Washington Post 2003 Annual Report Download - page 53

summary of operating results for 2002 compared to 2001 is as ny's affiliate investments at the end of 2002 consisted of a
follows (in thousands): 49.4 percent interest in BrassRing LLC, a 50 percent interest in the
International Herald Tribune, and a 49 percent interest in Bowater
2002 2001 % Change Mersey Paper Company Limited.
Revenue Non-Operating Items. The Company recorded other non-
Supplemental educationÏÏÏÏ $371,248 $328,039 13 operating income, net, of $28.9 million in 2002, compared to
Higher education ÏÏÏÏÏÏÏÏÏ 249,877 165,642 51 $283.7 million of non-operating income, net, for 2001. The 2002
$621,125 $493,681 26 non-operating income includes a pre-tax gain of $27.8 million on
the exchange of certain cable systems in the fourth quarter of 2002
Operating income
and a gain on the sale of marketable securities; these gains were
(loss)
offset by write-downs recorded on certain investments. The 2001
Supplemental educationÏÏÏÏ $ 54,103 $ 27,509 97
Higher education ÏÏÏÏÏÏÏÏÏ 27,569 9,149 201 non-operating income mostly comprised gains arising from the sale
Kaplan corporate overhead (26,143) (23,981) (9) and exchange of certain cable systems completed in the first quarter
OtherÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (35,017) (25,738) (36) of 2001, offset by write-downs recorded on certain investments
$ 20,512 $(13,061) Ì and a parcel of non-operating land to their estimated fair value.
Supplemental education includes Kaplan's test preparation, profes- A summary of non-operating income (expense) for the years
sional training and Score! businesses. The improvement in supple- ended December 29, 2002 and December 30, 2001, follows (in
mental education results for 2002 is due mostly to higher enroll- millions):
ments and to a lesser extent, higher prices at Kaplan's traditional 2002 2001
test preparation business (particularly the LSAT, MCAT and GRE
prep courses), as well as higher revenues and operating income Gain on sale or exchange of cable
from Kaplan's CFA» and real estate licensure preparation services. system businesses ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 27.8 $321.1
Score! also contributed to the improved results, with increased Gain (loss) on sales of marketable
enrollment, higher prices and strong cost controls. securitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 13.2 (0.3)
Impairment write-downs on cost method
Higher education includes all of Kaplan's post-secondary education and other investmentsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (21.2) (32.4)
businesses, including the fixed-facility colleges that were formerly Impairment write-down of non-operating
part of Quest Education, as well as online post-secondary and asset ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì(4.3)
career programs (various distance-learning businesses). Higher Other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9.1 (0.4)
education results are showing significant growth due to student TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 28.9 $283.7
enrollment increases, high student retention rates and several
The Company incurred net interest expense of $33.5 million in
acquisitions.
2002, compared to $47.5 million in 2001. At December 29,
Corporate overhead represents unallocated expenses of Kaplan, 2002, the Company had $664.8 million in borrowings outstanding
Inc.'s corporate office, including expenses associated with the at an average interest rate of 4.0 percent; at December 30, 2001,
design and development of educational software that, if successful- the Company had $933.1 million in borrowings outstanding.
ly completed, will benefit all of Kaplan's business units.
Income Taxes. The effective tax rate was 38.8 percent for
Other expense comprises primarily accrued charges for stock- 2002, compared to 40.7 percent for 2001. Excluding the effect of
based incentive compensation arising from a stock option plan the cable gain transactions, the Company's effective rate approxi-
established for certain members of Kaplan's management and mated 38.7 percent for 2002 and 50.2 percent for 2001. The
amortization of certain intangibles. Under the stock-based incentive effective tax rate for 2002 declined primarily because the Compa-
plan, the amount of compensation expense varies directly with the ny no longer has any permanent difference from goodwill amortiza-
estimated fair value of Kaplan's common stock and the number of tion not deductible for tax purposes as a result of the adoption of
options outstanding. For 2002 and 2001, the Company recorded SFAS 142. The Company's effective tax rate also has declined due
expense of $34.5 million and $25.3 million, respectively, related to to an increase in operating earnings and a decrease in the overall
this plan. The increase in other expense for 2002 is attributable to state tax rate.
an increase in stock-based incentive compensation, which is due to
Cumulative Effect of Change in Accounting Principle. In
an increase in Kaplan's estimated value.
2002, the Company completed its SFAS 142 transitional goodwill
Equity in Losses of Affiliates. The Company's equity in losses impairment test, resulting in an after-tax impairment loss of
of affiliates for 2002 was $19.3 million, compared to losses of $12.1 million, or $1.27 per share, related to PostNewsweek Tech
$68.7 million for 2001. The improvements were primarily due to Media (part of the magazine publishing segment). This loss is
better operating results at BrassRing LLC, which accounted for included in the Company's 2002 results as a cumulative effect of
approximately $13.9 million of 2002 equity in losses of affiliates, change in accounting principle.
compared to $75.1 million in equity losses for 2001. The Compa-
2003 FORM 10-K 33