Washington Post 2011 Annual Report Download - page 67

Robinson Terminal Warehouse Corporation recorded early
retirement program expense of $1.1 million in the third quarter of
2009. The costs of these early retirement programs are funded
mostly from the assets of the Company’s pension plans. Also as
previously reported, the Post closed a printing plant in July 2009
and consolidated its printing operations. The Post also completed
the consolidation of certain other operations in Washington, DC,
in the first quarter of 2010. In connection with these activities,
accelerated depreciation of $33.8 million was recorded in 2009,
along with $3.9 million in shutdown costs and lease losses. An
additional $3.1 million loss on an office lease was recorded by
the Company in the first quarter of 2010.
The newspaper publishing division reported an operating loss of
$9.8 million in 2010, compared to an operating loss of $163.5
million in 2009. Excluding the multiemployer pension plan charge,
early retirement program expense and accelerated depreciation,
operating results improved in 2010 due to expense reductions
in payroll, newsprint, depreciation, bad debt and agency fees,
and expense reductions at washingtonpost.com. Newsprint
expense decreased 16% in 2010 due to a decline in newsprint
consumption, offset by an increase in newsprint prices.
Television Broadcasting Division. Revenue for the television
broadcasting division increased 25% to $342.2 million in 2010,
from $272.7 million in 2009. Television broadcasting division
operating income for 2010 increased 72% to $121.3 million, from
$70.5 million in 2009.
The increase in revenue and operating income is due to improved
advertising demand in all markets and most product categories,
particularly automotive. The increased revenue and operating
income also includes $4.7 million in incremental winter Olympics-
related advertising at the Company’s NBC affiliates in the first
quarter of 2010, and a $32.2 million increase in political
advertising revenue for 2010. Operating margin at the television
broadcasting division was 35% in 2010 and 26% in 2009.
Competitive market position remained strong for the Company’s
television stations. KSAT in San Antonio, WPLG in Miami and WJXT in
Jacksonville ranked number one in the November 2010 ratings period,
Monday through Friday, sign-on to sign-off; WDIV in Detroit and
WKMG in Orlando ranked second; and KPRC in Houston ranked third.
Other Businesses. Other businesses includes the operating results of
Avenue100 Media Solutions, the Company’s digital marketing
business that sources leads for academic institutions and recruiting
organizations, and other small businesses. In the third quarter of
2010, a goodwill and other intangible assets impairment charge of
$27.5 million was recorded at Avenue100 Media Solutions.
Corporate Office. Corporate office includes the expenses of the
Company’s corporate office and the pension credit previously
reported in the magazine publishing division (refer to Discontinued
Operations discussion below). In the fourth quarter of 2010, certain
Kaplan operations moved to the former Newsweek headquarters
facility. In connection with this move, $11.5 million in lease
termination and other charges were recorded by the corporate office.
Equity in Losses of Affiliates. The Company holds a 49% interest in
Bowater Mersey Paper Company, a 16.5% interest in Classified
Ventures, LLC and interests in several other affiliates. The Company’s
equity in losses of affiliates for 2010 was $4.1 million, compared
to $29.4 million in losses for 2009. Results for 2009 included
$29.0 million in write-downs at two of the Company’s affiliate
investments; most of the loss related to an impairment charge
recorded on the Company’s interest in Bowater Mersey Paper
Company as a result of the challenging economic environment for
newsprint producers in 2009.
Other Non-Operating Income (Expense). The Company recorded
other non-operating income, net, of $7.5 million in 2010,
compared to other non-operating income, net, of $13.2 million in
2009. The 2010 non-operating income, net, included $6.7 million
in unrealized foreign currency gains and other items. The 2009
non-operating income, net, included $16.9 million in unrealized
foreign currency gains, offset by $3.8 million in impairment write-
downs on cost method investments and other items. As noted
above, a large part of the Company’s non-operating income
(expense) is from unrealized foreign currency gains or losses arising
from the translation of British pound and Australian dollar
denominated intercompany loans into U.S. dollars.
A summary of non-operating income (expense) for the years ended
January 2, 2011 and January 3, 2010, is as follows:
(in thousands) 2010 2009
Foreign currency gains, net .............. $6,705 $16,871
Impairment write-downs on cost method
investments ........................ —(3,800)
Other, net ........................... 810 126
Total ............................. $7,515 $13,197
Net Interest Expense. The Company incurred net interest expense of
$27.9 million in 2010, compared to $29.0 million in 2009. At
January 2, 2011, the Company had $399.7 million in borrowings
outstanding at an average interest rate of 7.2%; at January 3, 2010,
the Company had $399.3 million in borrowings outstanding at an
average interest rate of 7.2%.
Income Taxes. 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 the third quarter
of 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.
The effective tax rate for income from continuing operations in
2009 was 36.3%. This effective rate in 2009 was adversely
impacted by $7.4 million in valuation allowances provided against
deferred income tax benefits where realization is doubtful, and
$3.3 million from nondeductible goodwill in connection with
impairment charges recorded in 2009; these items were offset by
favorable adjustments recorded for a reduction in state income taxes
and for prior-year permanent U.S. Federal tax deductions.
2011 FORM 10-K 55