Washington Post 2015 Annual Report Download - page 47

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The Company’s computer networks may also be vulnerable to unauthorized access, computer hackers, computer
viruses and other security threats. The Company has expended, and will continue to expend, significant resources
to protect against the threat of security breaches, including unauthorized access to student and patient data and
personally identifiable information, but its systems may still be vulnerable to these threats. A user who
circumvents security measures could misappropriate proprietary information or cause disruptions or malfunctions
in operations. Any of these events could have a material adverse effect on the Company’s business and results of
operations.
• Failure to Successfully Assimilate Acquired Businesses Could Negatively Affect the Company’s
Business
The Company’s Kaplan subsidiary has historically been an active acquirer of businesses that provide educational
services. Kaplan completed one acquisition in 2015 and two in early 2016 and expects to continue to acquire
businesses from time to time. In addition, during 2015, the Company completed the acquisition of Group Dekko.
Acquisitions involve various inherent risks and uncertainties, including difficulties in efficiently integrating the
service offerings, accounting and other administrative systems of an acquired business; the challenges of
assimilating and retaining key personnel; the consequences of diverting the attention of senior management from
existing operations; the possibility that an acquired business does not meet or exceed the financial projections
that supported the purchase price; and the possible failure of the due diligence process to identify significant
business risks or undisclosed liabilities associated with the acquired business. A failure to effectively manage
growth and integrate acquired businesses could have a material adverse effect on the Company’s operating
results.
• Changes in Business Conditions May Cause Goodwill and Other Intangible Assets to Become
Impaired
Goodwill generally represents the purchase price paid in excess of the fair value of net tangible and intangible
assets acquired in a business combination. Goodwill is not amortized and remains on the Company’s balance
sheet indefinitely unless there is an impairment or a sale of a portion of the business. Goodwill is subject to an
impairment test on an annual basis and when circumstances indicate that an impairment is more likely than not.
Such circumstances include an adverse change in the business climate for one of the Company’s businesses or a
decision to dispose of a business or a significant portion of a business. As a result of continued declines in
student enrollments at KHE and the challenging industry operating environment, Kaplan completed an interim
impairment review of KHE’s remaining long-lived assets in the third quarter of 2015 that resulted in a $248.6
million goodwill impairment charge. This goodwill impairment charge followed long-lived asset impairment
charges of $6.9 million and $13.6 million that were recorded in the second quarter of 2015 and fourth quarter of
2014, respectively, in connection with the KHE Campuses business. The Company’s businesses each face
uncertainty in their business environment due to a variety of factors. The Company may experience unforeseen
circumstances that adversely affect the value of the Company’s goodwill or intangible assets and trigger an
evaluation of the amount of the recorded goodwill and intangible assets. Future write-offs of goodwill or other
intangible assets as a result of an impairment in the business could adversely affect the Company’s results of
operations and financial condition.
• The Spin-Off of Cable ONE Could Result in Significant Tax Liability to the Company and Our
Stockholders
In connection with our spin-off of Cable ONE, we received a written opinion of counsel to the effect that the
distribution of Cable ONE common stock in the spin-off (Distribution) should qualify for non-recognition of gain
and loss under Section 355 of the Internal Revenue Code.
The opinion assumed that the spin-off was completed according to the terms of the transaction documents for the
spin-off and relied on the facts as stated in those documents and a number of other documents. The opinion
2015 FORM 10-K 32