Washington Post 2003 Annual Report Download - page 54

FINANCIAL CONDITION: CAPITAL RESOURCES AND approximately $42.0 million to AT&T Broadband for cable systems
LIQUIDITY serving approximately 155,000 subscribers principally located in
Idaho. In a related transaction in January 2001, the Company
Acquisitions, Exchanges and Dispositions. During 2003,
completed the sale of a cable system serving about 15,000
Kaplan acquired 13 businesses in its higher education and profes-
subscribers in Greenwood, Indiana, for $61.9 million. The gain
sional divisions for a total of $166.8 million, financed through cash
resulting from the cable system sale and exchange transactions
and debt, with $36.7 million remaining to be paid. The largest of
increased net income by $196.5 million, or $20.69 per share. For
these was the March 2003 acquisition of the stock of Financial
income tax purposes, substantial components of the cable system
Training Company (FTC), for 55.3 million ($87.4 million).
sale and exchange transactions qualify as like-kind exchanges and
Headquartered in London, FTC provides test preparation services
therefore, a large portion of these transactions does not result in a
for accountants and financial services professionals, with 28 train-
current tax liability.
ing centers in the United Kingdom as well as operations in Asia. This
acquisition was financed through cash and debt, and $29.7 million Capital Expenditures. During 2003, the Company's capital
remains to be paid, primarily to employees of the business. In expenditures totaled $125.6 million. The Company's capital
November 2003, Kaplan acquired Dublin Business School, Ire- expenditures for 2003, 2002 and 2001 are disclosed in Note N
land's largest private undergraduate institution, serving approxi- to the Consolidated Financial Statements. The Company estimates
mately 5,000 students. Most of the purchase price for the 2003 that its capital expenditures will be in the range of $200 million to
Kaplan acquisitions was allocated to goodwill and other intangibles $225 million in 2004.
and property, plant and equipment.
Kaplan Stock Compensation Plan. As discussed above, in
In addition, the cable division acquired three additional systems in connection with the Company's September 2003 offer totaling
2003 for $2.8 million. Most of the purchase price for these $138 million for approximately 55 percent of the stock options
acquisitions was allocated to franchise agreements, an indefinite- outstanding at Kaplan, the Company paid out $118.7 million in the
lived intangible asset. fourth quarter of 2003.
On January 1, 2003, the Company sold its 50 percent interest in Investments in Marketable Equity Securities. At Decem-
the International Herald Tribune for $65 million and the Company ber 28, 2003, the fair value of the Company's investments in
recorded an after-tax non-operating gain of $32.3 million ($3.38 marketable equity securities was $248.0 million, which includes
per share) in the first quarter of 2003. $245.3 million in Berkshire Hathaway Inc. Class A and B common
stock and $2.7 million of various common stocks of publicly traded
During 2002, Kaplan acquired several businesses in its higher
companies with e-commerce business concentrations.
education and test preparation divisions for approximately
$42.2 million. In November 2002, the Company completed a At December 28, 2003, the gross unrealized gain related to the
cable system exchange transaction with Time Warner Cable which Company's Berkshire Hathaway Inc. stock investment totaled
consisted of the exchange by the Company of its cable system in $60.4 million; the gross unrealized gain on this investment was
Akron, Ohio serving about 15,500 subscribers, and $5.2 million to $29.9 million at December 29, 2002. The Company presently
Time Warner Cable, for cable systems serving about 20,300 intends to hold the Berkshire Hathaway stock long term.
subscribers in Kansas. The non-cash, non-operating gain resulting
Cost Method Investments. At December 28, 2003 and
from the exchange transaction increased net income by $16.7 mil-
December 29, 2002, the Company held minority investments in
lion, or $1.75 per share.
various non-public companies. The companies represented by these
During 2001, the Company completed acquisitions and exchanges investments have products or services that in most cases have
totaling $422.8 million (including estimated fair value of cable potential strategic relevance to the Company's operating units. The
systems surrendered). These principally included the purchase of Company records its investment in these companies at the lower of
Southern Maryland Newspapers, a division of Chesapeake Publish- cost or estimated fair value. During 2003 and 2002, the Company
ing Corporation, and a cable system exchange with AT&T Broad- invested $0.8 million and $0.3 million, respectively, in various cost
band. During 2001, the Company also acquired a provider of method investees. At December 28, 2003 and December 29,
CFA» exam preparation services and a company that provides pre- 2002, the carrying value of the Company's cost method invest-
certification training for real estate, insurance and securities ments totaled $9.6 million and $9.5 million, respectively.
professionals.
Common Stock Repurchases and Dividend Rate. During
Southern Maryland Newspapers publishes the Maryland Indepen- 2003, 2002 and 2001, the Company repurchased 910 shares,
dent in Charles County, Maryland; The Enterprise in St. Mary's 1,229 shares and 714 shares, respectively, of its Class B common
County, Maryland; and The Calvert Recorder in Calvert County, stock at a cost of $0.7 million, $0.8 million and $0.4 million. At
Maryland, with a combined total paid circulation of approximately December 28, 2003, the Company had authorization from the
50,000. Board of Directors to purchase up to 542,800 shares of Class B
common stock. The annual dividend rate for 2004 was increased to
The cable system exchange with AT&T Broadband was completed
$7.00 per share, from $5.80 per share in 2003, and from $5.60
in March 2001 and consisted of the exchange by the Company of
per share in 2002.
its cable systems in Modesto and Santa Rosa, California, and
34 THE WASHINGTON POST COMPANY