Washington Post 2013 Annual Report Download - page 61

Equity in Earnings of Affiliates. The Company holds a 16.5%
interest in Classified Ventures, LLC and interests in several other
affiliates.
The Company’s equity in earnings of affiliates, net, for 2013 was
$13.2 million, compared to $14.1 million in 2012.
Other Non-Operating (Expense) Income. The Company recorded
other non-operating expense, net, of $23.8 million in 2013,
compared to $5.5 million in 2012.
The 2013 non-operating expense, net, included a $10.4 million
write-down of a marketable equity security, $13.4 million in
unrealized foreign currency losses and other items. The 2012 non-
operating expense, net, included an $18.0 million write-down of a
marketable equity security, offset by $6.6 million in net gains from
cost method investments, $3.1 million in unrealized foreign currency
gains and other items.
During 2013, on an overall basis, the fair value of the Company’s
marketable securities appreciated by $96.3 million.
Net Interest Expense. The Company incurred net interest expense of
$33.8 million in 2013, compared to $32.6 million in 2012. At
December 31, 2013, the Company had $450.8 million in borrowings
outstanding at an average interest rate of 7.0%; at December 31,
2012, the Company had $696.7 million in borrowings outstanding at
an average interest rate of 5.1%.
Provision for Income Taxes. The effective tax rate for income from
continuing operations in 2013 was 36.5%. This effective tax rate
benefited from lower state taxes, offset by $4.6 million in net state
and non-U.S. valuation allowances provided against deferred
income tax benefits where realization is doubtful.
The effective tax rate for income from continuing operations in
2012 was 53.6%. This effective tax rate was adversely impacted
by $12.8 million from nondeductible goodwill in connection with
an impairment charge recorded in 2012, and $12.5 million in net
state and non-U.S. valuation allowances provided against deferred
income tax benefits where realization is doubtful, offset by tax
benefits from lower rates in jurisdictions outside the United States.
Discontinued Operations. On October 1, 2013, the Company
completed the sale of most of its newspaper publishing businesses.
The publishing businesses sold include The Washington Post, Express,
The Gazette Newspapers, Southern Maryland Newspapers,
Greater Washington Publishing, Fairfax County Times and
El Tiempo Latino and related websites (Publishing Subsidiaries).
Slate magazine, TheRoot.com and Foreign Policy were not part of the
transaction and remain with the Company, as do the Trove and
SocialCode businesses, the Company’s interest in Classified Ventures
and certain real estate assets, including the headquarters building in
downtown Washington, DC. Consequently, income from continuing
operations excludes these sold businesses, which have been reclass-
ified to discontinued operations, net of tax, for all periods presented.
The Company sold all the issued and outstanding equity securities
of the Publishing Subsidiaries for $250 million, subject to customary
adjustments for cash, debt and working capital at closing. In 2013,
a pre-tax gain of $157.5 million was recorded on the sale
($100.0 million after-tax gain).
In March 2013, the Company sold The Herald. Kaplan sold Kidum
in August 2012, EduNeering in April 2012 and Kaplan Learning
Technologies (KLT) in February 2012. In addition, the Company
divested its interest in Avenue100 Media Solutions in July 2012.
Consequently, income from continuing operations also excludes the
operating results and related net gains on disposition of these
businesses, which have been reclassified to discontinued
operations, net of tax, for all periods presented.
RESULTS OF OPERATIONS — 2012 COMPARED TO 2011
Net income attributable to common shares was $131.2 million
($17.39 per share) for the year ended December 31, 2012,
compared to $116.2 million ($14.70 per share) for the year
ended December 31, 2011. Net income includes $60.1 million in
income ($8.17 per share) and $34.2 million in losses ($4.33 per
share) from discontinued operations for 2012 and 2011 respec-
tively. Income from continuing operations attributable to common
shares was $71.1 million ($9.22 per share) for 2012, compared
to $150.5 million ($19.03 per share) for 2011. As a result of the
Company’s share repurchases, there were 6% fewer diluted
average shares outstanding in 2012.
Items included in the Company’s income from continuing operations
for 2012 are listed below:
• $111.6 million noncash goodwill and other long-lived assets
impairment charge at KTP (after-tax impact of $81.9 million, or
$11.33 per share);
• $45.2 million in severance and restructuring charges at the
education division (after-tax impact of $32.9 million, or $4.53
per share);
• an $18.0 million write-down of a marketable equity security
(after-tax impact of $11.2 million, or $1.54 per share);
• a $5.8 million gain on the sale of a cost method investment
(after-tax impact of $3.7 million, or $0.48 per share); and
• $3.1 million in non-operating unrealized foreign currency gains
(after-tax impact of $2.0 million, or $0.27 per share).
Items included in the Company’s income from continuing operations
for 2011 are listed below:
• $28.9 million in severance and restructuring charges at the
education division (after-tax impact of $17.9 million, or $2.26
per share);
• a $9.2 million impairment charge at one of the Company’s
affiliates (after-tax impact of $5.7 million, or $0.72 per share);
• a $53.8 million write-down of a marketable equity security (after-
tax impact of $34.6 million, or $4.34 per share); and
• $3.3 million in non-operating unrealized foreign currency losses
(after-tax impact of $2.1 million, or $0.26 per share).
Revenue for 2012 was $3,455.6 million, down 2% from
$3,526.0 million in 2011. Revenues were down at the education
division, partially offset by increases at the television broadcasting
and cable divisions.
2013 FORM 10-K 43