BUSINESS SEGMENTS

Basis of Presentation. The Company’s organizational structure is based on a number of factors that management uses to evaluate, view and run its business operations, which include, but are not limited to, customers, the nature of products and services and use of resources. The business segments disclosed in the Consolidated Financial Statements are based on this organizational structure and information reviewed by the Company’s management to evaluate the business segment results. The Company has six reportable segments: KHE, KTP, Kaplan International, cable, television broadcasting and other businesses.

The Company evaluates segment performance based on operating income before amortization of intangible assets and impairment of goodwill and other long-lived assets. The accounting policies at the segments are the same as described in Note 2. In computing income from operations by segment, the effects of equity in earnings (losses) of affiliates, interest income, interest expense, other non-operating income and expense items and income taxes are not included. Intersegment sales are not material.

Identifiable assets by segment are those assets used in the Company’s operations in each business segment. The Prepaid Pension cost is not included in identifiable assets by segment. Investments in marketable equity securities are discussed in Note 4.

Education. Education products and services are provided by Kaplan, Inc. KHE includes Kaplan’s postsecondary education businesses, made up of fixed-facility colleges, as well as online postsecondary and career programs. KHE also includes the domestic professional training businesses. KTP includes Kaplan’s standardized test preparation programs. Kaplan International includes professional training and postsecondary education businesses outside the United States, as well as English-language programs.

Kaplan’s Colloquy business moved from Kaplan International to Kaplan Corporate effective January 1, 2013. Segment operating results of the education division have been restated to reflect this change.

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.

In response to student demand levels, Kaplan has formulated and implemented restructuring plans at its various businesses that have resulted in significant costs in the past three years, with the objective of establishing lower cost levels in future periods. Across all Kaplan businesses, restructuring costs of $36.4 million, $45.2 million and $28.9 million were recorded in 2013, 2012 and 2011, respectively, as follows:



	Year Ended December 31
(in thousands)	2013		2012		2011
Accelerated depreciation	$	16,856	$	17,230	$	3,965
Lease obligation losses	9,351		9,794		7,570
Severance	6,289		14,349		17,205
Accelerated amortization of intangible assets	—		2,595		—
Other	3,862		1,274		205
	$	36,358	$	45,242	$	28,945

KHE incurred restructuring costs of $19.5 million, $23.4 million and $13.2 million in 2013, 2012 and 2011, respectively, primarily from accelerated depreciation and severance and lease obligations. In 2013 and 2012, these costs were incurred in connection with a plan announced in September 2012 for KHE to close or consolidate operations at 13 ground campuses, along with plans to consolidate facilities and reduce workforce at its online programs. The 2011 costs were primarily severance costs from workforce reduction programs.

Kaplan International incurred restructuring costs of $5.8 million, $16.4 million and $1.0 million in 2013, 2012 and 2011, respectively. These restructuring costs were largely in Australia, where Kaplan is consolidating and restructuring its businesses, and included lease obligations, accelerated depreciation and severance charges.

In 2010, KTP began implementing a plan to reorganize its business consistent with the migration of students to Kaplan’s online and hybrid test preparation offerings, reducing the number of leased test preparation centers. In 2011, implementation of the plan was completed and $12.5 million in lease and severance obligations and accelerated depreciation was recorded.

Total accrued restructuring costs at Kaplan were $17.6 million at the end of each of 2013 and 2012.

In the second quarter of 2012, Kaplan International results benefited from a favorable $3.9 million out of period expense adjustment related to certain items 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 2013, 2012 and 2011 and the related interim periods, based on its consideration of quantitative and qualitative factors.

Cable. Cable operations consist of cable systems offering video, Internet, phone and other services to subscribers in midwestern, western and southern states. The principal source of revenue is monthly subscription fees charged for services.

Television Broadcasting. Television broadcasting operations are conducted through six VHF television stations serving the Detroit, Houston, Miami, San Antonio, Orlando and Jacksonville television markets. All stations are network-affiliated (except for WJXT in Jacksonville), with revenues derived primarily from sales of advertising time.

Other Businesses. Other businesses includes the results of Social Code, a marketing solutions provider helping companies with marketing on social-media platforms; Celtic Healthcare, a provider of home health and hospice services in the northeastern and mid-Atlantic regions, acquired by the Company in November 2012; Forney, a global supplier of products and systems that control and monitor combustion processes in electric utility and industrial applications, acquired by the Company in August 2013; and Trove, a digital team focused on emerging technologies and new product development. Also included are The Slate Group and FP Group, previously included as part of the Company’s newspaper publishing division, which publish online and print magazines and websites.

Corporate Office. Corporate office includes the expenses of the Company’s corporate office and a net pension credit.

Geographical Information. The Company’s non-U.S. revenues in 2013, 2012 and 2011 totaled approximately $672 million, $644 million and $594 million, respectively, primarily from Kaplan’s operations outside the U.S. The Company’s long-lived assets in non-U.S. countries (excluding goodwill and other intangible assets), totaled approximately $66 million and $58 million at December 31, 2013 and 2012, respectively.

Company information broken down by operating segment and education division:



	Year Ended December 31
(in thousands)	2013			2012			2011
Operating Revenues
Education	$	2,177,508		$	2,196,496		$	2,404,459
Cable	807,309			787,117			760,221
Television broadcasting	374,605			399,691			319,206
Other businesses	128,803			72,837			42,891
Corporate office	—			—			—
Intersegment elimination	(361		)	(571		)	(780		)
	$	3,487,864		$	3,455,570		$	3,525,997
Income (Loss) from Operations
Education	$	51,301		$	(105,368	)	$	96,286
Cable	169,735			154,581			156,844
Television broadcasting	171,276			191,642			117,089
Other businesses	(23,468		)	(33,010		)	(16,771		)
Corporate office	(23,279		)	(28,665		)	(19,330		)
	$	345,565		$	179,180		$	334,118
Equity in Earnings of Affiliates, Net	13,215			14,086			5,949
Interest Expense, Net	(33,803		)	(32,551		)	(29,079		)
Other Expense, Net	(23,751		)	(5,456		)	(55,200		)
Income from Continuing Operations before Income Taxes	$	301,226		$	155,259		$	255,788
Depreciation of Property, Plant and Equipment
Education	$	89,764		$	101,183		$	83,735
Cable	128,184			129,107			126,302
Television broadcasting	12,467			13,018			12,448
Other businesses	2,177			770			674
Corporate office	626			—			244
	$	233,218		$	244,078		$	223,403
Amortization of Intangible Assets and Impairment of Goodwill and
Other Long-Lived Assets
Education	$	13,212		$	129,312		$	19,417
Cable	220			211			267
Television broadcasting	—			—			—
Other businesses	3,416			3,016			2,517
Corporate office	—			—			—
	$	16,848		$	132,539		$	22,201
Net Pension (Credit) Expense
Education	$	16,538		$	11,584		$	6,345
Cable	3,708			2,540			1,924
Television broadcasting	3,381			4,970			1,669
Other businesses	610			169			132
Corporate office	(41,836		)	(27,871		)	(33,289		)
	$	(17,599	)	$	(8,608	)	$	(23,219	)
Capital Expenditures
Education	$	45,550		$	51,241		$	51,871
Cable	160,246			150,525			143,225
Television broadcasting	12,702			6,401			6,415
Other businesses	2,005			1,451			1,013
Corporate office	309			—			—
	$	220,812		$	209,618		$	202,524

Asset information for the Company’s business segments is as follows:



	As of December 31
(in thousands)	2013		2012
Identifiable Assets
Education	$	1,921,037	$	1,988,015
Cable	1,215,320		1,187,603
Television broadcasting	383,251		374,075
Other businesses	171,539		88,393
Corporate office	371,484		466,538
	$	4,062,631	$	4,104,624
Investments in Marketable Equity Securities	487,156		380,087
Investments in Affiliates	15,754		15,535
Prepaid Pension Cost	1,245,505		604,823
Total Assets	$	5,811,046	$	5,105,069

The Company’s education division comprises the following operating segments:



	Year Ended December 31
(in thousands)	2013			2012			2011
Operating Revenues
Higher education	$	1,080,908		$	1,149,407		$	1,399,583
Test preparation	293,201			284,252			303,093
Kaplan international	797,362			753,790			690,226
Kaplan corporate and other	7,990			15,039			18,940
Intersegment elimination	(1,953		)	(5,992		)	(7,383		)
	$	2,177,508		$	2,196,496		$	2,404,459
Income (Loss) from Operations
Higher education	$	71,584		$	27,245		$	148,915
Test preparation	4,118			(10,799		)	(28,498		)
Kaplan international	53,424			49,612			46,498
Kaplan corporate and other	(78,160		)	(172,472		)	(69,509		)
Intersegment elimination	335			1,046			(1,120		)
	$	51,301		$	(105,368	)	$	96,286
Depreciation of Property, Plant and Equipment
Higher education	$	43,892		$	58,514		$	48,379
Test preparation	19,194			19,718			15,489
Kaplan international	16,296			21,149			16,746
Kaplan corporate and other	10,382			1,802			3,121
	$	89,764		$	101,183		$	83,735
Amortization of Intangible Assets	$	9,962		$	17,719		$	19,417
Impairment of Goodwill and Other Long-Lived Assets	$	3,250		$	111,593		$	—
Pension Expense
Higher education	$	11,714		$	7,943		$	4,249
Test preparation	2,674			2,007			1,288
Kaplan international	363			189			142
Kaplan corporate and other	1,787			1,445			666
	$	16,538		$	11,584		$	6,345
Capital Expenditures
Higher education	$	10,879		$	26,406		$	19,735
Test preparation	7,008			8,211			17,266
Kaplan international	27,601			16,864			16,304
Kaplan corporate and other	62			(240		)	(1,434		)
	$	45,550		$	51,241		$	51,871

Asset information for the Company’s education division is as follows:



	As of December 31
(in thousands)	2013		2012
Identifiable Assets
Higher education	$	859,208	$	949,260
Test preparation	173,435		197,672
Kaplan international	864,507		818,613
Kaplan corporate and other	23,887		22,470
	$	1,921,037	$	1,988,015