Washington Post 2014 Annual Report Download - page 67

Holdings and $327.7 million in cash, in exchange for 1,620,190
shares of Graham Holdings Class B common stock owned by
Berkshire Hathaway (Berkshire exchange transaction).
In July 2014, the cable division sold its wireless spectrum licenses
for $98.8 million.
On October 1, 2014, the Company and the remaining partners
completed the sale of their entire stakes in Classified Ventures. 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 gain of $396.6 million on the
sale of its interest in Classified Ventures in the fourth quarter of 2014.
The Company expects to fund its estimated capital needs primarily
through existing cash balances and internally generated funds and,
to a lesser extent, borrowings under its revolving credit facility. In
management’s opinion, the Company will have ample liquidity to
meet its various cash needs in 2015.
The following reflects a summary of the Company’s contractual
obligations as of December 31, 2014:
(in thousands) 2015 2016 2017 2018 2019 Thereafter Total
Debt and
interest .... $ 75,882$ 29,000$ 29,000$ 29,000$414,500 $ — $ 577,382
Programming
purchase
commitments(1) 180,987 138,386 66,737 59,184 61,035 61,048 567,377
Operating
leases(2) . . . 122,527 115,772 101,638 83,628 66,966 347,329 837,860
Other
purchase
obligations(3) 109,624 50,568 19,041 8,470 4,150 5,805 197,658
Long-term
liabilities(4) 6,606 6,438 6,290 5,986 5,819 37,847 68,986
Total..... $495,626 $340,164 $222,706 $186,268 $552,470 $452,029 $2,249,263
(1) Includes commitments for the Company’s television broadcasting and cable businesses that
are reflected in the Company’s Consolidated Financial Statements and commitments to
purchase programming to be produced in future years.
(2) Includes a Kaplan lease signed January 31, 2015 with a total obligation of $16.5 million.
(3) Includes purchase obligations related to employment agreements, capital projects and other
legally binding commitments. Other purchase orders made in the ordinary course of business
are excluded from the table above. Any amounts for which the Company is liable under
purchase orders are reflected in the Company’s Consolidated Balance Sheets as accounts
payable and accrued liabilities.
(4) Primarily made up of postretirement benefit obligations other than pensions. The Company has
other long-term liabilities excluded from the table above, including obligations for deferred
compensation, long-term incentive plans and long-term deferred revenue.
Other. The Company does not have any off-balance-sheet
arrangements or financing activities with special-purpose entities (SPEs).
Transactions with related parties, as discussed in Note 4 to the
Company’s Consolidated Financial Statements, are in the ordinary
course of business and are conducted on an arm’s-length basis.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make
estimates and judgments that affect the amounts reported in the
financial statements. On an ongoing basis, the Company evaluates
its estimates and assumptions. The Company bases its estimates on
historical experience and other assumptions believed to be
reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying value of assets and
liabilities that are not readily apparent from other sources. Actual
results could differ from these estimates.
An accounting policy is considered to be critical if it is important to
the Company’s financial condition and results and if it requires
management’s most difficult, subjective and complex judgments in
its application. For a summary of all of the Company’s significant
accounting policies, see Note 2 to the Company’s Consolidated
Financial Statements.
Revenue Recognition, Trade Accounts Receivable and Allowance
for Doubtful Accounts. Education tuition revenue is recognized
ratably over the period of instruction as services are delivered to
students, net of any refunds, corporate discounts, scholarships and
employee tuition discounts.
At KTP and Kaplan International, estimates of average student
course length are developed for each course, along with estimates
for the anticipated level of student drops and refunds from test
performance guarantees, and these estimates are evaluated on an
ongoing basis and adjusted as necessary. As Kaplan’s businesses
and related course offerings have changed, including more online
programs, the complexity and significance of management’s
estimates have increased.
KHE, through the Kaplan Commitment program, provides first-time
students with a risk-free trial period. Under the program, KHE monitors
academic progress and conducts assessments to help determine
whether students are likely to be successful in their chosen course of
study. Students who withdraw or are subject to dismissal during the
risk-free trial period do not incur any significant financial obligation.
The Company does not recognize revenues related to coursework until
the students complete the risk-free period and decide to continue with
their studies, at which time the fees become fixed or determinable.
The determination of whether revenue should be reported on a
gross or net basis is based on an assessment of whether the
Company acts as a principal or an agent in the transaction. In
certain cases, the Company is considered the agent, and the
Company records revenue equal to the net amount retained when
the fee is earned. In these cases, costs incurred with third-party
suppliers are excluded from the Company’s revenue. The
Company assesses whether it or the third-party supplier is the
primary obligor and evaluates the terms of its customer arrange-
ments as part of this assessment. In addition, the Company
considers other key indicators such as latitude in establishing price,
inventory risk, nature of services performed, discretion in supplier
selection and credit risk.
Accounts receivable have been reduced by an allowance for
amounts that may be uncollectible in the future. This estimated
allowance is based primarily on the aging category, historical
collection experience and management’s evaluation of the financial
condition of the customer. The Company generally considers an
account past due or delinquent when a student or customer misses a
scheduled payment. The Company writes off accounts receivable
balances deemed uncollectible against the allowance for doubtful
accounts following the passage of a certain period of time, or
generally when the account is turned over for collection to an
outside collection agency.
2014 FORM 10-K 51