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: Kaplan International, KHE, KTP, Professional (U.S.), television broadcasting and healthcare.

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, non-operating pension and postretirement benefit income, 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. Kaplan International includes professional training and postsecondary education businesses largely outside the United States, as well as English-language programs. Prior to the KU Transaction closing on March 22, 2018, KHE included Kaplan’s domestic postsecondary education business, made up of fixed-facility colleges and online postsecondary and career programs. Following the KU Transaction closing, KHE includes the results as a service provider to higher education institutions. KTP includes Kaplan’s standardized test preparation and new economy skills training programs. Professional (U.S.) includes the domestic professional training and other continuing education businesses.

In recent years, Kaplan has formulated and implemented restructuring plans at its various businesses. There were no significant restructuring costs in 2018. Across all Kaplan businesses, restructuring costs of $9.1 million and $11.9 million were recorded in 2017 and 2016, respectively, as follows:



	Year Ended December 31
(in thousands)	2017		2016
Accelerated depreciation	$	339	$	1,815
Lease obligation losses	—		2,694
Severance	6,099		5,902
Other	2,627		1,441
	$	9,065	$	11,852

Kaplan International incurred restructuring costs of $2.9 million and $4.7 million in 2017 and 2016, respectively. These restructuring costs were largely in the U.K. and Australia and included severance charges, lease obligations, and accelerated depreciation.

KHE incurred restructuring costs of $1.4 million and $7.1 million in 2017 and 2016, respectively, primarily from severance, lease obligation losses and accelerated depreciation.

KTP incurred restructuring costs of $4.3 million in 2017 primarily from severance.

Total accrued restructuring costs at Kaplan were $4.6 million and $8.5 million at the end of 2018 and 2017, respectively.

Television Broadcasting. Television broadcasting operations are conducted through seven television stations serving the Detroit, Houston, San Antonio, Orlando, Jacksonville and Roanoke television markets. All stations are network-affiliated (except for WJXT in Jacksonville), with revenues derived primarily from sales of advertising time. In addition, the stations generate revenue from retransmission consent agreements for the right to carry their signals.

Healthcare. Graham Healthcare Group provides home health and hospice services.

Other Businesses. Other businesses includes the following:

•

Hoover, a Thomson, GA-based supplier of pressure impregnated kiln-dried lumber and plywood products for fire retardant and preservative applications (acquired in April 2017); Dekko, a Garrett, IN-based manufacturer of electrical workspace solutions, architectural lighting, and electrical components and assemblies; Joyce/Dayton Corp., a Dayton, OH-based manufacturer of screw jacks and other linear motion systems; and Forney, a global supplier of products and systems that control and monitor combustion processes in electric utility and industrial applications;


•	SocialCode, a marketing and insights company that manages digital advertising for leading brands; The Slate Group and Foreign Policy Group, which publish online and print magazines and websites; and three investment stage businesses, Panoply, Pinna and CyberVista.

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 2018, 2017 and 2016 totaled approximately $657 million, $637 million and $624 million, respectively, primarily from Kaplan’s operations outside the U.S. Additionally, revenues in 2018, 2017 and 2016 totaled approximately $345 million, $320 million, and $312 million, respectively, from Kaplan’s operations in the U.K. The Company’s long-lived assets in non-U.S. countries (excluding goodwill and other intangible assets), totaled approximately $124 million and $89 million at December 31, 2018 and 2017, respectively.

Company information broken down by operating segment and education division:



	Year Ended December 31
(in thousands)	2018			2017			2016
Operating Revenues
Education	$	1,451,015		$	1,516,776		$	1,598,461
Television broadcasting	505,549			409,916			409,718
Healthcare	149,275			154,202			146,962
Other businesses	590,227			511,003			326,888
Corporate office	—			—			—
Intersegment elimination	(100		)	(51		)	(139		)
	$	2,695,966		$	2,591,846		$	2,481,890
Income (Loss) from Operations
Education	$	97,136		$	77,687		$	95,321
Television broadcasting	210,533			139,258			202,863
Healthcare	(8,401		)	(2,569		)	2,799
Other businesses	(246		)	(19,263		)	(24,901		)
Corporate office	(52,861		)	(58,710		)	(53,213		)
	$	246,161		$	136,403		$	222,869
Equity in Earnings (Losses) of Affiliates, Net	14,473			(3,249		)	(7,937		)
Interest Expense, Net	(32,549		)	(27,305		)	(32,297		)
Debt Extinguishment Costs	(11,378		)	—			—
Non-Operating Pension and Postretirement Benefit Income, Net	120,541			72,699			80,665
Loss on Marketable Equity Securities, net	(15,843		)	—			—
Other Income (Expense), Net	2,103			4,241			(12,642		)
Income Before Income Taxes	$	323,508		$	182,789		$	250,658
Depreciation of Property, Plant and Equipment
Education	$	28,099		$	32,906		$	41,187
Television broadcasting	13,204			12,179			9,942
Healthcare	2,577			4,583			2,805
Other businesses	11,835			11,723			9,570
Corporate office	1,007			1,118			1,116
	$	56,722		$	62,509		$	64,620
Amortization of Intangible Assets and Impairment of Goodwill and
Other Long-Lived Assets
Education	$	9,362		$	5,162		$	7,516
Television broadcasting	5,632			6,349			251
Healthcare	14,855			7,905			6,701
Other businesses	25,674			31,385			13,806
Corporate office	—			—			—
	$	55,523		$	50,801		$	28,274
Pension Service Cost
Education	$	8,753		$	9,720		$	11,803
Television broadcasting	2,188			1,942			1,714
Healthcare	573			665			—
Other businesses	1,373			1,125			1,118
Corporate office	5,334			5,235			5,826
	$	18,221		$	18,687		$	20,461
Capital Expenditures
Education	$	54,159		$	27,520		$	26,497
Television broadcasting	27,013			16,802			27,453
Healthcare	1,741			2,987			2,954
Other businesses	15,154			9,771			13,093
Corporate office	—			—			715
	$	98,067		$	57,080		$	70,712

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



	As of December 31
(in thousands)	2018		2017
Identifiable Assets
Education	$	1,568,747	$	1,592,097
Television broadcasting	452,853		455,884
Healthcare	108,596		129,856
Other businesses	827,113		855,399
Corporate office	162,971		182,905
	$	3,120,280	$	3,216,141
Investments in Marketable Equity Securities	496,390		536,315
Investments in Affiliates	143,813		128,590
Prepaid Pension Cost	1,003,558		1,056,777
Total Assets	$	4,764,041	$	4,937,823

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



	Year Ended December 31
(in thousands)	2018			2017			2016
Operating Revenues
Kaplan international	$	719,982		$	697,999		$	696,362
Higher education	342,085			431,425			501,784
Test preparation	256,102			273,298			286,556
Professional (U.S.)	134,187			115,839			115,263
Kaplan corporate and other	1,142			294			214
Intersegment elimination	(2,483		)	(2,079		)	(1,718		)
	$	1,451,015		$	1,516,776		$	1,598,461
Income (Loss) from Operations
Kaplan international	$	70,315		$	51,623		$	48,398
Higher education	15,217			16,719			39,196
Test preparation	19,096			11,507			9,599
Professional (U.S.)	28,608			27,558			27,436
Kaplan corporate and other	(36,064		)	(29,863		)	(29,279		)
Intersegment elimination	(36		)	143			(29		)
	$	97,136		$	77,687		$	95,321
Depreciation of Property, Plant and Equipment
Kaplan international	$	15,755		$	14,892		$	17,523
Higher education	4,826			9,117			13,816
Test preparation	3,941			5,286			6,287
Professional (U.S.)	3,096			3,041			3,006
Kaplan corporate and other	481			570			555
	$	28,099		$	32,906		$	41,187
Amortization of Intangible Assets	$	9,362		$	5,162		$	7,516
Pension Service Cost
Kaplan international	$	298		$	264		$	268
Higher education	4,310			5,269			6,544
Test preparation	2,611			2,755			3,072
Professional (U.S.)	1,162			913			1,076
Kaplan corporate and other	372			519			843
	$	8,753		$	9,720		$	11,803
Capital Expenditures
Kaplan international	$	44,469		$	21,667		$	16,252
Higher education	4,045			2,158			3,140
Test preparation	681			1,038			4,672
Professional (U.S.)	4,845			2,475			2,224
Kaplan corporate and other	119			182			209
	$	54,159		$	27,520		$	26,497

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



	As of December 31
(in thousands)	2018		2017
Identifiable Assets
Kaplan international	$	1,101,040	$	1,115,919
Higher education	126,752		231,986
Test preparation	145,308		130,938
Professional (U.S.)	166,916		91,630
Kaplan corporate and other	28,731		21,624
	$	1,568,747	$	1,592,097