Washington Post 2014 Annual Report Download - page 59

KHE includes Kaplan’s domestic postsecondary education businesses,
made up of fixed-facility colleges and online postsecondary and
career programs. KHE also includes the domestic professional
training and other continuing education businesses.
In 2012, KHE began implementing plans to close or merge 13
ground campuses, consolidate other facilities and reduce its
workforce. The last two of these campus closures were completed in
the second quarter of 2014. In April 2014, KHE announced plans
to close two additional ground campuses, and in July 2014, KHE
announced plans to close another three campuses. KHE is in the
process of teaching out the current students, and the campus closures
will be completed by the end of 2015. In July 2014, KHE also
announced plans to further reduce its work force. In connection with
these and other plans, KHE incurred $6.5 million and $19.5 million
in restructuring costs from severance, accelerated depreciation, lease
obligations and other items in 2014 and 2013, respectively.
In February 2015, Kaplan entered into a Purchase and Sale
Agreement with ECA to sell substantially all of the assets of its KHE
Campuses business. The transaction is contingent upon certain
regulatory and accrediting agency approvals and is expected to
close in the second or third quarter of 2015. In addition, in the
fourth quarter of 2014, Kaplan recorded a $13.6 million other
long-lived asset impairment charge in connection with its KHE
Campuses business. KHE results include revenue and operating
income (loss) related to the KHE Campuses business as follows:
Year Ended December 31
(in thousands) 2014 2013
Revenue ........................ $274,487 $299,714
Operating income (loss) ............ $ (12,500) $ (28,343)
In 2014, KHE revenue declined 7% due largely to declines in
average enrollments at KHE campuses and at Kaplan University
that reflect weaker market demand over the past year and lower
average tuition. The declines were most pronounced at KHE’s
ground campuses due to the impact of campuses closed or in the
process of closing, as well as weakness in demand for KHE’s non-
degree vocational programs. KHE operating income improved in
2014 due largely to expense reductions associated with lower
enrollments and recent restructuring efforts and lower restructuring
costs, partially offset by revenue declines and increased marketing
spending at Kaplan University.
New student enrollments at KHE declined 3% in 2014 due to lower
demand across KHE and the impact of campus closures. Total
students at December 31, 2014, were down 6% compared to
December 31, 2013. Excluding campuses closed or planned for
closure, total students at December 31, 2014, were down 4%
compared to December 31, 2013. A summary of student
enrollments is as follows:
Excluding Campuses
Closing
As of December 31 %
Change
As of December 31 %
Change2014 2013 2014 2013
Kaplan University . . 42,469 42,816 (1) 42,469 42,816 (1)
Other Campuses . . 14,266 17,417 (18) 14,045 15,818 (11)
56,735 60,233 (6) 56,514 58,634 (4)
Kaplan University and Other Campuses enrollments by certificate
and degree programs, are as follows:
As of December 31
2014 2013
Certificate ........................ 20.6% 21.7%
Associate’s ....................... 27.4% 29.7%
Bachelor’s ........................ 34.2% 32.3%
Master’s ......................... 17.8% 16.3%
100.0% 100.0%
KTP includes Kaplan’s standardized test preparation programs. KTP
revenue increased 4% in 2014. Excluding revenues from acquired
businesses, KTP revenue increased 2% in 2014. KTP recorded a
$7.7 million software asset write-off in the second quarter of 2014
due to a decision to consolidate certain learning management
systems. KTP operating results declined in 2014 due to the software
asset write-off and increased costs for newly acquired businesses.
Kaplan International includes English-language programs and
postsecondary education and professional training businesses
largely outside the United States. Kaplan International revenue
increased 7% in 2014 due to enrollment growth in the pathways,
English-language, Australia professional and Singapore higher
education programs. Kaplan International operating income
increased 34% in 2014 due primarily to improved results from
operations in Australia and Singapore, and lower restructuring costs
in 2014. Restructuring costs at Kaplan International totaled $0.2
million and $5.8 million in 2014 and 2013, respectively.
In 2014, Kaplan recorded $17.2 million in noncash intangible and
other long-lived assets impairment charges in connection with
businesses at KHE, KTP and Kaplan International. In 2013, Kaplan
recorded $3.3 million in noncash intangible assets impairment
charges primarily in connection with one of the businesses in
Kaplan International.
Kaplan corporate represents unallocated expenses of Kaplan, Inc.’s
corporate office, other minor businesses and certain shared activities. In
2013, $11.0 million in restructuring costs was recorded in connection
with charges related to office space managed by Kaplan corporate.
Kaplan continues to evaluate its cost structure and is pursuing
additional cost savings opportunities, including eliminating excess
office capacity. This will likely result in additional restructuring plans
and related costs in 2015.
Cable Division. Cable division revenue for 2014 declined 1% to
$798.1 million, from $807.3 million in 2013 due to 4% fewer
customers and 8% fewer Primary Service Units (PSUs). Operating
expenses in 2014 declined 3%, from $637.6 million to $619.4
million in 2014. The expense declines are due to fewer customers and
significantly reduced programming costs. Cable division operating
income grew 5% to $178.7 million, from $169.7 million in 2013.
The cable division continues its focus on higher margin businesses,
namely high-speed data and business sales. Residential high-speed
data revenue increased 5.3% in 2014 on 2.5% customer growth,
and business sales increased 18.5% on a 14.9% increase in business
high-speed data customers. Overall, business sales comprised 8.9%
of total revenue for 2014, compared with 7.4% of total revenue for
2014 FORM 10-K 43