Washington Post 2009 Annual Report Download - page 61

Income Taxes. The effective tax rate was 54.7% for 2008 and
40.0% for 2007. The higher effective tax rate for 2008 is due to
$31.1 million from nondeductible goodwill in connection with
impairment charges recorded in 2008 and $9.5 million in noncash
valuation allowances provided against deferred state and local
income tax benefits, net of U.S. Federal income taxes; these were
offset by a favorable $4.6 million provision to return adjustment
from 2007. As previously discussed, results for 2007 included an
additional $12.9 million in income tax expense related to the
Company’s Bowater Mersey affiliate and a $6.3 million income tax
benefit related to a change in certain state income tax laws enacted
in the second quarter of 2007. Both of these were noncash items in
2007 that impacted the Company’s long-term net deferred income
tax liabilities. Excluding the impact of these items, the effective tax
rate for 2008 was 35.1%, compared to 37.7% for 2007. The
decline is due to a reduction in state income taxes and a higher
proportion of earnings in jurisdictions outside the U.S. with lower
effective tax rates.
FINANCIAL CONDITION: CAPITAL RESOURCES AND LIQUIDITY
Acquisitions and Dispositions. The Company completed business
acquisitions totaling approximately $26.1 million in 2009,
$123.5 million in 2008 and $296.3 million in 2007. The assets
and liabilities of the companies acquired have been recorded at
their estimated fair values at the date of acquisition; the purchase
price allocations mostly comprised goodwill and other intangibles,
and property, plant and equipment. Any additional purchase
consideration related to a 2008 acquisition is expected to be
recorded as goodwill.
During 2009, the Company acquired three businesses for $22.9
million. Kaplan acquired one business in each of its International
and Test Preparation divisions, and the newspaper division
acquired a small local publication. The purchase price allocations
for these acquisitions mostly comprised goodwill and other
intangible assets. Also in 2009, the Company recorded $3.2
million of additional purchase consideration in connection with the
achievement of certain operating results by a company acquired in
2007 and allocated the additional purchase consideration to
goodwill.
In December 2009, the Company completed the sale of
Newsweek’s Budget Travel, which was part of the Company’s
magazine publishing segment, and recorded a gain.
During 2008, the Company acquired ten businesses within its
education and newspaper segments, for a total of $93.1 million,
financed with cash and $3.2 million in debt. Kaplan acquired
nine businesses in its International, Test Preparation and Ventures
divisions. These included Kaplan International’s acquisition of a
majority interest in Shanghai Kai Bo Education Management
Investment Co., Ltd. (“Kaplan China”), a provider of education in
China that offers preparation courses for entry to U.K. universities,
along with degree and professional training programs at campuses
throughout China. In 2007, Kaplan purchased a 40% interest in
Kaplan China. In the first quarter of 2008, Kaplan exercised an
option to increase its investment in Kaplan China to an 85%
majority interest. The transaction was completed in November
2008, and Kaplan China’s results from the transaction date forward
have been included in the Company’s consolidated financial
statements. The purchase price allocations for these acquisitions
mostly comprised goodwill and other intangible assets.
Also in 2008, the cable television division acquired subscribers
primarily in the Mississippi area for $15.3 million. The purchase
price allocations for these transactions mostly comprised intangible
assets and property, plant and equipment.
In connection with a 2008 acquisition, additional purchase
consideration of approximately $1.5 million was contingent on the
achievement of certain future operating results and was not included
in the Company’s purchase accounting as of December 28, 2008.
During 2008, the Company recorded $15.1 million of additional
purchase consideration in connection with the achievement of
certain operating results by a company acquired in 2007 and
allocated the additional purchase consideration to goodwill.
During 2007, the Company acquired 11 businesses within its
education, newspaper and other businesses and corporate office
segments for a total of $292.0 million, financed with cash and
$2.0 million in debt. Kaplan acquired 9 businesses in its
International, Test Preparation and Ventures divisions, of which the
largest two were Kaplan Ventures’ acquisition of EduNeering
Holdings, Inc., a Princeton, NJ-based provider of knowledge
management solutions for organizations in the pharmaceutical,
medical device, health care, energy and manufacturing sectors;
and Kaplan International’s acquisition of the education division of
Financial Services Institute of Australasia. In October 2007, the
Company acquired the outstanding stock of Avenue100 Media
Solutions (formerly CourseAdvisor, Inc.), a premier online lead
generation provider, headquartered in Wakefield, MA. Through its
search engine marketing expertise and proprietary technology
platform, Avenue100 generates student leads for the postsecondary
education market. Avenue100 operates as an independent
subsidiary of the Company. The purchase price allocations for these
acquisitions mostly comprised goodwill and other intangible assets.
Also in 2007, the cable television division acquired subscribers in
the Boise, ID, area for $4.3 million. Most of the purchase price for
this transaction was allocated to indefinite-lived intangible assets
and property, plant and equipment.
In connection with certain 2007 acquisitions, additional purchase
consideration of approximately $22 million was contingent on the
achievement of certain future operating results; such amounts were
largely funded in escrow in 2007 and were not included in the
Company’s purchase accounting as of December 30, 2007.
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 was amortized over the leaseback period. The television
broadcasting division purchased land and built a new Miami tele-
vision station facility that was completed in 2009.
Capital Expenditures. During 2009, the Company’s capital
expenditures totaled $257.8 million. The Company’s capital expen-
ditures for 2009, 2008 and 2007 are disclosed in Note Q
2009 FORM 10-K 47