Washington Post 2014 Annual Report Download - page 61

recorded $10.3 million in early retirement program expense and
other related charges, a portion of which is being funded from the
assets of the Company’s pension plan. Excluding early retirement
program expense, the total pension credit for the Company’s
traditional defined benefit plan was $91.2 million and $42.7
million for 2014 and 2013, respectively.
Excluding the pension credit, early retirement program expense and
other related charges, corporate office expenses increased in 2014
due to higher compensation costs, expenses related to acquisitions,
the Berkshire exchange transaction and the cable spin-off, and
incremental costs associated with the corporate office headquarters
move to Arlington, VA.
Equity in Earnings of Affiliates. At September 30, 2014, the
Company held a 16.5% interest in Classified Ventures, LLC (CV)
and interests in several other affiliates. On October 1, 2014, the
Company and the remaining partners in CV completed the sale of
their entire stakes in CV. Total proceeds to the Company, net of
transaction costs, were $408.5 million, of which $16.5 million will
be held in escrow until October 1, 2015. The Company recorded
a pre-tax non-operating gain of $396.6 million in connection with
the sale in the fourth quarter of 2014.
The Company’s equity in earnings of affiliates, net, for 2014 was
$100.4 million, compared to $13.2 million in 2013. The 2014
results include a pre-tax gain of $90.9 million from the CV sale of
apartments.com in the second quarter of 2014.
Other Non-Operating Income (Expense). The Company recorded
other non-operating income, net, of $853.3 million in 2014,
compared to expense of $23.8 million in 2013.
The 2014 non-operating income, net, included a fourth quarter pre-
tax gain of $396.6 million on the sale of CV, the pre-tax gain of
$266.7 million in connection with the Company’s exchange of
Berkshire shares, a pre-tax gain of $127.7 million on the sale of the
headquarters building, a $75.2 million pre-tax gain on the sale of
wireless licenses, $11.1 million in unrealized foreign currency losses
and other items. The 2013 non-operating expense, net, included a
$10.4 million write-down of a marketable equity security, $13.4
million in unrealized foreign currency losses and other items.
Net Interest Expense. The Company incurred net interest expense
of $34.5 million in 2014, compared to $33.8 million in 2013. At
December 31, 2014, the Company had $445.9 million in
borrowings outstanding at an average interest rate of 7.1%; at
December 31, 2013, the Company had $450.8 million in
borrowings outstanding at an average interest rate of 7.0%.
Provision for Income Taxes. The effective tax rate for income from
continuing operations in 2014 was 30.6%. The lower effective tax
rate in 2014 largely relates to the Berkshire exchange transaction.
The pre-tax gain of $266.7 million related to the disposition of the
Berkshire shares was not subject to income tax as the exchange
qualifies as a tax-free transaction.
The effective tax rate for income from continuing operations in 2013
was 36.9%. This effective tax rate benefited from lower state taxes
and lower rates in jurisdictions outside the United States, offset by
$4.6 million in net state and non-U.S. valuation allowances provided
against deferred income tax benefits where realization is doubtful.
Discontinued Operations. On June 30, 2014, the Company and
Berkshire Hathaway Inc. completed the Berkshire exchange
transaction. A gain of $375.0 million was recorded in discontinued
operations in connection with the disposition of WPLG, a Miami-
based television station. This gain is not subject to income tax.
In the third quarter of 2014, Kaplan completed the sale of three of
its schools in China that were previously part of Kaplan International.
An additional school in China was sold by Kaplan in January 2015.
On October 1, 2013, the Company completed the sale of its
newspaper publishing businesses for $250.0 million. The related
publishing businesses sold include The Washington Post, Express, The
Gazette Newspapers, Southern Maryland Newspapers, Greater
Washington Publishing, Fairfax County Times, El Tiempo Latino and
related websites (Publishing Subsidiaries). In the fourth quarter of
2013, a pre-tax gain of $157.5 million was recorded in discontinued
operations on the sale ($100.0 million after-tax gain).
In March 2013, the Company sold The Herald, a daily newspaper
headquartered in Everett, WA.
As a result of these transactions, income from continuing operations
excludes the operating results and related net gain on dispositions
of these businesses, which have been reclassified to discontinued
operations, net of tax, for all periods presented.
RESULTS OF OPERATIONS — 2013 COMPARED TO 2012
Net income attributable to common shares was $236.0 million
($32.05 per share) for the year ended December 31, 2013,
compared to $131.2 million ($17.39 per share) for the year
ended December 31, 2012. Net income includes $64.0 million
($8.69 per share) and $80.9 million ($10.99 per share) in income
from discontinued operations for 2013 and 2012, respectively.
Income from continuing operations attributable to common shares
was $172.0 million ($23.36 per share) for 2013, compared to
$50.3 million ($6.40 per share) for 2012.
Items included in the Company’s income from continuing operations
for 2013 are listed below:
• $36.4 million in severance and restructuring charges at the
education division (after-tax impact of $25.3 million, or $3.46
per share);
• a $3.3 million noncash intangible assets impairment charge at
Kaplan (after-tax impact of $3.2 million, or $0.44 per share);
• a $10.4 million write-down of a marketable equity security (after-
tax impact of $6.7 million, or $0.91 per share); and
• $13.4 million in non-operating unrealized foreign currency losses
(after-tax impact of $8.6 million, or $1.17 per share).
2014 FORM 10-K 45