Washington Post 2012 Annual Report Download - page 106

Statements are based on this organizational structure and information
reviewed by the Company’s management to evaluate the business
segment results. The Company has seven reportable segments: KHE,
KTP, Kaplan International, cable television, newspaper publishing,
television broadcasting and other businesses.
The Company evaluates segment performance based on operating
income before amortization of intangible assets and impairment of
goodwill and other long-lived assets. The accounting policies at the
segments are the same as described in Note 2. In computing
income from operations by segment, the effects of equity in earnings
(losses) of affiliates, interest income, interest expense, other non-
operating income and expense items and income taxes are not
included. Intersegment sales are not material.
Identifiable assets by segment are those assets used in the
Company’s operations in each business segment. The Prepaid
Pension cost is not included in identifiable assets by segment.
Investments in marketable equity securities are discussed in Note 4.
Education. Education products and services are provided by
Kaplan, Inc. KHE includes Kaplan’s postsecondary education
businesses, made up of fixed-facility colleges as well as online
postsecondary and career programs. KHE also includes the
domestic professional training businesses. KTP includes Kaplan’s
standardized test preparation and tutoring offerings. Kaplan
International includes professional training and postsecondary
education businesses outside the United States, as well as English-
language programs.
Kaplan sold Kidum in August 2012, EduNeering in April 2012,
KLT in February 2012, KCS in October 2011, KVE in July 2011,
and Education Connection in April 2010; therefore, the education
division’s operating results exclude these businesses. As a result, the
Kaplan Ventures segment is no longer included as a separate
segment as its results have been reclassified to discontinued
operations. Also, Kaplan’s Colloquy and U.S. Pathways businesses
moved from Kaplan Ventures to Kaplan International. Segment
operating results of the education division have been restated to
reflect these changes.
In response to student demand levels, Kaplan has formulated and
implemented restructuring plans at its various businesses that have
resulted in significant costs in the past three years, with the objective
of establishing lower cost levels in future periods. Across all Kaplan
businesses, restructuring costs of $45.2 million, $28.9 million and
$27.5 million were recorded in 2012, 2011 and 2010,
respectively, as follows:
Fiscal Year Ended
(in thousands) 2012 2011 2010
Accelerated depreciation ..... $17,230 $ 3,965 $ 1,152
Severance ................ 14,349 17,205 15,099
Lease obligation losses ....... 9,794 7,570 5,385
Accelerated amortization of
intangible assets .......... 2,595 ——
Other ................... 1,274 205 5,904
$45,242 $28,945 $27,540
KHE incurred restructuring costs of $23.4 million, $13.2 million
and $9.3 million in 2012, 2011 and 2010, respectively, from
accelerated depreciation and severance and lease obligations. In
2012, these costs were incurred in connection with a plan announced
in September 2012 for KHE to close or consolidate operations at 13
ground campuses, along with plans to consolidate facilities and
reduce workforce at its online programs. The 2011 and 2010 costs
were primarily severance costs from workforce reduction programs.
Kaplan International incurred restructuring costs of $16.4 million
and $1.0 million in 2012 and 2011, respectively. These
restructuring costs were largely in Australia, where Kaplan is
consolidating and restructuring its businesses, and included lease
obligations, accelerated depreciation and severance charges.
KTP incurred restructuring costs of $12.5 million and $18.2 million in
2011 and 2010, respectively, from lease and severance obligations
and accelerated depreciation. In 2010, KTP discontinued certain
offerings at its K12 business, resulting in $7.8 million in severance and
other closure costs. Also in 2010, KTP began implementing a plan to
reorganize its business consistent with the migration of students to
Kaplan’s online and hybrid test preparation offerings, reducing the
number of leased test preparation centers; $10.4 million in lease and
severance obligations and accelerated depreciation was recorded. In
2011, implementation of the plan was completed and $12.5 million in
additional lease and severance obligations and accelerated
depreciation was recorded.
Total accrued restructuring costs at Kaplan were $17.6 million and
$10.5 million at the end of 2012 and 2011, respectively.
In the second quarter of 2012, Kaplan International results
benefited from a favorable $3.9 million out of period expense
adjustment related to certain items in 2011 and 2010. With
respect to this out of period expense adjustment, the Company has
concluded that it was not material to the Company’s financial
position or results of operations for 2012, 2011 and 2010 and the
related interim periods, based on its consideration of quantitative
and qualitative factors.
Cable Television. Cable television operations consist of cable
systems offering video, Internet, phone and other services to
subscribers in midwestern, western and southern states. The
principal source of revenue is monthly subscription fees charged for
services.
Newspaper Publishing. Newspaper publishing includes the
publication of newspapers in the Washington, DC, area and
Everett, WA; newsprint warehousing; and the Company’s digital
media publishing businesses (primarily washingtonpost.com and
Slate). Revenues from newspaper publishing operations are derived
from advertising and, to a lesser extent, from circulation. In February
2013, the Company announced that it had signed an agreement to
sell The Herald, a daily and Sunday newspaper headquartered in
Everett, WA; the transaction is expected to close in March 2013.
Television Broadcasting. Television broadcasting operations are
conducted through six VHF television stations serving the Detroit,
Houston, Miami, San Antonio, Orlando and Jacksonville television
markets. All stations are network-affiliated (except for WJXT in
Jacksonville), with revenues derived primarily from sales of
advertising time.
94 THE WASHINGTON POST COMPANY