Washington Post 2007 Annual Report Download - page 79

purchase price for the 2007 acquisitions has been allocated on
a preliminary basis to goodwill and other intangibles.
Also in 2007, the cable division acquired subscribers in the
Boise, ID area for $4.3 million. Most of the purchase price for
this transaction has been allocated to indefinite-lived intangibles
and property, plant and equipment.
In connection with the 2007 acquisitions, additional purchase
consideration of approximately $22 million is contingent on the
achievement of certain future operating results; such amounts
have largely been funded in escrow and are not included in
the Company’s purchase accounting as of December 30, 2007.
Any additional purchase consideration related to these
contingencies is expected to be recorded as goodwill.
In July 2007, the television broadcasting division entered into a
transaction to sell and lease back its current Miami television station
facility; a $9.5 million gain was recorded as a reduction to expense
in the third quarter. An additional $1.9 million deferred gain is being
amortized over the leaseback period. The television broadcasting
division has purchased land and is building a new Miami television
station facility that is expected to be completed in 2009.
During the second quarter of 2007, Kaplan purchased a 40%
interest in ACE Education, a provider of education in China that
provides preparation courses for entry to U.K. universities, along
with degree and professional training programs at campuses
throughout China. In February 2008, Kaplan exercised an option
to increase its investment in ACE Education to a majority interest.
During 2006, Kaplan acquired 11 businesses in its higher
education, professional and test prep divisions for a total of
$143.4 million, financed with cash. The largest of these
included Tribeca, a leading provider to the Australian
financial services sector; SpellRead, the originator of
SpellRead Phonological Auditory Training, a reading
intervention program for struggling students; Aspect
Education Limited, a major provider of English-language
instruction in the U.K., Ireland, Australia, New Zealand,
Canada and the U.S.; and PMBR, a nationwide provider of
test preparation for the Multistate Bar Exam. Most of the
purchase price for the 2006 acquisitions was allocated to
goodwill and other intangibles.
In December 2006, Cable ONE participated in the FCC’s
Advanced Wireless Service auction and purchased
approximately 20 MHz of spectrum, which can be used to
provide a variety of advanced wireless services, in areas that
covermorethan85%ofthehomespassedbythecable
division’s systems. Licenses for this spectrum have an initial
15-year term and 10-year renewal term and require proof that
they have provided substantial service by the end of the initial
license term.
In November 2006, the Company completed the sale of the
Company’s 49% interest in BrassRing. The pre-tax gain of
$43.2 million resulting from this transaction, which is
included in “Other income, net” in the Consolidated
Statements of Income, increased net income by
approximately $27.4 million and diluted earnings per share
by $2.86.
In December 2006, the Company completed the sale of the
PostNewsweek Tech Media division, which was part of the
Company’s magazine publishing segment, and recorded a
$1.5 million loss.
During 2005, Kaplan acquired 10 businesses in its higher
education, professional and test prep divisions for a total of
$140.1 million, financed with cash and $3.0 million in debt.
The largest of these included BISYS Education Services, a
provider of licensing education and compliance solutions for
financial service institutions and professionals; The Kidum
Group, the leading provider of test preparation services in
Israel; and Asia Pacific Management Institute, a private
education provider for undergraduate and postgraduate
students in Asia. In addition, on January 14, 2005, the
Company completed the acquisition of Slate, the online
magazine, which is included as part of the Company’s
newspaper publishing division. Most of the purchase price
for the 2005 acquisitions was allocated to goodwill and other
intangibles, and property, plant and equipment.
The results of operations for each of the businesses acquired are
included in the Consolidated Statements of Income from their
respective dates of acquisition. Pro forma results of operations for
2007, 2006 and 2005, assuming the acquisitions occurred at
the beginning of 2006 or 2005, are not materially different from
reported results of operations.
E. GOODWILL AND OTHER INTANGIBLE ASSETS
The Company accounts for goodwill and other intangible
assets in accordance with Statement of Financial Accounting
Standards No. 142 (SFAS 142), “Goodwill and Other
Intangible Assets.”
The Company’s intangible assets with an indefinite life are
principally from franchise agreements at its cable division, as the
Company expects its cable franchise agreements to provide the
Company with substantial benefit for a period that extends beyond
the foreseeable horizon, and the Company’s cable division
historically has obtained renewals and extensions of such
agreements for nominal costs and without any material
modifications to the agreements. Amortized intangible assets are
primarily mastheads, customer relationship intangibles, non-
compete agreements, trademarks and databases, with
amortization periods up to 10 years. Amortization expense was
$17.6 million in 2007 and is estimated to be approximately
$20.0 million in each of the next five years.
In the third quarter of 2006, as a result of a challenging advertising
environment, the Company completed a review of the carrying value
of goodwill at PostNewsweek Tech Media, which was part of the
magazine publishing division. As a result of this review, the
Company recorded an impairment charge of $9.9 million to
write down PostNewsweek Tech Media’s goodwill to its estimated
fair value utilizing a discounted cash flow model. The Company
subsequently sold PostNewsweek Tech Media in December 2006.
2007 FORM 10-K 63