Washington Post 2001 Annual Report Download - page 18

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THE WASHINGTON POST COMPANY
On September 29, 1999, the Company merged its career fair and
HireSystems businesses together and renamed the combined oper-
ations 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 aggregate 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 minor-
ity investors were granted certain participatory rights. As such, the
Company de-consolidated BrassRing on September 29, 1999 and
recorded its investment under the equity method of accounting. The
1999 increase in the basis of the Company’s investment in
BrassRing resulting from this transaction of $34,571,000, net of
taxes, was recorded as contributed capital.
During 2000, BrassRing issued stock to various parties in connec-
tion with its acquisitions of various career fair and recruiting serv-
ices companies. The effect of these transactions reduced the
Company’s investment interest in BrassRing to 42 percent, from 54
percent, at January 2, 2000, and increased the Company’s invest-
ment basis in BrassRing by $13,332,000, net of taxes. The increase
in investment basis was recorded as contributed capital.
BrassRing accounted for approximately $75.1 million of the 2001
equity in losses of affiliates compared to $37.0 million in 2000. The
increase in 2001 equity in affiliate losses from BrassRing is largely
due to a one-time non-cash goodwill and other intangibles impair-
ment charge that BrassRing recorded in 2001 primarily to reduce the
carrying value of its career fair business. As a substantial portion of
BrassRing’s losses arose from goodwill and intangible amortization
expense for both 2001 and 2000, the $75.1 million and $37.0 mil-
lion of equity in affiliate losses recorded by the Company in 2001 and
2000 did not require significant funding by the Company.
In December 2001, BrassRing, Inc. was restructured, and the
Company’s interest in BrassRing, Inc. was converted into an inter-
est in the newly-formed BrassRing LLC. At December 30, 2001, the
Company held a 39.7 percent interest in the BrassRing LLC com-
mon equity and a $14.9 million Subordinated Convertible Promissory
Note from BrassRing LLC.
Cost Method Investments. The Company’s cost method investments
consist of minority investments in non-public companies where the
Company does not have significant influence over the investees’
operating and management decisions. Most of the companies rep-
resented by these cost method investments have concentrations in
Internet-related business activities. At December 30, 2001 and
December 31, 2000, the carrying value of the Company’s cost
method investments was $29,595,000 and $48,617,000, respec-
tively. Cost method investments are included in “Deferred Charges
and Other Assets” in the Consolidated Balance Sheets.
During 2001, 2000, and 1999, the Company invested $11,675,000,
$42,459,000 and $33,549,000, respectively, in companies constitut-
ing cost method investments and recorded charges of $32,415,000,
$23,097,000, and $13,555,000, respectively, to write-down cost
method investments to estimated fair value. Charges recorded to write-
down cost method investments are included in “Other income
(expense), net” in the Consolidated Statements of Income.
During 2001 and 2000, proceeds from sales of cost method invest-
ments were $451,000 and $7,070,000, and gross realized (losses)
gains on such sales were ($157,000) and $6,570,000, respectively.
There were no sales of cost method investments in 1999. Gross real-
ized gains or losses upon the sale of cost method investments are
included in “Other income (expense), net” in the Consolidated
Statements of Income.
DINCOME TAXES
The provision for income taxes consists of the following:
(in thousands) Current Deferred
2001
U.S. Federal............................... $ 48,253 $ 86,384
Foreign .................................... 1,270 714
State and local ............................ 11,075 10,204
$ 60,598 $ 97,302
2000
U.S. Federal............................... $ 77,517 $ 4,854
Foreign .................................... 1,033 75
State and local ............................ 22,593 (12,672)
$101,143 $ (7,743)
1999
U.S. Federal............................... $ 94,609 $ 30,346
Foreign .................................... 1,306 (22)
State and local ............................ 23,697 (336)
$119,612 $ 29,988