Washington Post 2008 Annual Report Download - page 57

Operating income for 2007 increased by 4% to $477.0 million,
from $459.8 million in 2006. Operating results were significantly
impacted by unusual or one-time operating items described above.
Excluding these one-time or unusual items, results at the newspaper
publishing, magazine publishing and television broadcasting
divisions were down generally due to 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
13% to 77,900 at December 31, 2007, compared to 68,900 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 had 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.
Corporate represents unallocated expenses of Kaplan, Inc.’s
corporate office and other minor activities. Corporate expenses
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