Washington Post 2008 Annual Report Download - page 61

During 2006, Kaplan acquired 11 businesses in its test prep,
professional and higher education divisions for a total of $143.4
million. The largest of these included Tribeca Learning Limited, a
leading provider of education to the Australian financial services
sector; SpellRead, originator of SpellRead Phonological Auditory
Training, a reading intervention program for struggling students;
Aspect Education Limited, a major provider of English-language
instruction with schools located 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
intangible assets.
In the fourth quarter of 2006, the Company recorded a $43.2 million
pre-tax gain on the sale of BrassRing, in which the Company held a 49%
interest. Also in the fourth quarter of 2006, the Company recorded a
$1.5 million loss on the sale of PostNewsweek Tech Media, which was
part of the Company’s magazine publishing segment.
Capital Expenditures. During 2008, the Company’s capital
expenditures totaled $288.9 million. The Company’s capital
expenditures for 2008, 2007 and 2006 are disclosed in Note P
to the consolidated financial statements. The Company estimates
that its capital expenditures will be in the range of $275 million to
$300 million in 2009.
Investments in Marketable Equity Securities. At December 28,
2008, the fair value of the Company’s investments in marketable
equity securities was $333.3 million, which includes $218.8
million in Berkshire Hathaway Inc. Class A and B common stock
and $114.5 million in the common stock of a publicly traded
education company.
At December 28, 2008 and December 30, 2007, the gross
unrealized gain related to the Company’s Berkshire stock investment
totaled $72.4 million and $232.9 million, respectively. During
2008, the Company sold 420 and 5,975 shares of Berkshire
Class A and Class B common stock, respectively. Total proceeds
from the sale were $64.4 million and the net realized gains were
$26.0 million. As the Company sold some of its investment in
Berkshire stock in 2008, the Company changed its classification of
the Berkshire common stock investment to current from non-current in
the Company’s Consolidated Balance Sheets as of December 28,
2008. The gross unrealized gain related to the Company’s other
marketable equity security investments totaled $48.7 million and
$23.0 million at December 28, 2008 and December 30, 2007,
respectively.
Common Stock Repurchases and Dividend Rate. During 2008,
2007 and 2006, the Company repurchased 167,642 shares,
54,506 shares and 77,300 shares, respectively, of its Class B
common stock at a cost of $99.0 million, $42.0 million and $56.6
million, respectively. At December 28, 2008, the Company had
authorization from the Board of Directors to purchase up to
245,956 shares of Class B common stock. The annual dividend
rate for 2009 remains at $8.60 per share, consistent with 2008,
which was increased from $8.20 per share in 2007.
Liquidity. At December 28, 2008, the Company had $390.5 million
in cash and cash equivalents, compared to $321.5 million at
December 30, 2007. As of December 28, 2008 and December 30,
2007, the Company had money market investments of $15.7 million
and $5.1 million, respectively, that are classified as cash and cash
equivalents in the Company’s consolidated financial statements.
At December 28, 2008, the Company had $150.0 million in
commercial paper borrowings outstanding at an average interest rate
of 0.2% with various maturities through the first quarter of 2009. In
addition, the Company had outstanding $399.9 million of 5.5%
unsecured notes due February 15, 2009 and $3.9 million in other
debt. On January 30, 2009, the Company completed the issuance of
$400.0 million of 7.25% unsecured notes due February 1, 2019. The
interest is payable semi-annually on February 1 and August 1,
beginning August 1, 2009. The Company used the net proceeds from
the sale of the notes and other cash to repay the Company’s $400.0
million unsecured notes that matured on February 15, 2009.
During 2008, the Company’s borrowings, net of repayments,
increased by $63.7 million, and the Company’s cash and cash
equivalents increased by $69.0 million.
The Company’s $500 million commercial paper program continues
to serve as a significant source of short-term liquidity. The $500
million revolving credit facility that expires in August 2011 supports
the issuance of the Company’s short-term commercial paper and
provides for general corporate purposes. Despite the recent
disruption to the general credit markets, the Company continued to
have access and borrowed funds under its commercial paper
program and did not need to borrow funds under its revolving credit
facility. There is no assurance, however, that the cost or availability
of future borrowings under our commercial paper program in the
debt markets will not be impacted by the ongoing capital market
conditions.
The Company’s credit ratings were affirmed by the rating agencies
in October 2008 with a change in ratings outlook from stable to
negative. The Company’s current credit ratings are as follows:
Moody’s Standard & Poor’s
Long-term ........................... A1 A+
Short-term ........................... Prime-1 A-1
During 2008 and 2007, the Company had average borrowings
outstanding of approximately $492.3 million and $412.1 million,
respectively, at average annual interest rates of approximately 4.9%
and 5.5%, respectively. The Company incurred net interest costs on
its borrowings of $19.0 million and $12.7 million, respectively,
during 2008 and 2007.
At December 28, 2008 and December 30, 2007, the Company
had working capital of $257.3 million and a working capital
deficit of $18.5 million, respectively. The Company maintains
working capital levels consistent with its underlying business
requirements and consistently generates cash from operations in
excess of required interest or principal payments.
The Company’s net cash provided by operating activities, as reported
in the Company’s Consolidated Statements of Cash Flows, was
$535.8 million in 2008, compared to $581.2 million in 2007.
2008 FORM 10-K 49