Washington Post 2005 Annual Report Download - page 53

included in supplemental education is The Financial Training Compa- On January 1, 2003, the Company sold its 50% interest in the
ny (FTC), which was acquired in March 2003. Headquartered in International Herald Tribune for $65 million and recorded an after-
London, FTC provides training services for accountants and financial tax non-operating gain of $32.3 million in the first quarter of 2003.
services professionals, with training centers in the United Kingdom Non-Operating Items. The Company recorded other non-
and Asia. FTC revenues grew by 44% in 2004 over the same time operating income, net, of $8.1 million in 2004, compared to
period the business was owned by Kaplan in 2003. Supplemental $55.4 million in 2003. The 2004 non-operating income, net, is
education results also include professional real estate, insurance primarily from foreign currency gains. The 2003 non-operating
and security courses. Real estate publishing and training courses income, net, mostly comprises a $49.8 million pre-tax gain from the
contributed to growth in supplemental education in 2004. The final sale of the Company's 50% interest in the International Herald
component of supplemental education is Score!, which provides Tribune.
academic enrichment to children and has lower operating margins
than the other supplemental education businesses due to higher A summary of non-operating income (expense) for the years
fixed costs. Revenues at Score! were up slightly compared to 2003. ended January 2, 2005 and December 28, 2003, follows (in
millions):
Higher education includes all of Kaplan's post-secondary education
2004 2003
businesses, including fixed-facility colleges as well as online post-
secondary and career programs (various distance-learning busi-
Foreign currency gains, netÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 5.5 $ 4.2
nesses). Excluding revenue from acquired businesses, higher edu-
Gain on sale of interest in IHT ÏÏÏÏÏÏÏÏÏÏÏ Ì49.8
cation revenues grew by 35% in 2004. Higher education results
Impairment write-downs on cost method
are showing significant growth, especially the online programs, in and other investmentsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (0.7) (1.3)
which revenues more than doubled in 2004. At the end of 2004, Gain on exchange of cable system
higher education enrollments totaled 58,500, compared to 45,000 businessÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 0.5 Ì
at the end of 2003. Other gains ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2.8 2.7
TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 8.1 $55.4
Corporate overhead represents unallocated expenses of Kaplan,
Inc.'s corporate office, including a $6.5 million charge in the fourth The Company incurred net interest expense of $26.4 million in
quarter of 2003 for the Kaplan Educational Foundation. 2004, compared to $26.9 million in 2003. At January 2, 2005,
Other expense comprises accrued charges for stock-based incen- the Company had $484.1 million in borrowings outstanding at an
tive compensation arising from a stock option plan established for average interest rate of 5.1%; at December 28, 2003, the
certain members of Kaplan's management (the general provisions Company had $631.1 million in borrowings outstanding.
of which are discussed in Note G to the Consolidated Financial Income Taxes. The effective tax rate was 38.7% for 2004,
Statements) and amortization of certain intangibles. Under the compared to 37.0% for 2003. The 2003 effective tax rate
stock-based incentive plan, the amount of compensation expense benefited from the 35.1% effective tax rate applicable to the one-
varies directly with the estimated fair value of Kaplan's common time gain arising from the sale of the Company's interest in the
stock and the number of options outstanding. The Company record- International Herald Tribune.
ed expense of $32.5 million and $119.1 million for 2004 and
2003, respectively, related to this plan. The stock compensation FINANCIAL CONDITION: CAPITAL RESOURCES AND
expense for 2003 included the impact of the third quarter 2003 LIQUIDITY
buyout offer for approximately 55% of the stock options outstand- Acquisitions, Exchanges and Dispositions. During 2005,
ing at Kaplan. The stock compensation expense in 2004 is based Kaplan acquired ten businesses in its higher education, professional
on the remaining Kaplan stock options held by a small number of and test preparation divisions for a total of $140.1 million, financed
Kaplan executives after the 2003 buyout. with cash and $3.0 million in debt. The largest of these included
Corporate Office. The corporate office operating expenses BISYS Education Services, a provider of licensing education and
increased to $32.8 million in 2004, from $30.3 million in 2003. compliance solutions for financial service institutions and profession-
The increase is primarily due to the corporate office's share of als; The Kidum Group, the leading provider of test preparation
increased compliance costs in connection with Section 404 of the services in Israel; and Asia Pacific Management Institute, a private
SarbanesÓOxley Act of 2002. education provider for undergraduate and postgraduate students in
Asia. In January 2005, the Company completed the acquisition of
Equity in Losses of Affiliates. The Company's equity in losses Slate, the online magazine, which is included as part of the
of affiliates for 2004 was $2.3 million, compared to losses of Company's newspaper publishing division. Most of the purchase
$9.8 million for 2003. The Company's affiliate investments at the price for the 2005 acquisitions was allocated to goodwill and other
end of 2004 consisted of a 49% interest in BrassRing LLC and a intangibles, and property, plant and equipment.
49% interest in Bowater Mersey Paper Company Limited. The
reduction in affiliate losses for 2004 is attributable to improved During 2004, Kaplan acquired eight businesses in its higher educa-
operating results at both BrassRing and Bowater. tion and professional divisions for a total of $59.6 million, financed
with cash and $8.7 million of debt. In addition, the cable division
2005 FORM 10-K 37