Washington Post 2004 Annual Report Download - page 47

Corporate overhead represents unallocated expenses of Kaplan, The Company incurred net interest expense of $26.4 million in
Inc.'s corporate office, including a $6.5 million charge in the fourth 2004, compared to $26.9 million in 2003. At January 2, 2005,
quarter of 2003 for the Kaplan Educational Foundation. the Company had $484.1 million in borrowings outstanding at an
average interest rate of 5.1%; at December 28, 2003, the
Other expense comprises accrued charges for stock-based incen- Company had $631.1 million in borrowings outstanding.
tive compensation arising from a stock option plan established for
certain members of Kaplan's management (the general provisions Income Taxes. The effective tax rate was 38.7% for 2004,
of which are discussed in Note G to the Consolidated Financial compared to 37.0% for 2003. The 2003 effective tax rate
Statements) and amortization of certain intangibles. Under the benefited from the 35.1% effective tax rate applicable to the one-
stock-based incentive plan, the amount of compensation expense time gain arising from the sale of the Company's interest in the
varies directly with the estimated fair value of Kaplan's common International Herald Tribune. The Company expects an effective tax
stock and the number of options outstanding. The Company record- rate in 2005 of approximately 38.7%.
ed expense of $32.5 million and $119.1 million for 2004 and
RESULTS OF OPERATIONS Ì 2003 COMPARED TO 2002
2003, respectively, related to this plan. The stock compensation
expense for 2003 included the impact of the third quarter 2003 Net income was $241.1 million ($25.12 per share) for the fiscal
buyout offer for approximately 55% of the stock options outstand- year ended December 28, 2003, compared with net income of
ing at Kaplan. The stock compensation expense in 2004 is based $204.3 million ($21.34 per share) for the fiscal year ended
on the remaining Kaplan stock options held by a small number of December 29, 2002. The Company's 2003 results include a non-
Kaplan executives after the 2003 buyout. operating gain from the sale of the Company's 50% interest in the
International Herald Tribune (after-tax impact of $32.3 million, or
Corporate Office. The corporate office operating expenses
$3.38 per share), an operating gain from the sale of land at The
increased to $32.8 million in 2004, from $30.3 million in 2003.
Washington Post newspaper (after-tax impact of $25.5 million, or
The increase is primarily due to the corporate office's share of
$2.66 per share), early retirement program charges at The Wash-
increased compliance costs in connection with Section 404 of the
ington Post newspaper (after-tax impact of $20.8 million, or
SarbanesÓOxley Act of 2002.
$2.18 per share), Kaplan stock compensation expense for the
Equity in Losses of Affiliates. The Company's equity in losses 10% premium associated with the purchase of certain outstanding
of affiliates for 2004 was $2.3 million, compared to losses of stock options announced in the third quarter (after-tax impact of
$9.8 million for 2003. The Company's affiliate investments at the $6.4 million, or $0.67 per share), and a charge in connection with
end of 2004 consisted of a 49% interest in BrassRing LLC and a the establishment of the Kaplan Educational Foundation (after-tax
49% interest in Bowater Mersey Paper Company Limited. The impact of $3.9 million, or $0.41 per share). The Company's 2002
reduction in affiliate losses for 2004 is attributable to improved results included a net non-operating gain from the exchange of
operating results at both BrassRing and Bowater. certain cable systems (after-tax impact of $16.7 million, or
$1.75 per share), a transitional goodwill impairment loss (after-
On January 1, 2003, the Company sold its 50% interest in the
tax impact of $12.1 million, or $1.27 per share), charges from
International Herald Tribune for $65 million and recorded an after-
early retirement programs (after-tax impact of $11.3 million, or
tax non-operating gain of $32.3 million in the first quarter of 2003.
$1.18 per share), and a net non-operating loss from the write-
Non-Operating Items. The Company recorded other non- down of certain of the Company's investments (after-tax impact of
operating income, net, of $8.1 million in 2004, compared to $2.3 million, or $0.24 per share).
$55.4 million in 2003. The 2004 non-operating income, net, is
Results for 2003 include $119.1 million in stock compensation
primarily from foreign currency gains. The 2003 non-operating
expense at the Kaplan education division, which was significantly
income, net, mostly comprises a $49.8 million pre-tax gain from the
higher than the $34.5 million in Kaplan stock compensation expense
sale of the Company's 50% interest in the International Herald
in 2002. In September 2003, the Company announced an offer
Tribune.
totaling $138 million for approximately 55% of the stock options
A summary of non-operating income (expense) for the years outstanding at Kaplan. The Company's offer included a 10% premi-
ended January 2, 2005 and December 28, 2003, follows (in um over the then current valuation price. The Company paid out
millions): $118.7 million in the fourth quarter of 2003, with the remainder of
the payouts to be made from 2004 through 2008. A small number
2004 2003
of key Kaplan executives will continue to hold the remaining 45% of
outstanding Kaplan stock options, with roughly half of the remaining
Foreign currency gains, netÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 5.5 $ 4.2
Gain on sale of interest in IHT ÏÏÏÏÏÏÏÏÏÏÏ Ì49.8 options expiring in 2007 and half expiring in 2011.
Impairment write-downs on cost method Revenue for 2003 was $2,838.9 million, up 10% compared to
and other investmentsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (0.7) (1.3)
revenue of $2,584.2 million in 2002. The increase in revenue is
Gain on exchange of cable system
due mostly to significant revenue growth at the education division,
businessÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 0.5 Ì
along with increases at the Company's cable television, newspaper
Other gains ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2.8 2.7
TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 8.1 $55.4 publishing, and magazine publishing divisions; revenues were down
2004 FORM 10-K 31