Washington Post 2012 Annual Report Download - page 69

Equity in Losses of Affiliates. In 2011, the Company held a 49%
interest in Bowater Mersey Paper Company, a 16.5% interest in
Classified Ventures, LLC and interests in several other affiliates. The
Company’s equity in earnings of affiliates for 2011 was $5.9
million, compared with losses of $4.1 million in 2010. The results
for 2011 reflect improved earnings at the Company’s Classified
Ventures affiliate and other affiliates, offset by a $9.2 million
impairment charge recorded in 2011 on the Company’s interest in
Bowater Mersey Paper Company.
Other Non-Operating (Expense) Income. The Company recorded
other non-operating expense, net, of $55.2 million in 2011,
compared to other non-operating income, net, of $7.5 million in
2010.
The 2011 non-operating expense, net, included a $53.8 million
write-down of a marketable equity security (Corinthian Colleges,
Inc.), $3.3 million in unrealized foreign currency losses and other
items. The 2010 non-operating income, net, included $6.7 million
in unrealized foreign currency gains.
A summary of non-operating (expense) income for the years ended
December 31, 2011, and January 2, 2011, is as follows:
(in thousands) 2011 2010
Impairment write-down on a
marketable equity security ............. $(53,793) $—
Gains (losses) on sales or write-downs of
cost method investments .............. 419 —
Foreign currency (losses) gains, net ........ (3,263) 6,705
Other, net .......................... 1,437 810
Total ............................ $(55,200) $7,515
Net Interest Expense. The Company incurred net interest expense
of $29.1 million in 2011, compared to $27.9 million in 2010.
At December 31, 2011, the Company had $565.2 million in
borrowings outstanding at an average interest rate of 5.7%; at
January 2, 2011, the Company had $399.7 million in borrowings
outstanding at an average interest rate of 7.2%.
Income Taxes. The effective tax rate for income from continuing
operations in 2011 was 41.2%. This effective tax rate was
adversely impacted by $17.8 million in valuation allowances
provided against deferred income tax benefits where realization is
doubtful. The effective tax rate benefited from lower rates at
jurisdictions outside the United States.
Theeffectivetaxrateforincomefromcontinuingoperationsin
2010 was 38.5%. This effective rate in 2010 was adversely
impacted by $16.8 million in valuation allowances provided
against deferred income tax benefits where realization is doubtful,
offset by permanent U.S. Federal tax benefit items and tax benefits
from lower rates at jurisdictions outside the United States.
Discontinued Operations. The Company divested its interest in
Avenue100 Media Solutions in July 2012. Kaplan sold Kidum
in August 2012, EduNeering in April 2012, KLT in February 2012,
KCS in October 2011, KVE in July 2011 and Education Connection
in April 2010. In addition, on September 30, 2010, the Company
completed the sale of Newsweek. Consequently, the Company’s
income from continuing operations excludes these businesses, which
have been reclassified to discontinued operations, net of tax.
FINANCIAL CONDITION: CAPITAL RESOURCES AND LIQUIDITY
Acquisitions and Dispositions. The Company completed business
acquisitions totaling approximately $55.6 million, $136.5 million
and $14.1 million, in 2012, 2011 and 2010, respectively.
The assets and liabilities of the companies acquired have been
recorded at their estimated fair values at the date of acquisition.
During 2012, the Company completed five business acquisitions
totaling approximately $55.6 million. In November 2012, the
Company completed its acquisition of a controlling interest in Celtic
Healthcare, Inc. (Celtic), a provider of home health care and
hospice services in the northeastern and mid-Atlantic regions. The
operating results of Celtic are included in other businesses. The fair
value of the noncontrolling interest in Celtic was $5.9 million at the
acquisition date, determined using a market approach. The minority
shareholder has an option to put their shares to the Company from
2018 to 2022, and the Company has an option to buy the shares
of the minority shareholder in 2022. The Company also acquired
three small businesses in its education division and one small
business in other businesses. The purchase price allocations mostly
comprised goodwill and other intangible assets on a preliminary
basis.
The Company divested its interest in Avenue100 Media Solutions
in July 2012, which was previously reported in other businesses.
Kaplan completed the sales of Kidum in August 2012, EduNeering
in April 2012 and Kaplan Learning Technologies in February 2012,
which were part of the Kaplan Ventures division. Consequently, the
Company’s income from continuing operations excludes results from
these businesses, which have been reclassified to discontinued
operations, as discussed in Note 3 to the Company’s Consolidated
Financial Statements.
In February 2013, the Company announced that it had signed an
agreement to sell The Herald, a daily and Sunday newspaper
headquartered in Everett, WA; the transaction is expected to close
in March 2013.
During 2011, the Company completed five business acquisitions
totaling approximately $136.5 million, including assumed debt of
$5.5 million and other assumed liabilities. Kaplan acquired three
businesses in its Kaplan International division, one business in its
KHE division and one business in its Kaplan Ventures division.
These included the May 2011 acquisitions of Franklyn Scholar and
Carrick Education Group, leading national providers of vocational
training and higher education in Australia, and the June 2011
acquisition of Structuralia, a provider of e-learning for the
engineering and infrastructure sector in Spain. During 2010, the
Company acquired six businesses for $14.1 million. Kaplan
acquired two small businesses in its KTP division, one small business
in its Ventures division and one small business in its International
division. The Company made two small acquisitions in its cable
television and other businesses divisions. The purchase price
allocations for these acquisitions mostly comprised goodwill, other
intangible assets and property, plant and equipment.
Kaplan completed the sales of KVE in July 2011 and KCS in
October 2011, which were part of Kaplan Ventures and KHE,
respectively. In April 2010, Kaplan completed the sale of
2012 FORM 10-K 57