Washington Post 2007 Annual Report Download - page 58

weakness in advertising demand, offset by improved results at the
Company’s education and cable television divisions.
The Company’s 2007 operating income includes $22.3 million
of net pension credits, compared to $21.8 million in 2006.
These amounts exclude $50.9 million in charges related to
early retirement programs in 2006.
DIVISION RESULTS
Education Division. Education division revenue in 2007
increased 21% to $2,030.9 million, from $1,684.1 million in
2006. Excluding revenue from acquired businesses, education
division revenue increased 13% in 2007. Kaplan reported
operating income of $149.0 million for the year, compared to
$130.2 million in 2006. Kaplan’s results for 2007 and 2006
were impacted by several unusual or one-time items (discussed
below). The improvement in 2007 operating income was offset
by a $13.6 million increase in stock compensation expense.
A summary of Kaplan’s operating results for 2007 compared to
2006 is as follows:
(in thousands) 2007 2006 % Change
Revenue
Higher education . . $1,021,595 $ 855,757 19
Test prep ....... 569,316 457,293 24
Professional ...... 439,720 371,091 18
Kaplan corporate . . 1,261 ——
Intersegment
elimination ..... (1,003) ——
$2,030,889 $1,684,141 21
Operating income (loss)
Higher education . . $125,629 $ 100,690 25
Test prep ....... 71,316 77,632 (8)
Professional ...... 41,073 35,503 16
Kaplan corporate . . (32,773) (50,726) 35
Other.......... (55,964) (32,910) (70)
Intersegment
elimination ..... (244) ——
$149,037 $ 130,189 14
Higher education includes Kaplan’s domestic and international
post-secondary education businesses, including fixed-facility
colleges, as well as online post-secondary and career
programs. Higher education revenue grew by 19% for 2007.
Enrollments increased 11% to 80,000 at December 31, 2007,
compared to 72,000 at December 31, 2006, due to enrollment
growth in the online programs. Higher education results for the
online programs in 2007 benefited from increases in both price
and demand for higher priced advanced programs. Results at the
fixed-facility colleges also benefited from course fee increases.
Higher education results in 2007 were adversely affected by
$2.7 million in lease termination charges; results in 2006 were
adversely affected by $3.0 million in asset write-downs.
Test prep includes Kaplan’s standardized test preparation and
English-language course offerings, as well as the K12 and Score!
businesses. Test prep revenue grew 24% in 2007, largely due to
the Aspect and PMBR acquisitions made in October 2006.
Excluding revenue from acquired businesses, revenue grew 6%
in 2007 due to overall strength in the traditional test preparation
courses, offset by declines in revenue from the Score! business.
Operating income for test prep declined in 2007 due to an
$11.2 million Score! restructuring charge and weakness from
the Score! and K12 businesses, offset by strong results from the
Aspect and PMBR acquisitions and a $6.1 million revenue
decrease in 2006 related to timing of courses and estimates of
average course length. In the fourth quarter of 2007, Kaplan
management announced plans to restructure the Score! business.
In order to implement a revised business model, 75 Score! centers
have been closed. After closings and consolidations, Score! has
80 centers that focus on providing computer-assisted instruction
and small-group tutoring. The restructuring plan includes
relocating certain management and terminating certain
employees from closed centers. The Company incurred
approximately $11.2 million in expenses in 2007 related to
lease obligations, severance and accelerated depreciation of
fixed assets. The Company completed an impairment review of
Score! long-lived assets and intangibles in 2007 and determined
that no impairment charge was necessary.
Professional includes Kaplan’s domestic and overseas
professional businesses. Professional revenue grew 18% in
2007, largely due to the May 2006 acquisition of Tribeca;
the March 2007 acquisition of EduNeering Holdings, Inc., a
Princeton, NJ-based provider of knowledge management
solutions for organizations in the pharmaceutical, medical
device, healthcare, energy and manufacturing sectors; and the
August 2007 acquisition of the education division of Financial
Services Institute of Australasia. Excluding revenue from acquired
businesses, professional revenue grew 8% in 2007. The revenue
increase is a result of higher revenues at Kaplan Professional
(U.K.) due primarily to favorable exchange rates, and from
growth in the Schweser CFA exam course offerings, offset by
continued soft market demand for professional’s insurance,
securities, real estate book publishing and real estate course
offerings. Operating income increased in 2007 due to strong
results at Kaplan Professional (U.K.) and $6.9 million in transition
costs at Tribeca in 2006, offset by weakness in professional’s
insurance, securities and real estate businesses. Also, Kaplan
Professional (U.S.) recorded a $6.0 million charge in the fourth
quarter of 2007, comprised of a write-off of an integrated
software product under development and severance costs in
connection with the restructuring of Kaplan Professional (U.S.).
As part of the restructuring, product changes are being
implemented and certain operations are in the process of
being decentralized, in addition to employee terminations.
Additional severance and other restructuring related expenses
of an estimated $3.0 million are expected to be incurred in
2008.
Corporate represents unallocated expenses of Kaplan, Inc.’s
corporate office and other minor activities. Corporate
expenses declined in 2007 primarily due to the fourth quarter
2006 charge of $13.0 million related to an agreement to settle a
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