Washington Post 2015 Annual Report Download - page 60

MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
This analysis should be read in conjunction with the Consolidated Financial Statements and the notes thereto.
OVERVIEW
Graham Holdings Company (the Company) is a diversified education and media company whose operations
include educational services; television broadcasting; online, print and local TV news; social-media advertising
services; home health and hospice care; and manufacturing. Education is the largest business and through its
subsidiary Kaplan, Inc., the Company provides extensive worldwide education services for individuals, schools
and businesses. The Company’s second largest business is television broadcasting. Since November 2012, the
Company has completed several acquisitions in home health services and manufacturing. The Company’s
business units are diverse and subject to different trends and risks.
The Company’s education division is the largest operating division of the Company, accounting for 74.5% of the
Company’s consolidated revenues in 2015. The Company has devoted significant resources and attention to this
division for many years, given its geographic and product diversity; the investment opportunities and growth
prospects during this time; and challenges related to government regulation. In recent years, Kaplan has
formulated and implemented restructuring plans at most of its businesses, resulting in significant costs in order to
establish lower cost levels in future periods. Kaplan is organized into the following three operating segments:
Kaplan Higher Education (KHE), Kaplan Test Preparation (KTP) and Kaplan International.
KHE is the largest segment of Kaplan, representing 44% of total Kaplan revenues in 2015. KHE’s revenue
declined in 2015, largely due to the sale of the KHE Campuses business and other school closures, and declines
in average enrollments at Kaplan University. KHE’s restructuring costs totaled $12.9 million in 2015. Operating
income at KHE declined in 2015 due largely to increased losses at the KHE Campuses business and overall
revenue declines.
KTP revenues were down modestly in 2015; however, operating results improved due to reduced operating costs,
due partly to $7.7 million in software asset write-offs in 2014 that did not recur in 2015.
Kaplan International reported revenue declines for 2015 due to the adverse impact of exchange rates and
weakness in English-language programs, offset by growth in Australia professional and Singapore higher
education programs. Kaplan International operating results were down in 2015 due to declines in the English-
language programs’ results.
Kaplan made one acquisition in 2015, three acquisitions in 2014 and one acquisition in 2013. None of these were
individually significant.
The Company’s television broadcasting division reported lower revenues and operating income in 2015 as 2014
included significant political and Olympics-related advertising. In recent years, the television broadcasting
division has consistently generated significantly higher operating income amounts and operating income margins
than the education division and other businesses.
With the recent Celtic Healthcare, Residential Healthcare, Forney, Joyce/Dayton and Group Dekko acquisitions,
the Company has invested in new lines of business from late 2012 through 2015.
In November 2014, the Company announced a plan for a tax-free spin-off of the cable division, which was
completed on July 1, 2015.
The Company generates a significant amount of cash from its businesses that is used to support its operations,
pay down debt and fund capital expenditures, share repurchases, dividends, acquisitions and other investments.
45 GRAHAM HOLDINGS COMPANY