Washington Post 2011 Annual Report Download - page 68

Discontinued Operations. In connection with the 2011 sales of
KCS and KVE and the 2010 sales of Newsweek and Education
Connection, the Company’s income from continuing operations for
2010 and 2009 excludes these businesses, which have been
reclassified to discontinued operations, net of tax.
Under the terms of the Newsweek sale agreement in 2010, The
Washington Post Company retained the pension assets and
liabilities, certain employee obligations arising prior to the sale and
other items. A loss of $11.5 million from the Newsweek sale is
included in discontinued operations. Newsweek employees were
participants in The Washington Post Company Retirement Plan, and
Newsweek was historically allocated a net pension credit. Since
this net pension credit will be included in income from continuing
operations in the future, it has been excluded from the
reclassification of Newsweek results to discontinued operations. The
pension cost arising from early retirement programs at Newsweek,
however, is included in discontinued operations.
FINANCIAL CONDITION: CAPITAL RESOURCES AND LIQUIDITY
Acquisitions and Dispositions. The Company completed business
acquisitions totaling approximately $136.5 million, $14.1 million
and $26.1 million, in 2011, 2010 and 2009, respectively. The
assets and liabilities of the companies acquired have been
recorded at their estimated fair values at the date of acquisition.
During 2011, the Company completed five business acquisitions
totaling approximately $136.5 million, including assumed debt of $5.5
million and other assumed liabilities. Kaplan acquired three businesses
in its Kaplan International division, one business in its KHE division, and
one business in its Kaplan Ventures division. These included the May
2011 acquisitions of Franklyn Scholar and Carrick Education Group,
leading national providers of vocational training and higher education
in Australia, and the June 2011 acquisition of Structuralia, a provider of
e-learning for the engineering and infrastructure sector in Spain. The
purchase price allocations mostly comprised goodwill, other intangible
assets, and property, plant and equipment.
Kaplan completed the sales of KVE in July 2011 and KCS in October
2011, which were part of Kaplan Ventures and KHE, respectively. In
April 2010, Kaplan completed the sale of Education Connection,
which was part of Kaplan Ventures. Consequently, the Company’s
income from continuing operations excludes results from these
businesses, which have been reclassified to discontinued operations.
During 2010, the Company acquired six businesses for $14.1
million. Kaplan acquired two small businesses in its KTP division,
one small business in its Ventures division and one small business in
its International division. The Company made two small acquisitions
in its cable television and other businesses divisions. The purchase
price allocations for these acquisitions mostly comprised goodwill
and other intangible assets.
In September 2010, the Company completed the sale of Newsweek.
In December 2009, the Company completed the sale of Newsweek’s
Budget Travel. Consequently, the Company’s income from continuing
operations excludes magazine publishing division results, which have
been reclassified to discontinued operations.
During 2009, the Company acquired three businesses for $26.1
million. Kaplan acquired one business in each of its International
and KTP divisions, and the newspaper publishing division acquired
a small 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.
Capital expenditures. During 2011, the Company’s capital
expenditures totaled $216.4 million. The Company’s capital
expenditures for businesses included in continuing operations for 2011,
2010 and 2009 are disclosed in Note 18 to the Consolidated
Financial Statements. The Company estimates that its capital expenditures
will be in the range of $220 million to $245 million in 2012.
Investments in Marketable Equity Securities. At December 31,
2011, the fair value of the Company’s investments in marketable
equity securities was $303.2 million, which includes $286.4
million in Berkshire Hathaway Inc. Class A and B common stock
and $16.8 million in the common stock of Corinthian Colleges,
Inc., a publicly traded education company.
At December 31, 2011, and January 2, 2011, the gross unrealized
gain related to the Company’s Berkshire stock investment totaled $129.1
million and $143.4 million, respectively. During 2009, the Company
invested $10.8 million in the Class B common stock of Berkshire.
At the end of the first quarter of 2011, the Company’s investment in
Corinthian Colleges, Inc. had been in an unrealized loss position for
over six months. The Company evaluated this investment for other-than-
temporary impairment based on various factors, including the duration
and severity of the unrealized loss, the reason for the decline in value
and the potential recovery period, and the Company’s ability and
intent to hold the investment. In the first quarter of 2011, the Company
concluded the loss was other-than-temporary and recorded a $30.7
million write-down on the investment. The investment continued to
decline, and in the third quarter of 2011, the Company recorded an
additional $23.1 million write-down on the investment. The
Company’s investment in Corinthian Colleges, Inc. accounted for
$16.8 million of the total fair value of the Company’s investments in
marketable equity securities at December 31, 2011.
Common Stock Repurchases and Dividend Rate. During 2011,
2010 and 2009, the Company purchased a total of 644,948,
1,057,940 and 145,040 shares, respectively, of its Class B
common stock at a cost of approximately $248.1 million, $404.8
million and $61.0 million, respectively. In September 2011, the
Company’s Board of Directors authorized the Company to acquire
up to 750,000 shares of its Class B common stock. The Company
did not announce a ceiling price or a time limit for the purchases.
The authorization included 43,573 shares that remained under the
previous authorization. At December 31, 2011, the Company had
remaining authorization from the Board of Directors to purchase up
to 493,474 shares of Class B common stock. The annual dividend
rate for 2012 was increased to $9.80 per share, from $9.40 per
share in 2011 and $9.00 per share in 2010.
Liquidity. During 2011, the Company’s borrowings, net of
repayments, increased by $165.6 million and the Company’s cash
and cash equivalents decreased by $56.6 million.
56 THE WASHINGTON POST COMPANY