Washington Post 2012 Annual Report Download - page 105

A majority of KHE students are enrolled in certificate and associate’s
degree programs. Revenue from certificate and associate’s degree
programs is composed of a higher percentage of Title IV funds than
is the case for revenue from its bachelor’s and other degree
programs. KHE is taking various measures to reduce the percentage
of its receipts attributable to Title IV funds, including modifying
student payment options; emphasizing direct-pay and employer-
paid education programs; encouraging students to carefully
evaluate the amount of their Title IV borrowing; eliminating some
programs; cash-matching; and developing and offering additional
non-Title IV-eligible certificate preparation, professional development
and continuing education programs. Some of the other programs
may currently be offered by other Kaplan businesses. Absent the
adoption of the changes mentioned above, and if current trends
continue, management estimates that in 2013, 20 of the KHE
Campuses’ OPEID units, representing approximately 21% of KHE’s
2012 revenues, could have a 90/10 ratio over 90%. As noted
above, Kaplan is taking steps to address compliance with the
90/10 rule; however, there can be no guarantee that these
measures will be adequate to prevent the 90/10 rule calculations
at some or all of the schools from exceeding 90% in the future.
17. FAIR VALUE MEASUREMENTS
Fair value measurements are determined based on the assumptions
that a market participant would use in pricing an asset or liability
based on a three-tiered hierarchy that draws a distinction between
market participant assumptions based on (i) observable inputs, such
as quoted prices in active markets (Level 1); (ii) inputs other than
quoted prices in active markets that are observable either directly or
indirectly (Level 2); and (iii) unobservable inputs that require the
Company to use present value and other valuation techniques in the
determination of fair value (Level 3). Financial assets and liabilities
are classified in their entirety based on the lowest level of input that
is significant to the fair value measure. The Company’s assessment
of the significance of a particular input to the fair value measurements
requires judgment and may affect the valuation of the assets and
liabilities being measured and their placement within the fair value
hierarchy.
The Company’s financial assets and liabilities measured at fair
value on a recurring basis were as follows:
(in thousands) Level 1 Level 2 Total
At December 31, 2012
Assets
Money market investments(1) .... $—$432,670 $432,670
Marketable equity securities(2) ... 380,087 — 380,087
Other current investments(3) .... 14,134 24,717 38,851
Total Financial Assets ....... $394,221 $457,387 $851,608
Liabilities
Deferred compensation plan
liabilities(5) ............... $ — $ 62,297 $ 62,297
7.25% unsecured notes(6) ...... — 481,424 481,424
AUD revolving credit
borrowing(6) .............. — 51,915 51,915
Interest rate swap(7) .......... —1,567 1,567
Total Financial Liabilities ..... $ — $597,203 $597,203
(in thousands) Level 1 Level 2 Total
At December 31, 2011
Assets
Money market investments(1) .... $—$180,136 $180,136
Marketable equity securities(2) .. 303,201 — 303,201
Other current investments(3) ..... 15,223 20,250 35,473
Interest rate swap(4) .......... —14 14
Total Financial Assets ....... $318,424 $200,400 $518,824
Liabilities
Deferred compensation plan
liabilities(5) ............... $—$ 63,403 $ 63,403
7.25% unsecured notes(6) ...... —460,500 460,500
AUD revolving credit
borrowing(6) .............. —51,012 51,012
Total Financial Liabilities ..... $—$574,915 $574,915
(1) The Company’s money market investments are included in cash, cash
equivalents and restricted cash.
(2) The Company’s investments in marketable equity securities are classified as
available-for-sale.
(3) Includes U.S. Government Securities, corporate bonds, mutual funds and time
deposits (with original maturities greater than 90 days, but less than one
year).
(4) Included in deferred charges and other assets. The Company utilized a
market approach model using the notional amount of the interest rate swap
multiplied by the observable inputs of time to maturity and market interest
rates.
(5) Includes The Washington Post Company Deferred Compensation Plan and
supplemental savings plan benefits under The Washington Post Company
Supplemental Executive Retirement Plan, which are included in accrued
compensation and related benefits.
(6) See Note 10 for carrying amount of these notes and borrowing.
(7) Included in Other liabilities. The Company utilized a market approach model
using the notional amount of the interest rate swap multiplied by the
observable inputs of time to maturity and market interest rates.
For assets that are measured using quoted prices in active markets,
the total fair value is the published market price per unit multiplied
by the number of units held, without consideration of transaction
costs. Assets and liabilities that are measured using significant other
observable inputs are primarily valued by reference to quoted prices
of similar assets or liabilities in active markets, adjusted for any
terms specific to that asset or liability.
The Company measures certain assets, including goodwill, intangible
assets, property, plant, and equipment, cost and equity-method
investments, at fair value on a nonrecurring basis when they are
deemed to be impaired. The fair value of these assets is determined
with valuation techniques using the best information available, and
may include quoted market prices, market comparables, and
discounted cash flow models. For the year ended December 31,
2012, the Company recorded a goodwill and other long-lived asset
impairment charge of $111.6 million (see Note 2 and 8). The
remeasurement of the goodwill and other long-lived assets is classified
as a Level 3 fair value assessment due to the significance of
unobservable inputs developed in the determination of the fair value.
18. BUSINESS SEGMENTS
Basis of Presentation. The Company’s organizational structure is
based on a number of factors that management uses to evaluate, view
and run its business operations, which include, but are not limited to,
customers, the nature of products and services and use of resources.
The business segments disclosed in the Consolidated Financial
2012 FORM 10-K 93