Washington Post 2002 Annual Report Download - page 36

units. Also included in 2000 corporate overhead results are The Company incurred net interest expense of $47.5 million in
costs associated with eScore.com. 2001, compared to $53.8 million in 2000. At December 30,
2001, the Company had $933.1 million in borrowings out-
Other expense is comprised primarily of accrued charges for standing at an average interest rate of 3.5 percent.
stock-based incentive compensation arising from a stock option
plan established for certain members of Kaplan’s management Income Taxes. The effective rate was 40.7 percent for 2001,
and amortization of certain intangibles. Under the stock-based compared to 40.6 percent for 2000. Excluding the effect of the
incentive plan, the amount of compensation expense varies cable gain transactions, the Company’s effective tax rate
directly with the estimated fair value of Kaplan’s common stock approximated 50.2 percent for 2001, with the increase in rate
and the number of options outstanding. For 2001 and 2000, due mostly to the decline in pre-tax income.
the Company recorded expense of $25.3 million and $6.0 mil-
FINANCIAL CONDITION: CAPITAL RESOURCES AND LIQUIDITY
lion, respectively, related to this plan. The increase in other
expense for 2001 is attributable to an increase in stock-based Acquisitions, Exchanges and Dispositions. During 2002,
incentive compensation, which is due to an increase in Kaplan’s Kaplan acquired several businesses in its higher education and
estimated value. test preparation divisions for approximately $42.2 million.
About $9.6 million remains to be paid on these acquisitions, of
Equity in Losses of Affiliates. The Company’s equity in losses of
which $2.2 million has been classified in current liabilities and
affiliates for 2001 was $68.7 million, compared to losses of
$7.4 million as long-term debt at December 29, 2002.
$36.5 million for 2000. The Company’s affiliate investments
consisted of a 39.7 percent common interest in BrassRing LLC, a In November 2002, the Company completed a cable system
50 percent interest in the International Herald Tribune, and a exchange transaction with Time Warner Cable which consisted
49 percent interest in Bowater Mersey Paper Company Limited. of the exchange by the Company of its cable system in Akron,
Ohio serving about 15,500 subscribers, and $5.2 million to
BrassRing accounted for approximately $75.1 million of the
Time Warner Cable, for cable systems serving about 20,300
2001 equity in losses of affiliates, compared to $37.0 million in
subscribers in Kansas. The non-cash, non-operating gain result-
2000. The increase in 2001 equity in affiliate losses from Brass-
ing from the exchange transaction increased net income by
Ring is largely due to a non-cash goodwill and other intangibles
$16.7 million, or $1.75 per share.
impairment charge that BrassRing recorded in 2001 primarily to
reduce the carrying value of its career fair business. As a sub- During 2001, the Company spent approximately $104.4 mil-
stantial portion of BrassRing’s losses arose from goodwill and lion on business acquisitions and exchanges, which principally
intangible amortization expense for both 2001 and 2000, the included the purchase of Southern Maryland Newspapers, a
$75.1 million and $37.0 million of equity in affiliate losses division of Chesapeake Publishing Corporation, and amounts
recorded by the Company in 2001 and 2000 did not require paid as part of a cable system exchange with AT&T Broadband.
significant funding by the Company. During 2001, the Company also acquired a provider of CFA˛
exam preparation services and a company that provides pre-
In December 2001, BrassRing, Inc. was restructured and the
certification training for real estate, insurance and securities
Company’s interest in BrassRing, Inc. was converted into an
professionals.
interest in the newly-formed BrassRing LLC. At December 30,
2001, the Company held a 39.7 percent interest in the Brass- Southern Maryland Newspapers publishes the Maryland Inde-
Ring LLC common equity and a $14.9 million Subordinated pendent in Charles County, Maryland; The Enterprise in St.
Convertible Promissory Note (‘‘Note’’) from BrassRing LLC. In Mary’s County, Maryland; and The Calvert Recorder in Calvert
February 2002, the Note was converted into Preferred Units, County, Maryland, with a combined total paid circulation of
which are convertible at the Company’s option to BrassRing LLC approximately 50,000.
common equity. Assuming the conversion of the Preferred Units,
The cable system exchange with AT&T Broadband was complet-
the Company’s common equity interest in BrassRing LLC would
ed in March 2001 and consisted of the exchange by the Com-
have been approximately 49.5 percent.
pany of its cable systems in Modesto and Santa Rosa, Califor-
Non-Operating Items. The Company recorded other non-oper- nia, and approximately $42.0 million to AT&T Broadband for
ating income of $283.7 million in 2001, compared to cable systems serving approximately 155,000 subscribers prin-
$19.8 million in non-operating expense for 2000. The 2001 cipally located in Idaho. In a related transaction in January
non-operating income mostly comprised gains arising from the 2001, the Company completed the sale of a cable system serv-
sale and exchange of certain cable systems completed in Janua- ing about 15,000 subscribers in Greenwood, Indiana, for
ry and March of 2001. Offsetting these gains were losses from $61.9 million. The gain resulting from the cable system sale and
the write-downs of a non-operating parcel of land and certain exchange transactions increased net income by $196.5 million,
investments to their estimated fair value. For income tax pur- or $20.69 per share. For income tax purposes, substantial com-
poses, substantial components of the cable system sale and ponents of the cable system sale and exchange transactions
exchange transactions qualify as like-kind exchanges, and there- qualify as like-kind exchanges and therefore, a large portion of
fore, a large portion of these transactions does not result in a these transactions does not result in a current tax liability.
current tax liability.
34 THE WASHINGTON POST COMPANY