Washington Post 2012 Annual Report Download - page 49

• Failure to Demonstrate Administrative Capability Could Result in Loss of Eligibility to Participate in Title IV
Programs or Other Sanctions
DOE regulations specify extensive criteria that an institution must satisfy to establish that it has the required “administrative
capability” to participate in Title IV programs. These criteria include, but are not limited to, requirements relating to the
institution’s compliance with all applicable Title IV requirements; the institution’s administration of Title IV programs; the
institution’s compliance with certain reporting, disclosure and record-keeping obligations; and the institution’s ability to
maintain cohort default rates below prescribed thresholds. Failure to comply with these criteria could result in the loss or
limitation of the eligibility of one or more of the schools in KHE to participate in the Title IV programs, a requirement to
pay fines or to repay Title IV program funds, a denial or refusal by the DOE to consider a school’s application for renewal
of its certification to participate in the Title IV programs, civil or criminal penalties or other sanctions. Any one or more of
these actions by the DOE could have a material adverse effect on Kaplan’s results of operations.
• Failure to Obtain Regulatory Approval of Transactions Involving a Change of Control May Result in Loss of Ability
to Operate Schools or to Participate in U.S. Federal Student Financial Aid Programs
If one or more of KHE’s schools experiences a change of control under the standards of applicable state agencies,
accrediting agencies or the DOE, the schools governed by such agencies must seek the approval of the relevant
agencies. Failure of any of KHE’s schools to reestablish its state authorization, accreditation or DOE certification following
a change of control as defined by the applicable agency could result in a suspension of operating authority or suspension
or loss of U.S. Federal student financial aid funding, which could have a material adverse effect on KHE’s student
population and revenue.
• Actions of Other Postsecondary Education Institutions and Related Media Coverage May Negatively Influence the
Regulatory Environment and Kaplan’s Reputation
The HELP Committee hearings, along with other recent investigations and lawsuits, have included allegations of, among
other things, deceptive trade practices, false claims against the U.S. and noncompliance with state and DOE regulations.
These allegations have attracted significant adverse media coverage. Allegations against the overall student lending and
postsecondary education sectors may impact general public perceptions of private-sector educational institutions,
including Kaplan, in a negative manner. Adverse media coverage regarding other educational institutions or regarding
Kaplan directly could damage Kaplan’s reputation, reduce student demand for Kaplan programs, adversely impact its
revenues and operating profit or result in increased regulatory scrutiny.
• Changes in the Extent to Which Standardized Tests Are Used in the Admissions Process by Colleges or Graduate
Schools Could Reduce Demand for KTP Offerings
A substantial portion of Kaplan’s revenue is generated by KTP. The source of this income is fees charged for courses that
prepare students for a broad range of admissions examinations that are required for admission to colleges and graduate
schools. Historically, colleges and graduate schools have required standardized tests as part of the admissions process.
There has been some movement away from this historical reliance on standardized admissions tests among a small
number of colleges that have adopted “test-optional” admissions policies. Any significant reduction in the use of
standardized tests in the college or graduate school admissions process could have an adverse effect on Kaplan’s
operating results.
• Changes in the Extent to Which Licensing and Proficiency Examinations Are Used to Qualify Individuals to Pursue
Certain Careers Could Reduce Demand for Kaplan Offerings
A substantial portion of PACE and Kaplan International’s revenue comes from preparing individuals for licensing or
technical proficiency examinations in various fields. Any significant relaxation or elimination of licensing or technical
proficiency requirements in those fields served by PACE and Kaplan International’s businesses could negatively impact
Kaplan’s operating results.
• System Disruptions and Security Threats to the Company’s Technology Infrastructure Could Have a Material
Adverse Effect on Its Businesses
Kaplan’s reputation and ability to attract and retain students is highly dependent on the performance and reliability of its
information technology platforms with respect to its online and campus-based education offerings. Kaplan’s delivery of
these programs could be negatively affected due to events beyond its control, including natural disasters and network and
telecommunications failures. Any such computer system error or failure could result in a significant outage that materially
disrupts Kaplan’s online and on-ground operations.
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