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.

In the third quarter of 2014, Kaplan completed the sale of three of its schools in China that were previously included as part of Kaplan International. An additional school in China was sold in January 2015. Kaplan sold Kidum in August 2012, EduNeering in April 2012 and KLT in February 2012; therefore, the education division’s operating results exclude these businesses.

In recent years, 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 $16.8 million, $36.4 million and $45.2 million were recorded in 2014, 2013 and 2012, respectively, as follows:



	Year Ended December 31
(in thousands)	2014		2013		2012
Accelerated depreciation	$	2,062	$	16,856	$	17,230
Lease obligation losses	1,750		9,351		9,794
Severance	5,075		6,289		14,349
Accelerated amortization of intangible assets	—		—		2,595
Software asset write-offs	7,689		—		—
Other	230		3,862		1,274
	$	16,806	$	36,358	$	45,242

KHE incurred restructuring costs of $6.5 million, $19.5 million and $23.4 million in 2014, 2013 and 2012, respectively, primarily from accelerated depreciation and severance and lease obligations. These costs were incurred in connection with a plan announced in September 2012 for KHE to close or consolidate operations at 13 ground campuses, additional plans announced in 2014 to close five more campuses, along with plans to consolidate facilities and reduce its workforce.

In February 2015, Kaplan entered a Purchase and Sale Agreement with ECA to sell substantially all of the assets of its KHE Campuses business. The transaction is contingent upon certain regulatory and accrediting agency approvals and is expected to close in the second or third quarter of 2015. In addition, in the fourth quarter of 2014, Kaplan recorded a $13.6 million other long-lived asset impairment charge in connection with its KHE Campuses business.

Kaplan International incurred restructuring costs of $0.2 million, $5.8 million and $16.4 million in 2014, 2013 and 2012, respectively. These restructuring costs were largely in Australia and included lease obligations, accelerated depreciation and severance charges.

Total accrued restructuring costs at Kaplan were $12.7 million and $17.6 million at the end of each of 2014 and 2013, respectively.

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 2014, 2013 and 2012 and the related interim periods, based on its consideration of quantitative and qualitative factors.

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

In November 2014, the Company announced a plan for the complete legal and structural separation of Cable ONE, Inc. from the Company (See Note 1).

Television Broadcasting. Television broadcasting operations are conducted through five VHF television stations serving the Detroit, Houston, 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.

In June 2014, the Company completed the sale of WPLG, a television station serving the Miami market. WPLG results are included in discontinued operations, net of tax, for all periods presented. The television broadcasting segment operating results have been reclassified to reflect this change.

Other Businesses. Other businesses includes the operating results of The Slate Group and Foreign Policy Group, which publish online and print magazines and websites; SocialCode, a marketing solutions provider helping companies with marketing on social-media platforms; Celtic, a provider of home health and hospice services; 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 innovation team that builds products and technologies in the news space. In April 2014, Celtic acquired the assets of VNA-TIP Healthcare of Bridgeton, MO. On May 30, 2014, the Company acquired Joyce/Dayton Corp., a Dayton, OH-based manufacturer of screw jacks and other linear motion systems and on July 3, 2014, the Company acquired a majority interest in Residential Healthcare Group, Inc. (Residential), the parent company of Residential Home Health and Residential Hospice, leading providers of skilled home health care and hospice services in Michigan and Illinois.

Corporate Office. Corporate office includes the expenses of the Company’s corporate office, a net pension credit and certain continuing obligations related to prior business dispositions.

Geographical Information. The Company’s non-U.S. revenues in 2014, 2013 and 2012 totaled approximately $712 million, $658 million and $632 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 $58 million and $66 million at December 31, 2014 and 2013, respectively.

Company information broken down by operating segment and education division:



	Year Ended December 31
(in thousands)	2014			2013			2012
Operating Revenues
Education	$	2,160,417		$	2,163,734		$	2,184,532
Cable	798,134			807,309			787,117
Television broadcasting	363,836			308,306			328,396
Other businesses	212,907			128,803			72,837
Corporate office	—			—			—
Intersegment elimination	(128		)	(241		)	(296		)
	$	3,535,166		$	3,407,911		$	3,372,586
Income (Loss) from Operations
Education	$	65,463		$	50,989		$	(106,424	)
Cable	178,722			169,735			154,581
Television broadcasting	187,833			145,192			162,131
Other businesses	(21,086		)	(23,468		)	(33,010		)
Corporate office	(3,000		)	(23,279		)	(28,665		)
	$	407,932		$	319,169		$	148,613
Equity in Earnings of Affiliates, Net	100,370			13,215			14,086
Interest Expense, Net	(34,450		)	(33,803		)	(32,551		)
Other Income (Expense), Net	853,259			(23,751		)	(5,456		)
Income from Continuing Operations before Income Taxes	$	1,327,111		$	274,830		$	124,692
Depreciation of Property, Plant and Equipment
Education	$	61,737		$	89,622		$	101,009
Cable	128,733			128,184			129,107
Television broadcasting	8,409			8,746			9,253
Other businesses	3,931			2,177			770
Corporate office	836			626			—
	$	203,646		$	229,355		$	240,139
Amortization of Intangible Assets and Impairment of Goodwill and
Other Long-Lived Assets
Education	$	24,941		$	11,753		$	127,876
Cable	181			220			211
Television broadcasting	32			—			—
Other businesses	10,516			3,416			3,016
Corporate office	—			—			—
	$	35,670		$	15,389		$	131,103
Net Pension (Credit) Expense
Education	$	15,418		$	16,538		$	11,584
Cable	3,585			3,708			2,540
Television broadcasting	1,355			3,961			5,046
Other businesses	748			610			169
Corporate office	(82,301		)	(41,836		)	(27,871		)
	$	(61,195	)	$	(17,019	)	$	(8,532	)
Capital Expenditures
Education	$	33,528		$	45,421		$	51,105
Cable	165,787			160,246			150,525
Television broadcasting	11,295			12,131			6,122
Other businesses	5,110			2,005			1,451
Corporate office	7,074			309			—
	$	222,794		$	220,112		$	209,203

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



	As of December 31
(in thousands)	2014		2013
Identifiable Assets
Education	$	1,781,543	$	1,921,037
Cable	1,253,764		1,215,320
Television broadcasting	305,426		383,251
Other businesses	518,807		171,539
Corporate office	524,627		371,484
	$	4,384,167	$	4,062,631
Investments in Marketable Equity Securities	193,793		487,156
Investments in Affiliates	19,811		15,754
Prepaid Pension Cost	1,152,488		1,245,505
Assets of Discontinued Operations	2,060		—
Total Assets	$	5,752,319	$	5,811,046

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



	Year Ended December 31
(in thousands)	2014			2013			2012
Operating Revenues
Higher education	$	1,010,058		$	1,080,908		$	1,149,407
Test preparation	304,662			293,201			284,252
Kaplan international	840,915			783,588			741,826
Kaplan corporate and other	6,094			7,990			15,039
Intersegment elimination	(1,312		)	(1,953		)	(5,992		)
	$	2,160,417		$	2,163,734		$	2,184,532
Income (Loss) from Operations
Higher education	$	83,069		$	71,584		$	27,245
Test preparation	(4,730		)	4,118			(10,799		)
Kaplan international	69,153			51,653			47,120
Kaplan corporate and other	(82,034		)	(76,701		)	(171,036		)
Intersegment elimination	5			335			1,046
	$	65,463		$	50,989		$	(106,424	)
Depreciation of Property, Plant and Equipment
Higher education	$	29,187		$	43,892		$	58,514
Test preparation	12,547			19,194			19,718
Kaplan international	19,297			16,154			20,975
Kaplan corporate and other	706			10,382			1,802
	$	61,737		$	89,622		$	101,009
Amortization of Intangible Assets	$	7,738		$	8,503		$	16,283
Impairment of Goodwill and Other Long-Lived Assets	$	17,203		$	3,250		$	111,593
Pension Expense
Higher education	$	10,514		$	11,714		$	7,943
Test preparation	2,888			2,674			2,007
Kaplan international	356			363			189
Kaplan corporate and other	1,660			1,787			1,445
	$	15,418		$	16,538		$	11,584
Capital Expenditures
Higher education	$	11,551		$	10,879		$	26,406
Test preparation	1,143			7,008			8,211
Kaplan international	20,802			27,472			16,728
Kaplan corporate and other	32			62			(240		)
	$	33,528		$	45,421		$	51,105

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



	As of December 31
(in thousands)	2014		2013
Identifiable Assets
Higher education	$	749,421	$	859,208
Test preparation	167,055		173,435
Kaplan international	838,148		864,507
Kaplan corporate and other	26,919		23,887
	$	1,781,543	$	1,921,037