Washington Post 2012 Annual Report Download - page 66

A summary of non-operating (expense) income for the years ended
December 31, 2012 and 2011, is as follows:
(in thousands) 2012 2011
Impairment write-down of a
marketable equity security ............ $(17,998) $(53,793)
Gains (losses) on sales or write-downs of
cost method investments ............. 6,639 419
Foreign currency gains (losses), net ....... 3,132 (3,263)
Other, net ......................... 2,771 1,437
Total ........................... $ (5,456) $(55,200)
Net Interest Expense. The Company incurred net interest expense
of $32.6 million in 2012, compared to $29.1 million in 2011.
At December 31, 2012, the Company had $696.7 million in
borrowings outstanding at an average interest rate of 5.1%; at
December 31, 2011, the Company had $565.2 million in
borrowings outstanding at an average interest rate of 5.7%.
Income Taxes. Theeffectivetaxrateforincomefromcontinuing
operations in 2012 was 59.4%. This effective tax rate was
adversely impacted by $12.5 million in valuation allowances
provided against deferred income tax benefits where realization is
doubtful, and $12.8 million from nondeductible goodwill in
connection with an impairment charge recorded in 2012, offset by
tax benefits from lower rates at jurisdictions outside the United States.
The effective tax rate for income from continuing operations in
2011 was 41.2%. This effective tax rate was adversely impacted
by $17.8 million in valuation allowances provided against deferred
income tax benefits where realization is doubtful, offset by tax
benefits from lower rates at jurisdictions outside the United States.
Discontinued Operations. Kaplan sold Kidum in August 2012,
EduNeering in April 2012 and Kaplan Learning Technologies in
February 2012. In addition, the Company divested its interest in
Avenue100 Media Solutions on July 31, 2012. Consequently, the
Company’s income from continuing operations excludes these
businesses, which have been reclassified to discontinued
operations, net of tax.
The sale of Kaplan Learning Technologies resulted in a pre-tax loss
of $3.1 million, which was recorded in the first quarter of 2012.
The sale of EduNeering resulted in a pre-tax gain of $29.5 million,
which was recorded in the second quarter of 2012. The sale of
Kidum resulted in a pre-tax gain of $3.6 million, which was
recorded in the third quarter of 2012.
In connection with each of the sales of the Company’s stock in
EduNeering and Kaplan Learning Technologies, in the first quarter
of 2012, the Company recorded $23.2 million of income tax
benefits related to the excess of the outside stock tax basis over the
net book value of the net assets disposed.
In connection with the disposal of Avenue100 Media Solutions,
Inc., the Company recorded a pre-tax loss of $5.7 million in the
third quarter of 2012. An income tax benefit of $44.5 million was
also recorded in the third quarter of 2012 as the Company
determined that Avenue100 Media Solutions, Inc. had no value.
The income tax benefit is due to the Company’s tax basis in the
stock of Avenue100 exceeding its net book value as a result of
goodwill and other intangible asset impairment charges recorded in
2008, 2010 and 2011, for which no tax benefit was previously
recorded.
RESULTS OF OPERATIONS — 2011 COMPARED TO 2010
Net income attributable to common shares was $116.2 million
($14.70 per share) for the fiscal year ended December 31, 2011,
down from net income attributable to common shares of $277.2
million ($31.04 per share) for the fiscal year ended January 2,
2011. Net income includes $28.5 million ($3.60 per share) and
$77.9 million ($8.72 per share) in losses from discontinued
operations for 2011 and 2010, respectively. Income from
continuing operations attributable to common shares was $144.7
million ($18.30 per share) for fiscal year 2011, compared to
$355.1 million ($39.76 per share) for fiscal year 2010. As a
result of the Company’s share repurchases, there were 11% fewer
diluted average shares outstanding in 2011.
Items included in the Company’s income from continuing operations
for 2011 are listed below:
• $31.3 million in severance and other restructuring charges at the
education and newspaper publishing divisions (after-tax impact of
$19.4 million, or $2.46 per share);
• a $9.2 million impairment charge at one of the Company’s
affiliates (after-tax impact of $5.7 million, or $0.72 per share);
• a $53.8 million write-down of a marketable equity security (after-
tax impact of $34.6 million, or $4.34 per share); and
• $3.3 million in non-operating unrealized foreign currency losses
(after-tax impact of $2.1 million, or $0.26 per share).
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); and
• $6.7 million in non-operating unrealized foreign currency gains
(after-tax impact of $4.2 million, or $0.47 per share).
Revenue for 2011 was $4,131.1 million, down 10% from
$4,586.4 million in 2010. Revenues were down at the education,
newspaper publishing and television broadcasting divisions, while
revenues were up slightly at the cable television division. In 2011,
education revenue decreased 14%, advertising revenue decreased
9%, circulation and subscriber revenue was flat and other revenue
increased 28%. Revenue declines at Kaplan accounted for the
decrease in education revenue. The decrease in advertising revenue
is due to declines at the television broadcasting and newspaper
publishing divisions. Both subscriber revenue at the cable television
division and circulation revenue at the Post were even with last year.
Operating costs and expenses for the year decreased 4% to
$3,805.3 million in 2011, from $3,983.6 million in 2010. The
decline is due to lower expenses at the education, television
broadcasting and newspaper publishing divisions, offset by
increased costs at the cable television division.
54 THE WASHINGTON POST COMPANY