Washington Post 2010 Annual Report Download - page 89

In the second quarter of 2010, Kaplan completed the sale of
Education Connection, which was part of the Kaplan Ventures
division.
During 2009, the Company acquired three businesses for $22.9
million. Kaplan acquired one business in each of its International
and Test Preparation divisions, and the newspaper division
acquired a small local publication. The purchase price allocations
for these acquisitions mostly comprised goodwill and other
intangible assets. Also in 2009, the Company recorded $3.2
million of additional purchase consideration in connection with the
achievement of certain operating results by a company acquired in
2007 and allocated the additional purchase consideration to
goodwill.
During 2008, the Company acquired ten businesses within its
education and newspaper segments, for a total of $93.1 million,
financed with cash and $3.2 million in debt. Kaplan acquired nine
businesses in its International, Test Preparation and Ventures
divisions. In November 2008, Kaplan International exercised an
option to acquire an 85% majority interest in Shanghai Kai Bo
Education Management Investment Co., Ltd. (“Kaplan China”), a
provider of education in China that offers preparation courses for
entry to U.K. universities. Kaplan China’s results from the transaction
date forward are included in the Company’s Consolidated
Financial Statements. The purchase price allocations for these
acquisitions mostly comprised goodwill and other intangible assets.
Also in 2008, the cable television division acquired subscribers
primarily in the Mississippi area for $15.3 million. The purchase
price allocations for these transactions mostly comprised intangible
assets and property, plant and equipment.
During 2008, the Company recorded $15.1 million of additional
purchase consideration in connection with the achievement of
certain operating results by a company acquired in 2007 and
allocated the additional purchase consideration to goodwill.
H. GOODWILL AND OTHER INTANGIBLE ASSETS
The education division made several minor changes to its operating
and reporting structure in the first quarter of 2010, changing the
composition of the reporting units within Kaplan Test Preparation,
Kaplan Ventures and KHE (see Note R). The changes resulted in the
reassignment of the assets and liabilities to the reporting units
affected. The goodwill was allocated to the reporting units affected
using the relative fair value approach.
As a result of challenges in the lead generation industry, in the third
quarter of 2010, the Company performed an interim review of the
carrying value of goodwill and other intangible assets at its online
lead generation business, which are included within the other
businesses segment. The business failed the step one goodwill
impairment test and performed a step two analysis. The Company
estimated the fair value utilizing a discounted cash flow model and
recorded a goodwill and other intangible asset impairment charge
of $27.5 million.
The education division reorganized its operations 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. The reorganization changed
the composition of the reporting units within the education division
and resulted in the reassignment of the assets and liabilities. The
goodwill was allocated to the reporting units using the relative fair
value approach. As a result of the reassignment and allocation,
the Company performed an interim review of the carrying value of
goodwill at the education division for possible impairment on both
a prereorganization and postreorganization basis. No impairment
of goodwill was indicated at the prereorganization reporting units.
On a postreorganization basis, the Company failed the step one
goodwill impairment test at two reporting units (Kaplan EduNeering
and Kaplan Compliance Solutions) within the Kaplan Ventures
operating segment and performed a step two analysis. The
Company recorded a goodwill and other long-lived asset impair-
ment charge of $25.4 million related to these two reporting units.
The fair value of Kaplan EduNeering was determined utilizing a
discounted cash flow model; the fair value of Kaplan Compliance
Solutions was determined using a cost approach.
In 2008, the Company recorded goodwill and other intangible
asset impairment charges totalling $135.4 million. As a result of
the challenging advertising environment at the Company’s
community newspapers and The Herald, which are part of the
newspaper publishing segment, the Company performed an
interim review of the carrying value of goodwill and recorded a
$59.7 million goodwill impairment charge. The Company
estimated the fair value utilizing a discounted cash flow model. As
part of the Company’s annual impairment review, a $69.7 million
goodwill and other intangible assets impairment charge was
recorded at the Company’s online lead generation business within
the other businesses and corporate office segment due to lower
than expected revenue and operating income growth since its
acquisition. The Company estimated the fair value utilizing a
discounted cash flow model. The Company also recorded a
goodwill impairment charge of $6.1 million in the newspaper
publishing segment as part of its annual impairment review. The
Company estimated the fair value utilizing a market approach.
Also in the fourth quarter of 2008, the Company recorded a
$28.4 million amortized intangible asset in connection with a
noncompetition and nonsolicitation agreement entered into
between the Company and the former Kaplan chief executive
officer, who resigned in November 2008. This asset is being
amortized over three years.
The Company amortizes the recorded values of its amortized
intangible assets over their estimated useful lives. Amortization of
intangible assets is estimated to be approximately $23 million in
2011, $11 million in 2012, $7 million in 2013, $4 million in
2014, $3 million in 2015 and $13 million thereafter.
2010 FORM 10-K 73