Washington Post 2012 Annual Report Download - page 67

Operating income for 2011 decreased to $325.9 million, from
$602.9 million in 2010. Operating results declined at all of the
Company’s divisions.
DIVISION RESULTS
Education Division. Education division revenue in 2011 totaled
$2,404.5 million, a 14% decline from revenue of $2,804.8
million in 2010. Excluding revenue from acquired businesses,
education division revenue declined 17% in 2011. Kaplan
reported operating income of $96.3 million for 2011, down
from $359.6 million in 2010.
In light of recent revenue declines and other business challenges,
Kaplan has formulated and implemented restructuring plans at its
various businesses that have resulted in significant costs in 2010
and 2011, with the objective of establishing lower cost levels in
future periods. Across all businesses, severance and restructuring
costs totaled $28.9 million in 2011 and $27.5 million in 2010.
A summary of Kaplan’s operating results for 2011 compared to
2010 is as follows:
(in thousands) 2011 2010 % Change
Revenue
Higher education ......... $1,399,583 $1,905,038 (27)
Test preparation .......... 303,093 314,879 (4)
Kaplan international ....... 704,581 587,781 20
Kaplan corporate ......... 4,585 5,537 (17)
Intersegment elimination .... (7,383) (8,395) —
$2,404,459 $2,804,840 (14)
Operating Income (Loss)
Higher education ......... $ 148,915 $ 406,880 (63)
Test preparation .......... (28,498) (32,583) 13
Kaplan international ....... 41,506 49,309 (16)
Kaplan corporate ......... (45,100) (44,586) (1)
Amortization of
intangible assets ........ (19,417) (19,202) (1)
Intersegment elimination .... (1,120) (234) —
$ 96,286 $ 359,584 (73)
Kaplan sold Kidum in August 2012, EduNeering in April 2012,
Kaplan Learning Technology (KLT) in February 2012, Kaplan
Compliance Solutions (KCS) in October 2011, Kaplan Virtual
Education (KVE) in July 2011 and Education Connection in April
2010. Consequently, the education division’s operating results
exclude these businesses.
KHE includes Kaplan’s domestic postsecondary education businesses,
made up of fixed-facility colleges and online postsecondary and
career programs. KHE also includes the Kaplan University School of
Professional and Continuing Education. In 2011, KHE revenue declined
27% due to declines in average enrollments. Operating income
decreased 63% in 2011 due to lower revenue, increased regulatory
compliance costs and $13.2 million in severance and restructuring costs
in 2011. Offsetting the decline were lower advertising costs, other
expense reductions associated with lower enrollments, incentive comp-
ensation credits recorded in 2011 related to amounts previously
accrued and $9.3 million in 2010 severance costs.
KHE has implemented a number of marketing and admissions
changes to increase student selectivity and help KHE comply with
recent regulations. KHE also implemented the Kaplan Commitment
program, which provides first-time students with a risk-free trial
period. Under the program, KHE also monitors academic progress
and conducts assessments to help determine whether students are
likely to be successful in their chosen course of study. Students
who withdraw or are subject to dismissal during the risk-free trial
period do not incur any significant financial obligation. These
changes, along with generally lower demand, have resulted in
a 37% decline in new enrollments for 2011 as a whole, in
comparison to 2010. Management estimates that without the
Kaplan Commitment, the decline for 2011 would have been
approximately 20%. Management also estimates that revenue for
2011 would have been approximately $63 million higher if the
Kaplan Commitment had not been implemented. KHE does not
recognize tuition revenue for students during the risk-free period.
Total students at December 31, 2011 were down 23% compared
to December 31, 2010, as follows:
As of December 31, %
Change2011 2010
Kaplan University ............... 50,190 65,643 (24)
KHE Campuses ................ 24,360 31,058 (22)
74,550 96,701 (23)
Kaplan University enrollments included 5,799 and 7,426 campus-
based students as of December 31, 2011 and 2010, respectively.
Kaplan University and KHE Campuses enrollments at December 31,
2011 and 2010, by degree and certificate programs are as
follows: As of December 31,
2011 2010
Certificate ....................... 23.6% 23.6%
Associate’s ....................... 30.3% 33.8%
Bachelor’s ....................... 34.6% 35.1%
Master’s ......................... 11.5% 7.5%
100.0% 100.0%
KTP includes Kaplan’s standardized test preparation and tutoring
offerings and other businesses. In the first quarter of 2010, the
Company discontinued certain offerings of the K12 business; $7.8
million in severance and other closure costs were recorded in the
first half of 2010 in connection with this plan. In the fourth quarter
of 2010, KTP began implementing a plan to reorganize its business
consistent with the migration of students to Kaplan’s online and
hybrid test preparation offerings, reducing the number of leased test
preparation centers; $10.4 million in costs were incurred, mostly
comprised of charges related to early lease termination and
property, plant and equipment write-downs. In 2011, implement-
ation of the plan was completed, and $12.5 million in additional
restructuring and severance costs were incurred.
KTP revenue declined 4% in 2011. Higher enrollment, particularly
in the health and bar review programs, was offset by reduced
prices for many programs related to increased competition and a
shift in demand to lower priced online test preparation offerings.
KTP operating results improved in 2011 due to a $5.7 million
decline in restructuring costs and lower operating expenses, offset
by revenue reductions.
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