Washington Post 1999 Annual Report Download - page 6

Equity in (Losses) Earnings of Affiliates. The Company’s equity in
losses of affiliates in 1998 was $5.1 million, compared with income
of $10.0 million in 1997. The $15.1 million decline in affiliate
earnings resulted from increased spending at new media joint
ventures (principally Classified Ventures and CareerPath.com) and
the absence of affiliate earnings that were provided in the prior
year from the Company’s investment interest in the Bear Island
Partnerships (sold in November 1997) and Cowles Media Company
(disposed of in March 1998).
Non-Operating Items. In 1998, the Company incurred net interest
expense of $10.4 million, compared to $2.2 million of net interest
income in 1997. The average short-term borrowings outstanding in
1998 was $231.8 million, as compared to $10.7 million in average
borrowings outstanding in 1997.
Other income, net, in 1998 was $304.7 million, compared to
$69.5 million in 1997. For 1998, other income, net, includes
$309.7 million arising from the disposition of the Company’s 28
percent interest in Cowles Media Company, the sale of 14 small
cable systems and the disposition of the Company’s interest in
Junglee, a facilitator of Internet commerce. For 1997, other income,
net, includes $74.8 million in gains arising from the sale of the
Bear Island partnerships and the sale of the assets of the Company’s
PASS regional cable sports network.
Income Taxes. The effective tax rate in 1998 was 37.5 percent, as
compared to 39 percent in 1997. The decrease in the effective
income tax rate is principally the result of the disposition of Cowles
Media Company being subject to state income tax in jurisdictions
with lower tax rates, and to a lesser extent, from a favorable IRS-
approved income tax change in the fourth quarter of 1998.
FINANCIAL CONDITION: CAPITAL RESOURCES AND LIQUIDITY
Acquisitions. During 1999, the Company acquired various businesses
for about $90.5 million, which included, among others, $18.3 mil-
lion for cable systems serving approximately 10,300 subscribers
and $61.8 million for various educational and training companies to
expand Kaplan, Inc.’s business offerings.
During 1998, the Company acquired various businesses for about
$320.6 million, which included, among others, $209.0 million for
cable systems serving approximately 115,400 subscribers and $100.4
million for educational, training and career services companies.
In 1997, the Company spent $118.9 million on business acqui-
sitions. These acquisitions included, among others, $23.9 million
for cable systems serving approximately 16,000 subscribers and
$84.5 million for the publishing rights to two computer services
industry periodicals and the rights to conduct two computer industry
trade shows.
On February 10, 2000, BrassRing, Inc. announced an agree-
ment to acquire from Central Newspapers, Inc. the Westech Group
of Companies in exchange for BrassRing, Inc. stock representing a
23 percent equity ownership in BrassRing, Inc. Westech provides
Internet recruitment services and high-tech career fairs. Upon the
closing of this transaction, the Company’s ownership in BrassRing,
Inc. will decline from 54 percent to 42 percent.
Exchanges. During 1997, the Company exchanged the assets of
certain cable systems with Tele-Communications, Inc., resulting in
an increase of about 21,000 subscribers for the Company. The
Company also completed, in 1997, a transaction with Meredith
Corporation whereby the Company exchanged the assets of WFSB-
TV, the CBS affiliate in Hartford, Connecticut, and $60.0 million
in cash for the assets of WCPX-TV (renamed WKMG), the CBS
affiliate in Orlando, Florida.
Dispositions
In March 1998, the Company received $330.5 million in cash and
730,525 shares of McClatchy Newspapers, Inc. Class A common
stock as a result of the merger of Cowles and McClatchy. The market
value of the McClatchy stock received was $21.6 million, based upon
publicly quoted market prices. During the last three quarters of
1998, the Company sold 464,700 shares of the McClatchy stock (64
percent of the total shares received) for $15.4 million.
In July 1998, the Company completed the sale of 14 small cable
systems in Texas, Missouri and Kansas serving approximately 29,000
subscribers for $41.9 million. In August 1998, the Company received
202,961 shares of Amazon.com common stock as a result of the
merger of Amazon.com and Junglee Corporation. At the time of the
merger transaction, the Company owned a minority investment inter-
est in Junglee Corporation, a facilitator of Internet commerce. The
market value of the Amazon.com stock received was $25.2 million.
In November 1997, the Company sold its 35 percent interest
in Bear Island Paper Company, L.P., and Bear Island Timberlands
Company, L.P., for approximately $92.8 million. In September
1997, the Company sold the assets of its PASS regional cable sports
network for $27.4 million.
Capital Expenditures. During 1999, the Company’s capital expendi-
tures totaled $130.0 million, about half of which related to plant
upgrades at the Company’s cable subsidiary. The Company estimates
that in 2000 it will spend approximately $145.0 million for prop-
erty and equipment, primarily for various projects at the cable,
broadcasting and newspaper divisions.
Investments in Marketable Equity Securities. At January 2, 2000, the
fair value of the Company’s investments in marketable equity securities
was $203.0 million, which includes $165.8 million of Berkshire
37THE WASHINGTON POST COMPANY