Business Segments

9 Months Ended

Sep. 30, 2012

12. BUSINESS SEGMENTS

The Company has six reportable segments: Kaplan Higher Education, Kaplan Test Preparation, Kaplan International, cable television, newspaper publishing, and television broadcasting.

Education. Kaplan sold Kidum in August 2012, EduNeering in April 2012, KLT in February 2012, KCS in October 2011 and KVE in July 2011; therefore, the education division's operating results exclude these businesses. Due to the sale of Kidum, the Kaplan Ventures segment is no longer included as a separate segment as its results have been reclassified to discontinued operations. Also, Kaplan's Colloquy and U.S. Pathways businesses moved from Kaplan Ventures to Kaplan International. Segment operating results of the education division have been restated to reflect these changes.

For the first nine months of 2012, Kaplan International results benefited from a favorable $3.9 million out of period expense adjustment related to certain items recorded in 2011 and 2010. With respect to this out of period expense adjustment, the Company has concluded that it was not material to the Company's financial position or results of operations for 2012, 2011 and 2010 and the related interim periods, based on its consideration of quantitative and qualitative factors.

Other Businesses. In the third quarter of 2012, Social Code has been moved from the newspaper publishing segment to other businesses. Due to the disposal of Avenue100 Media Solutions, it is no longer included in the other businesses segment, as its results have been reclassified to discontinued operations. The other businesses operating results have been restated to reflect these changes.

Identifiable Assets. In the third quarter of 2012, the Company has excluded prepaid pension cost from identifiable assets by segment. The 2011 amounts have been revised to reflect this change; the 2010 revised amounts are not included.

The following table summarizes the 2012 quarterly financial information related to each of the Company's business segments:

		March 31,		June 30,		September 30,
(in thousands)		2012		2012		2012
Operating Revenues
	Education	$	547,280	$	552,202	$	552,585
	Cable television		190,210		195,579		199,625
	Newspaper publishing		137,553		144,721		137,276
	Television broadcasting		81,497		95,591		106,411
	Other businesses		4,768		7,177		15,834
	Corporate office		―		―		―
	Intersegment elimination		(109)		(246)		(397)
		$	961,199	$	995,024	$	1,011,334

Income (Loss) From Operations
	Education	$	(11,915)	$	3,728	$	14,693
	Cable television		32,777		38,446		39,913
	Newspaper publishing		(21,431)		(13,079)		(21,825)
	Television broadcasting		30,999		43,728		54,082
	Other businesses		(4,643)		(6,775)		(5,248)
	Corporate office		(5,308)		(3,492)		(5,694)
		$	20,479	$	62,556	$	75,921

Equity in Earnings of Affiliates, Net			3,888		3,314		4,099
Interest Expense, Net			(8,094)		(8,204)		(8,090)
Other Income (Expense), Net			8,588		(635)		4,163
Income from Continuing Operations Before Income Taxes		$	24,861	$	57,031	$	76,093

Depreciation of Property, Plant and Equipment
	Education	$	20,717	$	21,011	$	22,024
	Cable television		32,197		32,234		32,310
	Newspaper publishing		6,236		6,282		6,274
	Television broadcasting		3,125		3,222		3,126
	Other businesses		―		―		5
	Corporate office		―		―		―
		$	62,275	$	62,749	$	63,739

Amortization of Intangible Assets
	Education	$	3,236	$	3,803	$	4,489
	Cable television		54		53		52
	Newspaper publishing		183		172		150
	Television broadcasting		―		―		―
	Other businesses		400		400		400
	Corporate office		―		―		―
		$	3,873	$	4,428	$	5,091

Net Pension Expense (Credit)
	Education	$	2,392	$	1,969	$	3,522
	Cable television		530		514		694
	Newspaper publishing		8,601		7,772		16,181
	Television broadcasting		960		1,055		1,432
	Other businesses		10		10		18
	Corporate office		(9,298)		(8,896)		(9,021)
		$	3,195	$	2,424	$	12,826

The following table summarizes the 2011 quarterly financial information related to each of the Company's business segments:

		April 3,		July 3,		October 2,		December 31,
(in thousands)		2011		2011		2011		2011
Operating Revenues
	Education	$	611,714	$	610,371	$	601,611	$	580,763
	Cable television		190,280		191,231		187,892		190,818
	Newspaper publishing		151,053		155,863		143,495		172,121
	Television broadcasting		72,183		84,940		73,830		88,253
	Other businesses		3,944		6,909		5,764		8,890
	Corporate office		―		―		―		―
	Intersegment elimination		(253)		(9)		(94)		(424)
		$	1,028,921	$	1,049,305	$	1,012,498	$	1,040,421
Income (Loss) From Operations
	Education	$	21,029	$	23,556	$	20,808	$	30,893
	Cable television		37,707		40,425		36,795		41,917
	Newspaper publishing		(13,712)		(3,524)		(10,761)		6,793
	Television broadcasting		19,591		32,571		24,073		40,854
	Other businesses		(1,918)		(2,008)		(1,745)		(3,064)
	Corporate office		(2,928)		(4,433)		1,069		(8,130)
		$	59,769	$	86,587	$	70,239	$	109,263
Equity in Earnings (Losses) of Affiliates, Net			3,737		3,138		(1,494)		568
Interest Expense, Net			(6,979)		(6,963)		(7,673)		(7,464)
Other (Expense) Income, Net			(24,032)		(2,591)		(29,650)		1,073
Income from Continuing Operations Before Income Taxes		$	32,495	$	80,171	$	31,422	$	103,440
Depreciation of Property, Plant and Equipment
	Education	$	19,989	$	21,308	$	20,338	$	22,100
	Cable television		31,786		31,533		31,661		31,322
	Newspaper publishing		6,900		6,540		6,453		6,443
	Television broadcasting		3,110		3,134		3,137		3,067
	Other businesses		―		―		―		―
	Corporate office		144		100		―		―
		$	61,929	$	62,615	$	61,589	$	62,932
Amortization of Intangible Assets
	Education	$	4,413	$	5,042	$	5,568	$	4,394
	Cable television		73		66		62		66
	Newspaper publishing		290		289		290		182
	Television broadcasting		―		―		―		―
	Other businesses		400		400		400		400
	Corporate office		―		―		―		―
		$	5,176	$	5,797	$	6,320	$	5,042
Net Pension Expense (Credit)
	Education	$	1,552	$	1,652	$	1,655	$	1,486
	Cable television		518		497		455		454
	Newspaper publishing⁽¹⁾		6,700		5,285		5,241		8,057
	Television broadcasting		646		335		325		363
	Other businesses		5		4		4		4
	Corporate office		(9,297)		(9,247)		(9,185)		(9,254)
		$	124	$	(1,474)	$	(1,505)	$	1,110

(1) Includes a $2.4 million charge in the fourth quarter of 2011 related to the withdrawal from a multiemployer pension plan.

The following table summarizes financial information related to each of the Company's business segments:

		Nine Months Ended				Fiscal Year Ended
		September 30,		October 2,		December 31,		January 2,
(in thousands)		2012		2011		2011		2011
Operating Revenues
	Education	$	1,652,067	$	1,823,696	$	2,404,459	$	2,804,840
	Cable television		585,414		569,403		760,221		759,884
	Newspaper publishing		419,550		450,411		622,532		675,931
	Television broadcasting		283,499		230,953		319,206		342,164
	Other businesses		27,779		16,617		25,507		4,442
	Corporate office		―		―		―		―
	Intersegment elimination		(752)		(356)		(780)		(844)
		$	2,967,557	$	3,090,724	$	4,131,145	$	4,586,417
Income (Loss) from Operations
	Education	$	6,506	$	65,393	$	96,286	$	359,584
	Cable television		111,136		114,927		156,844		163,945
	Newspaper publishing		(56,335)		(27,997)		(21,204)		(11,115)
	Television broadcasting		128,809		76,235		117,089		121,348
	Other businesses		(16,666)		(5,671)		(8,735)		(6,326)
	Corporate office		(14,494)		(6,292)		(14,422)		(24,572)
		$	158,956	$	216,595	$	325,858	$	602,864
Equity in Earnings (Losses) of Affiliates, Net			11,301		5,381		5,949		(4,133)
Interest Expense, Net			(24,388)		(21,615)		(29,079)		(27,927)
Other Income (Expense), Net			12,116		(56,273)		(55,200)		7,515
Income from Continuing Operations Before Income Taxes		$	157,985	$	144,088	$	247,528	$	578,319
Depreciation of Property, Plant and Equipment
	Education	$	63,752	$	61,635	$	83,735	$	73,351
	Cable television		96,741		94,980		126,302		124,834
	Newspaper publishing		18,792		19,893		26,336		30,341
	Television broadcasting		9,473		9,381		12,448		12,720
	Other businesses		5		―		―		―
	Corporate office		―		244		244		1,159
		$	188,763	$	186,133	$	249,065	$	242,405
Amortization of Intangible Assets
	Education	$	11,528	$	15,023	$	19,417	$	19,202
	Cable television		159		201		267		327
	Newspaper publishing		505		869		1,051		1,223
	Television broadcasting		―		―		―		―
	Other businesses		1,200		1,200		1,600		800
	Corporate office		―		―		―		―
		$	13,392	$	17,293	$	22,335	$	21,552
Net Pension Expense (Credit)
	Education	$	7,883	$	4,859	$	6,345	$	5,707
	Cable television		1,738		1,470		1,924		1,919
	Newspaper publishing⁽¹⁾		32,554		17,226		25,283		42,287
	Television broadcasting		3,447		1,306		1,669		1,113
	Other businesses		38		13		17		―
	Corporate office		(27,215)		(27,729)		(36,983)		(34,599)
		$	18,445	$	(2,855)	$	(1,745)	$	16,427

(1) Includes a $2.4 and $20.4 million charge in 2011 and 2010, respectively, related to the withdrawal from a multiemployer pension plan

Asset information for the Company's business segments are as follows:

			As of
		September 30,		December 31,
(in thousands)		2012		2011
Identifiable Assets
	Education	$	1,915,268	$	2,217,719
	Cable television		1,175,151		1,164,756
	Newspaper publishing		272,203		314,405
	Television broadcasting		381,795		376,259
	Other businesses		25,844		15,381
	Corporate office		262,604		70,902
		$	4,032,865	$	4,159,422
Investments in Marketable Equity Securities			379,928		303,201
Investments in Affiliates			25,219		17,101
Prepaid Pension Cost			528,438		537,262
Total Assets		$	4,966,450	$	5,016,986

The following table summarizes the 2012 quarterly financial information related to the operating segments of the Company's education division:

		March 31,		June 30,		September 30,
(in thousands)		2012		2012		2012
Operating Revenues
	Higher education	$	308,384	$	290,861	$	273,703
	Test preparation		62,829		79,787		81,151
	Kaplan international		176,385		181,656		197,858
	Kaplan corporate and other		1,157		1,003		998
	Intersegment elimination		(1,475)		(1,105)		(1,125)
		$	547,280	$	552,202	$	552,585
Income (Loss) from Operations
	Higher education	$	8,959	$	5,860	$	1,510
	Test preparation		(10,219)		2,706		3,446
	Kaplan international		3,423		9,294		20,619
	Kaplan corporate and other		(14,272)		(14,293)		(11,106)
	Intersegment elimination		194		161		224
		$	(11,915)	$	3,728	$	14,693
Depreciation of Property, Plant and Equipment
	Higher education	$	11,757	$	11,673	$	12,168
	Test preparation		4,315		4,449		5,544
	Kaplan international		4,200		4,472		3,841
	Kaplan corporate and other		445		417		471
		$	20,717	$	21,011	$	22,024

The following table summarizes the 2011 quarterly financial information related to the reportable segments within the Company's education division:

		March 31,		June 30,		September 30,		December 31,
(in thousands)		2011		2011		2011		2011
Operating Revenues
	Higher education	$	386,883	$	358,312	$	330,856	$	323,532
	Test preparation		73,365		83,197		79,630		66,901
	Kaplan international		152,135		169,016		192,609		190,821
	Kaplan corporate and other		1,117		1,065		1,293		1,110
	Intersegment elimination		(1,786)		(1,219)		(2,777)		(1,601)
		$	611,714	$	610,371	$	601,611	$	580,763
Income (Loss) from Operations
	Higher education	$	50,650	$	45,157	$	25,083	$	28,025
	Test preparation		(12,676)		(11,597)		(4,745)		520
	Kaplan international		(682)		8,642		10,775		22,771
	Kaplan corporate and other		(16,032)		(18,664)		(9,225)		(20,596)
	Intersegment elimination		(231)		18		(1,080)		173
		$	21,029	$	23,556	$	20,808	$	30,893
Depreciation of Property, Plant and Equipment
	Higher education	$	11,241	$	11,897	$	11,825	$	13,416
	Test preparation		4,449		3,796		3,445		3,799
	Kaplan international		3,468		4,751		4,384		4,350
	Kaplan corporate and other		831		864		684		535
		$	19,989	$	21,308	$	20,338	$	22,100

The following table summarizes financial information related to the operating segments of the Company's education division segments:


		Nine Months Ended				Fiscal Year Ended
		September 30,				December 31,
(in thousands)		2012		2011		2011		2010
Operating Revenues
	Higher education	$	872,948	$	1,076,051	$	1,399,583	$	1,905,038
	Test preparation		223,767		236,192		303,093		314,879
	Kaplan international		555,899		513,760		704,581		587,781
	Kaplan corporate and other		3,158		3,475		4,585		5,537
	Intersegment elimination		(3,705)		(5,782)		(7,383)		(8,395)
		$	1,652,067	$	1,823,696	$	2,404,459	$	2,804,840
Income (Loss) from Operations
	Higher education	$	16,329	$	120,890	$	148,915	$	406,880
	Test preparation		(4,067)		(29,018)		(28,498)		(32,583)
	Kaplan international		33,336		18,735		41,506		49,309
	Kaplan corporate and other		(39,671)		(43,921)		(64,517)		(63,788)
	Intersegment elimination		579		(1,293)		(1,120)		(234)
		$	6,506	$	65,393	$	96,286	$	359,584
Depreciation of Property, Plant and Equipment
	Higher education	$	35,598	$	34,963	$	48,379	$	42,412
	Test preparation		14,308		11,690		15,489		14,095
	Kaplan international		12,513		12,603		16,953		12,993
	Kaplan corporate and other		1,333		2,379		2,914		3,851
		$	63,752	$	61,635	$	83,735	$	73,351

Identifiable assets for the Company's education division consist of the following:


		As of
		September 30,		December 31,
(in thousands)		2012		2011
Identifiable Assets
	Higher education	$	683,253	$	919,443
	Test preparation		325,143		334,343
	Kaplan international		884,285		810,140
	Kaplan corporate and other		22,587		153,793
		$	1,915,268	$	2,217,719

- Definition

The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments.

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