Washington Post 2015 Annual Report Download - page 44

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• 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 experience a change of control under the standards of applicable state agencies,
accrediting agencies or the ED, the schools governed by such agencies must seek the approval of the relevant
agencies. An institution that undergoes a change of control, which may include a change of control of the
institution’s parent corporation or other owners, must be reviewed and recertified by the ED and obtain approvals
from certain state agencies and accrediting bodies, in some cases prior to the change of control. Failure of any of
KHE’s schools to reestablish its state authorization, accreditation or ED 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 and various state Attorneys General’s actions, along with other recent
investigations and lawsuits, have included allegations against various for-profit schools of, among other things,
deceptive trade practices, false claims against the U.S. and noncompliance with state and ED regulations. These
allegations have attracted significant negative 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. Negative media coverage regarding other educational
institutions or regarding Kaplan directly could damage Kaplan’s reputation, reduce student demand for Kaplan
programs or lead to increased regulatory scrutiny and could negatively impact Kaplan’s operating results.
• 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.
• Difficulties of Managing Foreign Operations Could Negatively Affect Kaplan’s Business
Kaplan has operations and investments in a growing number of foreign countries, including Australia, Canada,
China, Colombia, France, Germany, India, Ireland, Japan, Mexico, New Zealand, Nigeria, Singapore, the U.K.
and Venezuela. Kaplan also conducts business in the Middle East. Operating in foreign countries presents a
number of inherent risks, including the difficulties of complying with unfamiliar laws and regulations, effectively
managing and staffing foreign operations, successfully navigating local customs and practices, preparing for
potential political and economic instability and adapting to currency exchange rate fluctuations. Failure to
effectively manage these risks could have a material adverse effect on Kaplan’s operating results.
29 GRAHAM HOLDINGS COMPANY