Washington Post 2015 Annual Report Download - page 62

In 2015, education revenue was down by 11%, advertising revenue decreased 9% and other revenue increased
41%. The revenue declines at Kaplan account for the reported education revenue. The decline in advertising
revenue is due to decreased television broadcasting revenue. The increase in other revenues is due primarily to
the inclusion of revenues from businesses acquired in 2015 and 2014.
Operating costs and expenses for the year increased 6% to $2,666.9 million in 2015, from $2,504.3 million in
2014. Expenses were higher at the education division due to goodwill and other long-lived assets impairment
charges recorded in 2015; increased spending on digital initiatives and network fees at the television
broadcasting division in 2015; and increased expenses at other businesses as a result of businesses acquired in
2015 and 2014.
The Company reported an operating loss for 2015 of $80.8 million, compared with operating income of $232.7
million in 2014. Operating results were down at the education and television broadcasting divisions, offset by
improvement in other businesses.
On July 1, 2015, the Company completed the spin-off of Cable ONE as an independent, publicly traded
company. The transaction was structured as a tax-free spin-off of Cable ONE to the stockholders of the Company
as one share of Cable ONE common stock was distributed for every share of Class A and Class B common stock
of Graham Holdings outstanding on the June 15, 2015, record date. The historical operating results of the
Company’s cable division are included in discontinued operations, net of tax, for all periods presented.
On February 12, 2015, Kaplan entered into a Purchase and Sale Agreement with Education Corporation of
America (ECA) to sell substantially all of the assets of its KHE Campuses business, consisting of 38 nationally
accredited ground campuses, and certain related assets, in exchange for a preferred equity interest in ECA. The
transaction closed on September 3, 2015.
On June 30, 2014, the Company and Berkshire Hathaway Inc. completed a transaction in which Berkshire
acquired a wholly owned subsidiary of the Company that included, among other things, WPLG, a Miami-based
television station, 2,107 Class A Berkshire shares and 1,278 Class B Berkshire shares owned by Graham
Holdings and $327.7 million in cash, in exchange for 1,620,190 shares of Graham Holdings Class B common
stock owned by Berkshire Hathaway (Berkshire exchange transaction). As a result, income from continuing
operations for 2014 includes a $266.7 million gain from the exchange of the Berkshire Hathaway shares, and
income from discontinued operations for 2014 includes a $375.0 million gain from the WPLG exchange.
DIVISION RESULTS
Education Division. Education division revenue in 2015 totaled $1,927.5 million, down 11% from revenue of
$2,160.4 million in 2014. Kaplan reported an operating loss of $223.5 million for 2015, compared to operating
income of $65.5 million in 2014. Kaplan’s 2015 operating results include goodwill and intangible assets
impairment charges of $256.8 million in comparison to a $17.2 million charge in 2014. In 2015, operating results
at Kaplan Higher Education and Kaplan International were down, partially offset by improved results at Kaplan
Test Preparation.
In recent years, Kaplan has formulated and implemented restructuring plans at its various businesses that have
resulted in significant costs in 2015 and 2014, with the objective of establishing lower cost levels in future
periods. Across all businesses, restructuring costs totaled $44.4 million in 2015 and $16.8 million in 2014.
47 GRAHAM HOLDINGS COMPANY