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Shareholders may well ask: if KTP is improving
so much, why did we record a $112 million charge
against goodwill and other assets in the fourth
quarter?
Forgive a small explosion: after three years of
recording GAAP losses (KTP was cash-flow
positive in 2012), we were required to perform a
more extensive test as to whether the goodwill
attributed to KTP’s business had been impaired.
Conforming to normal procedure, we hired a
firm of valuation experts who meticulously fol-
lowed professional guidelines and produced a
result that seems silly. KTP is definitely worth
less than it was in years when it made more than
$60million; but results have distinctly, obviously
improved in the past two years. We’ll always
follow accounting rules, of course; my only con-
cern is that this charge not mislead shareholders
about the prospects for the business.
KTP is still far from its glory-days levels of prof-
its. But we do expect continued improvement
and a profitable business. As to the impairment
charge, as I said when accountants mandated
a huge positive (but non-cash) gain on the sale
of a couple of cable systems: in valuing the
company, I’d ignore it.
Kaplan’s international businesses produced a pleas-
ant surprise in 2012. Kaplan International recorded
close to $50 million of operating income—and
that despite $31 million of losses associated with
a struggling acquisition in Australia. (We knew
the company was struggling when we bought
it—its struggles exceeded our expectations.
Losses in Australia will be less in 2013.)
One nice plus for Kaplan came in an annual sur-
vey on private education in Singapore. We were
voted number one in the country for the first
time—a high honor in a country that makes the
most of private-sector education and where we
have excellent competition from the U.K., China,
Australia and Singapore itself.
Kaplan International isn’t one business—we
generate substantial profits from (among oth-
ers) accountancy training in the U.K. and the
Republic of Ireland; oering university degrees
in Singapore; English-language teaching in class-
rooms around the world; and university path-
ways programs for international students. All this
makes it hard to project Kaplan International’s
business, and it certainly won’t go upward in a
steady line. But, it’s promising.
Nonetheless, even without the impairment and
restructuring charges, Kaplan had a bad year
in profits and the reason was simple: Kaplan
Higher Education had a much poorer year
than we expected. Our largest division, Kaplan
University, still serves more than 44,000 students.
ETS tests of our first-year students and seniors
show that, on average, our students are improv-
ing at a faster rate than those at the 400 univer-
sities where ETS administers the same tests.
EACH OF OUR FOUR BUSINESSES HAS HAD YEARS OF BEING THE COMPANY’S
MOST PROFITABLE. 2012 WAS A RUNAWAY: POST–NEWSWEEK STATIONS BROKE ITS
ALL-TIME RECORD OF PROFITABILITY.
// 2012 ANNUAL REPORT // 3