Washington Post 2011 Annual Report Download - page 64

items. The 2010 non-operating income, net, included $6.7 million
in unrealized foreign currency gains.
A summary of non-operating (expense) income for the years ended
December 31, 2011 and January 2, 2011, is as follows:
(in thousands) 2011 2010
Impairment write-down of a marketable equity
security ........................... $(53,793) $—
Foreign currency (losses) gains, net ........ (3,263) 6,705
Gain on sale of a cost method investment . . . 4,031 —
Impairment write-down on a cost method
investment ......................... (3,612) —
Other, net ........................... 1,437 810
Total ............................. $(55,200) $7,515
Net Interest Expense. The Company incurred net interest expense
of $29.1 million in 2011, compared to $27.9 million in 2010. At
December 31, 2011, the Company had $565.2 million in
borrowings outstanding at an average interest rate of 5.7%; at
January 2, 2011, the Company had $399.7 million in borrowings
outstanding at an average interest rate of 7.2%.
Income Taxes. Theeffectivetaxrateforincomefromcontinuing
operations in 2011 was 44.2%. This effective tax rate was adversely
impacted by $17.8 million in valuation allowances provided against
deferred income tax benefits where realization is doubtful, and $4.5
million from nondeductible goodwill in connection with an impairment
charge recorded in 2011. The effective tax rate benefited from lower
rates at jurisdictions outside the United States.
The effective tax rate for income from continuing operations in
2010 was 40.5%. This effective tax rate was adversely impacted
by $16.8 million in valuation allowances provided against deferred
income tax benefits where realization is doubtful, and $9.1 million
from nondeductible goodwill in connection with an impairment
charge recorded in 2010; these items were offset by permanent
U.S. Federal tax benefit items and tax benefits from lower rates at
jurisdictions outside the United States.
Discontinued Operations. On September 30, 2010, the Company
completed the sale of Newsweek. In addition, Kaplan sold KCS in
October 2011, KVE in July 2011 and Education Connection in
April 2010. Consequently, the Company’s income from continuing
operations excludes these businesses, which have been reclassified
to discontinued operations, net of tax.
RESULTS OF OPERATIONS — 2010 COMPARED TO 2009
Net income attributable to common shares was $277.2 million
($31.04 per share) for the fiscal year ended January 2, 2011, up
from net income attributable to common shares of $91.8 million
($9.78 per share) for the fiscal year ended January 3, 2010. Net
income includes $42.1 million ($4.71 per share) and $65.0
million ($6.92 per share) in losses from discontinued operations for
fiscal year 2010 and 2009, respectively. Income from continuing
operations attributable to common shares was $319.3 million
($35.75 per share) for fiscal year 2010, compared to $156.9
million ($16.70 per share) for fiscal year 2009. As a result of the
Company’s share repurchases, there were fewer diluted average
shares outstanding in 2010.
Items included in the Company’s income from continuing operations
for 2010:
• a $20.4 million charge recorded at the Post in connection with
the withdrawal from a multiemployer pension plan (after-tax
impact of $12.7 million, or $1.38 per share);
• $39.0 million in severance and restructuring charges (after-tax
impact of $24.2 million, or $2.83 per share);
• a $27.5 million goodwill and other intangible assets impairment
charge at the Company’s online lead generation business,
included in other businesses (after-tax impact of $26.3 million, or
$2.96 per share); and
• $6.7 million in non-operating unrealized foreign currency gains
(after-tax impact of $4.2 million, or $0.47 per share).
Items included in the Company’s income from continuing operations
for 2009:
• $57.9 million in early retirement program expense at the
newspaper publishing division (after-tax impact of $35.9 million,
or $3.82 per share);
• $33.2 million in restructuring charges at Kaplan (after-tax impact
of $20.6 million, or $2.19 per share);
• $33.8 million in accelerated depreciation at the Post (after-tax
impact of $21.0 million, or $2.23 per share);
• an $8.5 million goodwill impairment charge related to Kaplan
Ventures (after-tax impact of $8.5 million, or $0.90 per share);
• a $29.0 million decline in equity in earnings (losses) of affiliates
associated with impairment charges at two of the Company’s
affiliates (after-tax impact of $18.8 million, or $2.00 per share);
and
• $16.9 million in non-operating unrealized foreign currency gains
(after-tax impact of $10.3 million, or $1.10 per share).
Revenue for 2010 was $4,684.0 million, up 8% compared to
revenue of $4,326.0 million in 2009. The increase is due to strong
revenue growth at the education and television broadcasting
divisions, and increased revenue at the cable television division. In
2010, education revenue increased 11%, advertising revenue
increased 7%, circulation and subscriber revenue increased 1% and
other revenue increased 4%. Revenue growth at Kaplan accounted
for the increase in education revenue. The increase in advertising
revenue is due to increased revenues at the television broadcasting
division and increases in newspaper publishing online revenue,
offset by declines in print advertising at The Washington Post.
The increase in circulation and subscriber revenue is due to a 1%
increase in subscriber revenue at the cable television division and a
4% increase in circulation revenue at the Post.
Operating costs and expenses for the year increased 2% to
$4,121.4 million in 2010, from $4,035.6 million in 2009. The
increase is due to higher expenses at the education, cable television
and television broadcasting divisions, offset by reduced costs at the
newspaper publishing division.
Operating income for 2010 increased to $562.7 million, from
$290.4 million in 2009, due to improved results at the education,
newspaper publishing and television broadcasting divisions.
52 THE WASHINGTON POST COMPANY