Washington Post 2007 Annual Report Download - page 67

During 2007 and 2006, the Company had average borrowings
outstanding of approximately $412.1 million and $418.7 million,
respectively, at average annual interest rates of approximately
5.5%. The Company incurred net interest costs on its borrowings of
$12.7 million and $14.9 million, respectively, during 2007 and
2006.
At December 30, 2007 and December 31, 2006, the Company
had a working capital deficit of $18.5 million and working
capital of $123.2 million, respectively. The Company
maintains working capital levels consistent with its underlying
business requirements and consistently generates cash from
operations in excess of required interest or principal payments.
The Company’s net cash provided by operating activities, as
reported in the Company’s Consolidated Statements of Cash
Flows, was $581.2 million in 2007, compared to $594.8 million
in 2006.
The Company expects to fund its estimated capital needs
primarily through existing cash balances and internally
generated funds and, to a lesser extent, through commercial
paper borrowings. In management’s opinion, the Company
will have ample liquidity to meet its various cash needs in 2008.
The following reflects a summary of the Company’s contractual
obligations and commercial commitments as of December 30,
2007:
2008 2009 2010 2011 2012 Thereafter Total
Contractual Obligations
(in thousands)
Debt and interest. . . $111,585 $411,700 $ 75 $ — $ — $ — $ 523,360
Programming
purchase
commitments(1) . . 159,455 135,685 113,309 103,640 68,906 107,252 688,247
Operating leases . . 125,526 111,568 98,143 81,400 69,358 214,206 700,201
Other purchase
obligations(2) . . . 247,070 66,614 45,500 29,079 16,107 25,500 429,870
Long-term
liabilities(3) . . . . 5,513 5,253 6,208 7,163 8,118 63,248 95,503
Total . . . . . . . . $649,149 $730,820 $263,235 $221,282 $162,489 $410,206 $2,437,181
(1) Includes commitments for the Company’s television broadcasting and cable
television businesses that are reflected in the Company’s Consolidated Balance
Sheets and commitments to purchase programming to be produced in future years.
(2) Includes purchase obligations related to newsprint contracts, printing contracts,
employment agreements, circulation distribution agreements, capital projects and
other legally binding commitments. Other purchase orders made in the ordinary
course of business are excluded from the table above. Any amounts for which the
Company is liable under purchase orders are reflected in the Company’s
Consolidated Balance Sheets as “Accounts payable and accrued liabilities.”
(3) Primarily made up of postretirement benefit obligations other than pensions. The
Company has other long-term liabilities excluded from the table above, including
obligations for deferred compensation, long-term incentive plans and long-term
deferred revenue.
Fiscal Year Line of Credit
Other Commercial Commitments
(in thousands)
2008 ............................ $ —
2009 ............................ —
2010 ............................ —
2011 ............................ 500,000
2012 ............................ —
Thereafter . . . ....................... —
Total . ............................ $500,000
Other. The Company does not have any off-balance-sheet
arrangements or financing activities with special-purpose
entities (SPEs). Transactions with related parties, as discussed
in Note C to the Consolidated Financial Statements, are in the
ordinary course of business and are conducted on an arm’s-length
basis.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the amounts
reported in the financial statements. In preparing these
financial statements, management has made its best estimates
and judgments of certain amounts included in the financial
statements. Actual results will inevitably differ to some extent
from these estimates.
The following are accounting policies that management believes
are the most important to the Company’s portrayal of the
Company’s financial condition and results and require
management’s most difficult, subjective or complex judgments.
Revenue Recognition and Trade Accounts Receivable,
Less Estimated Returns, Doubtful Accounts and Allowances.
The Company’s revenue recognition policies are described in
Note A to the Consolidated Financial Statements. Education
revenue is recognized ratably over the period during which
educational services are delivered. At Kaplan’s test prep
division, estimates of average student course length are
developed for each course, along with estimates for the
anticipated level of student drops and refunds from test
performance guarantees, and these estimates are evaluated on
an ongoing basis and adjusted as necessary. As Kaplan’s
businesses and related course offerings have expanded,
including distance-learning businesses and contracts with
school districts as part of its K12 business, the complexity and
significance of management estimates have increased. Revenues
from magazine retail sales are recognized on the later of delivery
or the cover date, with adequate provision made for anticipated
sales returns. The Company bases its estimates for sales returns on
historical experience and has not experienced significant
fluctuations between estimated and actual return activity.
Accounts receivable have been reduced by an allowance for
amounts that may be uncollectible in the future. This estimated
allowance is based primarily on the aging category, historical
trends and management’s evaluation of the financial condition of
the customer. Accounts receivable also have been reduced by an
estimate of advertising rate adjustments and discounts, based on
estimates of advertising volumes for contract customers who are
eligible for advertising rate adjustments and discounts.
Pension Costs. Excluding special termination benefits related to
early retirement programs, the Company’s net pension credit was
$22.3 million, $21.8 million and $37.9 million for 2007, 2006
and 2005, respectively. The Company’s pension benefit costs
are actuarially determined and are impacted significantly by the
Company’s assumptions related to future events, including the
discount rate, expected return on plan assets and rate of
2007 FORM 10-K 51