Washington Post 2009 Annual Report Download - page 92

P. FAIR VALUE MEASUREMENTS
Fair value measurements are determined based on the assumptions
that a market participant would use in pricing an asset or liability
based on a three-tiered hierarchy that draws a distinction between
market participant assumptions based on (i) observable inputs, such
as quoted prices in active markets (Level 1); (ii) inputs other than
quoted prices in active markets that are observable either directly
or indirectly (Level 2) and (iii) unobservable inputs that require the
Company to use present value and other valuation techniques
in the determination of fair value (Level 3). Financial assets and
liabilities are classified in their entirety based on the lowest level of
input that is significant to the fair value measure. The Company’s
assessment of the significance of a particular input to the fair value
measurements requires judgment and may affect the valuation of the
assets and liabilities being measured and their placement within the
fair value hierarchy.
The Company’s financial assets and liabilities measured at fair
value on a recurring basis as of January 3, 2010 were as follows:
Fair Value Measurements at
January 3, 2010
(in millions)
Fair Value at
January 3,
2010
Quoted Prices in
Active Markets
for Identical
Items (Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Assets:
Money market
investments ......... $327.8 $ — $327.8
Marketable equity
securities(1) .......... 353.9 353.9 —
Other current
investments(2) ........ 31.1 30.4 0.7
Total financial assets .... $712.8 $384.3 $328.5
Liabilities:
Deferred compensation
plan liabilities(3) ...... $ 66.6 $ — $ 66.6
7.25% unsecured
notes .............. 443.1 — 443.1
Total financial liabilities . . $509.7 $ — $509.7
(1) The Company’s investments in marketable equity securities are classified as
available-for-sale.
(2) Includes U.S. Government Securities, corporate bonds, mutual funds and time
deposits (with original maturities greater than 90 days, but less than one
year).
(3) Includes The Washington Post Company Deferred Compensation Plan and
supplemental savings plan benefits under The Washington Post Company
Supplemental Executive Retirement Plan, which are included in accrued
compensation and related benefits.
For assets that are measured using quoted prices in active markets,
the total fair value is the published market price per unit multiplied
by the number of units held without consideration of transaction
costs. Assets and liabilities that are measured using significant other
observable inputs are primarily valued by reference to quoted prices
of similar assets or liabilities in active markets, adjusted for any
terms specific to that asset or liability.
Q. BUSINESS SEGMENTS
Through its subsidiary Kaplan, Inc., the Company provides
educational services for individuals, schools and businesses. The
Company also operates principally in four areas of the media
business: cable television, newspaper publishing, television
broadcasting and magazine publishing.
Kaplan reorganized its operations effective in the third quarter of
2009 into the following four operating segments for the purpose of
making operating decisions and assessing performance: Higher
Education, Test Preparation, Kaplan International and Kaplan
Ventures. Kaplan International was organized primarily from the
non-U.S. businesses previously included in the Higher Education,
Test Preparation and Professional operating segments. Most of the
U.S.-based businesses previously included in the Professional
operating segment were moved into the operations of Test
Preparation. The Kaplan Ventures operating segment was organized
to manage and develop new and more recently acquired
businesses. Kaplan’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 condensed consolidated
financial statements are based on this new organizational structure
and information reviewed by the Company’s management to
evaluate the business segment results. Segment operating results of
the education division for fiscal years ended 2008 and 2007 have
been restated to reflect this organization change.
In the third quarter of 2009, Kaplan Higher Education (KHE)
modified its method of recognizing revenue ratably over the period
of instruction as services are delivered to students from a weekly
convention to a daily convention, on a prospective basis. If KHE’s
revenue recognition convention had been on a daily convention in
prior periods, revenues and operating income in the first quarter of
2009 would have increased by $7.0 million and $6.5 million,
respectively, and revenues and operating income in the fourth
quarter of 2008 would have decreased by $7.8 million and $7.3
million, respectively. The Company has concluded that the impact
of this change was not material to the Company’s financial position
or results of operations for 2009, 2008 and 2007 and the related
interim periods, based on its consideration of quantitative and
qualitative factors.
In 2007, Kaplan announced plans to restructure the Score business.
The Score restructuring included the closing of 75 Score centers and
relocating certain management and terminating certain employees
from closed centers; Score incurred approximately $11.2 million in
expenses in the fourth quarter of 2007 related to lease obligations,
severance and accelerated depreciation of fixed assets. After
closings and consolidations, Score operated 78 centers.
At the end of March 2009, the Company approved a plan to offer
tutoring services, previously provided at Score, in Kaplan test
preparation centers. The plan was substantially completed by the
end of the second quarter of 2009. In conjunction with this plan,
14 existing Score centers were converted into Kaplan test
preparation centers, and the remaining 64 Score centers were
closed. The Company recorded $24.9 million in asset write-downs,
lease terminations, severance and accelerated depreciation of fixed
assets in the first half of 2009. This amount includes a $9.2 million
write-down of Score’s software product to its fair value following an
impairment review.
78 THE WASHINGTON POST COMPANY