Washington Post 2002 Annual Report Download - page 37

During 2000, the Company spent $212.3 million on business est payments of $11.0 million payable on February 15 and
acquisitions. These acquisitions included $177.7 million for August 15. The Company also had $7.1 million in other debt.
Quest Education Corporation, a provider of post-secondary edu- In the third quarter of 2002, the Company replaced its revolving
cation; $16.2 million for two cable systems serving 8,500 sub- credit facility agreements with a five-year $350 million revolving
scribers; and $18.4 million for various other small businesses credit facility, which expires in August 2007, and a 364-day
(principally consisting of educational services companies). There $350 million revolving credit facility, which expires in August
were no significant business dispositions in 2000. 2003. These revolving credit facility agreements support the
Capital Expenditures. During 2002, the Company’s capital issuance of the Company’s short-term commercial paper and
expenditures totaled $153.0 million. The Company’s capital provide for general corporate purposes. In May 2002, Moody’s
expenditures for 2002, 2001 and 2000 are disclosed in downgraded the Company’s long-term debt ratings to A1 from
Note M to the Consolidated Financial Statements. The Company Aa3 and affirmed the Company’s short-term debt rating at P-1.
estimates that its capital expenditures will total $180 million in During 2002, the Company’s borrowings, net of repayments,
2003. decreased by $268.3 million, with the decrease primarily due
Investments in Marketable Equity Securities. At December 29, to cash flow from operations.
2002, the fair value of the Company’s investments in marketable The Company expects to fund its estimated capital needs prima-
equity securities was $216.5 million, which includes rily through internally generated funds and, to a lesser extent,
$214.8 million in Berkshire Hathaway Inc. Class A and B com- commercial paper borrowings. In management’s opinion, the
mon stock and $1.7 million of various common stocks of publicly Company will have ample liquidity to meet its various cash
traded companies with e-commerce business concentrations. needs in 2003.
At December 29, 2002, the gross unrealized gain related to the
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Company’s Berkshire Hathaway Inc. stock investment totaled
$29.9 million; the gross unrealized gain on this investment was The preparation of financial statements in conformity with gener-
$34.1 million at December 30, 2001. The Company presently ally accepted accounting principles requires management to
intends to hold the Berkshire Hathaway stock long term. make estimates and assumptions that affect the amounts reported
in the financial statements. In preparing these financial state-
Cost Method Investments. At December 29, 2002 and Decem-
ments, management has made their best estimates and judg-
ber 30, 2001, the Company held minority investments in various
ments of certain amounts included in the financial statements.
non-public companies. The companies represented by these
Actual results will inevitably differ to some extent from these
investments have products or services that in most cases have
estimates.
potential strategic relevance to the Company’s operating units.
The Company records its investment in these companies at the The following are accounting policies that management believes
lower of cost or estimated fair value. During 2002 and 2001, are the most important to the Company’s portrayal of the Com-
the Company invested $0.3 million and $11.7 million, respec- pany’s financial condition and results and require management’s
tively, in various cost method investees. At December 29, 2002 most difficult, subjective, or complex judgments.
and December 30, 2001, the carrying value of the Company’s
Revenue Recognition and Trade Accounts Receivable, Less Esti-
cost method investments totaled $9.5 million and $29.6 million,
mated Returns, Doubtful Accounts and Allowances. Revenues
respectively.
from magazine retail sales are recognized on the later of deliv-
Common Stock Repurchases and Dividend Rate. During 2002, ery or the cover date, with adequate provision made for antici-
2001 and 2000, the Company repurchased 1,229 shares, pated sales returns. The Company bases its estimates for sales
714 shares and 200 shares, respectively, of its Class B common returns on historical experience and has not experienced signifi-
stock at a cost of $0.8 million, $0.4 million and $0.1 million. At cant fluctuations between estimated and actual return activity.
December 29, 2002, the Company had authorization from the Education revenue is recognized ratably over the period during
Board of Directors to purchase up to 544,796 shares of Class B which educational services are delivered. For example, at
common stock. The annual dividend rate for 2003 was Kaplan’s test preparation division, estimates of average student
increased to $5.80 per share, from $5.60 per share in 2002 course length are developed for each course and these estimates
and 2001. are evaluated on an ongoing basis and adjusted as necessary.
As Kaplan’s businesses and related course offerings have
Liquidity. At December 29, 2002, the Company had
expanded, including distance-learning businesses, the complexi-
$28.8 million in cash and cash equivalents.
ty and significance of management estimates have increased.
At December 29, 2002, the Company had $259.3 million in
Accounts receivable have been reduced by an allowance for
commercial paper borrowings outstanding at an average inter-
amounts that may be uncollectible in the future. This estimated
est rate of 1.6 percent with various maturities throughout the first
allowance is based primarily on the aging category, historical
and second quarters of 2003. In addition, the Company had
trends and management’s evaluation of the financial condition
outstanding $398.4 million of 5.5 percent, 10-year unsecured
of the customer. Accounts receivable also have been reduced by
notes due February 2009. These notes require semiannual inter-
2002 FORM 10-K 35