Washington Post 2009 Annual Report Download - page 58

Operating income for 2008 declined to $174.2 million, from
$477.0 million in 2007. Operating results were significantly
impacted by the 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 2008 operating income included $25.7 million of
net pension credits, compared to $22.3 million in 2007. These
amounts exclude $111.1 million in charges related to early
retirement programs in 2008.
DIVISION RESULTS
Education Division. Education division revenue in 2008 increased
15% to $2,331.6 million, from $2,030.9 million in 2007.
Excluding revenue from acquired businesses, education division
revenue increased 11% in 2008. Kaplan reported operating income
of $206.3 million for 2008, compared to $149.0 million in 2007.
Kaplan’s results for 2008 and 2007 were impacted by several
unusual or one-time items (discussed below).
Kaplan completed a reorganization of its organizational and
internal reporting structure during 2009 that resulted in changes to
the composition of the Company’s reporting segments. A summary
of Kaplan’s operating results reported under this new structure for
2008 compared to 2007 is as follows:
(in thousands) 2008 2007 % Change
Revenue
Higher education ....... $1,160,062 $ 933,286 24
Test preparation, excluding
Score .............. 478,440 499,010 (4)
Score ................ 28,672 55,830 (48)
Kaplan international ..... 545,070 442,200 23
Kaplan ventures ........ 126,242 105,806 19
Kaplan corporate ....... 1,426 1,261 13
Intersegment elimination . . (8,332) (6,504) —
$2,331,580 $2,030,889 15
Operating income (loss)
Higher education ....... $ 172,897 $ 123,535 40
Test preparation, excluding
Score .............. 47,580 81,215 (41)
Score ................ (13,278) (23,228) 43
Kaplan international ..... 59,957 54,962 9
Kaplan ventures ........ (3,844) 1,596 —
Kaplan corporate ....... (49,143) (32,772) (50)
Kaplan stock
compensation ........ 7,829 (41,294) —
Amortization of intangible
assets .............. (15,472) (14,670) (5)
Intersegment elimination . . (224) (307) —
$ 206,302 $ 149,037 38
Kaplan Higher Education (KHE) includes Kaplan’s domestic post-
secondary education businesses, made up of fixed-facility colleges,
as well as online postsecondary and career programs. Higher
education revenue grew by 24% for 2008, and operating income
increased 40% due to strong enrollment growth. At December 31,
2008, KHE’s enrollments totaled 79,800, a 21% increase
compared to total enrollments of 65,700 at December 31, 2007,
due to growth in the online and residential programs. Higher
Education results in 2007 were adversely affected by $2.7 million
in lease termination charges.
Test Preparation includes Kaplan’s standardized test preparation
and tutoring offerings, as well as the professional domestic training
business, K12 and other businesses. Test Preparation revenue,
excluding Score, declined 4% in 2008 due to continued revenue
declines in the real estate and financial education businesses. Test
Preparation operating results, excluding Score, were down 41% in
2008 due to continued weakness in the real estate and financial
education businesses, and higher payroll and marketing costs for
the traditional test preparation programs.
Score revenues declined 48% in 2008 as a result of the Score
restructuring in 2007 that included the closing of 75 Score centers.
Score incurred approximately $11.2 million in expenses in
2007 related to lease obligations, severance and accelerated
depreciation of fixed assets.
In 2007, Kaplan announced restructuring plans at its professional
domestic training businesses that involved product changes and
decentralization of certain operations, in addition to employee
terminations. A charge of $6.0 million was recorded in 2007
related to the write-off of an integrated software product under
development and severance costs in connection with the re-
structuring; an additional $3 million was anticipated to be incurred
in 2008. In the fourth quarter of 2008, Kaplan expanded this
restructuring to include additional operations. Total severance and
other restructuring-related expenses of $11.0 million were recorded
in 2008.
Kaplan International includes professional training and post-
secondary education businesses outside the United States, as well
as English-language programs. Kaplan International revenue
increased 23% in 2008. Excluding revenue from acquired
businesses, Kaplan International revenue increased 9% in 2008
due to revenue growth in English-language programs and at
International’s Asian and Pacific businesses, offset by reductions in
the U.K. due to unfavorable exchange rates. Kaplan International’s
operating income increased 9% in 2008 due to growth in English-
language programs and improved results in the Asian operations,
offset by unfavorable exchange rates in the U.K. and investments in
higher education international programs.
Kaplan Ventures is made up of a number of businesses in various
stages of development that are managed separately from the
other education businesses. Kaplan Ventures includes Kaplan
EduNeering, Kaplan Compliance Solutions, Kaplan IT Learning,
Education Connection, Kaplan Virtual Education, Kidum and other
smaller businesses. Revenues at Kaplan Ventures increased 19% in
2008. Kaplan Ventures reported operating losses of $3.8 million
in 2008, compared to operating income of $1.6 million in 2007,
due primarily to additional costs associated with the expansion of
Kaplan’s online high school.
Corporate represents unallocated expenses of Kaplan, Inc.’s
corporate office and other minor activities. Kaplan corporate ex-
penses increased in 2008 due to an increase in employee benefits
costs in the fourth quarter of 2008 and expenses associated with the
resignation of Kaplan’s former chief executive officer in November
2008.
44 THE WASHINGTON POST COMPANY