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10-K
GRAHAM HOLDINGS CO filed this Form 10-K on 02/23/2018
Entire Document
 


Operating costs and expenses for the year decreased 18% to $2,178.4 million in 2016, from $2,666.9 million in 2015. Expenses were lower at the education division due to goodwill and other long-lived assets impairment charges recorded in 2015, partially offset by increased spending on digital initiatives and network fees at the television broadcasting division in 2016, and increased expenses at other businesses as a result of businesses acquired in 2016 and 2015.
The Company reported operating income for 2016 of $303.5 million, compared with an operating loss of $80.8 million in 2015. Operating results improved at the education and television broadcasting divisions, offset by a decline in other businesses.
Division Results
Education Division.  Education division revenue in 2016 totaled $1,598.5 million, down 17% from $1,927.5 million in 2015. Kaplan reported operating income of $93.6 million for 2016, compared to an operating loss of $223.5 million in 2015. Kaplan’s 2015 operating results include goodwill and intangible assets impairment charges of $256.8 million. In 2016, operating results at Kaplan Higher Education (KHE) were up and costs at Kaplan corporate and other declined, partially offset by declines at Kaplan Test Preparation (KTP) and Kaplan International.
In recent years, Kaplan has formulated and implemented restructuring plans at its various businesses that have resulted in restructuring costs in 2016 and 2015, with the objective of establishing lower cost levels in future periods. Across all businesses, restructuring costs totaled $11.9 million in 2016 and $44.4 million in 2015.
A summary of Kaplan’s operating results is as follows:
 
Year Ended December 31
 
 
(in thousands)
2016
 
2015
 
% Change
Revenue
 
 
 
 
 
Higher education
$
617,047

 
$
849,625

 
(27
)
Test preparation
286,556

 
301,607

 
(5
)
Kaplan international
696,362

 
770,273

 
(10
)
Kaplan corporate and other
214

 
6,502

 
(97
)
Intersegment elimination
(1,718
)
 
(486
)
 

 
$
1,598,461

 
$
1,927,521

 
(17
)
Operating Income (Loss)
 

 
 

 
 

Higher education
$
66,632

 
$
55,572

 
20

Test preparation
9,599

 
16,798

 
(43
)
Kaplan international
48,398

 
53,661

 
(10
)
Kaplan corporate and other
(23,452
)
 
(87,230
)
 
73

Amortization of intangible assets
(7,516
)
 
(5,523
)
 
(36
)
Impairment of goodwill and other long-lived assets

 
(256,830
)
 

Intersegment elimination
(29
)
 
96

 

 
$
93,632

 
$
(223,456
)
 

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.
On September 3, 2015, Kaplan completed the sale of substantially all of the remaining assets of its KHE Campuses business. In connection with these and other plans, KHE incurred $7.2 million and $12.9 million in restructuring costs in 2016 and 2015, respectively.
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 a $6.9 million long-lived asset impairment charge that was recorded in the second quarter of 2015 in connection with the KHE Campuses business.

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