(this target excludes budgeted restructuring costs, and other operating losses related to business sales and closures) weighted at 80% and Kaplans enterprise revenue target of $1,731.6
million weighted at 20%. The potential payouts for the Kaplan component of Mr. Rosens bonus amount range from 0% to 200% of target, with the maximum potential payout available in the event 150% of the operating income target is attained
and the revenue target is met. Due to continued operating environment challenges in the U.S. higher education industry, Kaplan completed a number of unplanned restructuring activities in 2016 with the objective and result of significantly reducing
its expenses to be more in line with current revenue levels. Given the impact and importance of these restructuring charges and discontinued operations, in calculating the 75% of Mr. Rosens bonus based on Kaplans enterprise
operating income and enterprise revenue, the Committee excluded these restructuring charges and discontinued operations as they are not tied to Kaplans continuing operations. In addition, in calculating the 75% of Mr. Rosens bonus
based on Kaplans enterprise operating income and enterprise value, the Committee included a net $16 million pre-tax gain on the sale of a historically loss-making business. On this basis, Kaplan achieved adjusted enterprise operating income of
$131.8 million versus a target of $156.2 million, or 84% achievement, which resulted in payout of the portion of Mr. Rosens bonus attributable to Kaplans enterprise operating income of 68% of target. Kaplan enterprise revenue
totaled $1,637.4 million versus a target of $1,731.6 million, or 95% achievement, which resulted in payout of the portion of Mr. Rosens bonus attributable to Kaplans enterprise revenue of 73% of target. Thus, the total
percentage achievement of the Kaplan portion of Mr. Rosens bonus totaled 69% of target, or $836,030.
The original diluted
earnings per share goal for 2016 was $32.21. In setting the original goal, the Committee established a formula for bonus purposes that included adjustments for certain items, to the extent that actual amounts varied from those in the 2016
annual budget. Specifically, these adjustments included additions for foreign exchange losses and a Kaplan stock compensation expense variance; these were offset by credits for a pension budget variance, gains from business dispositions and net
earnings from an unbudgeted acquisition.
In calculating the Companys achievement of 2016 diluted earnings per share for purposes of
making its final bonus determinations for the named executive officers, the Committee also exercised its discretion to exclude certain unusual and unbudgeted items, in addition to the adjustments included in the diluted earnings per share formula.
Specifically, the adjustments included additions for write-downs on cost and equity method investments, a portion of the gain on sale of a business, Long Term Incentive Plan (LTIP) expense variance from budget at SocialCode and Panoply,
unbudgeted restructuring charges at Kaplan, unbudgeted transaction-related costs at the broadcasting division and Graham Healthcare Group, unbudgeted interest expense and unbudgeted intangible and long-lived asset impairment charges. These additions
were offset by deductions for net gains on the sale of land and marketable equity securities and a portion of favorable income tax adjustments. The Committee adjusted for these items as they do not relate to the regular operating results that
are customarily considered by the Committee in determining bonus amounts, however in the case of the gain on sale of a business, the Committee did not adjust for the favorable outcome of the transaction for the Company. The exhibit to the
Companys Form 8-K filed on February 24, 2017, detailed most of these items, as does page 42 of the Companys Annual Report on Form 10-K, filed on February 24, 2017. These items
collectively amounted to $1.28 in diluted earnings per share net deductions.
Taking into account these adjustments, the Companys
2016 diluted earnings per share, as adjusted for purposes of the bonus determination, was $34.18 (compared to reported diluted earnings per share of $29.80), resulting in the Companys achievement of 106.1% of its earnings per share goal for
2016. As a result, the annual bonus payout was approximately 115% of target, based on the established annual formula.
To align the interests of the Companys shareholders and management and to ensure that the full potential of an executives
compensation package cannot be realized unless stock appreciation occurs over a number of years, the 2012 ICP also provides for grants of restricted stock of the Company. To determine the number of shares to be granted, the Committee considers on an
individual basis the estimated value of shares already held, the level of contribution the employee has previously made and the potential of the employee to bring additional value to the Company. The shares generally cliff vest at the conclusion of
a four-year vesting period and accelerate vesting only at the discretion of the Committee. The named executive officers generally receive grants of restricted stock every other year. The grants made in January 2015 will vest in January 2019. In
addition, in connection with the Cable ONE spin-off in 2015, a distribution of Cable ONE, Inc. shares was made with respect to outstanding shares of restricted stock, subject to the same vesting terms and conditions as such shares of Company
restricted stock. For additional information regarding such distributions, see the Outstanding Equity Awards at Fiscal Year-End table.