Washington Post 2010 Annual Report Download - page 65

million in severance, asset write-offs and other closure costs were
recorded in connection with this plan. In the fourth quarter of 2009,
a $4.6 million charge was recorded for product development and
other write-downs at the K12 business. In the fourth quarter of
2010, Kaplan Test Preparation announced a plan to reorganize its
business consistent with the migration of students to Kaplan’s online
and hybrid test preparation offerings. In conjunction with this plan,
in the fourth quarter of 2010, Kaplan Test Preparation began to
reduce the number of leased test preparation centers and incurred
$10.4 million in costs, mostly comprised of charges related to early
lease termination and property, plant and equipment write-downs.
The plan is expected to be largely completed by the end of 2011,
and the Company estimates that an additional $10.0 million in
costs will be incurred.
Test Preparation revenue declined 4% in 2010; excluding
acquisitions, Test Preparation revenue declined 8%, due mostly to
the termination of certain K12 offerings. Revenue at the traditional
test preparation programs in 2010 was essentially flat. Strong
enrollment increases, particularly in the Pre-College and Nursing
programs, were offset by reduced prices for many programs related
to increased competition and increased demand for lower priced
online test preparation offerings.
Test Preparation operating results were down in 2010 due to the
termination of certain K12 offerings and $7.8 million in related
closure costs in 2010, reduced prices at the traditional test
preparation programs and higher spending to expand online
offerings and innovate various programs, as well as $10.4 million
in 2010 restructuring-related charges. The declines were offset by
improved results at test preparation’s domestic professional training
businesses due to expense reductions. In 2009, total restructuring-
related expenses of $8.3 million were recorded in conjunction with
the professional training businesses. Test preparation operating
results in 2009 were also adversely affected by a $4.6 million
charge at the K12 business for product development and other
write-downs.
In March 2009, the Company approved a plan to close its Score
tutoring centers. The Company recorded charges of $24.9 million
in asset write-downs, lease terminations, severance and accelerated
depreciation of fixed assets in the first half of 2009.
Kaplan International includes professional training and post-
secondary education businesses outside the United States, as well
as English-language programs. Kaplan International revenue
increased 9% in 2010 and operating income rose 4% due to
enrollment growth in the pathway and other higher education
programs in the U.K. and Singapore. The rise in revenue is also
due to increased English-language program revenue and favorable
exchange rates in Australia and Singapore.
Kaplan Ventures is made up of a number of businesses in various
stages of development that are managed separately from the other
education businesses. Revenue at Kaplan Ventures declined 10% in
2010; this revenue comparison was adversely impacted by the
April 2010 sale of a business unit within the division. Kaplan
Ventures reported operating losses of $30.7 million in 2010,
compared to operating losses of $16.4 million in 2009. The
decline in results for 2010 is due to the sale of the above-noted
business, decreased operating margins at several of Kaplan
Ventures’ established businesses and increased investment in certain
developing business units. A goodwill and other long-lived assets
impairment charge of $25.4 million was recorded at Kaplan in the
third quarter of 2009 related to certain Kaplan Ventures’ businesses,
as the book value of these businesses exceeded their estimated fair
value.
Corporate represents unallocated expenses of Kaplan, Inc.’s
corporate office and other minor shared activities. Corporate
expenses declined in 2010, due largely to the reversal of incentive
compensation accruals.
Stock compensation relates to incentive compensation arising from
equity awards under the Kaplan stock option plan. Kaplan recorded
a stock compensation credit of $1.2 million in 2010, compared to
stock compensation expense of $0.9 million in 2009. The stock
compensation credit for 2010 relates to an estimated decline in the
fair value of Kaplan common stock since the end of 2009.
Cable Television Division. Cable television division revenue of
$759.9 million for 2010 represents a 1% increase from $750.4
million in 2009 due to continued growth of the division’s cable
modem and telephone revenues.
Cable television division operating income in 2010 decreased to
$163.9 million, from $169.1 million in 2009. The cable division’s
operating results in 2009 included a $7.7 million gain arising from
changes to the cable division retiree health care benefits program.
Excluding this gain, the cable division’s operating income in 2010
increased due to the division’s revenue growth, offset by increased
technical and sales costs. Operating margin at the cable television
division was 22% in 2010 and 23% in 2009.
At December 31, 2010, Revenue Generating Units (RGUs) were up
4% from the prior year-end due to growth in high-speed data and
telephony subscribers, offset by a decrease in basic and digital
subscribers. A summary of RGUs is as follows:
Cable Television Division
Subscribers December 31, 2010 December 31, 2009
Basic ...................... 648,413 668,986
Digital ..................... 215,284 219,062
High-speed data ............. 425,402 392,832
Telephony .................. 153,044 109,619
Total .................... 1,442,143 1,390,499
RGUs include about 6,300 subscribers who receive free basic
video service, primarily local governments, schools and other
organizations as required by various franchise agreements.
Below are details of cable television division capital expenditures
for 2010 and 2009 in the NCTA Standard Reporting Categories:
(in millions) 2010 2009
Customer premise equipment ........ $ 22.4 $24.1
Commercial ..................... 1.3 —
Scalable infrastructure ............. 50.5 23.9
Line extensions ................... 7.1 10.1
Upgrade/rebuild ................. 7.2 8.6
Support capital .................. 21.1 17.3
Total ........................ $109.6 $84.0
2010 FORM 10-K 49