Washington Post 2010 Annual Report Download - page 67

A summary of non-operating income (expense) for the years ended
January 2, 2011 and January 3, 2010 follows:
(in millions) 2010 2009
Foreign currency gains, net .................. $6.7 $16.9
Impairment write-downs on cost method
investments ............................ —(3.8)
Other net gains ........................... 2.0 0.1
Total ................................. $8.7 $13.2
The Company incurred net interest expense of $27.9 million in
2010, compared to $29.0 million in 2009. At January 2, 2011,
the Company had $399.7 million in borrowings outstanding at an
average interest rate of 7.2%; at January 3, 2010, the Company
had $399.3 million in borrowings outstanding at an average
interest rate of 7.2%.
Income Taxes. The effective tax rate for income from continuing
operations in 2010 was 41.4%. This effective tax rate was
adversely impacted by $13.9 million in noncash valuation
allowances provided against deferred state and local income tax
benefits, net of U.S. Federal income taxes, and $9.1 million from
nondeductible goodwill in connection with an impairment charge
recorded in the third quarter of 2010; these items were offset by
permanent U.S. Federal tax benefit items and tax benefits with
respect to jurisdictions outside the United States.
The effective tax rate for income from continuing operations in
2009 was 35.9%. This effective tax rate was adversely impacted
by $7.4 million in noncash valuation allowances provided against
deferred state and local income tax benefits, net of U.S. Federal
income taxes, and $3.3 million from nondeductible goodwill in
connection with impairment charges recorded in 2009; these items
were offset by favorable adjustments recorded for a reduction in
state income taxes and for prior-year permanent U.S. Federal tax
deductions.
Discontinued Operations. On September 30, 2010, the Company
completed the sale of Newsweek. Consequently, the Company’s
income from continuing operations excludes magazine publishing
operations, which have been reclassified to discontinued
operations, net of tax. Under the terms of the asset purchase
agreement, The Washington Post Company retained the pension
assets and liabilities, certain employee obligations arising prior to
the sale and other items. A loss of $11.5 million from the
Newsweek sale is included in discontinued operations.
Newsweek employees were participants in The Washington Post
Company Retirement Plan, and Newsweek was historically
allocated a net pension credit. Since this net pension credit will be
included in income from continuing operations in the future, it has
been excluded from the reclassification of Newsweek results to
discontinued operations. The pension cost arising from early
retirement programs at Newsweek, however, is included in
discontinued operations.
RESULTS OF OPERATIONS — 2009 COMPARED TO 2008
Net income available for common shares was $91.8 million
($9.78 per share) for the fiscal year ended January 3, 2010, up
from $64.8 million ($6.87 per share) for the fiscal year ended
December 28, 2008. Net income includes $45.1 million ($4.80
per share) and $30.5 million ($3.24 per share) in losses from
discontinued operations for fiscal year 2009 and 2008,
respectively. Income from continuing operations available for
common shares was $136.9 million ($14.58 per share) for fiscal
year 2009, compared to $95.3 million for fiscal year 2008
($10.11 per share).
Items included in the Company’s income from continuing operations
in 2009:
• $57.9 million in early retirement program expense at the
newspaper division (after-tax impact of $35.9 million, or $3.82
per share);
• $33.2 million in restructuring charges related to Kaplan’s Score
and Test Preparation operations (after-tax impact of $20.6
million, or $2.19 per share);
• $33.8 million in accelerated depreciation at The Washington
Post (after-tax impact of $21.0 million, or $2.23 per share);
• A $25.4 million goodwill and other long-lived assets impairment
charge related to Kaplan Ventures (after-tax impact of $18.8
million, or $2.00 per share);
• A $29.0 million decline in equity in earnings (losses) of affiliates
associated with impairment charges at two of the Company’s
affiliates (after-tax impact of $18.8 million, or $2.00 per share);
and
• $16.9 million in non-operating unrealized foreign currency gains
arising from the weakening of the U.S. dollar (after-tax impact of
$10.3 million, or $1.10 per share).
Items included in the Company’s results in 2008:
• Goodwill, intangible assets and other impairment charges of
$142.3 million at the Company’s online lead generation
business, included in the other businesses and corporate office
segment; at the Company’s community newspapers, The Herald
and other operations, included in the newspaper publishing
segment; and at two of the Company’s equity affiliates (after-tax
impact of $115.7 million, or $12.35 per share);
• Charges of $82.8 million related to early retirement program
expense at The Washington Post newspaper and the corporate
office (after-tax impact of $50.1 million, or $5.27 per share);
• $22.3 million in accelerated depreciation related to the planned
closing of The Washington Post’s College Park, MD, plant
(after-tax impact of $13.9 million, or $1.48 per share);
• Expenses and charges of $11.0 million (after-tax impact of $6.8
million, or $0.72 per share) in connection with the restructuring of
Test Preparation’s professional training businesses;
• Non-operating gains include $47.3 million from the sales of
marketable equity securities (after-tax impact of $28.9 million, or
$3.09 per share), offset by $46.3 million in non-operating
unrealized foreign currency losses arising from the strengthening
of the U.S. dollar (after-tax impact of $28.5 million, or $3.04
per share); and
• Income tax expense of $9.5 million related to valuation allow-
ances provided against certain state and local income tax
benefits, net of U.S. Federal income tax benefits ($1.01 per
share).
2010 FORM 10-K 51