Washington Post 2003 Annual Report Download - page 72

J. ACQUISITIONS, EXCHANGES AND DISPOSITIONS
addition, the Company may consult with and consider the input of
financial and other professionals in developing appropriate return The Company completed business acquisitions and exchanges total-
benchmarks. ing approximately $169.5 million in 2003, $90.5 million in 2002
and $422.8 million in 2001 (including estimated fair value of cable
In December of 2003, the Medicare Prescription Drug, Improve-
systems surrendered, assumed debt and related acquisition costs).
ment, and Modernization Act of 2003 (the Act) was enacted. The
All of these acquisitions were accounted for using the purchase
Act introduced a prescription drug benefit under Medicare, as well
method, and accordingly, the assets and liabilities of the companies
as a federal subsidy to sponsors of retiree health benefit plans that
acquired have been recorded at their estimated fair values at the
provide a benefit that meets certain criteria. The Company's other
date of acquisition. The purchase price allocations for these acquisi-
postretirement plans covering retirees currently provide certain pre-
tions mostly comprised goodwill and other intangibles and property,
scription benefits to eligible participants. In accordance with FASB
plant and equipment.
Staff Position No. 106-1, ""Accounting and Disclosure Requirements
Related to the Medicare Prescription Drug, Improvement, and Mod- During 2003, Kaplan acquired 13 businesses in its higher education
ernization Act of 2003,'' the effects of the Act on the Company's and professional divisions for a total of $166.8 million, financed
medical plans have not been included in the measurement of the through cash and debt, with $36.7 million remaining to be paid. The
Company's accumulated postretirement benefit obligation or net largest of these was the March 2003 acquisition of the stock of
periodic postretirement benefit cost for 2003. Financial Training Company (FTC), for 55.3 million ($87.4 mil-
lion). Headquartered in London, FTC provides test preparation
Contributions to multi-employer pension plans, which are generally
services for accountants and financial services professionals, with
based on hours worked, amounted to $2.0 million in 2003,
28 training centers in the United Kingdom as well as operations in
$2.0 million in 2002 and $1.8 million in 2001.
Asia. This acquisition was financed through cash and debt with
The Company recorded expense associated with retirement bene- $29.7 million remaining to be paid, primarily to employees of the
fits provided under incentive savings plans (primarily 401(k) business. In November 2003, Kaplan acquired Dublin Business
plans) of approximately $15.5 million in 2003, $15.4 million in School, Ireland's largest private undergraduate institution, serving
2002 and $14.5 million in 2001. approximately 5,000 students. Most of the purchase price for the
2003 Kaplan acquisitions was allocated to goodwill and other
I. LEASE AND OTHER COMMITMENTS intangibles and property, plant and equipment.
The Company leases real property under operating agreements. In addition, the cable division acquired three additional systems in
Many of the leases contain renewal options and escalation clauses 2003 for $2.8 million. Most of the purchase price for these
that require payments of additional rent to the extent of increases in acquisitions was allocated to franchise agreements, an indefinite-
the related operating costs. lived intangible asset.
At December 28, 2003, future minimum rental payments under On January 1, 2003, the Company sold its 50 percent interest in
noncancelable operating leases approximate the following (in the International Herald Tribune for $65 million and the Company
thousands): recorded an after-tax non-operating gain of $32.3 million ($3.38
2004ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 69,104 per share) in the first quarter of 2003.
2005ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 63,905 During 2002, Kaplan acquired several businesses in its higher
2006ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 57,945
education and test preparation divisions for approximately
2007ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 54,095
$42.2 million. In November 2002, the Company completed a
2008ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 45,603
ThereafterÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 135,826 cable system exchange transaction with Time Warner Cable which
$426,478 consisted of the exchange by the Company of its cable system in
Akron, Ohio serving about 15,500 subscribers, and $5.2 million to
Minimum payments have not been reduced by minimum sublease Time Warner Cable, for cable systems serving about 20,300
rentals of $4.4 million due in the future under noncancelable subscribers in Kansas. The Kansas systems acquired in the exchange
subleases. transaction were recorded at their estimated fair value, as deter-
mined based on an appraisal completed by an independent third-
Rent expense under operating leases included in operating costs
party firm. The non-cash, non-operating gain resulting from the
was approximately $76.8 million, $60.7 million and $58.3 million
exchange transaction increased net income by $16.7 million, or
in 2003, 2002 and 2001, respectively. Sublease income was
$1.75 per share.
approximately $0.6 million, $0.6 million and $1.5 million in 2003,
2002 and 2001, respectively. The Company's acquisitions in 2001 principally included the
purchase of Southern Maryland Newspapers, a division of Chesa-
The Company's broadcast subsidiaries are parties to certain agree-
peake Publishing Corporation, and a cable system exchange with
ments that commit them to purchase programming to be produced in
AT&T Broadband. During 2001, the Company also acquired a
future years. At December 28, 2003, such commitments amounted
provider of CFA» exam preparation services and a company that
to approximately $55.3 million. If such programs are not produced,
the Company's commitment would expire without obligation.
52 THE WASHINGTON POST COMPANY