Washington Post 2014 Annual Report Download - page 62

Items included in the Company’s income from continuing operations
for 2012 are listed below:
• $111.6 million noncash goodwill and other long-lived assets
impairment charge at KTP (after-tax impact of $81.9 million, or
$11.33 per share);
• $45.2 million in severance and restructuring charges at the
education division (after-tax impact of $32.9 million, or $4.53
per share);
• an $18.0 million write-down of a marketable equity security
(after-tax impact of $11.2 million, or $1.54 per share);
• a $5.8 million gain on the sale of a cost method investment
(after-tax impact of $3.7 million, or $0.48 per share); and
• $3.1 million in non-operating unrealized foreign currency gains
(after-tax impact of $2.0 million, or $0.27 per share).
Revenue for 2013 was $3,407.9 million, up 1% from $3,372.6
million in 2012. Revenues increased at the cable division and in
other businesses, offset by declines at the television broadcasting
and education divisions.
In 2013, education revenue decreased 1%, subscriber revenue
increased 3%, advertising revenue decreased 8% and other revenue
increased 51%. Revenue declines at Kaplan accounted for the
decrease in education revenue. Subscriber revenue increased at the
cable division. The decrease in advertising revenue is due to
decreased television broadcasting revenue. The increase in other
revenue is due to growth at SocialCode and Slate, and from the
Celtic and Forney acquisitions.
Operating costs and expenses for the year declined to $3,088.7
million in 2013, from $3,224.0 million in 2012. Excluding the
noncash intangible assets impairment charge at Kaplan, overall
costs at Kaplan declined in 2013 and expenses were lower at the
television broadcasting division. This was offset by increased costs
at the cable division, along with higher expenses in other
businesses.
Operating income for 2013 increased to $319.2 million, from
$148.6 million in 2012. Operating results improved at the
education and cable divisions, offset by a decline at the television
broadcasting division.
DIVISION RESULTS
Education Division. Education division revenue in 2013 totaled
$2,163.7 million, a 1% decline from $2,184.5 million in
2012. Kaplan reported operating income of $51.0 million for
2013, compared to an operating loss of $106.4 million in
2012. Kaplan’s 2013 operating results in comparison to 2012
benefited from strong improvement in KHE and KTP results, and
a $111.6 million noncash goodwill and other long-lived assets
impairment charge related to KTP, recorded in the fourth quarter
of 2012.
In response to student demand levels, Kaplan has formulated and
implemented restructuring plans at its various businesses that have
resulted in significant costs in 2013 and 2012, with the objective
of establishing lower cost levels in future periods. Across all
businesses, restructuring costs totaled $36.4 million in 2013 and
$45.2 million in 2012.
A summary of Kaplan’s operating results is as follows:
Year Ended December 31
(in thousands) 2013 2012 % Change
Revenue
Higher education ......... $1,080,908 $1,149,407 (6)
Test preparation .......... 293,201 284,252 3
Kaplan international ....... 783,588 741,826 6
Kaplan corporate and
other ................ 7,990 15,039 (47)
Intersegment elimination .... (1,953) (5,992) —
$2,163,734 $2,184,532 (1)
Operating Income (Loss)
Higher education ......... $ 71,584 $ 27,245 —
Test preparation .......... 4,118 (10,799) —
Kaplan international ....... 51,653 47,120 10
Kaplan corporate and
other ................ (64,948) (43,160) (50)
Amortization of intangible
assets ............... (8,503) (16,283) 48
Impairment of goodwill and
other long-lived assets .... (3,250) (111,593) 97
Intersegment elimination .... 335 1,046 —
$ 50,989 $ (106,424) —
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. In connection with these and other plans, KHE incurred
$19.5 million and $23.4 million in restructuring costs primarily from
accelerated depreciation and severance and lease obligations in
2013 and 2012, respectively. At the end of 2013, the KHE
campus closures or mergers had been largely completed, with two
remaining campus closures to be completed in the first half of
2014.
In 2013, KHE revenue declined 6% due largely to declines in
average enrollments, which reflect weaker market demand over the
past year, and the impact of campuses closed or in the process of
closing. Operating income increased significantly for 2013 due
primarily to expense reductions associated with lower enrollments
and recent restructuring efforts.
New student enrollments at Kaplan University and Other Campuses
increased 4% in 2013 due to the positive impact of trial period
modifications and process improvements, offset by the impact of
campus closures. However, total students at December 31, 2013,
were down 8% compared to December 31, 2012. Excluding
campuses closed or planned for closure, total students at December 31,
2013, were down 5% compared to December 31, 2012. The
46 GRAHAM HOLDINGS COMPANY