Washington Post 2011 Annual Report Download - page 90

statements will ultimately be recognized in full. The Company has
taken reasonable efforts to address uncertain tax positions, and has
determined that there are no material transactions or material tax
positions taken by the Company that would fail to meet the more-
likely-than-not threshold for recognizing transactions or tax positions
in the financial statements. Accordingly, the Company has not
recorded a reserve for uncertain tax positions in the financial
statements, and the Company does not expect any significant tax
increase or decrease to occur within the next 12 months with
respect to any transactions or tax positions taken and reflected in
the financial statements. In making these determinations, the
Company presumes that taxing authorities pursuing examinations of
the Company’s compliance with tax law filing requirements will
have full knowledge of all relevant information, and, if necessary,
the Company will pursue resolution of disputed tax positions by
appeals or litigation.
10. DEBT
The Company’s borrowings consist of the following:
(in thousands) December 31, 2011 January 2, 2011
7.25% unsecured notes due
February 1, 2019 ............. $ 397,065 $396,650
Commercial paper borrowings ...... 109,671 —
AUD 50M borrowing ............. 51,012 —
Other indebtedness .............. 7,464 3,000
Total ......................... 565,212 399,650
Less: current portion .............. (112,983) (3,000)
Total long-term debt .............. $ 452,229 $396,650
At December 31, 2011, the average interest rate on the Company’s
outstanding commercial paper borrowing was 0.5%. The Company
did not borrow funds under its commercial paper program in 2010.
The Company’s other indebtedness at December 31, 2011 is at
interest rates of 0% to 6% and matures from 2012 to 2016.
In January 2009, the Company issued $400 million in unsecured
ten-year fixed-rate notes due February 1, 2019 (the Notes). The Notes
have a coupon rate of 7.25% per annum, payable semiannually on
February 1 and August 1. Under the terms of the Notes, unless the
Company has exercised its right to redeem the Notes, the Company is
required to offer to repurchase the Notes in cash at 101% of the
principal amount, plus accrued and unpaid interest, upon the
occurrence of both a Change of Control and Below Investment Grade
Rating Events as described in the Prospectus Supplement of
January 27, 2009.
On June 17, 2011, the Company terminated its U.S. $500 million
five-year revolving credit agreement, dated as of August 8, 2006,
among the Company, the lenders party thereto and Citibank, N.A.
(the 2006 Credit Agreement), in connection with the entrance into a
new revolving credit facility. No borrowings were outstanding under
the 2006 Credit Agreement at the time of termination. On June 17,
2011, the Company entered into a credit agreement (the Credit
Agreement) providing for a new U.S. $450 million, AUD 50 million
four-year revolving credit facility (the Facility), with each of the
lenders party thereto, JPMorgan Chase Bank, N.A., as
Administrative Agent (JP Morgan), and J.P. Morgan Australia
Limited, as Australian Sub-Agent. The Facility consists of two
tranches: (a) U.S. $450 million and (b) AUD 50 million (subject, at
the Company’s option, to conversion of the unused Australian dollar
commitments into U.S. dollar commitments at a specified exchange
rate). This agreement supports the issuance of the Company’s
commercial paper, but the Company may also draw on the facility
for general corporate purposes. The Credit Agreement provides for
an option to increase the total U.S. dollar commitments up to an
aggregate amount of U.S. $700 million. The Facility replaced the
Company’s 2006 Credit Agreement. The Company is required to
pay a facility fee on a quarterly basis, based on the Company’s
long-term debt ratings, of between 0.08% and 0.20% of the
amount of the Facility. Any borrowings are made on an unsecured
basis and bear interest at (a) for U.S. dollar borrowings, at the
Company’s option, either (i) a fluctuating interest rate equal to the
highest of JPMorgan’s prime rate, 0.50 percent above the Federal
funds rate or the one-month eurodollar rate plus 1%, or (ii) the
eurodollar rate for the applicable interest period, or (b) for
Australian dollar borrowings, the bank bill rate, in each case plus
an applicable margin that depends on the Company’s long-term
debt ratings. The Facility will expire on June 17, 2015, unless the
Company and the banks agree to extend the term. Any outstanding
borrowings must be repaid on or prior to the final termination date.
The Credit Agreement contains terms and conditions, including
remedies in the event of a default by the Company, typical of
facilities of this type and, among other things, requires the
Company to maintain at least $1.5 billion of consolidated
stockholders’ equity.
On September 7, 2011, the Company borrowed AUD 50 million
under its revolving credit facility. On the same date, the Company
entered into interest rate swap agreements with a total notional
value of AUD 50 million and a maturity date of March 7, 2015.
These interest rate swap agreements will pay the Company variable
interest on the AUD 50 million notional amount at the three-month
bank bill rate, and the Company will pay the counterparties a fixed
rate of 4.5275%. These interest rate swap agreements were
entered into to convert the variable rate Australian dollar borrowing
under the revolving credit facility into a fixed rate borrowing. Based
on the terms of the interest rate swap agreements and the underlying
borrowing, these interest rate swap agreements were determined to
be effective, and thus qualify as a cash flow hedge. As such, any
changes in the fair value of these interest rate swaps are recorded
in other comprehensive income on the accompanying condensed
consolidated balance sheets until earnings are affected by the
variability of cash flows.
During 2011 and 2010, the Company had average borrowings
outstanding of approximately $426.7 million and $399.5 million,
respectively, at average annual interest rates of approximately 7.0%
and 7.2%, respectively. The Company incurred net interest expense
of $29.1 million, $27.9 million and $29.0 million during 2011,
2010 and 2009, respectively.
At December 31, 2011 and January 2, 2011, the fair value of the
Company’s 7.25% unsecured notes, based on quoted market
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