafter   Total     (in millions)     (in millions)   Fixed rate (Chilean peso)   $ 17.6   $ 22.8   $ 5.5   $ 1.3   $ 0.1   $ 0.6   $ 47.9     $ 16.7   $ 22.5   $ 3.0   $ 0.1   $ 0.1   $ 0.3   $ 42.7   Average interest rate   6.2 % 6.0 % 5.4 % 5.4 % 8.5 % 8.5 % —     6.2 % 6.1 % 5.7 % 8.5 % 8.5 % 8.5 % —   Fixed rate (Swiss franc)   3.7   2.2   2.2   2.2   2.0   24.0   36.3     4.0   2.2   2.2   2.2   2.2   22.7   35.5   Average interest rate   2.0 % 2.1 % 2.3 % 2.4 % 2.6 % 2.9 % —     2.1 % 2.2 % 2.3 % 2.5 % 2.7 % 3.0 % —   Fixed rate (Euro)   1.1   0.7   0.3   1.7   0.2   1.7   5.7     2.3   2.2   2.1   3.6   2.1   11.0   23.3   Average interest rate   4.7 % 4.7 % 4.7 % 4.6 % 4.5 % 4.5 % —   Fixed rate (Brazilian Real)   5.3   4.9   4.9   —   —   —   15.1   Average interest rate   0.0 % 0.0 % 0.0 % —   —   —   —   Fixed rate (Honduran Lempira)   0.3   0.4   0.5   1.9   0.7   10.9   14.7   Average interest rate   6.7 % 6.9 % 7.0 % 6.9 % 6.9 % 6.9 % —     0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % —   Fixed rate (other)   1.5   1.7   4.9   2.4   1.2   7.3   19.0     4.3   —   —   —   —   —   4.3   Average interest rate   1.5 % 1.4 % 0.8 % 0.0 % 0.0 % 0.0 % —     5.9 % —   —   —   —   —   —   Variable rate (Chilean peso)   9.3   0.2   0.2   0.2   0.2   1.0   11.1     6.6   1.8   1.5   1.4   1.4   1.2   13.9   Average interest rate   6.1 % 3.5 % 3.5 % 3.5 % 3.5 % 3.5 % —     7.3 % 7.1 % 7.2 % 7.4 % 7.7 % 8.2 % —   Variable rate (Swiss franc)   0.2   0.1   —   —   —   5.4   5.7     0.2   —   —   —   —   5.4   5.6   Average interest rate   3.9 % 3.9 % —   —   —   3.9 % —     3.9 % —   —   —   —   3.9 % —   Variable rate (Euro)   4.4   1.4   0.6   0.5   0.3   3.4   10.6     1.8   1.1   0.6   0.6   0.6   3.1   7.8   Average interest rate   3.5 % 3.4 % 3.4 % 3.4 % 3.4 % 3.4 % —     3.5 % 3.4 % 3.4 % 3.4 % 3.4 % 3.4 % —   Variable rate (Cypriot pound)   0.8   1.1   1.1   1.1   1.1   4.0   9.2   Average interest rate   6.0 % 6.0 % 6.0 % 6.0 % 6.0 % 6.0 % —   Variable rate (Mexican Peso)   14.9   0.9   0.9   —   1.8   —   18.5     1.1   0.9   0.8   1.8   —   —   4.6   Average interest rate   8.3 % 3.3 % 2.9 % —   2.8 % —   —     2.1 % 1.2 % 1.1 % 0.6 % —   —   —   Variable rate (other)   1.2   2.1   2.1   2.1   1.1   2.0   10.6     26.3   2.2   2.1   2.1   1.2   1.3   35.2   Average interest rate   10.0 % 10.0 % 10.0 % 10.0 % 10.0 % 10.0 % —     7.3 % 10.0 % 10.0 % 10.0 % 10.0 % 10.0 % —     The weighted-average interest rates for the variable debt were calculated using the interest rate in effect as of September 30, 2005March 31, 2006 for each debt instrument. Investment Risk         The Company has an investment portfolio that includes short-term investments in available-for-sale debt and equity securities. The Company’s investment portfolio is exposed to risks arising from changes in these investment values. All the potential impacts noted above are based on sensitivity analysis performed on the Company’s financial position at September 30, 2005.March 31, 2006. Actual results may differ materially. Item 4. Controls and Procedures Evaluation of Disclosure Controls and Procedures The Company’s management, including the chief executive officer and the principal financial officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures as of September 30, 2005.March 31, 2006. The Company’s disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by the Company in the reports that it files or submits under the Securities Act of 1934, including in this Quarterly Report on Form 10-Q has beenis appropriately recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the chief executive officer and principal financial officer, to allow timely decisions regarding required disclosure. Based on that evaluation, the chief executive officer and principal financial officer have concluded that the Company’s disclosure controls and procedures are effective at the reasonable assurance level. level as of March 31, 2006. Changes in Internal Control over Financial Reporting The Company’s management, including the chief executive officer and principal financial officer, has evaluated any changes in the Company’s internal control over financial reporting that occurred during the quarterly period ended September 30,March 31, 2006. As previously disclosed in our Annual Report on Form 10-K/A, as of December 31, 2005, the Company identified a material weakness pertaining to insufficient controls over the accounting for income taxes as there was insufficient review of detailed analyses and supporting documentation by management with appropriate knowledge of income tax accounting, which resulted in an error in previously issued interim financial statements. As a result of this assessment the Company has implemented several improvements in an overall program to remediate the material weakness. During the quarter ended March 31, 2006, the Company conducted a complete review of the internal control structure for all tax processes and has concluded that there was noimplemented revisions to its reviews and controls of routine and non-routine transactions. The Company also substantially reduced its involvement in providing tax services to former subsidiaries of the Company under a shared services agreement. The Company continues to improve its documentation and standardization of tax related matters. The Company also remains focused on increasing the quality and the depth of its tax resources, internally and externally. Each of these corrective actions constitutes a change that occurredin the Company’s internal controls. No other changes were made in the Company’s internal controls during the quarterly period ended September 30, 2005first quarter of 2006 that has materially affected or isare reasonably likely to materially affect the Company’s internal control over financial reporting. 28 PART II -– OTHER INFORMATION Item 1.  Legal Proceedings The Company is not currently a party to any litigation that management believes to be material. Item 1A. Risk Factors There has been no material change in the information provided in Item 1A of the Form 10-K/A Annual Report for 2005. Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds None. Item 3.    Defaults Upon Senior Securities None. Item 4. Submission of Matters to a Vote of Security Holders No matters were submitted to a vote of security holders during the first quarter of 2006. None Item 5.    Other Information None. Item 6.    Exhibits (a)   Exhibits filed with this report: Exhibit Number   Description 31.013.1* Articles of Amendment and Restatement of the Charter (Exhibit to the Company’s Registration Statement on Form S-1) (Registration No. 33-69558)) 3.2* Amended and Restated Bylaws dated September 27, 1996 (Exhibit to the Company’s Form 10-K filed March 31, 1997) 3.3* Amendment to By-Laws as of December 31, 1999 (Exhibit to the Company’s Current Report on Form 8-K dated December 13, 1999) 18.01 Letter Regarding Change in Accounting Principle (a) 31(i).01   Certification of Douglas L. Becker pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (a) 31.0231(i).02   Certification of Edward A. CabanasRosemarie Mecca pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (a) 32.01   Certification of Douglas L. Becker pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (b) 32.02   Certification of Edward A. CabanasRosemarie Mecca pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (b) 29 *                    Incorporated by reference (a)             Filed herewith (b)            Furnished herewith SIGNATURESIGNATURES Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on November 3, 2005. May 10, 2006. LAUREATE EDUCATION, INC.   (Registrant)       By: /s/ Douglas L. Becker     Douglas L. Becker     Director, Chairman of the Board By: /s/ Rosemarie Mecca Rosemarie Mecca Executive Vice President and Chief ExecutiveFinancial Officer (Principal Financial Officer)   3028