Washington Post 1999 Annual Report Download - page 15

ing realized gains and losses, the cost basis of securities sold is
determined by specific identification.
D. INVESTMENTS IN AFFILIATES
The Company’s investments in affiliates at January 2, 2000 and
January 3, 1999 include the following (in thousands):
1999 1998
BrassRing, Inc. ..................................$75,842 —
Bowater Mersey Paper Company............... 39,885 $ 40,121
International Herald Tribune.................... 19,890 23,026
Other ................................................ 5,052 5,383
$140,669 $ 68,530
The Company’s investments in affiliates consist of a 54 percent
non-controlling interest in BrassRing, Inc., a recently established
company which provides recruiting, career development and hiring
management services for employers and job candidates; a 49 percent
interest in the common stock of Bowater Mersey Paper Company
Limited, which owns and operates a newsprint mill in Nova Scotia;
a 50 percent common stock interest in The International Herald
Tribune Newspaper, published near Paris, France; and a 50 percent
common stock interest in the Los Angeles Times-Washington Post
News Service, Inc.
Operating costs and expenses of the Company include newsprint
supplied by Bowater, Inc. (parent to Bowater Mersey Paper Company
Limited), the cost of which was approximately $36,300,000 in 1999,
$39,800,000 in 1998 and $40,100,000 in 1997.
The following table summarizes the status and results of the
Company’s investments in affiliates (in thousands):
1999 1998
Beginning investment ............................$68,530 $154,791
BrassRing, Inc. ................................... 83,493 —
Additional investment............................ 8,734 15,187
Equity in losses ................................... (8,814) (5,140)
Dividends and distributions received............ (930) (1,587)
Foreign currency translation..................... (3,289) (1,134)
Sale of interest in Cowles ........................ —(93,587)
Other .............................................. (7,055) —
Ending investment ................................$140,669 $ 68,530
On September 29, 1999, the Company merged its career fair
and HireSystems businesses together and renamed the combined
operations BrassRing, Inc. On the same date, BrassRing issued
stock representing a 46 percent equity interest to two parties under
two separate transactions for cash and businesses with an aggre-
gate fair value of $87,000,000. As a result of this transaction, the
Company’s ownership of BrassRing was reduced to 54 percent and
the minority investors were granted certain participatory rights.
As such, the Company has prospectively de-consolidated BrassRing
and recorded its investment under the equity method of accounting.
The increase in the basis of the Company’s investment in BrassRing
resulting from this transaction of $34,571,000, net of taxes, has
been recorded as contributed capital.
E. INCOME TAXES
The provision for income taxes consists of the following (in thousands):
Current Deferred
1999
U.S. Federal.......................................$94,609 $ 30,346
Foreign ............................................. 1,306 (22)
State and local .................................... 23,697 (336)
$119,612 $ 29,988
1998
U.S. Federal.......................................$200,898 $ 20,446
Foreign ............................................. 1,233 255
State and local .................................... 21,682 6,286
$223,813 $ 26,987
1997
U.S. Federal.......................................$149,003 $ 2,210
Foreign ............................................. 915 (165)
State and local .................................... 28,493 1,044
$ 178,411 $ 3,089
The provision for income taxes exceeds the amount of income tax
determined by applying the U.S. Federal statutory rate of 35 percent
to income before taxes as a result of the following (in thousands):
1999 1998 1997
U.S. Federal statutory taxes...... $131,385 $233,821 $162,076
State and local taxes,
net of U.S. Federal
income tax benefit ............... 15,185 18,179 19,199
Amortization of goodwill
not deductible for
income tax purposes............. 4,178 5,644 2,492
IRS approved accounting
change............................. —(3,550) —
Other, net ........................... (1,148) (3,294) (2,267)
Provision for income taxes ....... $149,600 $250,800 $181,500
46 THE WASHINGTON POST COMPANY